SCHEDULE 14A
(RULE 14A- 101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (A)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ____ )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropiate box:
[x] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11 (c) or Rule 14a-12
JOHN HANCOCK CAPITAL SERIES
(Name of Registrant as of specified in Its Charter)
JOHN HANCOCK CAPITAL SERIES
(Name of person(s) Filing Proxy Statements)
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July 7, 1998
John Hancock Special Value Fund
Dear Fellow Shareholder:
I am writing to ask for your vote on a proposal that the Special Value Fund's
Trustees believe will benefit you and your Fund over the long term.
As you know, your Fund has historically sought capital appreciation with income
as a secondary consideration. To pursue this objective, your Fund's management
team has focused on investment opportunities in small-company stocks whose
prices are below what the Fund's portfolio management team believes are their
true value. This value-oriented approach to small-cap investing has served
investors well in terms of capital appreciation--since the Fund began in
December 1994, the share price for Class A shares has risen from $8.50 to $13.48
as of March 31, 1998. As you may know, however, your Fund has not paid a
dividend for the last several quarters. This is not surprising given its
emphasis on smaller companies, which tend to reinvest earnings back into their
businesses rather than pay quarterly dividends.
Due to your Fund's small-cap focus and diminished prospects for quarterly
income, it is more accurately classified as a growth fund seeking capital
appreciation without regard to income. Consequently, your Trustees believe it is
in shareholders' best interests to remove the reference to "income as a
secondary consideration" from your fund's investment objective. If this change
is approved, your Fund will move from the John Hancock Growth and Income Funds
prospectus, where the Fund is currently offered, to the John Hancock Growth
Funds prospectus. This move entails a reorganization of your Fund's underlying
legal trust to match that of the other growth funds. This will have no federal
income tax consequences to you and is intended to increase efficiency while
reducing printing, registration, accounting, legal and other fees.
Since investors and investment professionals interested in a small-cap strategy
seeking capital appreciation are more likely to consult a growth funds
prospectus than a growth and income funds prospectus, we believe this move will
enhance your Fund's marketability and asset growth potential. Over time, a
greater asset base should help lower expenses for you as a Special Value Fund
shareholder.
Your Fund's Trustees are also asking you to remove or amend two investment
restrictions that limit your Fund's ability to respond to changing market
conditions. Updating these restrictions will bring the Fund in line with
established standards maintained by the majority of funds within John Hancock.
No Cost to Your Fund or Change in Investment Strategy
Though these proposals require your vote, please be assured that your Fund will
not bear the cost for either the voting process or making the changes. In
addition, these proposals do not in any way signal a change in your Fund's
investment strategy. Portfolio Manager Timothy E. Keefe and your Fund's
portfolio management team will continue to seek capital appreciation by
targeting small-company stocks whose prices they believe to be below their true
value.
These proposals have been unanimously approved by your Fund's Board of Trustees,
who believe they will benefit you and your fellow shareholders. They are
detailed in the enclosed proxy statement and summarized in the questions and
answers on the following page. I urge you to read both thoroughly before voting.
Your Vote Is Critical!
No matter what the size of your investment, your vote makes a difference. I urge
you to review the enclosed materials and to complete, sign and return the
enclosed proxy ballot to us immediately. Your prompt response will help avoid
the need for additional mailings. For your convenience, we have enclosed a
postage-paid envelope.
If you have any questions or need additional information, please contact your
investment professional or your Customer Service Representative at
1-800-225-5291, Monday through Friday between 8:00 a.m. and 8:00 p.m. Eastern
Time. I thank you for your prompt vote on this matter.
Sincerely,
Enclosure Edward J. Boudreau, Jr.
370PX 6/98 Chairman and CEO
- --------------------------------------------------------------------------------
John Hancock Advisers, Inc. John Hancock Funds, Inc.*, Boston, MA 02199 The
Patriot Group, Inc. John Hancock Advisers International, Ltd. NM Capital
Management Inc., Sovereign Asset Management Corporation
<PAGE>
How has the Special Value Fund performed?
By following its value-oriented approach to small-cap investing, your Fund's
Class A shares have posted average annual total returns for the period ended
March 31, 1998 of 35.46% over the past year, 19.55% over the past three years
and 17.97% since inception in December 1994. The Fund's Class B shares have
posted average annual total returns of 36.65% over the past year, 20.04% over
the past three years and 16.82% since inception in December 1994. These
performance figures reflect payment of the maximum sales charge and are not a
guarantee of future returns.
Why hasn't the Fund paid quarterly dividends recently?
As you know, a stock fund pays income when the stocks in its portfolio pay out
earnings to stockholders in the form of dividends. Stocks of large, established
companies tend to pay their earnings as dividends to shareholders, while small
companies often reinvest those earnings back into their business. Consequently,
large-company stock investments tend to offer investors a combination of capital
appreciation and income, while small-company stock investments may offer higher
appreciation potential, but limited income.
Does this mean my Fund will not pay dividends?
The proposal will not have any effect on your Fund's current income potential,
but its dividend payment schedule will change. Consistent with most growth
funds, your Fund will adopt an annual dividend schedule if this proposal is
approved. Consequently, if your Fund produces dividends in the future, they
would be paid in December rather than quarterly.
If the Fund's investment objective is adjusted to remove the reference to
income, will its strategy change or will it become more aggressive?
These proposed changes will not affect the portfolio management team's
investment style in any way. Portfolio Manager Timothy Keefe, CFA and his
seasoned investment team will continue to seek capital appreciation by investing
in stocks of small companies whose current share prices appear to be below their
true value. To provide current and prospective shareholders with the clearest
possible representation of the Fund's investment strategy and goals, the
proposed adjustment will better reflect the Fund's long-standing focus on
small-cap stocks.
