As filed with the Securities and Exchange Commission on June 2, 2003.
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
FILE NUMBER 811-4186
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate 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 INCOME SECURITIES TRUST
(Name of Registrant as Specified in Its Charter)
JOHN HANCOCK INCOME SECURITIES TRUST
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c) (1) (ii), 14a-6 (i) (1), or
14a-6 (i) (2) or Item 22(a) (2) or schedule 14A (sent by wire transmission).
[ ] Fee paid previously with preliminary materials.
[X] No fee required.
[JOHN HANCOCK LOGO]
John Hancock Investors Trust
John Hancock Income Securities Trust
June 26, 2003
Dear Fellow Shareholder:
As an investor in one of the funds listed above, you are cordially invited to
attend the special shareholder meeting on Thursday, August 21, 2003 at 9:00
A.M., Eastern time, to be held at John Hancock Funds, 101 Huntington Avenue,
Boston, MA 02199.
The proposals set forth in the enclosed proxy statement are non-routine items. A
non-routine item is one that does not occur annually and makes a fundamental or
material change to a fund's investment objectives, policies or restrictions, or
to the investment management contract.
Authorize each fund to issue preferred shares
For each fund to be able to issue preferred shares, certain amendments to each
fund's fundamental investment restrictions and Agreement and Declaration of
Trust would need to be made. Proposal number one, which is in two parts, asks
you to approve amendments to the fundamental restrictions and to the Agreement
and Declaration of Trust which would be required to permit the fund to issue
senior securities, including preferred shares.
The Trustees want each fund to have the ability to issue preferred shares
because they believe it can be an attractive strategy to seek to increase the
fund's return over the long-term. Any increase in returns generated by this
strategy would benefit you, the funds' holders of common shares. This strategy
does entail risks, namely the risks associated with leverage. Please see the
enclosed proxy statement for a description of the potential benefits of issuing
preferred shares and associated risks.
Approve amendments to the investment management contract
For each fund, proposal number two asks you to approve amendments to the
investment management contract to reflect the issuance of senior securities,
such as preferred shares, in the calculation of the investment management fees
and to eliminate a state law imposed expense limitation which is no longer
required and which has never been triggered. Approval of this proposal would not
change the rate at which each fund pays investment management fees.
Your vote is important!
Please complete the enclosed proxy ballot form, sign it and mail it to us
immediately. For your convenience, a postage-paid return envelope has been
provided. A prompt response will help avoid the cost of additional mailings.
If you have any questions, please call 1-800-852-0218, Monday through Friday,
between 9:00 A.M. and 7:00 P.M. Eastern time.
Thank you in advance for your prompt action on this very important matter.
Sincerely,
Maureen R. Ford
Chairman and Chief Executive Officer
JOHN HANCOCK INVESTORS TRUST
JOHN HANCOCK INCOME SECURITIES TRUST
101 Huntington Avenue, Boston, Massachusetts 02199
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
To Be Held August 21, 2003
This is the formal agenda for your fund's special shareholder 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 Investors Trust
John Hancock Income Securities Trust:
A shareholder meeting for each fund will be held at 101 Huntington Avenue,
Boston, Massachusetts, on Thursday, August 21, 2003 at 9:00 A.M., Eastern time,
and shareholders of each fund will consider the following proposals:
(1) To authorize the fund to issue senior securities, including preferred
shares, by approving the following amendments:
(a) To approve amendments to certain of the fund's fundamental
investment restrictions to permit the issuance of senior
securities.
(b) To approve certain amendments to the fund's Agreement and
Declaration of Trust to authorize the board of trustees to
establish and issue one or more classes of senior securities.
(2) To approve certain amendments to the fund's investment management
contract, including to reflect the issuance of senior securities in
the calculation of the investment management fees payable by the fund
to John Hancock Advisers, LLC.
(3) To transact such other business as may properly come before the
meeting or any adjournment of the meeting.
Your Trustees recommend that you vote in favor of all proposals.
Shareholders of record of each fund as of the close of business on June 19, 2003
are entitled to notice of and to vote at each fund's special meeting and at any
related follow-up meeting. The proxy statement and proxy card are being mailed
to shareholders on or about June 26, 2003.
Whether or not you can attend the meeting, please complete and return the
enclosed proxy in the accompanying envelope. No postage is necessary if mailed
in the United States.
