Regulatory Filings • Jul 5, 2013
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Download Source FileN-CSRS 1 a_taxadvdivincome.htm JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND HTML PUBLIC "" a_taxadvdivincome.htm $$/page=
| UNITED STATES | |
|---|---|
| SECURITIES AND EXCHANGE COMMISSION | |
| Washington, D.C. 20549 | |
| FORM N-CSR | |
| CERTIFIED SHAREHOLDER REPORT OF REGISTERED | |
| MANAGEMENT INVESTMENT COMPANIES | |
| Investment Company Act file number 811-21416 | |
| John Hancock Tax-Advantaged Dividend Income Fund | |
| (Exact name of registrant as specified in charter) | |
| 601 Congress Street, Boston, Massachusetts 02210 | |
| (Address of principal executive offices) (Zip code) | |
| Salvatore Schiavone | |
| Treasurer | |
| 601 Congress Street | |
| Boston, Massachusetts 02210 | |
| (Name and address of agent for service) | |
| Registrant's telephone number, including area code: 617-663-4497 | |
| Date of fiscal year end: | October 31 |
| Date of reporting period: | April 30, 2013 |
ITEM 1. REPORTS TO STOCKHOLDERS.
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Portfolio summary
| Top 10 Issuers (28.0% of Total Investments on 4-30-13) 1,2 — Bank of America Corp. | 4.0% | ONEOK, Inc. | 2.5% |
|---|---|---|---|
| DTE Energy Company | 3.2% | Atmos Energy Corp. | 2.4% |
| OGE Energy Corp. | 2.9% | BB&T Corp. | 2.4% |
| Deutsche Bank | 2.9% | Spectra Energy Corp. | 2.4% |
| Wells Fargo & Company | 2.9% | JPMorgan Chase & Company | 2.4% |
| Sector Composition 1,3 | |||
| Utilities | 55.3% | Telecommunication Services | 4.9% |
| Financials | 31.0% | Materials | 0.2% |
| Energy | 5.9% | Short-Term Investments | 2.7% |
1 As a percentage of the Fund’s total investments on 4-30-13.
2 Cash and cash equivalents not included.
3 Sector investing is subject to greater risks than the market as a whole. Because the Fund may focus on particular sectors of the economy, its performance may depend on the performance of those sectors.
6 Tax-Advantaged Dividend Income Fund | Semiannual report
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Fund’s investments
As of 4-30-13 (unaudited)
| Shares | Value | |
|---|---|---|
| Common Stocks 77.9% (51.2% of Total Investments) | $666,013,663 | |
| (Cost $483,565,119) | ||
| Energy 8.4% | 71,669,555 | |
| Oil, Gas & Consumable Fuels 8.4% | ||
| BP PLC, ADR | 187,500 | 8,175,000 |
| Chevron Corp. | 50,000 | 6,100,500 |
| ConocoPhillips (Z) | 142,500 | 8,614,125 |
| Royal Dutch Shell PLC, ADR | 69,000 | 4,689,930 |
| Spectra Energy Corp. (Z) | 1,000,000 | 31,530,000 |
| Total SA, ADR (Z) | 250,000 | 12,560,000 |
| Materials 0.3% | 2,495,260 | |
| Metals & Mining 0.3% | ||
| Freeport-McMoRan Copper & Gold, Inc. (Z) | 82,000 | 2,495,260 |
| Telecommunication Services 4.7% | 40,078,390 | |
| Diversified Telecommunication Services 3.1% | ||
| AT&T, Inc. (Z) | 385,000 | 14,422,100 |
| Verizon Communications, Inc. (Z) | 220,000 | 11,860,200 |
| Wireless Telecommunication Services 1.6% | ||
| Vodafone Group PLC, ADR (Z) | 451,000 | 13,796,090 |
| Utilities 64.5% | 551,770,458 | |
| Electric Utilities 25.9% | ||
| American Electric Power Company, Inc. (Z) | 590,000 | 30,343,700 |
| Duke Energy Corp. | 310,000 | 23,312,000 |
| Entergy Corp. (Z) | 204,500 | 14,566,535 |
| FirstEnergy Corp. (Z) | 540,000 | 25,164,000 |
| Northeast Utilities | 657,500 | 29,804,475 |
| NV Energy, Inc. | 40,000 | 865,200 |
| OGE Energy Corp. (Z) | 530,000 | 38,387,900 |
| The Southern Company (Z) | 375,000 | 18,086,250 |
| UIL Holdings Corp. (C)(Z) | 510,000 | 21,236,400 |
| Xcel Energy, Inc. (Z) | 635,000 | 20,186,650 |
| Gas Utilities 8.5% | ||
| AGL Resources, Inc. | 100,550 | 4,409,118 |
| Atmos Energy Corp. | 715,000 | 31,724,550 |
| Northwest Natural Gas Company | 85,000 | 3,779,950 |
| ONEOK, Inc. (C)(Z) | 640,000 | 32,870,400 |
See notes to financial statements Semiannual report | Tax-Advantaged Dividend Income Fund 7
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| Shares | Value | |
|---|---|---|
| Multi-Utilities 30.1% | ||
| Alliant Energy Corp. | 160,000 | $8,561,600 |
| Ameren Corp. (Z) | 555,000 | 20,118,750 |
| Black Hills Corp. (Z) | 597,000 | 27,993,330 |
| CH Energy Group, Inc. | 335,000 | 21,764,950 |
| Dominion Resources, Inc. (Z) | 420,000 | 25,905,600 |
| DTE Energy Company | 485,000 | 35,346,800 |
| Integrys Energy Group, Inc. (Z) | 485,000 | 29,856,600 |
| National Grid PLC, ADR (C)(Z) | 200,000 | 12,756,000 |
| NiSource, Inc. (Z) | 785,000 | 24,123,050 |
| Public Service Enterprise Group, Inc. (Z) | 360,000 | 13,179,600 |
| TECO Energy, Inc. | 425,000 | 8,130,250 |
| Vectren Corp. (Z) | 780,000 | 29,296,800 |
| Preferred Securities 69.9% (45.9% of Total Investments) | $597,425,920 | |
| (Cost $553,385,958) | ||
| Energy 0.6% | 5,290,000 | |
| Oil, Gas & Consumable Fuels 0.6% | ||
| Apache Corp., Series D, 6.000% | 125,000 | 5,290,000 |
| Financials 47.3% | 404,048,014 | |
| Capital Markets 5.7% | ||
| State Street Corp., 5.250% | 835,000 | 21,275,800 |
| The Bank of New York Mellon Corp., | ||
| 5.200% (Z) | 420,000 | 10,760,400 |
| The Goldman Sachs Group, Inc., 5.950% (Z) | 559,000 | 14,355,120 |
| The Goldman Sachs Group, Inc., Series B, | ||
| 6.200% (Z) | 92,500 | 2,367,075 |
| Commercial Banks 18.2% | ||
| Barclays Bank PLC, Series 3, 7.100% | 30,000 | 767,700 |
| Barclays Bank PLC, Series 5, 8.125% (Z) | 505,000 | 12,993,650 |
| BB&T Corp., 5.200% | 475,000 | 11,851,250 |
| BB&T Corp., 5.200% | 265,000 | 6,656,800 |
| BB&T Corp., 5.625% (Z) | 507,500 | 13,068,125 |
| HSBC Holdings PLC, 8.000% (C)(Z) | 325,000 | 9,369,750 |
| HSBC Holdings PLC, 8.125% (Z) | 50,000 | 1,289,500 |