How can moving my Fund to the growth prospectus benefit me?
As you may know, a fund's prospectus details its strategy, investment objective,
risks and expenses. It must be reviewed by a prospective investor before he or
she invests. You may also be aware that we recently consolidated our
prospectuses by investment objective, making it easier for investors and
investment professionals to review the range of funds we offer within each
objective. As might be expected, investment professionals and their clients
interested in a growth investment are more likely to find a fund like Special
Value, if it is listed in our growth prospectus with other growth funds. Listing
your Fund in a more appropriate prospectus may, in turn, lead to higher sales,
greater assets under management and lower expenses for you and your fellow
shareholders.
What is the Fund's underlying trust and why will it be reorganized?
Your Fund's underlying trust spells out your Fund's legal
structure. The trust sets your Fund's fiscal year end, which determines your
Fund's accounting, printing and SEC filing schedules. To increase efficiency,
similar funds are typically grouped under one trust. Consequently, if your Fund
moves from the Growth and Income Funds prospectus to the Growth Funds
prospectus, it will be removed from its current trust and added to the same
trust as our other growth funds. This proposed reorganization will have no
federal income tax consequences to you and will not affect your Fund's
investment style in any way.
What's the difference between value- and growth-oriented investing? Can a growth
fund have a value investment style?
Stocks and stock mutual funds are often divided into two categories: value and
growth. Value-oriented stock funds typically invest in stocks whose prices
appear to be below their true value, with the objective of profiting once the
stock market recognizes their actual worth and drives their stock prices up.
Growth-oriented stock funds, on the other hand, focus on stocks of companies
whose earnings growth outpaces their peers, justifying their potentially higher
stock prices. When portfolio managers believe these companies' earnings growth
will continue, they often add these stocks to their portfolio. In pursuing
capital growth, mutual funds can follow a value- or growth-oriented investment
style. In fact, many growthoriented investors invest in both styles to achieve
their goals.
Why are two investment restrictions being amended?
Before October 1996, state securities commissions had the authority to regulate
mutual fund operations. That authority has since been revoked so that two of
your fund's investment policies, those governing pledging assets and issuer
diversification, are now more restrictive than federal law requires. Relaxing
these restrictions will bring your fund into conformity with the standards
maintained by most of John Hancock's other funds. It will also give your fund
more flexibility to respond to changes and opportunities in the marketplace.
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JOHN HANCOCK SPECIAL VALUE FUND
(a series of John Hancock Capital Series)
101 Huntington Avenue
Boston, MA 02199
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 16, 1998
This is the formal agenda for your fund's special meeting. It tells you what
matters will be voted on and the time and place of the meeting, in case you want
to attend in person.
To the shareholders of John Hancock Special Value Fund:
A special meeting of shareholders of your fund will be held at 101 Huntington
Avenue, Boston, Massachusetts on Wednesday, September 16, 1998 at 9:00 a.m.,
Eastern time, to consider the following:
1. A proposal to approve an agreement and plan of reorganization
providing for the reorganization of your fund from a series of
John Hancock Capital Series (Capital Series) into a series of
John Hancock Investment Trust II (Investment Trust II). Your
board of trustees recommends that you vote FOR this proposal.
2. A proposal to amend your fund's investment objective to
eliminate the reference to income as a secondary
consideration. Your board of trustees recommends that you vote
FOR this proposal.
3(a)-(b). A proposal to amend or eliminate certain of your fund's
fundamental investment restrictions. Your board of trustees
recommends that you vote FOR this proposal.
4. Any other business that may properly come before the meeting.
Shareholders of record as of the close of business on June 19, 1998 are entitled
to vote at the meeting and any related follow-up meetings. Fund shareholders
will not pay the costs associated with the special meeting.
Whether or not you expect to attend the meeting, please complete and return the
enclosed proxy card. Please take a few minutes to vote now.
By order of the board of trustees,
Susan S. Newton
Secretary
July 7, 1998
<PAGE>
PROXY STATEMENT OF
JOHN HANCOCK SPECIAL VALUE FUND
(a series of John Hancock Capital Series)
This proxy statement contains the information you should know before voting on
the proposals as summarized below.
Special Value Fund will furnish without charge a copy of its Annual Report and
most recent Semi-Annual Report succeeding the Annual Report, if any, to any
shareholder upon request. Shareholders who want to obtain a copy of the fund's
report(s) should direct all written requests to the attention of the fund, 101
Huntington Avenue, Boston, Massachusetts 02199 or should call John Hancock Funds
at 1-800-225-5291.
INTRODUCTION
This proxy statement is being used by the board of trustees of your fund to
solicit proxies to be voted at a special meeting of shareholders of your fund.
This meeting will be held at 101 Huntington Avenue, Boston, Massachusetts on
Wednesday, September 16, 1998 at 9:00 a.m., eastern time. The purpose of the
meeting is to consider:
1. A proposal to approve an agreement and plan of reorganization
providing for the reorganization of your fund from a series of
John Hancock Capital Series (Capital Series) into a new series
of John Hancock Investment Trust II (Investment Trust II).
2. A proposal to amend your fund's investment objective to eliminate the
reference to income as a secondary consideration.
3(a)-(b). A proposal to amend or eliminate certain of your fund's fundamental
investment restrictions.
4. Any other business that may properly come before the meeting.
This proxy statement and the proxy card are being mailed to your fund's
shareholders on or about July 7, 1998.