By order of the Boards of Trustees,
Susan S. Newton
Senior Vice President and Secretary
June 26, 2003
JOHN HANCOCK INVESTORS TRUST
JOHN HANCOCK INCOME SECURITIES TRUST
101 Huntington Avenue, Boston, Massachusetts 02199
SPECIAL MEETINGS OF SHAREHOLDERS
To Be Held on August 21, 2003
PROXY STATEMENT
This proxy statement contains the information you should know before voting
on the proposals described in the notice. Each fund will furnish without charge
a copy of its Annual Report to any shareholder upon request. If you would like a
copy of your fund's report, please send a written request to the attention of
the fund at 101 Huntington Avenue, Boston, Massachusetts 02199 or call John
Hancock Funds at 1-800-892-9552.
This proxy statement is being used by each fund's Trustees to solicit
proxies to be voted at the special meeting of each fund's shareholders. The
meetings will be held at 101 Huntington Avenue, Boston, Massachusetts, on
Thursday, August 21, 2003 at 9:00 A.M., Eastern time.
If you sign the enclosed proxy card and return it in time to be voted at
the meetings, your shares will be voted in accordance with your instructions.
Signed proxies with no instructions will be voted FOR all proposals. If you want
to revoke your proxy, you may do so before it is exercised at the meetings by
filing a written notice of revocation with the fund at 101 Huntington Avenue,
Boston, Massachusetts 02199; by returning a signed proxy with a later date
before the meetings; or if attending the meeting of your fund and voting in
person, by notifying your fund's secretary (without complying with any
formalities) at any time before your proxy is voted.
Record Ownership
The Trustees of each fund have fixed the close of business on June 19, 2003
as the record date to determine which shareholders are entitled to vote at the
meeting. Shareholders of each fund are entitled to one vote per share on all
business of the meetings or any postponement of the meeting relating to their
fund. On the record date, the following number of shares of beneficial interest
of each fund were outstanding:
John Hancock Investors Trust [ ]
John Hancock Income Securities Trust [ ]
The funds' management does not know of anyone who beneficially owned more
than 5% of either fund's shares outstanding on the record date. (Beneficial
ownership means voting power and/or investment power, which includes the power
to dispose of shares.)
Although the special meetings of the funds are being held jointly and
proxies are being solicited through the use of this joint proxy statement,
shareholders of each fund will vote separately as to proposals affecting their
fund.
1
PROPOSALS 1(a) and 1(b)
TO AUTHORIZE EACH FUND TO ISSUE SENIOR SECURITIES,
INCLUDING PREFERRED SHARES
General
The Trustees recommend that shareholders approve certain amendments to each
fund's fundamental investment restrictions and Agreement and Declaration of
Trust (the "Declaration of Trust") to permit each fund to issue senior
securities, including preferred shares, to the maximum extent permitted by the
Investment Company Act of 1940, as amended (the "1940 Act"). Because these
proposals are intended to permit each fund to issue preferred shares,
shareholders should anticipate that the funds will issue preferred shares if the
proposals are approved. It is therefore important for shareholders to understand
what the issuance of preferred shares would mean for the fund and for them. For
that reason, a description of senior securities generally and preferred shares
specifically, including a discussion of the risks associated with the issuance
of preferred shares, precedes a description of the specific amendments to the
fundamental investment restrictions and Declaration of Trust being proposed.
What is a senior security and a preferred share?
A senior security is one that has priority over a company's common shares
in payment of dividends or interest and distribution of the company's assets in
the event the company is liquidated. A senior security may be an equity security
or a debt security. Preferred shares are equity securities that are senior to a
company's common shares. Notes, bonds and debentures are debt securities that
are senior to a company's preferred shares and common shares. While each fund
currently has the ability to issue senior securities in the form of debt
securities ("senior debt"), neither fund can issue senior securities in the form
of equity securities ("senior equity") such as preferred shares.
Why would the fund want the ability to issue preferred shares?
The issuance of a second class of fund securities -- whether in the form of
debt or equity securities -- could be an attractive strategy to increase each
fund's return. The Trustees believe that the holders of each fund's common
shares have the potential to benefit in the long-term if the fund issues senior
securities. Over time, the earnings to the fund from the portfolio securities
purchased with the proceeds of an offering of senior securities may be greater
than both (i) the cost of offering the senior securities and the operating
expenses of the senior securities and (ii) dividends that must be paid to
holders of senior equity or interest that must be paid to holders of senior
debt. The excess earnings will be applied to the benefit of the holders of
common shares in the form of increased distributions of income and/or capital
gain. An offering of senior securities should not, by itself, dilute a fund's
net assets attributable to the common shareholders. However, the net assets
attributable to a fund's common shares would be reduced if the fund loses money
or the return on the additional assets is less than the full cost of leverage.