| PNC Financial Services Group, Inc., 5.375% (C)(Z) | 412,500 | 10,597,125 |
| PNC Financial Services Group, Inc. (6.125% to | ||
| 5-1-22, then 3 month LIBOR + 4.067%) | 40,000 | 1,148,000 |
| Royal Bank of Scotland Group PLC, Series L, | ||
| 5.750% (Z) | 855,000 | 19,724,850 |
| Santander Finance Preferred SA Unipersonal, | ||
| Series 10, 10.500% (Z) | 277,000 | 7,642,430 |
| Santander Finance Preferred SA, Series 1, | ||
| 6.410% | 15,500 | 389,050 |
| Santander Holdings USA, Inc., Series C, | ||
| 7.300% | 111,610 | 2,830,430 |
| U.S. Bancorp, 5.150% | 550,000 | 13,750,000 |
| U.S. Bancorp (6.500% to 1-15-22, then | ||
| 3 month LIBOR + 4.468%) | 204,500 | 6,126,820 |
| Wells Fargo & Company, 8.000% (Z) | 1,207,000 | 37,115,250 |
8 Tax-Advantaged Dividend Income Fund | Semiannual report See notes to financial statements
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| Shares | Value | |
|---|---|---|
| Consumer Finance 2.0% | ||
| HSBC Finance Corp., Depositary Shares, | ||
| Series B, 6.360% (Z) | 505,000 | $12,842,150 |
| SLM Corp., Series A, 6.970% (Z) | 74,000 | 3,694,820 |
| Diversified Financial Services 18.4% | ||
| Bank of America Corp., 6.375% (Z) | 139,000 | 3,548,670 |
| Bank of America Corp., 6.625% (Z) | 355,000 | 9,904,500 |
| Bank of America Corp., 6.700% (Z) | 500,000 | 12,820,000 |
| Bank of America Corp., 8.200% | 135,000 | 3,373,650 |
| Bank of America Corp., Depositary Shares, | ||
| Series D, 6.204% (Z) | 230,000 | 5,825,900 |
| Bank of America Corp., Series MER, | ||
| 8.625% (C)(Z) | 652,800 | 16,646,400 |
| Citigroup, Inc., 8.125% (Z) | 270,400 | 8,314,800 |
| Deutsche Bank Capital Funding Trust VIII, | ||
| 6.375% (Z) | 282,000 | 7,145,880 |
| Deutsche Bank Contingent Capital Trust II, | ||
| 6.550% (C)(Z) | 310,000 | 8,444,400 |
| Deutsche Bank Contingent Capital Trust III, | ||
| 7.600% (Z) | 797,893 | 22,580,372 |
| ING Groep NV, 6.200% (Z) | 109,100 | 2,762,412 |
| ING Groep NV, 7.050% | 140,000 | 3,585,400 |
| JPMorgan Chase & Company, 5.450% | 200,000 | 5,050,000 |
| JPMorgan Chase & Company, 5.500% (Z) | 870,000 | 22,106,700 |
| JPMorgan Chase & Company, 8.625% (Z) | 140,000 | 3,571,400 |
| RBS Capital Funding Trust VII, 6.080% | 983,000 | 21,822,600 |
| Insurance 3.0% | ||
| MetLife, Inc., Series B, 6.500% (Z) | 995,500 | 25,654,035 |
| Thrifts & Mortgage Finance 0.0% | ||
| Federal National Mortgage Association, | ||
| Series S, 8.250% (I) | 60,000 | 274,800 |
| Telecommunication Services 2.7% | 23,514,656 | |
| Diversified Telecommunication Services 1.5% | ||
| Qwest Corp., 7.375% (Z) | 366,000 | 9,962,520 |
| Qwest Corp., 7.500% (Z) | 120,000 | 3,285,600 |
| Wireless Telecommunication Services 1.2% | ||
| Telephone & Data Systems, Inc., 5.875% | 116,635 | 2,991,686 |
| Telephone & Data Systems, Inc., 6.875% (Z) | 243,000 | 6,475,950 |
| United States Cellular Corp., 6.950% | 30,000 | 798,900 |
| Utilities 19.3% | 164,573,250 | |
| Electric Utilities 16.3% | ||
| Alabama Power Company, Class A, 5.300% (C)(Z) | 186,780 | 4,817,056 |
| Duquesne Light Company, 6.500% | 427,000 | 21,661,710 |
| Entergy Arkansas, Inc., 4.560% | 9,388 | 949,948 |
| Entergy Arkansas, Inc., 6.450% | 135,000 | 3,412,976 |
| Entergy Mississippi, Inc., 4.920% | 8,190 | 841,011 |
| Entergy Mississippi, Inc., 6.250% | 197,500 | 4,949,844 |
| Interstate Power & Light Company, 5.100% | 1,156,000 | 29,512,680 |
| Mississippi Power Company, 5.250% | 262,500 | 6,733,125 |
See notes to financial statements Semiannual report | Tax-Advantaged Dividend Income Fund 9
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| Shares | Value | |||
|---|---|---|---|---|
| Electric Utilities (continued) | ||||
| NextEra Energy Capital Holdings, Inc., 5.700% | 72,500 | $1,927,050 | ||
| PPL Capital Funding, Inc., 5.900% | 687,000 | 17,862,000 | ||
| PPL Corp., 9.500% | 285,000 | 16,658,250 | ||
| SCE Trust I, 5.625% | 55,000 | 1,471,250 | ||
| SCE Trust II, 5.100% | 1,118,500 | 28,186,200 | ||
| Independent Power Producers & Energy Traders 1.8% | ||||
| Constellation Energy Group, Inc., Series A, | ||||
| 8.625% (Z) | 600,000 | 15,270,000 | ||
| Multi-Utilities 1.2% | ||||
| BGE Capital Trust II, 6.200% (Z) | 160,500 | 4,124,850 | ||
| DTE Energy Company, 6.500% | 130,000 | 3,615,300 | ||
| DTE Energy Company, 5.250% | 100,000 | 2,580,000 | ||
| Maturity | ||||
| Rate (%) | date | Par value | Value | |
| Corporate Bonds 0.4% (0.2% of Total Investments) | $3,353,106 | |||
| (Cost $3,000,000) | ||||
| Utilities 0.4% | 3,353,106 | |||
| Southern California Edison Company | ||||
| (6.25% to 2-1-22, then 3 month LIBOR + | ||||
| 4.199%) (Q) | 6.250 | 2-1-22 | $3,000,000 | 3,353,106 |
| Par value | Value | |||
| Short-Term Investments 4.1% (2.7% of Total Investments) | $34,651,000 | |||
| (Cost $34,651,000) | ||||
| Repurchase Agreement 4.1% | 34,651,000 | |||
| Repurchase Agreement with State Street Corp. dated 4-30-13 at 0.010% to | ||||
| be repurchased at $34,651,010 on 5-1-13, collateralized by $35,170,000 | ||||
| U.S. Treasury Notes, 0.625% due 8-31-17 (valued at $35,345,850, | ||||
| including interest) | $34,651,000 | 34,651,000 | ||
| Total investments (Cost $1,074,602,077) † 152.3% | $1,301,443,689 | |||
| Other assets and liabilities, net (52.3%) | ($447,004,122) | |||
| Total net assets 100.0% | $854,439,567 |
The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund.
ADR American Depositary Receipts
LIBOR London Interbank Offered Rate
(C) A portion of this security is segregated as collateral for options overlay. Total collateral value at 4-30-13 was $3,207,080.
(I) Non-income producing security.
(Q) Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date.