Who is Eligible to Vote?
Shareholders of record on June 19, 1998 are entitled to attend and vote on each
proposal at the meeting or any adjourned meeting. Each share is entitled to one
vote. Shares represented by properly executed proxies, unless revoked before or
at the meeting, will be voted according to shareholders' instructions. If you
sign a proxy, but do not fill in a vote, your shares will be voted to approve
<PAGE>
the proposals. If any other business comes before the meeting, your shares will
be voted at the discretion of the persons named as proxies.
PROPOSAL 1
TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Purpose of the Reorganization
Your fund has historically focused its investments on stocks with a median
market capitalization below $1 billion (small capitalization stocks). As a
result, your fund typically appeals to investors seeking long-term capital
appreciation or growth. The fund's management believes that your fund would be
better positioned to increase its asset size if it were offered with other John
Hancock growth funds in the growth funds' consolidated prospectus.
The fund's management expects that shareholders will ultimately benefit from an
increase in the fund's asset size. An increase in asset size may increase the
number of investments in the portfolio or increase the size of a particular
investment in the portfolio. An increased number of portfolio investments means
an increased diversity of the fund's holdings which helps to reduce the
volatility of the fund's net asset value. The portfolio manager may also be
better able to meet redemption requests if the fund has more cash flow so that
desirable portfolio investments do not have to be reduced to meet redemptions.
An increase in your fund's asset size may also result, over time, in lower
annual fund operating expenses.
The John Hancock growth funds seek long term growth by investing primarily in
common stocks, as your fund does. Funds seeking growth of capital are often
divided into two basic styles--growth funds focusing on stocks of companies
whose earnings growth outpaces their peers, and value funds like your fund,
which invest in stocks that appear to be trading at prices below their true
value.
All John Hancock growth funds are offered in the same consolidated prospectus
and have an October 31 fiscal year end. In order to administer and operate the
funds in the consolidated prospectus efficiently, each fund must have the same
fiscal year end. Therefore, before your fund is offered in the growth fund
consolidated prospectus, its fiscal year end must be changed to October 31.
Currently, your fund is a series of Capital Series with a December 31 fiscal
year end. To move into the growth funds' prospectus, your fund must be moved out
of Capital Series and relocated as a series of a trust that has an October 31
fiscal year end, Investment Trust II. The most efficient way to move your fund
is by a tax-free reorganization of the type described in this proxy statement.
<PAGE>
Based on information provided by the fund's adviser and distributor, your board
of trustees believes that repositioning the fund as a growth fund may increase
its asset size. Because it believes that a repositioned fund would operate more
efficiently as a series of a different trust, your board of trustees has
determined that the proposed reorganization will be in the best interest of the
fund and the shareholders.
Description of Reorganization
You are being asked to approve an agreement and plan of reorganization, a copy
of which is attached as Exhibit A. The agreement provides for the reorganization
of your fund on the following terms:
o The reorganization is scheduled to occur on October 31, 1998. Your fund
will transfer all of its assets to a new series of Investment Trust II
and the new series will assume all of your fund's liabilities. Until
the completion of this transfer and the actions described below, the
new series will have no assets and no shareholders.
o The new series will issue to your fund a number of Class A, Class B and
Class C shares identical to the number of, and with the same net asset
value per share as, your fund's Class A, Class B and Class C shares,
respectively. As part of the liquidation of your fund, these shares
will be distributed to Class A, Class B and Class C shareholders of
record of your fund on the reorganization date after the vote described
below. As a result, Class A, Class B and Class C shareholders of your
fund will end up as Class A, Class B and Class C shareholders,
respectively, of the new series.
o Your fund, as the only shareholder of the new series until your fund
distributes shares to you, will vote to approve the investment
management contract between the new series and John Hancock Advisers,
Inc. (JHA) and the new series' Rule 12b-1 plan that are identical to
the existing contract and Rule 12b-1 plan.
o After the reorganization is over, the existence of your fund will be
terminated, and its business will continue to be carried on by the new
series in substantially the same manner as it had been carried on by
your fund.
o Your fund's board of trustees may terminate the Agreement (even if the
shareholders of your fund have already approved it) at any time before
the reorganization date, if the board believes that proceeding with the
<PAGE>
reorganization would no longer be advisable.
The following diagram shows how the reorganization would be carried out:
Special Value Fund Special Value Fund's New Special Value Fund
transfers assets and assets and liabilities receives assets and
liabilities to New Special assumes liablilities
Value Fund of Special Value Fund
<TABLE>
<CAPTION>
Class A Class B Class C Issues Class Issues Class Issues Class
shareholders shareholders shareholders C shares B shares A shares
<S> <C> <C> <C> <C> <C>
Your fund receives New Special Value Fund Class C
shares and distributes them to your fund's Class C
shareholders
Your fund receives New Special Value Fund Class B
shares and distributes them to your fund's
Class B shareholders
Your fund receives New Special Value Fund Class A shares and distributes
them to your fund's Class A shareholders
[The above was represented as a diagram illustrating the reorganization]
</TABLE>
Governance of the Fund
If shareholders approve this proposal, the fund will be governed by the
declaration of trust of Investment Trust II rather than the declaration of trust
of Capital Series. The Investment Trust II declaration is substantially similar
to the Capital Series declaration, except that the Investment Trust II
declaration provides the trustees with broader authority to amend the
declaration of trust without shareholder approval, thus avoiding the need for
costly shareholder meetings. However, the declaration does provide that trustees
may not amend the declaration to impair any voting or other rights of
shareholders prescribed by federal or state law.