Increasing the fund's asset size through the use of leverage involves risks,
particularly if the return on the additional assets is less than the fund's
adviser expects. See "Risks of Leverage."
If shareholders approve proposals 1(a) and 1(b), each fund would have the
flexibility to add leverage by issuing senior equity in addition to the current
authority to issue senior debt. This flexibility can be important because the
amount of the dividends or interest that must be paid to the holders of the
different types of senior securities depends significantly on current economic
conditions, such as the prevailing interest rate environment, and anticipated
future economic trends. Depending upon those conditions and future trends, the
amount of dividends that would need to be paid to the holders of the senior
equity may be higher or lower than the amount of interest that would need to be
paid to the holders of the senior debt. The amount and rate at which the
dividends or interest must be paid to the senior securities holders is
effectively the cost to the fund of maintaining the leverage. The lower this
cost, the greater the likelihood that the earnings generated by the portfolio
securities purchased with the proceeds of the offering of senior securities
would exceed that cost and the greater the likelihood that the holders of the
fund's common shares will benefit from the issuance of the senior securities.
2
John Hancock Advisers, LLC, each fund's investment adviser (the "adviser"),
believes that it would be beneficial to the holders of each fund's common shares
if leverage were employed by issuing senior equity, such as preferred shares,
rather than senior debt for the following reasons:
o The effective interest or dividend cost to the funds under current
market conditions are likely to be lower if the funds issued preferred
shares compared to borrowing (i.e., issuing senior debt).
Historically, preferred shares issued by investment companies yield a
dividend at a moderate premium above the prevailing rate on commercial
paper. Borrowing from a bank, insurance company or other institutional
lender is likely to bear interest at a higher rate. While initial
offering expenses associated with an offering of preferred shares are
likely to be higher than the transaction costs associated with an
similar amount of borrowing, the adviser believes that preferred
shares may offer a significant long-term cost advantage to the funds,
which advantage would accrue to the holders of the common shares.
o The adviser has significant experience in managing closed-end funds
leveraged through the issuance of preferred shares.
o Preferred shares offer a longer-term form of financing than borrowing.
Preferred shares would remain outstanding unless redeemed by a fund at
its option or because the fund failed to satisfy asset coverage
requirements imposed by the 1940 Act or a rating agency rating any
preferred shares. However, any borrowing would have a short to medium
term maturity (perhaps with the ability to roll the borrowing over
under a renewed facility) and more extensive provisions permitting the
lender to require early repayment. Consequently, a fund would be more
likely to be required to repay the principal on any indebtedness at a
much earlier date than the fund would need to redeem the preferred
shares. Any retirement of indebtedness would require the fund to need
to liquidate portfolio positions at a time that may not be
advantageous and incur additional transaction costs.
If these proposals are approved, will the funds issue preferred shares?
If shareholders approve the proposals, the Trustees will be authorized
to issue a class of preferred shares for each fund in the future without seeking
further shareholder approval. As of the date of this proxy statement, the
Trustees have not determined that either fund should issue preferred shares.
Before the Trustees would act to issue preferred shares, they would consider a
variety of factors including, but not limited to, an analysis of conditions in
the equity and debt markets and the potential benefits to the common
shareholders of issuing preferred shares and the associated risks, whether there
was interest among institutional investors for the fund's senior securities, and
whether there were sufficient securities meeting the fund's investment criteria
available for purchase with the proceeds of the offering.
It is anticipated that if the proposals are approved, the Trustees will
undertake an evaluation of the issuance of preferred shares by each fund to
determine whether such issuance would be in the best interest of each fund. For
this reason, it is important for shareholders of each fund to understand that
their approval of these proposals will likely result in a recommendation by the
adviser that each fund issue preferred shares. Accordingly, this proxy statement
includes a description of preferred shares and the associated risks to the
common shareholders of offering preferred shares. There can be no assurance,
however, that the Trustees would authorize either fund to issue preferred
shares, and if offered, whether the proceeds of the offering and the change to
the fund's capital structure would be sufficient to provide the benefits of
leverage to the holders of the common shares either immediately after the
offering or at some future time.