(Z) A portion of this security is pledged as collateral pursuant to the Credit Facility Agreement. Total collateral value at 4-31-13 was $738,775,665.
† At 4-30-13, the aggregate cost of investment securities for federal income tax purposes was $1,082,551,679. Net unrealized appreciation aggregated $218,892,010, of which $235,950,300 related to appreciated investment securities and $17,058,290 related to depreciated investment securities.
10 Tax-Advantaged Dividend Income Fund | Semiannual report See notes to financial statements
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FINANCIAL STATEMENTS
Financial statements
Statement of assets and liabilities 4-30-13 (unaudited)
This Statement of assets and liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value for each common share.
| Assets | |
|---|---|
| Investments, at value (Cost $1,074,602,077) | $1,301,443,689 |
| Cash | 688 |
| Cash segregated at custodian for swap contracts | 3,720,000 |
| Dividends and interest receivable | 2,389,720 |
| Other receivables and prepaid expenses | 28,709 |
| Total assets | 1,307,582,806 |
| Liabilities | |
| Credit facility agreement payable | 418,900,000 |
| Payable for cash segregated at custodian for swap contracts | 310,000 |
| Payable for investments purchased | 25,851,366 |
| Written options, at value (Premiums received $1,409,708) | 3,807,900 |
| Swap contracts, at value | 3,927,824 |
| Interest payable | 235,362 |
| Payable to affiliates | |
| Accounting and legal services fees | 20,515 |
| Trustees’ fees | 4,485 |
| Other liabilities and accrued expenses | 85,787 |
| Total liabilities | 453,143,239 |
| Net assets | $854,439,567 |
| Net assets consist of | |
| Paid-in capital | $705,004,523 |
| Undistributed net investment income | 3,508,012 |
| Accumulated net realized gain (loss) on investments, options written and | |
| swap agreements | (74,588,564) |
| Net unrealized appreciation (depreciation) on investments, options written | |
| and swap agreements | 220,515,596 |
| Net assets | $854,439,567 |
| Net assets value per share | |
| Based on 37,734,746 shares of beneficial interest outstanding — unlimited | |
| number of shares authorized with no par value | $22.64 |
See notes to financial statements Semiannual report | Tax-Advantaged Dividend Income Fund 11
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FINANCIAL STATEMENTS
Statement of operations For the six-month period ended 4-30-13 (unaudited)
This Statement of operations summarizes the Fund’s investment income earned, expenses incurred in operating the Fund and net gains (losses) for the period stated.
| Investment income | |
|---|---|
| Dividends | $29,670,442 |
| Interest | 94,991 |
| Less foreign taxes withheld | (50,172) |
| Total investment income | 29,715,261 |
| Expenses | |
| Investment management fees | 4,362,006 |
| Accounting and legal services fees | 159,872 |
| Transfer agent fees | 13,776 |
| Trustees’ fees | 42,746 |
| Printing and postage | 50,903 |
| Professional fees | 97,548 |
| Custodian fees | 38,608 |
| Registration and filing fees | 6,513 |
| Interest expense | 1,399,065 |
| Stock exchange listing fees | 16,221 |
| Other | 18,450 |
| Total expenses | 6,205,708 |
| Net investment income | 23,509,553 |
| Realized and unrealized gain (loss) | |
| Net realized gain (loss) on | |
| Investments | 9,744,039 |
| Written options | (3,981,882) |
| Swap contracts | (709,366) |
| 5,052,791 | |
| Change in net unrealized appreciation (depreciation) of | |
| Investments | 78,128,541 |
| Written options | (2,895,027) |
| Swap contracts | (202,959) |
| 75,030,555 | |
| Net realized and unrealized gain | 80,083,346 |
| Increase in net assets from operations | $103,592,899 |
12 Tax-Advantaged Dividend Income Fund | Semiannual report See notes to financial statements
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FINANCIAL STATEMENTS
Statements of changes in net assets
These Statements of changes in net assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
| Six months — ended | Year | |
|---|---|---|
| 4-30-13 | ended | |
| (Unaudited) | 10-31-12 | |
| Increase (decrease) in net assets | ||
| From operations | ||
| Net investment income | $23,509,553 | $45,156,951 |
| Net realized gain | 5,052,791 | 2,223,674 |
| Change in net unrealized appreciation (depreciation) | 75,030,555 | 80,812,127 |
| Increase in net assets resulting from operations | 103,592,899 | 128,192,752 |
| Distributions to shareholders | ||
| From net investment income | (22,301,235) | (44,602,470) |
| Total increase | 81,291,664 | 83,590,282 |
| Net assets | ||
| Beginning of period | 773,147,903 | 689,557,621 |
| End of period | $854,439,567 | $773,147,903 |
| Undistributed net investment income | $3,508,012 | $2,299,694 |
| Share activity | ||
| Shares outstanding | ||
| Beginning of period | 37,734,746 | 37,734,746 |
| End of period | 37,734,746 | 37,734,746 |
See notes to financial statements Semiannual report | Tax-Advantaged Dividend Income Fund 13
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FINANCIAL STATEMENTS
Statement of cash flows 4-30-13
This Statement of cash flows shows cash flow from operating and financing activities for the period stated.
| For the | |
|---|---|
| six months | |
| ended | |
| 4-30-13 | |
| (unaudited) | |
| Cash flows from operating activities | |
| Net increase in net assets from operations | $103,592,899 |
| Adjustments to reconcile net increase in net assets from operations to net | |
| cash used in operating activities: | |
| Long-term investments purchased | (131,107,492) |
| Long-term investments sold | 110,543,139 |
| Increase in short term investments | (31,565,000) |
| Increase in dividends and interest receivable | (51,380) |
| Increase in payable for investments purchased | 24,895,766 |
| Decrease in receivable for investments sold | 1,636,838 |
| Increase in cash segregated at custodian for swap contracts | (640,000) |
| Increase in payable for cash segregated at custodian for swap contracts | 310,000 |
| Decrease in other receivables and prepaid expenses | 43,239 |
| Increase in unrealized depreciation of swap contracts | 202,959 |
| Increase in payable for options written | 3,695,210 |
| Decrease in payable to affiliates | (46,979) |
| Decrease in interest payable | (9,697) |
| Decrease in other liabilities and accrued expenses | (22,226) |
| Net change in unrealized (appreciation) depreciation on investments | (78,128,541) |
| Net realized gain on investments | (9,744,039) |
| Net cash used in operating activities | ($6,395,304) |
| Cash flows from financing activities | |
| Borrowings from credit facility agreement payable | $28,600,000 |
| Distributions to common shareholders | (22,301,235) |
| Net cash provided by financing activities | $6,298,765 |
| Net decrease in cash | ($96,539) |
| Cash at beginning of period | $97,227 |
| Cash at end of period | $688 |
| Supplemental disclosure of cash flow information | |
| Cash paid for interest | $1,408,762 |
14 Tax-Advantaged Dividend Income Fund | Semiannual report See notes to financial statements
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Financial highlights
The Financial highlights show how the Fund’s net asset value for a share has changed during the period.