<PAGE>
Since the boards of trustees of Capital Series and Investment Trust II are
comprised of the same persons, your board of trustees will not change as a
result of the reorganization. Ernst & Young will continue to serve as the fund's
independent auditor. Investors Bank & Trust Company and John Hancock Funds, Inc.
(John Hancock Funds) will continue to provide custody and distribution services
to the fund. The fee schedules for services provided to the new series under the
contracts described above will be identical to those in effect before the
reorganization.
The terms of the fund's investment management contract, Rule 12b-1 distribution
plans and Rule 18f-3 multiple class plan will not change.
Except as described below, and subject to your approval, your fund's investment
policies and investment strategies will not change.
Shareholder Accounts and Elections
The fund's transfer agent, John Hancock Signature Services, Inc., will establish
accounts for all fund shareholders containing the appropriate number of shares
of the new series to be received by each shareholder as a part of the
reorganization. Each account and its elections will be identical in all material
respects to those currently maintained by the fund for its shareholders.
Expenses of the Reorganization
JHA has agreed to bear the costs related to the reorganization for your fund and
the new series.
Tax Consequences of the Reorganization
The reorganization will be tax-free for federal income tax purposes and will not
take place unless both funds receive a satisfactory opinion from Hale and Dorr
LLP, counsel to the funds, substantially to the effect that:
o The reorganization will be a "reorganization" within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986 (Code), and each
fund will be "a party to a reorganization" within the meaning of
Section 368 of the Code;
o No gain or loss will be recognized by your fund upon (1) the transfer
of all of its assets and liabilities to the new series as described
above or (2) the distribution by your fund of shares of the new series
to your fund's shareholders;
<PAGE>
o No gain or loss will be recognized by the new series upon the receipt
of your fund's assets solely in exchange for the issuance of shares of
the new series and the assumption of all of your fund's liabilities by
the new series;
o The tax basis of the assets of your fund acquired by the new series
will be the same as the basis of those assets in the hands of your fund
immediately before the transfer;
o The tax holding period of the assets of your fund in the hands of the
new series will include your fund's tax holding period for those
assets;
o The shareholders of your fund will not recognize gain or loss upon the
exchange of all their shares of your fund solely for shares of the new
series as part of the reorganization;
o The tax basis of shares of the new series received by your fund's
shareholders in the reorganization will be the same as the tax basis of
the shares of your fund surrendered in exchange; and
o The tax holding period of the shares of the new series received by your
fund's shareholders will include the tax holding period of your fund's
shares surrendered in the exchange, provided that the shares of your
fund were held as capital assets on the date of exchange.
BOARD EVALUATION AND RECOMMENDATION
For the reasons described above, the board of trustees, including the trustees
who are not "interested persons" of the fund, the new series or JHA (independent
trustees), approved the reorganization. In particular, the trustees determined
that the reorganization was in the best interests of your fund and that the
interests of your fund's shareholders would not be diluted as a result of the
reorganization.
If the required approval of shareholders is not obtained, the fund will remain
as a series of Capital Series.
The trustees of your fund recommend that the shareholders of your fund vote for
the proposal to approve the agreement and plan of reorganization.
<PAGE>
PROPOSAL 2
TO AMEND THE FUND'S INVESTMENT OBJECTIVE TO ELIMINATE THE
REFERENCE TO INCOME AS A SECONDARY CONSIDERATION
If the fund's shareholders approve this proposal, the fund's investment
objective will be amended to eliminate the reference to income as a secondary
consideration.
The fund's primary objective has been and will continue to be "capital
appreciation." The fund has historically focused its investments on stocks with
a median market capitalization below $1 billion (small capitalization stocks).
Because income was a secondary consideration, the fund is not required to be
managed to produce a predictable level of income. For the past several quarters,
the fund has not paid any dividend from income on its shares. To avoid
suggesting to investors that the fund will yield a regular dividend, the
trustees believe that it is appropriate to delete the reference to income in the
fund's objective.
BOARD EVALUATION AND RECOMMENDATION
For the reasons described above, the board of trustees, including the
independent trustees, recommends that the shareholders of the fund approve
amending the fund's investment objective to eliminate the reference to income as
a secondary objective.
If the required approval of shareholders is not obtained, the fund's investment
objective will remain unchanged.
The trustees of your fund recommend that the shareholders of your fund vote for
the proposal to amend the fund's investment objective to eliminate the reference
to income as a secondary consideration.
PROPOSALS 3(a)-(b)
TO AMEND OR ELIMINATE CERTAIN INVESTMENT RESTRICTIONS
The Investment Company Act of 1940 (the Act) governs many mutual fund
operations. The Act requires that funds adopt fundamental restrictions with
respect to certain types of investments and practices that may be changed only
with shareholder approval. It is being proposed that the fund's diversification
and pledging restrictions be changed to reflect the elimination of additional
<PAGE>
state regulations that formerly imposed these restrictions. Both the current and
the revised investment restrictions are listed in Exhibit B to this proxy
statement.
The following is a summary of the proposed changes to the investment
restrictions. The restrictions are summarized individually and will be voted
upon separately.
<PAGE>
Proposal 3(a): To Eliminate the Investment Restriction on Pledging Assets
Until October 11, 1996, state securities commissions regulated the investment
policies and restrictions of mutual funds and required funds to adopt
fundamental restrictions not required by the Act. The Act was amended in 1996 to
abolish the authority of these agencies to regulate the investment practices of
funds.