Additional information about preferred shares
If these proposals are approved, each fund would be authorized to issue
preferred shares to increase its assets available for investment to the maximum
extent permitted by the 1940 Act. The adviser currently anticipates that each
fund would issue preferred shares with an aggregate liquidation preference of
approximately 33 1/3 percent of the fund's total assets. The adviser also
anticipates that each fund would issue auction rate preferred shares. Auction
rate preferred shares are a type of preferred shares where the dividend rate
payable by a fund is determined by an auction conducted prior to the start of
each
3
dividend period. The costs associated with issuing auction rate preferred shares
would be higher because the fund bears the expense of conducting the auctions.
However, the adviser believes that the auction process would result in a lower
dividend rate for the preferred shares than if the rate were set by the fund as
is the case with non-auction rate preferred shares. The adviser believes that
the holders of the common shares would benefit from the issuance of auction rate
preferred shares because it believes the benefits of the lower dividend rate
will normally outweigh the costs associated with holding the auction. A fund
generally will not issue preferred shares or debt securities unless the adviser
expects that the fund will achieve a greater return on such borrowed funds than
the additional costs the fund incurs as a result of such borrowing. Each fund
also may borrow money as a temporary measure for extraordinary or emergency
purposes, including the payment of dividends and the settlement of securities
transactions which otherwise might require untimely dispositions of a fund's
portfolio holdings.
If the Trustees approve the issuance of preferred shares, they will
determine the terms of the securities including voting powers, preferences or
other rights and the timing and the terms of the offering without further
shareholder approval, but subject to applicable law and the respective fund's
Declaration of Trust and by-laws. Senior securities, such as preferred shares,
have certain dividend and liquidation rights that are different from those of
common shares. Also, the 1940 Act imposes requirements that control the extent
to which a fund can use leverage and grants special voting rights to a fund's
holders of senior securities.
Dividend and liquidation rights. Each fund's preferred shares will have the
right to the payment of dividends before dividends can be paid on the fund's
common shares. If the dividends that must be paid on the preferred shares exceed
the net return of the fund's portfolio attributable to the assets acquired with
the proceeds of the offering, there will be a lower rate of return to the
holders of the common shares. In that case, there might even be a return of
capital.
In the event of any liquidation, dissolution or winding up of the fund, the
holders of preferred shares are entitled to receive a final distribution of the
fund's assets after creditors are satisfied and before any distribution is paid
to the holders of the common shares. Unless and until payment in full has been
made to holders of senior securities of the liquidation distributions to which
they are entitled, no distributions will be made to holders of the common
shares.
Asset coverage requirements and voting rights. After a fund issues
preferred shares, the fund must comply with the asset coverage under the 1940
Act. This means that the value of the fund's total assets, less all liabilities
and indebtedness for borrowed money, must be a certain percentage of the
liquidation value of the senior securities outstanding. If the fund fails to
meet an asset coverage test, the fund may not, until the fund complies with the
test: (i) pay any dividends to the holders of the fund's common shares (except
for dividends paid in additional common shares) or (ii) repurchase the fund's
common shares. Senior securities issued by investment companies also have
special voting rights.
The table below shows the asset coverage requirements and different voting
rights that must apply to senior equity such as preferred shares under the 1940
Act in contrast to the requirements and rights applicable to senior debt which
each fund is currently permitted to issue.
-----------------------------------------------------------------------------------------------------------------------------
SENIOR SECURITIES
--------------------------------------------------------------------------------------------------------------
Equity Debt
-----------------------------------------------------------------------------------------------------------------------------
Asset The value of the fund's total assets, less all The value of the fund's total assets, less all
coverage liabilities and indebtedness for borrowed money, liabilities and indebtedness for borrowed
must be 200% of the liquidation value of the money, must be 300% of the senior debt
senior equity outstanding: outstanding:
o immediately after the senior equity is issued; o immediately after the senior debt is issued;
o before any dividend is paid to common o before any dividend is paid to common
shareholders (other than a dividend paid in shareholders (other than a dividend paid in
additional shares); and additional shares); and
o before the fund repurchases outstanding o before the fund repurchases outstanding
common shares. common shares.
