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:
[ ] Preliminary proxy statement
[x] 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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IMPORTANT INFORMATION
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[logo]
JOHN HANCOCK FUNDS
A Global Investment Management Firm
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. 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.
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
Funds.
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 pages. 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,
/s/ Edward J. Boudreau, Jr.
Edward J. Boudreau, Jr.
Chairman and CEO
Q&A
Q: HOW HAS THE SPECIAL VALUE FUND PERFORMED?*
A: 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 16.55% since inception in January 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 January
1994.These performance figures reflect payment of the maximum sales charge
and are not a guarantee of future returns.
Q: WHY HASN'T THE FUND PAID QUARTERLY DIVIDENDS RECENTLY?
A: 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 businesses. 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.
Q: DOES THIS MEAN MY FUND WILL NOT PAY DIVIDENDS?
A: 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 will be paid in December rather than quarterly.
Q: IF THE FUND'S INVESTMENT OBJECTIVE IS ADJUSTED TO REMOVE THE REFERENCE TO
INCOME, WILL ITS STRATEGY CHANGE OR BECOME MORE AGGRESSIVE?
A: These proposed changes will not affect the portfolio management team's
investment style in any way. Portfolio Manager Timothy E. 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.
Q: HOW CAN MOVING MY FUND TO THE GROWTH PROSPECTUS BENEFIT ME?
A: 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.
Q: WHAT IS THE FUND'S UNDERLYING TRUST AND WHY WILL IT BE REORGANIZED?
A: 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.
Q: WHAT'S THE DIFFERENCE BETWEEN VALUE- AND GROWTH-ORIENTED INVESTING? CAN A
GROWTH FUND HAVE A VALUE INVESTMENT STYLE?
A: 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 growth-oriented
investors invest in both styles to achieve their goals.
Q: WHY ARE TWO INVESTMENT RESTRICTIONS BEING AMENDED?
A: 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.
* Performance figures assume all distributions are reinvested and reflect a
maximum sales charge on Class A shares of 5% and the applicable contingent
deferred sales charge on Class B shares. The CDSC declines annually between
years 1-6 according to the following schedule:5,4,3,3,2,1%. No sales charge
will be assessed after the sixth year. The return and principal value of any
mutual fund investment will fluctuate, so that shares, when redeemed,may be
worth more or less than their original cost.
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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 (the "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 two 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
370PX 7/98
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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 Semiannual Report succeeding the Annual Report to any shareholder
upon request. If you would like a copy of your Fund's report(s), please send a
written request to the attention of the Fund at 101 Huntington Avenue, Boston,
Massachusetts 02199 or call John Hancock Funds at 1-800-225-5291.
INTRODUCTION
This proxy statement is being used by your Fund's Trustees to solicit proxies to
be voted at a special meeting of your Fund's shareholders. 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 two 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 the
proposals. If any other business comes before the meeting, your shares will be
voted at the discretion of the persons named as proxies.
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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
sell better 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, which can mean reduced volatility
through increased diversification of the Fund's holdings. 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.
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
YOUR FUND AND ITS 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 at 5:00 p.m. on October 31, 1998. At
that time, 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.
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 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 plans. These will be
identical to the existing contract and Rule 12b-1 plans.
o After the reorganization, your Fund will be terminated, and its business will
be carried on by the new series in 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 Trustees believe that proceeding with the
reorganization would no longer be advisable.
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The following diagram shows how the reorganization would be carried out:
<TABLE>
<S> <C> <C>
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Special Value Fund New Special Value Fund
transfers assets and receives assets and
liabilities to New Special Special Value Fund's assumes liabilities of
Value Fund assets and liabilities Special Value Fund
- -------------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C> <C>
- ------------ ------------ ------------ ------------- ------------- -------------
Class A Class B Class C Issue Class C Issue Class B Issue Class A
shareholders shareholders shareholders shares shares shares
- ------------ ------------ ------------ ------------- ------------- -------------
I I I I I I
I I --------------- I I
I I Your Fund receives New Special I I
I I Value Fund Class C shares and I I
I I distributes them to your I I
I I Fund's Class C shareholders I I
I ----------------------------------------- I
I Your Fund receives New Special Value Fund Class B shares and I
I distributes them to your Fund's Class B shareholders I
I I
--------------------------------------------------------------------
Your Fund receives New Special Value Fund Class A shares and
distributes them to your Fund's Class A shareholders
</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.
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 LLP 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
Your 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 received by each shareholder as a part of the
reorganization. Each account will be identical in all material respects to those
currently maintained by your 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(b) 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;
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 (the
"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.
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 has been a secondary consideration, the Fund is not required to
be managed to produce a predictable level of income. In fact, the Fund has not
paid any dividend from income on its shares for the past several quarters. 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 Fund's Trustees, including the Independent
Trustees, recommend 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 TWO 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
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.
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 sometimes required funds to adopt
fundamental restrictions not required by the Act. The Act was amended in 1996 to
abolish the authority of the states 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 also
redundant. Consequently, your Fund's Trustees recommend 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 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
Act's diversification test detailed above.
Changing this restriction for 25% of the Fund will enable the Fund to invest
more than 5% of its assets in the securities of any one issuer. This means the
Fund will have greater flexibility to pursue promising investment opportunities.