The fund's fundamental restriction on pledging or mortgaging its assets was
imposed under state securities laws that no longer apply to the fund. The fund's
borrowing activities are already regulated by the fund's separate restriction on
borrowing, and the restriction on pledging and mortgaging assets is redundant.
Consequently, your fund's board recommends that you vote to eliminate this
restriction.
Proposal 3(b): To Amend the Investment Policy on Issuer Diversification
To be classified as a diversified investment company under the Act, a fund must
not, with respect to 75% of its total assets, invest more than 5% of its total
assets in the securities of any one issuer or acquire more than 10% of the
outstanding voting securities of any one issuer. These restrictions apply only
at the time of investment. A fund may invest up to 25% of its total assets
without regard to these restrictions. In addition, these restrictions do not
apply to holdings of or investments in cash, cash items, U.S.
Government securities or securities of other funds.
The fund's current investment restriction is more restrictive than the Act
requires because it applies to 100% of the fund's assets. This means that the
fund may not hold more than 5% of its assets in any one issuer. JHA is
recommending that you approve amending this restriction to conform it to the
diversification test imposed by the Act.
Changing this restriction will enable the fund to invest a greater portion of
its assets in, and to acquire a greater percentage of, the securities of any one
issuer. The fund's ability to invest in any one issuer will still be limited by
its diversified status under the Act. To the extent that the fund's portfolio
becomes less diversified, it may suffer losses due to adverse events affecting a
particular issuer.
BOARD EVALUATION AND RECOMMENDATION
The trustees believe that the proposed amendments to the fund's pledging and
diversification restrictions will more clearly reflect current regulatory
<PAGE>
practice and will expand the investment opportunities available to the fund.
Accordingly, the trustees recommend that you approve the proposals to change the
fund's pledging and diversification restrictions.
If the required approval of a change to a restriction is not obtained, the
current investment restriction will continue in effect.
The trustees of your fund recommend that the shareholders of your fund vote for
the proposal to amend or eliminate certain of the fund's investment
restrictions.
VOTING RIGHTS AND REQUIRED VOTE
Each share of your fund is entitled to one vote. Approval of each proposal
requires the affirmative vote of a majority of the shares of your fund
outstanding and entitled to vote. For this purpose, a majority of the
outstanding shares of your fund means with respect to each proposal the vote of
the lesser of
(1) 67% or more of the shares present at the meeting, if the holders of
more than 50% of the shares of the fund are present or represented by
proxy, or
(2) more than 50% of the outstanding shares of the fund.
Shares of your fund represented in person or by proxy, including shares which
abstain or do not vote with respect to a proposal, will be counted for purposes
of determining whether there is a quorum at the meeting. Accordingly, an
abstention from voting has the same effect as a vote against a proposal.
However, if a broker or nominee holding shares in "street name" indicates on the
proxy card that it does not have discretionary authority to vote on a proposal,
those shares will not be considered present and entitled to vote on that
proposal. Thus, a "broker non-vote" has no effect on the voting in determining
whether a proposal has been adopted in accordance with clause (1) above, if more
than 50% of the outstanding shares (excluding the "broker non-votes") are
present or represented. However, for purposes of determining whether a proposal
has been adopted in accordance with clause (2) above, a "broker non-vote" has
the same effect as a vote against that proposal because shares represented by a
"broker non-vote" are considered to be outstanding shares.
<PAGE>
INFORMATION CONCERNING THE MEETING
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, by fax or in person by the trustees, officers and employees of your
fund; by personnel of JHA, the fund's principal distributor, John Hancock Funds,
and the fund's transfer agent, John Hancock Signature Services, Inc., or by
broker-dealer firms. Signature Services, together with a third party
solicitation firm, has agreed to provide proxy solicitation services at a cost
of approximately $_______, which will be paid by JHA.
The mailing address of the fund, JHA and John Hancock Funds is 101 Huntington
Avenue, Boston, Massachusetts, 02199.
Revoking Proxies
A shareholder signing and returning a proxy has the power to revoke it at any
time before it is exercised:
o By filing a written notice of revocation with your fund's
transfer agent, John Hancock Signature Services, Inc., 1 John
Hancock Way, Suite 1000, Boston, Massachusetts 02217-1000,
o By returning a duly executed proxy with a later date before
the time of the meeting, or
o If a shareholder has executed a proxy but is present at the
meeting and wishes to vote in person, by notifying the
secretary of the fund (without complying with any formalities)
at any time before it is voted.
Being present at the meeting alone does not revoke a previously executed and
returned proxy.
Outstanding Shares and Quorum
As of June 19, 1998, _____________ Class A shares, __________ Class B shares and
______________ Class C shares of beneficial interest of the fund were
outstanding. Only shareholders of record on June 19, 1998 (record date) are
entitled to notice of and to vote at the meeting. A majority of the outstanding
shares of the fund that are entitled to vote will be considered a quorum for the
transaction of business.
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Other Business
The fund's board of trustees knows of no business to be presented for
consideration at the meeting other than the proposal. If other business is
properly brought before the meeting, proxies will be voted according to the best
judgment of the persons named as proxies.
Adjournments
If a quorum is not present in person or by proxy at the time any session of the
meeting is called to order, the persons named as proxies may vote those proxies
that have been received to adjourn the meeting to a later date. If a quorum is
present but there are not sufficient votes in favor of a proposal, the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies concerning that proposal. Any adjournment will
require the affirmative vote of a majority of the fund's shares at the session
of the meeting to be adjourned. If an adjournment of the meeting is proposed
because there are not sufficient votes in favor of a proposal, the persons named
as proxies will vote those proxies favoring that proposal in favor of
adjournment, and will vote those proxies against the proposal against
adjournment.