4
-----------------------------------------------------------------------------------------------------------------------------
Voting o Voting as a separate class, entitled to elect two Unlike senior equity, the fund may choose to be
rights trustees. If dividends on senior equity remain governed by either of the following provisions,
unpaid in an amount equal to two full years' the first of which gives senior debt a limited
dividends, then, voting as a separate class, right to elect trustees.
entitled to elect additional trustees, who, together o Voting as a separate class, entitled to elect a
with the two trustees ordinarily elected by the majority of the trustees if the fund fails the
class, will constitute a majority of the fund's 100% asset coverage test on the last business
trustees. day of each of 12 consecutive calendar months.
o Voting as a separate class, entitled to vote on This voting right continues until the asset
any reorganization that adversely affects the coverage test equals 110% for 3 consecutive
senior equity class. calendar months.
o Voting as a separate class, entitled to vote on o If, on the last business day of each of 24
changes to the fund's fundamental policies and consecutive calendar months, the senior debt
restrictions. has an asset coverage of less than 100%, the
fund is considered to have defaulted on its
obligations with respect to the senior debt.
-----------------------------------------------------------------------------------------------------------------------------
As describe above, preferred shares have certain voting rights that are
required under the 1940 Act. If preferred shares are issued, the fund's common
shares may be precluded from approving certain matters for which a vote of
preferred shares is also required. As an example, included in the voting rights
of preferred shares is the right of the preferred shares to vote as a class on
changes to the fund's fundamental policies and restrictions. If either fund were
to present a proposal to convert the fund to an open-end management investment
company, the proposal would require the vote of the preferred shares and the
common shares voting separately because the fund's status as a closed-end fund
is a fundamental policy that cannot be changed without shareholder approval.
However, the interests of preferred shares and the common shares in considering
such a proposal may be different and the preferred shares might vote as a class
against the proposal. In this event, the proposal would not be approved and the
fund would not convert to an open-end company. If at any time in the future the
funds' Trustees consider whether to approve the issuance of preferred shares,
the Trustees will consider what, if any, additional voting rights should be
granted to the preferred shares.
Rating agency guidelines and limitations on borrowing. To enhance the
marketability of any senior securities, each fund may request that a nationally
recognized statistical rating organization, such as Standard & Poor's Ratings
Group or Moody's Investors' Service, Inc., rate the securities. If a rating
agency agrees to assign a rating to the senior securities, the rating agency
will require the fund to meet certain guidelines to ensure, as far as possible,
that the fund will meet the 1940 Act's asset coverage test and be able to pay
the agreed upon dividends to the holders of the senior equity or interest to the
holders of senior debt, as the case may be. These rating agency guidelines may
be more stringent than the 1940 Act and may impose restrictions on the
securities in which the fund invests, may impose limitations or prohibitions of
the fund's ability to engage in certain investment practices, may limit the
fund's ability to engage in repurchases of its securities, and in certain
circumstance, may require the fund to redeem or purchase outstanding senior
securities, suspend dividends and other distributions on the common shares and
liquidate portfolio securities.
If the fund is limited in its ability to repurchase common shares, the
market price of the common shares may be affected. Redemption of senior
securities and liquidations of portfolio securities to comply with assets
coverage requirements could cause a fund to incur transactions costs and could
result in capital losses. Prohibitions on dividends and other distributions
could impair the fund's ability to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended.
5
Risks of leverage
Although there are potential benefits to the holders of the fund's common
shares upon the issuance of preferred shares or senior debt and the resulting
leveraging of a fund's capital structure, shareholders should note that there
are risks associated with leverage. Because any decline in the net asset value
of the fund's investments is borne entirely by the holders of the common shares,
the effect of leverage in a declining market would be to further reduce the
fund's net asset value in an amount greater than would be the case if the fund
were not leveraged. This could result in a greater decline in the market price
for common shares.
Leverage creates risks that may adversely affect the return for common
shareholders, including:
> The likelihood of greater volatility of the net asset value and market
price of common shares;
> Fluctuations in the dividend rates on any preferred shares or in
interest rates on borrowings and short-term debt;
> Increased operating costs, which may reduce a fund's total return; and
> The potential for a decline in the value of an investment acquired with
borrowed funds, while the fund's obligations under such borrowing remain
fixed.