| COMMON SHARES — Period ended | 4-30-13 1 | 10-31-12 | 10-31-11 | 10-31-10 | 10-31-09 2 | 12-31-08 | 12-31-07 |
|---|---|---|---|---|---|---|---|
| Per share operating performance | |||||||
| Net asset value, beginning | |||||||
| of period | $20.49 | $18.27 | $16.58 | $12.87 | $12.48 | $19.99 | $22.90 |
| Net investment income 3 | 0.62 | 1.20 | 1.20 | 1.10 | 0.88 | 1.13 | 1.26 |
| Net realized and unrealized | |||||||
| gain (loss) on investments | 2.12 | 2.20 | 1.60 | 3.69 | 0.56 | (7.07) | (1.98) |
| Distributions to Auction | |||||||
| Preferred Shares (APS)* | — | — | — | — | — | (0.15) | (0.41) |
| Total from | |||||||
| investment operations | 2.74 | 3.40 | 2.80 | 4.79 | 1.44 | (6.09) | (1.13) |
| Less distributions to | |||||||
| common shareholders | |||||||
| From net investment income | (0.59) | (1.18) | (1.12) | (1.09) | (0.83) | (0.99) | (1.19) |
| From net realized gain | — | — | — | — | — | (0.15) | (0.59) |
| From tax return of capital | — | — | — | — | (0.23) | (0.44) | — |
| Total distributions | (0.59) | (1.18) | (1.12) | (1.09) | (1.06) | (1.58) | (1.78) |
| Anti-dilutive impact of | |||||||
| repurchase plan | — | — | 0.01 4 | 0.01 4 | 0.01 4 | 0.16 4 | — |
| Net asset value, end | |||||||
| of period | $22.64 | $20.49 | $18.27 | $16.58 | $12.87 | $12.48 | $19.99 |
| Per share market value, end | |||||||
| of period | $20.79 | $19.07 | $16.64 | $15.41 | $11.35 | $10.30 | $17.90 |
| Total return at net asset | |||||||
| value (%) 5,6 | 13.92 7 | 19.64 | 18.16 | 39.49 | 15.34 7 | (29.97) | (4.19) |
| Total return at market | |||||||
| value (%) 5 | 12.40 7 | 22.25 | 15.79 | 47.01 | 23.24 7 | (35.46) | (3.32) |
| Ratios and supplemental data | |||||||
| Net assets applicable to | |||||||
| common shares, end of | |||||||
| period (in millions) | $854 | $773 | $690 | $630 | $493 | $480 | $841 |
| Ratios (as a percentage of | |||||||
| average net assets): | |||||||
| Expenses before reductions | 1.61 8 | 1.65 | 1.77 9 | 2.03 | 2.26 8 | 2.29 | 1.27 10 |
| Expenses net of fee waivers | |||||||
| and credits 11 | 1.61 8 | 1.62 | 1.56 9 | 1.86 | 2.01 8 | 1.99 | 0.99 12 |
| Net investment income | 6.09 8 | 6.19 | 6.98 | 7.37 | 9.44 8 | 7.02 | 5.65 13 |
| Portfolio turnover (%) | 9 | 12 | 16 | 20 | 21 | 29 | 26 |
| 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 14 | — | — | — | — | — | — | $81,737 |
See notes to financial statements Semiannual report | Tax-Advantaged Dividend Income Fund 15
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| COMMON SHARES — Period ended | 4-30-13 1 | 10-31-12 | 10-31-11 | 10-31-10 | 10-31-09 2 | 12-31-08 | 12-31-07 |
|---|---|---|---|---|---|---|---|
| Senior securities | |||||||
| Total debt outstanding end of | |||||||
| period (in millions) (Note 8) | $419 | $390 | $344 | $311 | $253 | $267 | — |
| Asset coverage per $1,000 | |||||||
| of APS 15 | — | — | — | — | — | — | $3,212 |
| Asset coverage per $1,000 | |||||||
| of debt 16 | $3,040 | $2,981 | $3,005 | $3,030 | $2,946 | $2,797 | — |
16 Tax-Advantaged Dividend Income Fund | Semiannual report See notes to financial statements
Notes to financial statements (unaudited)
Note 1 — Organization
John Hancock Tax-Advantaged Dividend Income Fund (the Fund) is a closed-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act).
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M. , Eastern Time. In order to value the securities, the Fund uses the following valuation techniques: Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then the securities are valued using the last quoted bid or evaluated price. Options listed on an exchange are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Swaps are marked-to-market daily based upon values from third party vendors, which may include a registered commodities exchange, or broker quotations. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost. Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the Fund’s Pricing Committee following procedures established by the Board of Trustees, which include price verification procedures. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.
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The following is a summary of the values by input classification of the Fund’s investments as of April 30, 2013, by major security category or type:
| LEVEL 2 | LEVEL 3 — SIGNIFICANT | |||
|---|---|---|---|---|
| TOTAL MARKET | LEVEL 1 | SIGNIFICANT | UNOBSERVABLE | |
| VALUE AT 4-30-13 | QUOTED PRICE | OBSERVABLE INPUTS | INPUTS | |
| Common Stocks | ||||
| Energy | $71,669,555 | $71,669,555 | — | — |
| Materials | 2,495,260 | 2,495,260 | — | — |
| Telecommunication | ||||
| Services | 40,078,390 | 40,078,390 | — | — |
| Utilities | 551,770,458 | 551,770,458 | — | — |
| Preferred Securities | ||||
| Energy | 5,290,000 | 5,290,000 | — | — |
| Financials | 404,048,014 | 404,048,014 | — | — |
| Telecommunication | ||||
| Services | 23,514,656 | 23,514,656 | — | — |
| Utilities | 164,573,250 | 107,044,791 | $57,528,459 | — |
| Corporate Bonds | ||||
| Utilities | 3,353,106 | — | 3,353,106 | — |
| Short-Term Investments | 34,651,000 | — | 34,651,000 | — |
| Total Investments in | ||||
| Securities | $1,301,443,689 | $1,205,911,124 | $95,532,565 | — |
| Other Financial | ||||
| Instruments: | ||||
| Written options | ($3,807,900) | ($3,807,900) | — | — |
| Interest rate swaps | ($3,927,824) | — | ($3,927,824) | — |
Repurchase agreements. The Fund may enter into repurchase agreements. When the Fund enters into a repurchase agreement, it receives collateral that is held in a segregated account by the Fund’s custodian. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Dividend income is recorded on the ex-date, except for dividends of foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the Fund becomes aware of the dividends. Foreign taxes are provided for based on the Fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Foreign taxes. The Fund may be subject to withholding tax on income or capital gains or repatriation taxes as imposed by certain countries in which the Fund invests. Taxes are accrued based upon investment income, realized gains or unrealized appreciation.
Overdrafts. Pursuant to the custodian agreement, the Fund’s custodian may, in its discretion, advance funds to the Fund to make properly authorized payments. When such payments result in an overdraft, the Fund is obligated to repay the custodian for any overdraft, including any costs or expenses associated with the overdraft. The custodian may have a lien, security interest or security
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entitlement in any Fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
Expenses. Within the John Hancock Funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Federal income taxes. The Fund intends to continue to qualify 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.
Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
For federal income tax purposes, as of October 31, 2012, the Fund has a capital loss carryforward of $71,605,008 available to offset future net realized capital gains which expires on October 31, 2017.
As of October 31, 2012, the Fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends monthly and capital gain distributions, if any, annually.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to derivative transactions and wash sale loss deferrals.
Statement of cash flows. Information on financial transactions that have been settled through the receipt and disbursement of cash is presented in the Statement of cash flows. The cash amount shown in the Statement of cash flows is the amount included in the Fund’s Statement of assets and liabilities and represents the cash on hand at the Fund’s custodian and does not include any short-term investments or cash segregated at custodian for swap contracts.
New accounting pronouncements. In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11 (ASU 2011-11), Disclosures about Offsetting Assets and Liabilities and in January 2013, Accounting Standards Update No. 2013-1, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities . These updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of assets and liabilities or subject to an
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enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. These updates may result in additional disclosure relating to the presentation of derivatives and certain other financial instruments.