Telephone Voting
In addition to soliciting proxies by mail, by fax or in person, the fund may
also arrange to have votes recorded by telephone by officers and employees of
the fund or by personnel of the adviser or transfer agent. The telephone voting
procedure is designed to verify a shareholder's identity, to allow a shareholder
to authorize the voting of shares in accordance with the shareholder's
instructions and to confirm that the voting instructions have been properly
recorded. If these procedures were subject to a successful legal challenge,
these telephone votes would not be counted at the meeting. The fund has not
obtained an opinion of counsel about telephone voting, but is currently not
aware of any challenge.
o A shareholder will be called on a recorded line at the telephone number
in the fund's account records and will be asked to provide the
shareholder's social security number or other identifying information.
o The shareholder will then be given an opportunity to authorize proxies
to vote his or her shares at the meeting in accordance with the
shareholder's instructions.
<PAGE>
o To ensure that the shareholder's instructions have been recorded
correctly, the shareholder will also receive a confirmation of the
voting instructions by mail.
o A toll-free number will be available in case the voting information
contained in the confirmation is incorrect.
o If the shareholder decides after voting by telephone to attend the
meeting, the shareholder can revoke the proxy at that time and vote the
shares at the meeting.
OWNERSHIP OF SHARES IN THE FUNDS
To the knowledge of the fund, as of May 29, 1998, the following persons owned of
record or beneficially 5% or more of the outstanding Class A, Class B and Class
C shares of your fund.
[Insert Table of 5% and > shareholders here]
As of May 29, 1998, the trustees and officers of the fund owned in the
aggregate less than 1% of the outstanding shares of the fund.
<PAGE>
EXHIBIT A
JOHN HANCOCK SPECIAL VALUE FUND
Agreement and Plan of Reorganization
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
this 1st day of June, 1998, between John Hancock Capital Series, a Massachusetts
business trust (the "Existing Trust"), on behalf of John Hancock Special Value
Fund (the "Fund"), and John Hancock Investment Trust II, a Massachusetts
business trust (the "Successor Trust"), each with principal offices at 101
Huntington Avenue, Boston, Massachusetts 02199.
1. Plan of Reorganization and Liquidation
(a) The Existing Trust, on behalf of the Fund, shall assign, sell,
convey, transfer and deliver to a new series of the Successor
Trust (the "Successor Fund") at the Closing provided for in
Section 2 (hereinafter called the "Closing") all of its then
existing assets of every kind and nature. In consideration
therefor, the Successor Trust, on behalf of the Successor
Fund, agrees that at the Closing (i) the Successor Fund shall
assume all of the Fund's obligations and liabilities then
existing, whether absolute, accrued, contingent or otherwise,
including all unpaid fees and expenses of the Fund in
connection with the transactions contemplated hereby and (ii)
the Successor Trust shall issue and deliver to the Fund a
number of full and fractional shares of each class of shares
of beneficial interest of the Successor Fund (the "Successor
Fund Shares"), which is equal to the number of full and
fractional shares of the corresponding class of shares of the
Fund then outstanding.
(b) Upon consummation of the transactions described in paragraph
(a) of this Section 1, the Existing Trust, on behalf of the
Fund, shall distribute in complete liquidation pro rata to its
shareholders of record as of the Closing Date the Successor
Fund Shares received by the Fund. This distribution shall be
accomplished by establishing an account on the share record
books of the Successor Fund in the name of each shareholder of
each class of shares of the Fund, representing with respect to
each class of shares of the Successor Fund the number of full
and fractional Successor Fund Shares equal to the number of
shares of the corresponding class of shares of the Fund owned
of record by the shareholder at the Closing Date.
(c) As promptly as practicable after the above liquidation of the
Fund, the legal existence of the Fund shall be terminated.
2. Closing and Closing Date. The Closing shall occur at the end of the day on
October 31, 1998 or at such later time and date as the parties may mutually
agree (the "Closing Date").
3. Conditions Precedent. The obligations of the Existing Trust, the Fund, the
Successor Trust and the Successor Fund to effect the transactions contemplated
hereunder (the "Reorganization") shall be subject to the satisfaction of each of
the following conditions:
(a) All such filings shall have been made with, and all such
authorizations and orders shall have been received from, the
Securities and Exchange Commission (the "SEC") and state
securities commissions as may be necessary to permit the
parties to carry out the transactions contemplated by this
Agreement.
(b) Each party shall have received an opinion of counsel
substantially to the effect that for federal income tax
purposes: (1) the acquisition of the assets and assumption of
the liabilities of the Fund by the Successor Fund in return
for Successor Fund Shares, the distribution of such Successor
Fund Shares to the shareholders of the Fund in complete
-1-
<PAGE>
liquidation of the Fund, and the termination of the Fund will
constitute a "reorganization" within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Successor Fund and the Fund will each be
"a party to a reorganization" within the meaning of Section
368(b) of the Code; (2) no gain or loss will be recognized by
the Fund upon the transfer of all of its assets to the
Successor Fund solely in exchange for the Successor Fund
Shares and the assumption by the Successor Fund of the
liabilities of the Fund and the distribution by the Fund of
such Successor Fund Shares to the shareholders of the Fund;
(3) no gain or loss will be recognized by the Successor Fund
upon the receipt of all of the assets of the Fund in exchange
solely for Successor Fund Shares and the assumption by the
Successor Fund of the liabilities of the Fund; (4) the tax
basis of the Successor Fund in assets received from the Fund
will be the same as the tax basis of such assets in the hands
of the Fund immediately prior to the transfer of such assets
to the Successor Fund; (5) the Successor Fund's tax holding
period for the assets acquired from the Fund will include, in
each instance, the Fund's tax holding period for those assets;
(6) no gain or loss will be recognized by the Fund's
shareholders upon the exchange of their shares of the Fund
solely for Successor Fund Shares as part of the
reorganization; (7) the tax basis of the Successor Fund Shares
received by the Fund's shareholders in the transaction will
be, for each shareholder, the same as the tax basis of the
shares of the Fund exchanged therefor; and (8) the tax holding
period of the Successor Fund Shares received by the Fund's
shareholders will include, for each shareholder, the
shareholder's tax holding period for the shares of the Fund
surrendered therefor, provided that the surrendered shares
were held as capital assets in the hands of the Fund's
shareholders on the date of the exchange. The opinion may
cover any additional matters deemed material by such counsel.