The successful use of a leveraging strategy depends on the adviser's
ability to predict correctly interest rates and market movements. There is no
assurance that a leveraging strategy will be successful during any period in
which it is employed. A fund's use of leverage is premised upon the expectation
that the fund's preferred share dividends or borrowing cost in the case of
senior debt, together with any related offering or transaction costs, will be
lower than the return the fund achieves on the investments that the fund makes
with the proceeds of the issuance of preferred shares or borrowing. Such
difference in return may result from the fund's higher credit rating or the
short-term nature of its borrowing compared to the intermediate or long-term
nature of the fund's portfolio investments. The holders of common shares would
be the beneficiaries of the incremental return. Should the difference between
the underlying assets and the cost of leverage narrow, the incremental increase
in returns will be reduced. If intermediate or long-term interest rates rise or
the fund otherwise incurs losses on its investments, the fund's net assets
attributable to its common shares will reflect the decline in the value of
portfolio holdings. Fluctuations in the markets, short-term interest rates and
other factors that might affect the fund's ability to pay the dividend rate on
preferred shares or pay interest on senior debt may affect the yield to the
holders of common shares. To the extent that the fund's preferred share
dividends or borrowing cost in the case of senior debt, together with any
related offering or transaction costs, exceed the return the fund achieves on
the investments that the fund makes with the proceeds of the issuance of
preferred shares or borrowing, the common shareholders would be adversely
effected by the fund's use of leverage.
The issuance of additional classes of preferred shares involves offering
expenses and other costs and may limit a fund's freedom to pay dividends on
common shares or to engage in other activities. Each fund also may be required
to maintain minimum average balances in connection with borrowings or pay a
commitment or other fee to maintain a line of credit; either of these
requirements will increase the cost of borrowing.
An offering of senior securities is not a taxable event to either fund or
the holders of the common shares. If a fund issues senior equity, for tax
purposes, the fund allocates net capital gain, dividends and other types of
income, if any, between its common shares and any class of senior equity. It is
the current position of the Internal Revenue Service that income with particular
tax characteristics, such as income qualifying for the dividends received
deduction or net capital gain, may be designated as distributed to a particular
class only in proportion to that class's share of the total dividends paid by
the fund. If a fund issues senior debt instead of senior equity, interest
payments on this debt may reduce or eliminate the ordinary dividend
distributions the fund would otherwise be able to pay with respect to its common
shares and may also reduce the assets attributable to those shares.
6
A high rating from a rating agency on a fund's senior securities does not
eliminate or mitigate the risk of leverage for the holders of the fund's common
shares. The rating agency will monitor each fund's compliance with the 1940 Act
asset coverage test and the rating agency guidelines. If the rating agency is
not satisfied with the fund's compliance, it could impose additional
restrictions on the fund's investment operations, withdraw the rating or reduce
the rating assigned to the fund to a lower rating category. A withdrawal or a
reduction in the rating of the senior securities may signal a decline in the
quality of the fund's portfolio securities and may reduce the market price of
the fund's common shares.
Hypothetical effect of leverage. Assuming a fund issued preferred shares
with a liquidation value equal to approximately 33 1/3 percent of the fund's
total assets and an annual dividend rate of 1.50% of such liquidation value (the
approximate rate which the adviser expects each fund to pay), the fund would
need to achieve an annual return on its total assets of 0.50% to cover such
dividend payments on the preferred shares.
The following table illustrates the hypothetical effect on the return to a
holder of a fund's common shares as a result of the leverage obtained by issuing
preferred shares with a liquidation value equal to 33 1/3 percent of a fund's
total assets, assuming hypothetical annual returns of a fund's portfolio of
minus 10% to plus 10%. As the table shows, leverage generally increases the
return to common shareholders when portfolio return is positive and greater than
the cost of leverage, and decreases the return when the portfolio return is
negative or less than the cost of leverage. The figures appearing in the table
below are hypothetical and actual returns may be greater or less than those
appearing in the table.
-------------------------------------------------------------------------------------------------------------
Assumed portfolio return (net of expenses) ..... (10.00)% (5.00)% 0.00% 5.00% 10.00%
-------------------------------------------------------------------------------------------------------------
Corresponding common share return .............. (15.75)% (8.25)% (0.75)% 6.75% 14.25%
-------------------------------------------------------------------------------------------------------------
Proposal 1(a): Amendment to certain of the funds' fundamental investment
restrictions
Each fund's current fundamental investment restrictions limit the ability
of the fund to issue senior securities. These restrictions cannot be changed
without shareholder approval. Set forth below are the current fundamental
investment restrictions for each fund which would implicate the funds' ability
to issue senior equity and the proposed new fundamental investment restrictions
for each fund permitting each fund to issue senior equity in addition to senior
debt:
John Hancock Investors Trust's current investment restrictions:
(1) The fund will not issue senior securities, except as provided in (2)
below. For purposes of this restriction, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments and repurchase agreements entered into in accordance with
the fund's investment policy, and the pledge, mortgage or
hypothecation of the fund's assets within the meaning of paragraph 2
below, are not deemed to be senior securities.