Note 3 — Derivative instruments
The Fund may invest in derivatives in order to meet its investment objective. The use of derivatives involves risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, the Fund is exposed to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that the Fund will succeed in enforcing them.
The Fund has entered into collateral agreements with certain counterparties to mitigate counterparty risk on OTC derivatives. Subject to established minimum levels, collateral is generally determined based on the net aggregate unrealized gain or loss on contracts with a particular counterparty. Collateral pledged to the Fund is held in a segregated account by a third-party agent or held by the custodian bank for the benefit of the Fund and can be in the form of cash or debt securities issued by the U.S. government or related agencies; collateral posted by the Fund is held in a segregated account at the Fund’s custodian and is noted in the accompanying portfolio of investments, or if cash is posted, on the Statement of assets and liabilities. As of April 30, 2013, $3,720,000 was posted by the Fund for the benefit of counterparties.
Options. There are two types of options, put options and call options. Options are traded either OTC or on an exchange. A call option gives the purchaser of the option the right to buy (and the seller the obligation to sell) the underlying instrument at the exercise price. A put option gives the purchaser of the option the right to sell (and the writer the obligation to buy) the underlying instrument at the exercise price. Writing puts and buying calls may increase the Fund’s exposure to changes in the value of the underlying instrument. Buying puts and writing calls may decrease the Fund’s exposure to such changes. Risks related to the use of options include the loss of the premium, possible illiquidity of the options markets, trading restrictions imposed by an exchange and movements in underlying security values, and for written options, potential losses in excess of the amounts recognized on the Statement of assets and liabilities. In addition, OTC options are subject to the risks of all OTC derivatives contracts.
When the Fund purchases an option, the premium paid by the Fund is included in the portfolio of investments and subsequently “marked-to-market” to reflect current market value. If the purchased option expires, the Fund realizes a loss equal to the cost of the option. If the Fund exercises a call option, the cost of the securities acquired by exercising the call is increased by the premium paid to buy the call. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale are decreased by the premium paid. If the Fund enters into a closing sale transaction, the Fund realizes a gain or loss, depending on whether proceeds from the closing sale are greater or less than the original cost. When the Fund writes an option, the premium received is included as a liability and subsequently “marked-to-market” to reflect current market value of the option written. Premiums received from writing options that expire unexercised are recorded as realized gains. Premiums received from writing options which are exercised or are closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. If a put option on a security is exercised, the premium received reduces the cost basis of the securities purchased by the Fund.
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During the six months ended April 30, 2013, the Fund wrote option contracts to hedge against anticipated changes in securities market. The following tables summarize the Fund’s written options activities during the six months ended April 30, 2013 and the contracts held at April 30, 2013.
| NUMBER OF | PREMIUMS | |
|---|---|---|
| CONTRACTS | RECEIVED (PAID) | |
| Outstanding, beginning of period | 5,295 | $609,525 |
| Options written | 16,021 | 12,469,720 |
| Options expired | (6,595) | (2,047,922) |
| Options bought back | (13,576) | (9,621,615) |
| Outstanding, end of period | 1,145 | $1,409,708 |
| OPTIONS | EXERCISE — PRICE | EXPIRATION — DATE | NUMBER OF — CONTRACTS | PREMIUM | VALUE |
|---|---|---|---|---|---|
| CALLS | |||||
| NASDAQ 100 Stock Index | $2,765 | May 2013 | 45 | $175,465 | ($561,150) |
| Philadelphia | |||||
| Semiconductor Index | 420 | May 2013 | 195 | 120,307 | (492,375) |
| S&P 500 Index | 1,550 | May 2013 | 550 | 1,098,329 | (2,692,250) |
| S&P 500 Index | 1,635 | May 2013 | 355 | 15,607 | (62,125) |
| Total | 1,145 | $1,409,708 | ($3,807,900) |
Interest rate swaps. Interest rate swaps represent an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates applied to a notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. The Fund settles accrued net interest receivable or payable under the swap contracts at specified, future intervals. Swap agreements are privately negotiated in the OTC market or may be executed on a registered commodities exchange (centrally cleared swaps). Swaps are marked-to-market daily and the change in value is recorded as unrealized appreciation/depreciation of swap contracts. A termination payment by the counterparty or the Fund is recorded as realized gain or loss, as well as the net periodic payments received or paid by the Fund. The value of the swap will typically impose collateral posting obligations on the party that is considered out-of-the-money on the swap.
Entering into swap agreements involves, to varying degrees, elements of credit, market and documentation risk that may amount to values that are in excess of the amounts recognized on the Statement of assets and liabilities. Such risks involve the possibility that there will be no liquid market for the swap, or that a counterparty may default on its obligation or delay payment under the swap terms. The counterparty may disagree or contest the terms of the swap. Market risks may also accompany the swap, including interest rate risk. The Fund may also suffer losses if it is unable to terminate or assign outstanding swaps or reduce its exposure through offsetting transactions.
During the six months ended April 30, 2013, the Fund used interest rate swaps in anticipation of rising interest rates. The following table summarizes the interest rate swap contracts held as of April 30, 2013.
| USD — NOTIONAL | PAYMENTS — MADE | PAYMENTS — RECEIVED | MATURITY | ||
|---|---|---|---|---|---|
| COUNTERPARTY | AMOUNT | BY FUND | BY FUND | DATE | MARKET VALUE |
| Morgan Stanley | $86,000,000 | 1.4625% | 3-month | Aug 2016 | ($2,946,448) |
| Capital Services | LIBOR(a) | ||||
| Morgan Stanley | 86,000,000 | 0.8750% | 3-month | Jul 2017 | (981,376) |
| Capital Services | LIBOR(a) | ||||
| Total | $172,000,000 | ($3,927,824) |
(a) At 4-30-13, the 3-month LIBOR rate was 0.2731%
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No interest rate swap positions were entered into or closed during the six months ended April 30, 2013.
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the Fund at April 30, 2013 by risk category:
| STATEMENT OF ASSETS AND | FINANCIAL — INSTRUMENTS | ASSET — DERIVATIVES | LIABILITY — DERIVATIVES | |
|---|---|---|---|---|
| RISK | LIABILITIES LOCATION | LOCATION | FAIR VALUE | FAIR VALUE |
| Equity contracts | Payable for written options, | Written options | — | ($3,807,900) |
| at value | ||||
| Interest rate contracts | Unrealized depreciation of | Interest rate | — | ($3,927,824) |
| swap contracts | swaps | |||
| Total | — | ($7,735,724) |
Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended April 30, 2013:
| RISK | STATEMENT OF — OPERATIONS LOCATION | WRITTEN OPTIONS | SWAP — CONTRACTS | TOTAL |
|---|---|---|---|---|
| Equity contracts | Net realized gain (loss) | ($3,981,882) | — | ($3,981,882) |
| Interest rate | Net realized gain (loss) | — | ($709,366) | ($709,366) |
| contracts | ||||
| Total | ($3,981,882) | ($709,366) | ($4,691,248) |
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the six months ended April 30, 2013:
| RISK | STATEMENT OF — OPERATIONS LOCATION | WRITTEN OPTIONS | SWAP — CONTRACTS | TOTAL |
|---|---|---|---|---|
| Equity contracts | Change in unrealized | ($2,895,027) | — | ($2,895,027) |
| appreciation | ||||
| (depreciation) | ||||
| Interest rate | Change in unrealized | — | ($202,959) | ($202,959) |
| contracts | appreciation | |||
| (depreciation) | ||||
| Total | ($2,895,027) | ($202,959) | ($3,097,986) |
Note 4 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor) serves as investment advisor for the Fund. The Advisor is an indirect, wholly owned subsidiary of Manulife Financial Corporation (MFC).