(c) This Agreement and the Reorganization shall have been adopted
and approved by the affirmative vote of the holders of a
majority of the shares of the Fund outstanding and entitled to
vote (as defined by the Investment Company Act of 1940, as
amended (the "1940 Act")). All shares of the Fund will be
voted together as a single class.
(d) The Successor Trust, on behalf of the Successor Fund, shall
have entered into an Investment Management Contract with John
Hancock Advisers, Inc. which shall be substantially identical
in form and substance to the Investment Management Contract in
effect at the Closing Date between the Fund and John Hancock
Advisers, Inc. The Investment Management Contract shall have
been approved by the Trustees of the Successor Trust,
including, to the extent required by law, the Trustees of the
Successor Trust who are not "interested persons" of the Trust
as defined in the 1940 Act.
(e) The Successor Trust, on behalf of the Successor Fund, shall
have entered into a Transfer Agency Agreement with John
Hancock Signature Services, Inc. and a Distribution Agreement
with John Hancock Funds, Inc. These agreements shall be in
each case substantially identical in form and substance to
those respective agreements in effect at the Closing Date
between the Fund and said other parties. These agreements
shall have been approved by the Trustees of the Successor
Trust and, to the extent required by law, by the Trustees of
the Successor Trust who are not "interested persons" of the
Trust as defined in the 1940 Act.
-2-
<PAGE>
(f) The Trustees of the Successor Trust, including those Trustees
of the Successor Trust who are not "interested persons" of the
Successor Trust as defined in the 1940 Act, shall have
selected as auditors for the Successor Fund such auditors as
shall have been selected and ratified for the Fund. This
selection shall have been ratified by the Fund as the sole
shareholder of the Successor Fund prior to the consummation of
the Reorganization.
(g) The Successor Trust, on behalf of the Successor Fund,
shall have adopted a Class A Shares Distribution Plan, a Class
B Shares Distribution Plan, and a Class C Shares Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act substantially
identical in form and substance to the Fund's Class A Shares
Distribution Plan, Class B Shares Distribution Plan, and Class
C Shares Distribution Plan, respectively, in effect on the
Closing Date. Each of the Successor Fund's Distribution Plans
shall be approved by the Trustees of the Successor Trust in
accordance with Rule 12b-1 and by the Fund, as the sole
shareholder of the Successor Fund, prior to the consummation
of the Reorganization.
At any time prior to the Closing, any of the foregoing conditions except 3(c)
may be waived by the Board of Trustees of the Existing Trust or the Board of
Trustees of the Successor Trust if, in their judgment, the waiver will not have
a material adverse effect on the interests of the shareholders of the Fund.
4. Amendment. This Agreement may be amended at any time by action of the
Trustees of the Existing Trust and the Trustees of the Successor Trust,
notwithstanding approval thereof by the shareholders of the Fund, provided that
no amendment shall have a material adverse effect on the interests of the
shareholders of the Fund.
5. Termination. The Board of Trustees of the Existing Trust or the Board of
Trustees of the Successor Trust may terminate this Agreement and abandon the
Reorganization, notwithstanding approval thereof by the shareholders of the
Fund, at any time prior to the Closing, if circumstances should develop that, in
their judgment, make proceeding with the Reorganization inadvisable.
6. Limitation of Liability of the Trustees and the Shareholders. Copies of the
Declaration of Trust of the Existing Trust and the Successor Trust, as each may
be amended from time to time, are on file with the Secretary of State of the
Commonwealth of Massachusetts, and notice is hereby given of the limitation of
shareholder liability as set forth in each instrument. The obligations assumed
by the Existing Trust on behalf of the Fund and the Successor Trust on behalf of
the Successor Fund pursuant to this Agreement shall be limited in all cases to
the Existing Trust on behalf of the Fund and the Successor Trust on behalf of
the Successor Fund and their respective assets. None of the other series of the
Existing Trust or the Successor Trust shall be liable for any obligations
assumed by the Fund or the Successor Fund hereunder. No party named herein shall
seek satisfaction of any obligation hereunder from the shareholders or any
shareholder of the Existing Trust, the Fund, the Successor Trust or the
Successor Fund. No party named herein shall seek satisfaction of any such
obligation from the Trustees of the Successor Trust or the Trustees of the
Existing Trust or any individual Trustee.
This Agreement shall be executed in any number of counterparts each of which
shall be deemed to be an original, but all counterparts together shall
constitute only one instrument.
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to
be executed and delivered by their duly authorized officers as of the day and
year first above written.