(2) The fund will not borrow money, except that the fund may borrow (a) by
issuing, publicly or privately, a single class of senior security
representing indebtedness, in series or otherwise, with such interest
rates, terms and provisions, including conversion rights, as the
Trustees shall determine, provided that immediately after such
borrowing the aggregate amount of indebtedness outstanding shall not
exceed 33 1/3% of the fund's total assets taken at market or fair
value less liabilities other than such borrowing; and (b) from banks
as a temporary measure for emergency purposes when such borrowings
would not exceed 5% of its total assets taken at cost. The fund may
not pledge, mortgage or hypothecate its assets in an amount taken at
market value to an extent greater than 33 1/3 percent of net assets
taken at cost.
7
John Hancock Income Securities Trust's current investment restrictions:
(1) The fund will not issue senior securities, except as provided in (2)
below. For purposes of this restriction, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments and repurchase agreements entered into in accordance with
the fund's investment policy are not deemed to be senior securities.
(2) The fund will not borrow money, except that the fund may borrow (a) as
described below in the paragraph under "Borrowing and Leverage"*; (b)
by issuing, publicly or privately, a single class of senior security
representing indebtedness, in series or otherwise, with such interest
rates, terms and provisions, including conversion rights, as the
Trustees shall determine, provided that immediately after such
borrowing the aggregate amount of indebtedness outstanding shall not
exceed 33 1/3% of the fund's total assets taken at market or fair
value less liabilities other than such borrowing; and (c) from banks
as a temporary measure for emergency purposes when such borrowings
would not exceed 5% of its assets taken at cost.
(3) The fund will not pledge, mortgage or hypothecate its assets, except
to secure indebtedness permitted by paragraph (2)(b) above and then
only if the market value of such assets does not exceed 33 1/3 percent
of the fund's total net assets taken at cost.
* The "Borrowing and Leverage" paragraph in the fund's prospectus
provides that the fund may borrow from banks on an unsecured basis to
purchase securities, provided that the aggregate amount of such
borrowings would not exceed 20% of the market value of the fund's
total assets after giving effect to such borrowings and provided that
such borrowings comply with the applicable provisions of the 1940 Act.
Proposed Investment Restrictions. Each fund's proposed investment restrictions
are as follows:
(1) The fund may not issue senior securities, except as permitted by the
Investment Company Act of 1940, as amended (the "1940 Act") and the
rules and interpretive positions of the Securities and Exchange
Commission (the "SEC") thereunder. Senior securities that the fund may
issue in accordance with the 1940 Act include preferred shares,
borrowing, futures, when-issued and delayed delivery securities and
forward foreign currency exchange transactions.
(2) The fund may not borrow money, except as permitted by the 1940 Act and
the rules and interpretative positions of the SEC.
As proposed, each fund would be permitted to issue senior securities and
borrow money subject to the limitations imposed by the 1940 Act and the rules
and interpretive positions of the SEC. See "Additional information about
preferred shares" above for a description of those limitations. The specific
references to pledging, mortgaging, hypothecating or otherwise encumbering each
fund's assets in the restrictions would no longer be necessary when simplifying
the language in the proposed restrictions to reference senior securities and
borrowing generally, and thus those specific references have not been retained
in the proposed restrictions.
Proposal 1(b): Amendment to each fund's Declaration of Trust
In order to permit the funds to issue preferred shares, each fund's
Declaration of Trust must be amended. The Declaration of Trust is the governing
document for a fund and, among other things, establishes the rights of
shareholders, the powers and responsibilities of the Trustees and the provisions
for termination of the fund. Each Declaration of Trust currently only permits
the issuance of common shares by a fund. The proposed amendment to each
Declaration of Trust, the form of which is attached as Annex A, would grant the
Trustees the power to establish additional classes of
8
shares, which classes of shares may have rights and limitations that differ
from, and are preferential to, the rights and limitations of the common shares.