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Management fee. The Fund has an investment management agreement with the Advisor under which the Fund pays a daily management fee to the Advisor equivalent, on an annual basis, to 0.75% of the Fund’s average daily managed assets (net assets plus borrowings under the Credit Facility Agreement) (see Note 8). The Advisor has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor, and a subadvisory agreement with Analytic Investors, LLC (“Analytic”). On March 26, 2013, shareholders of the Fund approved a new subadvisory agreement for the Fund between the Advisor and Analytic, which manages the options strategy for the Fund. This was necessary as a result of a change in ownership of Analytic. The new subadvisory agreement is substantially the same as the prior agreement. The Fund is not responsible for payment of the subadvisory fees.
The investment management fees incurred for the six months ended April 30, 2013 were equivalent to a net annual effective rate of 0.75% of the Fund’s average daily managed assets.
Accounting and legal services. Pursuant to a service agreement, the Fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the Fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These accounting and legal services fees incurred for the six months ended April 30, 2013 amounted to an annual rate of 0.02% of the Fund’s average daily managed assets.
Trustee expenses. The Fund compensates each Trustee who is not an employee of the Advisor or its affiliates. Under the John Hancock Group of Funds Deferred Compensation Plan (the Plan), which was terminated in November 2012, certain Trustees could have elected, for tax purposes, to defer receipt of this compensation. Any deferred amounts were invested in various John Hancock funds. The investment of deferred amounts and the offsetting liability are included within Other receivables and prepaid expenses and Payable to affiliates — Trustees’ fees, respectively, in the accompanying Statement of assets and liabilities. Plan assets will be liquidated in accordance with the Plan documents.
Note 6 — Fund share transactions
In December 2007, the Board of Trustees approved a share repurchase plan, which was subsequently reviewed and approved by the Board of Trustees each year in December. Under the current share repurchase plan, the Fund may purchase in the open market up to 10% of its outstanding common shares as of December 31, 2012. The current share repurchase plan will remain in effect between January 1, 2013 and December 31, 2013.
During the six months ended April 30, 2013 and the year ended October 31, 2012, the Fund did not repurchase any shares under the repurchase plan.
Note 7 — Leverage risk
The Fund utilizes a Credit Facility Agreement (CFA) to increase its assets available for investment. When the Fund leverages its assets, common shareholders bear the fees associated with the CFA and have the potential to benefit or be disadvantaged from the use of leverage. The Advisor’s fee is also increased in dollar terms from the use of leverage. Consequently, the Fund and the Advisor may have differing interests in determining whether to leverage the Fund’s assets. Leverage creates risks that may adversely affect the return for the holders of common shares, including:
• the likelihood of greater volatility of net asset value and market price of common shares;
• fluctuations in the interest rate paid for the use of the credit facility;
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• increased operating costs, which may reduce the Fund’s total return;
• the potential for a decline in the value of an investment acquired through leverage, while the Fund’s obligations under such leverage remains fixed; and
• the Fund is more likely to have to sell securities in a volatile market in order to meet asset coverage or other debt compliance requirements.
To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Fund’s return will be greater than if leverage had not been used, conversely, returns would be lower if the cost of the leverage exceeds the income or capital appreciation derived.
In addition to the risks created by the Fund’s use of leverage, the Fund is subject to the risk that it would be unable to timely, or at all, obtain replacement financing if the CFA is terminated. Were this to happen, the Fund would be required to de-leverage, selling securities at a potentially inopportune time and incurring tax consequences. Further, the Fund’s ability to generate income from the use of leverage would be adversely affected.
Note 8 — Credit Facility Agreement
The Fund has entered into a CFA with Credit Suisse Securities LLC (CSSU), pursuant to which the Fund borrows money to increase its assets available for investment. In accordance with the 1940 Act, the Fund’s borrowings under the CFA will not exceed 33 1/3% of the Fund’s managed assets (net assets plus borrowings) at the time of any borrowing.
The Fund pledges a portion of its assets as collateral to secure borrowings under the CFA. Such pledged assets are held in a special custody account with the Fund’s custodian. The amount of assets required to be pledged by the Fund is determined in accordance with the CFA. The Fund retains the benefits of ownership of assets pledged to secure borrowings under the CFA. Interest charged is at the rate of three month LIBOR (London Interbank Offered Rate) plus 0.41% and is payable monthly. As of April 30, 2013, the Fund had borrowings of $418,900,000, at an interest rate of 0.68%, which is reflected in the Credit facility agreement payable on the Statement of assets and liabilities. During the six months ended April 30, 2013, the average borrowings under the CFA and the effective average interest rate were $394,430,939 and 0.72%, respectively.
The Fund may terminate the CFA with CSSU at any time. If certain asset coverage and collateral requirements or other covenants are not met, the CFA could be deemed in default and result in termination. Absent a default or facility termination event, CSSU is required to provide the Fund with 270 calendar days’ notice prior to terminating or amending the CFA.
Note 9 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $131,107,492 and $110,543,139, respectively, for the six months ended April 30, 2013.
Note 10 — Industry or sector risk
The Fund will generally invest a large percentage of its assets in one or more particular industries or sectors of the economy. If a large percentage of the Fund’s assets are economically tied to a single or small number of industries or sectors of the economy, the Fund will be less diversified than a more broadly diversified fund, and it may cause the Fund to underperform if that industry or sector underperforms. In addition, focusing on a particular industry or sector may make the Fund’s net asset value more volatile. Further, a fund that invests in particular industries or sectors is particularly susceptible to the impact of market, economic, regulatory and other factors affecting those industries or sectors.
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Additional information
Unaudited
Investment objective and policy
The Fund’s investment objective is to provide a high level of after-tax total return from dividend income and gains 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 Advisor 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 are currently taxed to noncorporate taxpayers at a maximum rate of 20% (15% or 0% for individuals in certain tax brackets) (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. The Fund may write (sell) covered call index options on up to 30% of the value of the Fund’s total assets.
Subadvisory Agreement with Analytic Investors, LLC
Analytic Investors, LLC (Analytic) is responsible for formulating and implementing the options strategy for the Fund (Options Strategy). On December 31, 2012, Analytic entered into a transaction with Old Mutual Intermediary, LLC (the Analytic Transaction). As a result of the Analytic Transaction, the prior subadvisory agreement between John Hancock Advisers, LLC (the Advisor) and Analytic terminated upon the closing of the Analytic Transaction as required under the Investment Company Act of 1940, as amended.
At an in-person meeting on December 10–12, 2012, the Board approved a new subadvisory agreement with Analytic and, to ensure continuation of the subadvisory services provided by Analytic to the Fund, the Board also approved an interim subadvisory agreement with Analytic to continue in effect until shareholders of the Fund approve the new subadvisory agreement. The new subadvisory agreement with Analytic was approved by shareholders of the Fund at the Special Meeting of Shareholders held on March 26, 2013. The interim and the new subadvisory agreements are referred to as Analytic Agreement. A description of the Board’s evaluation and recommendation with respect to the Analytic Agreement is set forth below.