-3-
<PAGE>
JOHN HANCOCK CAPITAL SERIES, on behalf of
its series John Hancock Special Value Fund
Attest: ____________________________ By: _________________________________
Secretary Vice Chairman
JOHN HANCOCK INVESTMENT TRUST II,
on behalf of its series John Hancock
Special Value Fund
Attest: ____________________________ By: _________________________________
Secretary Vice Chairman
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT B
JOHN HANCOCK SPECIAL VALUE FUND
Amendments to Investment Restrictions
Current Fundamental Restrictions Amended Fundamental Restrictions
<S> <C>
- ----------------------------------------------------------- --------------------------------------------------------
(4) Purchase securities of an issuer (other (4) Purchase securities of an issuer (other
than the U.S. Government, its agencies or than the U.S. Government, its agencies or
instumentalities), if (i) such purchase instrumentalities), if, with respect to 75%
would cause more than 5% of the fund's of the fund's total assets,
total assets taken at market value to be
invested in the securities of such issuer, (i) the purchase would cause more than
or (ii) such purchase would at the time 5% of the fund's total assets taken at
result in more than 10% of the market value to be invested in the
outstanding voting security of such issuer securities of the issuer, or
being held by the fund.
(ii) the purchase would at the time result
in more than 10% of the outstanding
voting securities of the issuer being held
by the fund.
- ----------------------------------------------------------- --------------------------------------------------------
(7) Pledge, mortgage or hypothecate its No similar restriction. This restriction was
assets, except to secure indebtedness required by state securities
permitted by paragraph (6) above and administrators and is no longer required
then only if such pledging, mortgaging or because of the 1996 preemption of state
hypothecating does not exceed 33 1/3% regulation of mutual funds. The fund's
of the fund's total assets taken at market activities related to borrowing are subject
value. to the limits of fundamental investment
restriction 6 on borrowing.
- ----------------------------------------------------------- --------------------------------------------------------
</TABLE>
<PAGE>
Form of Proxy Card [FRONT]
- -------------------------------------------------------------------------------
PROXY
JOHN HANCOCK SPECIAL VALUE FUND
A SERIES OF JOHN HANCOCK CAPITAL SERIES
The undersigned holder of shares of beneficial interest of John Hancock
Special Value Fund hereby constitutes and appoints Anne C. Hodsdon, James B.
Little and Susan S. Newton, and each of them singly, proxies and attorneys of
the undersigned, with full power of substitution to each, for and in the name of
the undersigned, to vote and act upon all matters at the special meeting of
shareholders of the fund to be held on Wednesday, September 16, 1998 at the
offices of the fund, 101 Huntington Avenue, Boston, Massachusetts, at 9:00 a.m.,
eastern time, and at any and all adjournments thereof, relating to all shares of
the fund held by the undersigned or relating to all shares of the fund held by
the undersigned which the undersigned would be entitled to vote or act, with all
the powers the undersigned would possess if personally present. All proxies
previously given by the undersigned relating to the meeting are hereby revoked.
ITEM 1: To approve the agreement and plan of reorganization.
|_| FOR |_| AGAINST |_| ABSTAIN
ITEM 2: To amend the fund's investment objective to eliminate the reference to
income as a secondary consideration.
|_| FOR |_| AGAINST |_| ABSTAIN
ITEM 3(a): To eliminate the fund's investment restriction on pledging assets.
|_| FOR |_| AGAINST |_| ABSTAIN
ITEM 3(b): To amend the fund's investment restriction on issuer diversification.
|_| FOR |_| AGAINST |_| ABSTAIN
<PAGE>
Form of Proxy Card [REVERSE]
- ------------------------------------------------------------------------------
Specify your desired action by check marks in the appropriate space. This proxy
will be voted as specified. If no specification is made, the proxy will be voted
in favor of each item. The persons named as proxies have discretionary
authority, which they intend to exercise in favor of the proposals referred to
and according to their best judgment as to any other matters which properly come
before the meeting.
o Please complete, sign, date and
return this proxy in the enclosed
envelope as soon as possible.
o Please sign exactly as your name or
names appear in the box on the left.
When signing as attorney, executor,
administrator, trustee or guardian,
please give your full title as such.
o If a corporation, please sign in
full corporate name by president or
other authorized officer.
o If a partnership, please sign in
partnership name by authorized
person.
Date ___________________________ , 1998
_______________________________________
_______________________________________
This proxy is solicited by the board of trustees
<PAGE>
EDGAR FILING
June 5, 1998
Securities and Exchange Commission
File Desk
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: John Hancock Capital Series (the "Trust")
- John Hancock Special Value Fund (the "Fund")
File Nos. 2-29502; 811-1677 (0000045291)
Ladies and Gentlemen:
Enclosed herewith for filing on behalf of the Trust, pursuant to Rule
14a-6 Regulation 14A under the Securities Exchange Act of 1934 (the "1934 Act")
and Rule 101(a) of Regulation S-T, is the notice of meeting, the proxy statement
and the form of proxy to be mailed to Fund shareholders in connection with the
meeting of Fund shareholders to be held on September 16, 1998.
The shareholder meeting to which the proxy materials relate is being
held for the purposes set forth in the Notice to Shareholders.
Pursuant to Rule 14a-6(d) under the 1934 Act, please be advised that
the Trust intends to begin mailing the materials to its shareholders on or about
July 7, 1998 and proposes to begin printing the proxy materials on or about June
26, 1998. Accordingly, please notify us of any comments as soon as possible.
If you have any questions or comments concerning the foregoing or the
enclosed, please contact either Avery Maher at (617) 375-1672 or the undersigned
at (617) 375-1513.
Sincerely,
Alfred P. Ouellette
Attorney and Assistant Secretary
Attachments
cc: Brion Thompson