However, to the extent that the Fund's portfolio becomes less diversified, it
would suffer greater losses from adverse events affecting a particular issuer,
than when the Fund was more diversified.
BOARD EVALUATION AND RECOMMENDATION
The Trustees believe that the proposed amendments to the Fund's pledging and
diversification restrictions will more accurately reflect current regulatory
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 TWO 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 $23,000, 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
If you have signed and returned your proxy, you may 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 you have executed a proxy but are present at the meeting and wish
to vote in person, you may notify the secretary of the Fund (without
complying with any formalities) at any time before it is voted.
OUTSTANDING SHARES AND QUORUM
As of June 19, 1998, 2,084,307 Class A shares, 3,293,611 Class B shares and
8,019 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.
OTHER BUSINESS
The Fund's Board of Trustees knows of no business to be presented for
consideration at the meeting other than the proposals described in this proxy.
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, the transfer agent or a third party
solicitation firm. 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.
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 June 19, 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.
Percentage of
Total Outstanding
Class of Shares of the
Name and Address of Shareholders Shares Class of the Fund
- -------------------------------- -------- -----------------
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS B 7.83%
ATTN FUND ADMINISTRATION
4800 DEER LAKE DRIVE EAST
JACKSONVILLE, FL 32246-6484
SMITH BARNEY INC. C 19.73%
388 GREENWICH STREET
NEW YORK, NY 10013-2339
DONALDSON LUFKIN JENRETTE C 14.18%
SECURITIES CORPORATION INC.
PO BOX 2052
JERSEY CITY, NJ 07303-2052
JOHN HANCOCK MUTUAL LIFE INSURANCE CO. C 13.17%
CUSTODIAN FOR THE ROLLOVER IRA OF
JAN SHARPE RETTKE
2028A N. 7TH
SHEBOYGAN, WI 53081-2726
LEONID UMANSKY C 12.88%
ASYA UMANSKY JT WROS
2743 EAST 66 ST
BROOKLYN NY 11234-6806
JOHN HANCOCK MUTUAL LIFE INSURANCE CO. C 9.73%
CUSTODIAN FOR THE IRA OF
BERNICE WALD
1613 SE 13 AVE
ABERDEEN, SD 57401-7823
PETER F. SENATORE C 7.22%
DIANE SENATORE JT WROS
118 SHADOW RIDGE RD.
STANFORD, CT 06905-1814
As of June 19, 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
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 and
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
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 share holder, 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.
(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.
JOHN HANCOCK CAPITAL SERIES, on behalf of
its series John Hancock Special Value Fund
Attest: /s/ Susan S. Newton By: /s/ Robert G. Freedman
-------------------- -------------------
Secretary Vice Chairman
JOHN HANCOCK INVESTMENT TRUST II,
on behalf of its series John Hancock Special Value Fund
Attest: /s/ Susan S. Newton By: /s/ Robert G. Freedman
-------------------- -------------------
Secretary Vice Chairman
<PAGE>
EXHIBIT B
JOHN HANCOCK SPECIAL VALUE FUND
AMENDMENTS TO INVESTMENT RESTRICTIONS
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------
(4) Purchase securities of an issuer (4) Purchase securities of an issuer
(other than the U.S. Government, its (other than the U.S. Government, its
agencies or instrumentalities), if agencies or instrumentalities), if, with
respect to 75% of the Fund's total assets,
(i) such purchase would cause more than
5% of the Fund's total assets taken at (i) the purchase would cause more than
market value to be invested in the securities 5% of the Fund's total assets
taken at of such issuer, or market value to be invested in the
securities of the issuer, or
(ii) such purchase would at the time
result in more than 10% of the outstanding (ii) the purchase would at the time result
voting securities of such issuer being in more than 10% of the outstanding
held by the Fund. voting securities of the issuer being held
by the Fund.
- ----------------------------------------------------------------------------------------------------
(7) Pledge, mortgage or hypothecate its No similar restriction. This restriction
assets, except to secure indebtedness permitted was required by state securities
by paragraph (6) above and then administrators and is no longer required
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.
- ----------------------------------------------------------------------------------------------------
Current Fundamental Restrictions Amended Fundamental Restrictions
</TABLE>
<PAGE>
---------------
THANK YOU
FOR MAILING
YOUR PROXY CARD
PROMPTLY!
---------------
[logo] JOHN HANCOCK FUNDS
A Global Investment Management Firm
JOHN HANCOCK FUNDS, INC., Member NASD
101 Huntington Avenue, Boston, MA 02199-7603
1- 800-225-5291 1- 800-554-6713 (TDD)
[logo]
370PX 7/98
<PAGE>
JOHN HANCOCK FUNDS
A Global Investment Management Firm
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
THE EXPENSE OF ADDITIONAL MAILINGS
JOHN HANCOCK SPECIAL VALUE FUND
A SERIES OF JOHN HANCOCK CAPITAL SERIES
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
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.
Date _____________________________________ , 1998
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 at 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.
---------------------------------------
Signature(s)
<PAGE>
JOHN HANCOCK FUNDS
A Global Investment Management Firm
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
THE EXPENSE OF ADDITIONAL MAILINGS
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.
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