Board Consideration of Analytic Agreement
The Board, including all the Independent Trustees, approved the Analytic Agreement at the in-person meeting on December 10–12, 2012. In considering the approval of the Analytic Agreement, the Board took into account certain information and materials relating to Analytic that the Board had received and considered in connection with the annual evaluation of the prior subadvisory agreement between the Advisor and Analytic at the in-person meetings held on May 6–8 and June 3–5, 2012. A discussion of the bases of the Board’s approval of the prior agreement is included in the Fund’s annual shareholder report dated October 31, 2012.
At the December 10–12, 2012 meeting, the Board revisited the factors it previously considered at the May 6-8 and June 3–5, 2012 meetings to the extent relevant to the Analytic Agreement. The Board also took into account other factors that it considered relevant in its evaluation of the Analytic Agreement, including its review of the information provided by Analytic with respect to changes since those meetings and information about the Analytic Transaction.
The Board reviewed the nature, extent and quality of services provided by Analytic, including the quality and depth of the investment professionals having principal investment responsibility for managing the Options Strategy and the capability and the performance record of those
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professionals. The Board considered Analytic’s history and experience providing services to the Fund, including the performance record of the Options Strategy and its effectiveness in reducing the overall volatility of the Fund’s performance. In evaluating the performance of the Options Strategy, the Board noted that it outperformed the options component of the CBOE S&P 500 BuyWrite Index for the year-to-date and one year periods ended September 30, 2012.
In addition to evaluating the nature, extent and quality of services provided by Analytic, the Board reviewed the contractual subadvisory fee rate payable to Analytic with respect to the Fund. The Board noted that the subadvisory fee is paid by the Advisor and not by the Fund and that the Board relies on the ability of the Advisor to negotiate the subadvisory fee at arm’s-length. The Board further noted that neither the advisory fee paid by the Fund nor the subadvisory fee paid by the Advisor will change under the Analytic Agreement.
In evaluating the impact of the Analytic Transaction, the Board noted that no changes were planned to the current portfolio management team or investment approach after the closing of the Analytic Transaction. In addition, the Board considered Analytic’s representations that the Analytic Transaction would provide Analytic with an opportunity to take advantage of full autonomy regarding its business, such as greater latitude to hire and reward investment and research staff and more freedom to pursue market opportunities.
Based on its review, the Board, including the Independent Trustees, determined that the terms of the Analytic Agreement, including the fee rate, were fair and reasonable and in the best interests of the Fund and its shareholders, and unanimously approved the Analytic Agreement.
Dividends and distributions
During the six months ended April 30, 2013, dividends from net investment income totaling $0.5910 per share were paid to shareholders. The dates of payments and the amounts per share were as follows:
| INCOME | |
|---|---|
| PAYMENT DATE | DIVIDENDS |
| November 30, 2012 | $0.0985 |
| December 31, 2012 | 0.0985 |
| January 31, 2013 | 0.0985 |
| February 28, 2013 | 0.0985 |
| March 28, 2013 | 0.0985 |
| April 30, 2013 | 0.0985 |
| Total | $0.5910 |
Dividend reinvestment plan
The Fund’s Dividend Reinvestment Plan (the Plan) provides that distributions of dividends and capital gains are automatically reinvested in common shares of the Fund by Computershare Trust Company, N.A. (the Plan Agent). Every shareholder holding at least one full share of the Fund is entitled to participate in the Plan. In addition, every shareholder who became a shareholder of the Fund after June 30, 2011 and holds at least one full share of the Fund will be automatically enrolled in the Plan. Shareholders may withdraw from the Plan at any time and shareholders who do not participate in the Plan will receive all distributions in cash.
If the Fund declares a dividend or distribution payable either in cash or in common shares of the Fund and the market price of shares on the payment date for the distribution or dividend equals or exceeds the Fund’s net asset value per share (NAV), the Fund will issue common shares to participants at a value equal to the higher of NAV or 95% of the market price. The number of additional shares to be credited to each participant’s account will be determined by dividing the dollar amount of the distribution or dividend by the higher of NAV or 95% of the market price. If
26 Tax-Advantaged Dividend Income Fund | Semiannual report
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the market price is lower than NAV, or if dividends or distributions are payable only in cash, then participants will receive shares purchased by the Plan Agent on participants’ behalf on the New York Stock Exchange (NYSE) or otherwise on the open market. If the market price exceeds NAV before the Plan Agent has completed its purchases, the average per share purchase price may exceed NAV, resulting in fewer shares being acquired than if the Fund had issued new shares.
There are no brokerage charges with respect to common shares issued directly by the Fund. However, whenever shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees, currently $0.05 per share purchased or sold. Brokerage trading fees will be deducted from amounts to be invested.
The reinvestment of dividends and net capital gains distributions does not relieve participants of any income tax that may be payable on such dividends or distributions.
Shareholders participating in the Plan may buy additional shares of the Fund through the Plan at any time in amounts of at least $50 per investment, up to a maximum of $10,000, with a total calendar year limit of $100,000. Shareholders will be charged a $5 transaction fee plus $0.05 per share brokerage trading fee for each order. Purchases of additional shares of the Fund will be made on the open market. Shareholders who elect to utilize monthly electronic fund transfers to buy additional shares of the Fund will be charged a $2 transaction fee plus $0.05 per share brokerage trading fee for each automatic purchase. Shareholders can also sell Fund shares held in the Plan account at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent’s Web site at www.computershare.com by clicking on EquityAccess & More. The Plan Agent will mail a check (less applicable brokerage trading fees) on settlement date, which is three business days after the shares have been sold. If shareholders choose to sell shares through their stockbroker, they will need to request that the Plan Agent electronically transfer those shares to their stockbroker through the Direct Registration System.
Shareholders participating 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.computershare.com. Click on EquityAccess & More. Such termination will be effective immediately if the notice is received by the Plan Agent prior to any dividend or distribution record date; otherwise, such termination will be effective on the first trading day after the payment date for such dividend or distribution, with respect to any subsequent dividend or distribution. If shareholders withdraw from the Plan, their shares will be credited to their account; or, if they wish, the Plan Agent will sell their full and fractional shares and send the shareholders the proceeds, less a transaction fee of $5 and less brokerage trading fees of $0.05 per share. If a shareholder does not maintain at least one whole share of common stock in the Plan account, the Plan Agent may terminate such shareholder’s participation in the Plan after written notice. Upon termination, shareholders will be sent a check for the cash value of any fractional share in the Plan account, less any applicable broker commissions and taxes.
Shareholders who hold at least one full share of the Fund may join the Plan by notifying the Plan Agent by telephone, in writing or by visiting the Plan Agent’s Web site at www.computershare.com. Click on EquityAccess & More. If received in proper form by the Plan Agent before the record date of a dividend, the election will be effective with respect to all dividends paid after such record date. If shareholders wish to participate in the Plan and their shares are held in the name of a brokerage firm, bank or other nominee, shareholders should contact their nominee to see if it will participate in the Plan. If shareholders wish to participate in the Plan, but their brokerage firm, bank or other nominee is unable to participate on their behalf, they will need to request that their shares be re-registered in their own name, or they will not be able to participate. The Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by shareholders as representing the total amount registered in their name and held for their account by their nominee.
Semiannual report | Tax-Advantaged Dividend Income Fund 27
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Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund and the Plan Agent reserve the right to amend or terminate the Plan. Participants generally will receive written notice at least 90 days before the effective date of any amendment. In the case of termination, participants will receive written notice at least 90 days before the record date for the payment of any dividend or distribution by the Fund.
Effective July 1, 2013, the Plan will be revised to reflect an updated definition of the market price. Under the revised Plan, “market price” will be defined as “the last sale price for the Fund’s shares in the market on that date as of the close of regular trading on the New York Stock Exchange (NYSE), or, if there is no sale in the market on that date or sale prices are not available, then the mean between the closing bid and asked quotations for such shares on such date.” This definition will replace the current definition, stating that “market price” is “the last sale price for the Fund’s shares on the New York Stock Exchange (NYSE) on that date, or, if there is no sale on the NYSE on that date, then the mean between the closing bid and asked quotations for such shares on the NYSE on such date”.
All correspondence or requests for additional information about the Plan should be directed to Computershare Trust Company, N.A., at the address stated below, or by calling 1-800-852-0218, 1-201-680-6578 (For International Telephone Inquiries) and 1-800-952-9245 (For the Hearing Impaired (TDD)).
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:
Computershare P.O. Box 43006 Providence, RI 02940-3006 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.
Shareholder meetings
Special Meeting of Shareholders
The Fund held a Special Meeting of Shareholders at an adjourned session held on March 26, 2013. The following proposal was considered by the shareholders:
Proposal: To approve a new subadvisory agreement for John Hancock Tax-Advantaged Dividend Income Fund between John Hancock Advisers, LLC and Analytic Investors, LLC (the “Agreement”).
Shareholders of the Fund approved the Agreement and the votes cast with respect to this proposal are set forth below:
| FOR | AGAINST | ABSTAIN | BROKER NON-VOTES |
|---|---|---|---|
| 16,299,037.882 | 472,378.254 | 608,726.731 | 2,919,818.000 |
28 Tax-Advantaged Dividend Income Fund | Semiannual report
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Annual Meeting of Shareholders
The Fund held its Annual Meeting of Shareholders on November 9, 2012. The following proposal was considered by the shareholders:
Proposal: Election of thirteen (13) Trustees to serve until the expiration of their respective terms as shown below.
Each nominee was elected by the Fund’s shareholders and the votes cast with respect to each Trustee are set forth below:
| For a Term to Expire in 2016: | TOTAL VOTES | TOTAL VOTES WITHHELD |
|---|---|---|
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Deborah C. Jackson | 33,565,855 | 639,458 |
| James M. Oates | 33,562,903 | 642,410 |
| Steven R. Pruchansky | 33,585,679 | 619,634 |
| Non-Independent Trustee | ||
| Craig Bromley | 33,469,466 | 735,847 |
| For a Term to Expire in 2015: | ||
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| Charles L. Bardelis | 33,578,296 | 627,017 |
| Peter S. Burgess | 33,560,510 | 644,803 |
| Theron S. Hoffman | 33,600,410 | 604,903 |
| Non-Independent Trustee | ||
| Warren A. Thomson | 33,601,166 | 604,147 |
| For a Term to Expire in 2014: | ||
| TOTAL VOTES | TOTAL VOTES WITHHELD | |
| FOR THE NOMINEE | FROM THE NOMINEE | |
| Independent Trustees | ||
| William H. Cunningham | 33,543,658 | 661,655 |
| Grace K. Fey | 33,605,042 | 600,271 |
| Hassell H. McClellan | 33,555,342 | 649,971 |
| Gregory A. Russo | 33,585,013 | 620,300 |
| Non-Independent Trustee | ||
| James R. Boyle | 33,611,390 | 593,923 |
Portfolio manager change
Effective February 4, 2013, the portfolio management team at John Hancock Asset Management a division of Manulife Asset Management (US) LLC has changed as follows: Lisa Welch no longer serves on the portfolio management team responsible for managing the Fund. Gregory Phelps and Mark Maloney, who have served on the portfolio management team for the Fund since its inception, continue to serve on the team responsible for the management of the underlying portfolio.
Semiannual report | Tax-Advantaged Dividend Income Fund 29
More information
| Trustees | Officers | Investment advisor |
|---|---|---|
| James M. Oates, | Hugh McHaffie | John Hancock Advisers, LLC |
| Chairman | President | |
| Steven R. Pruchansky, | Subadvisors | |
| Vice Chairman | Andrew G. Arnott | John Hancock Asset Management |
| Charles L. Bardelis * | Executive Vice President | a division of Manulife Asset |
| James R. Boyle † | Management (US) LLC | |
| Craig Bromley † | Thomas M. Kinzler | |
| Peter S. Burgess * | Secretary and Chief Legal Officer | Analytic Investors, LLC |
| William H. Cunningham | ||
| Grace K. Fey | Francis V. Knox, Jr. | Custodian |
| Theron S. Hoffman * | Chief Compliance Officer | State Street Bank and |
| Deborah C. Jackson | Trust Company | |
| Hassell H. McClellan | Charles A. Rizzo | |
| Gregory A. Russo | Chief Financial Officer | Transfer agent |
| Warren A. Thomson † | Computershare Shareowner | |
| Salvatore Schiavone | Services, LLC | |
| *Member of the | Treasurer | |
| Audit Committee | Legal counsel | |
| †Non-Independent Trustee | K&L Gates LLP | |
| Stock symbol | ||
| Listed New York Stock | ||
| Exchange: HTD |
For shareholder assistance refer to page 28
| You can also contact us: | |
|---|---|
| 1-800-852-0218 | Regular mail: |
| jhfunds.com | Computershare |
| P.O. Box 43006 | |
| Providence, RI 02940-3006 |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings , and other fund details available on our Web site at www.jhfunds.com or by calling 1-800-852-0218.
The report is certified under the Sarbanes-Oxley Act, which requires closed-end funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.
30 Tax-Advantaged Dividend Income Fund | Semiannual report
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| PRESORTED |
|---|
| STANDARD |
| U.S. POSTAGE |
| PAID |
| MIS |
1-800-852-0218 1-800-231-5469 TDD 1-800-843-0090 EASI-Line www. jhfunds. com
| P13SA 4/13 | |
|---|---|
| MF142247 | 6/13 |
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ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable. (b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
(a) Not applicable.
(b)
| Total number of | Total number of — shares purchased | Maximum number of — shares that may yet | ||
|---|---|---|---|---|
| shares | Average price | as part of publicly | be purchased under | |
| Period | purchased | per share | announced plans* | the plans |
| Nov-12 | - | - | - | 3,773,475 |
| Dec-12 | - | - | - | 3,773,475* |
| Jan-13 | - | - | - | 3,773,475 |
| Feb-13 | - | - | - | 3,773,475 |
| Mar-13 | - | - | - | 3,773,475 |
| Apr-13 | - | - | - | 3,773,475 |
| Total | - | - | ||
| *In December 2007, the Trustees approved a share repurchase plan, which has been | ||||
| subsequently reviewed and approved by the Board of Trustees each year in December. Under | ||||
| the current share repurchase plan, the Fund may purchase in the open market up to 10% of its | ||||
| outstanding common shares as of December 31, 2012. The plan renewed by the Board in | ||||
| December 2012 will remain in effect between January 1, 2013 and December 31, 2013. |
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ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has adopted procedures by which shareholders may recommend nominees to the registrants Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached John Hancock Funds Nominating, Governance and 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 financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached John Hancock Funds Nominating, Governance and Administration Committee Charter.
(c)(2) Contact person at the registrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Tax-Advantaged Dividend Income Fund
| By: | /s/ Hugh McHaffie |
|---|---|
| ------------------------------ | |
| Hugh McHaffie | |
| President | |
| Date: | June 26, 2013 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Hugh McHaffie |
|---|---|
| ------------------------------- | |
| Hugh McHaffie | |
| President | |
| Date: | June 26, 2013 |
| By: | /s/ Charles A. Rizzo |
| ----------------------- | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Date: | June 26, 2013 |
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