In addition to certain specific modifications to the Declarations of Trust, the
amendment would also amend any provision of the Declaration of Trust that
conflicts with or is inconsistent with the authority to establish and issue
additional classes of shares to the extent the Trustees or affiliates of the
Trust determine to be necessary to eliminate such conflict or inconsistency.
The amendments to the Declarations of Trust provide the Trustees with broad
authority in establishing the terms of any issuance of preferred shares,
including the rights and limitations of such preferred shares. The amendment
also provide that to the extent that the Trustees authorize and issue preferred
shares, the Trustees are authorized and empowered to amend or supplement the
Declaration, including an amendment or modification to the rights of any
outstanding common shares, as the Trustees deem necessary or appropriate,
including to comply with the requirements of the 1940 Act or requirements
imposed by the rating agencies or other persons, all without the further
approval of the common shareholders. For example, the 1940 Act requires that the
holders of a class of preferred shares have the power to elect two Trustees of
the fund and in the event of a payment default on the preferred shares that
continues for two years, to have the power to elect a majority of the board. The
terms of the preferred shares would also impose limitations on the payment on
dividends on the common shares unless all dividend on the preferred shares had
been paid and the fund remained in compliance with certain asset coverage
requirements imposed by the 1940 Act on investment companies that use leverage
or any rating agency that has rated the preferred shares. These provisions
designed to protect the interest of the holders of the preferred shares limit
the rights of the holders of the common shares.
Other than modifications necessary to permit the funds to issue one or more
classes of preferred shares, the amendments do not alter the Declarations of
Trust.
The amendment to the Declarations of Trust would authorize each fund to
issue an unlimited number of preferred shares in one or more classes or series
with such rights as are determined by the Trustees without further shareholder
approval. The text of the proposed amendment to each Declaration of Trust is
attached to this proxy statement as Annex A.
Trustees Evaluation and Recommendation
At a meeting held on May 20, 2003, the Trustees concluded that giving each
fund the ability to issue preferred shares in one or more series would be in the
best interest of the respective funds and their holders of common shares. In the
course of their evaluation, the Trustees considered information provided by the
adviser as to adviser's view of the potential benefits to the fund and its
holders of common shares of issuing senior securities generally and how those
benefits would likely be greater if the senior securities could be issued in the
form of senior equity as opposed to senior debt. This information included a
discussion of the costs to the fund of issuing senior equity versus senior debt,
anticipated differences in the effective dividend rate payable on the senior
equity versus the interest rate payable on the senior debt under current and
future market conditions, other differences between senior equity and senior
debt, and the adviser's experience in managing closed-end funds leveraged
through the issuance of preferred shares. The Trustees also considered the risks
to which the fund and the common shareholders may be exposed as a result of the
leveraging effect of an offering of senior securities.
As a result of their consideration of the above factors and other relevant
information, the Trustees recommend that shareholders approve the amendments to
each fund's investment restrictions and Declarations to permit each fund to
issue senior securities.
If the proposals are not approved, the funds will not be authorized to
issue preferred shares. The Trustees may consider leveraging the fund through
borrowing, which is currently permitted, if the amendments are not approved.
9
Required vote
Proposals 1(a) and 1(b) must be approved by the vote of a majority of each
fund's shares (as described below). For each fund, the approval of proposals
1(a) and (b) are contingent on the approval of proposal 2 described below for
that fund. This means that even if a majority of a fund's shares vote in favor
of proposals 1(a) and 1(b), the fundamental investment restrictions will not be
amended unless shareholders also vote to approve proposal 2 for that fund. The
Trustees will consider what further action, if any, to take in the event any of
the proposals are not approved.
The Trustees recommend [unanimously] that shareholders of each fund vote FOR the
proposals 1(a) and 1(b) to amend certain of the fund's fundamental investment
restrictions and amend the fund's Declaration of Trust.
PROPOSAL 2
AMENDMENT OF INVESTMENT MANAGEMENT CONTRACT
General
The Trustees recommend that shareholders approve the following proposal to
amend the investment management contract to provide for leverage in the
calculation of the investment management fees. The investment management contact
cannot be changed without shareholder approval. The current method for
calculating investment management fees does not account for the issuance of
senior securities. In the event the fund issues preferred shares, the amendment
would allow the fee paid to the adviser to be directly aligned with the amount
of assets that the adviser would be managing on behalf of the fund. The
contractual investment management fee rate will not change if the proposal is
approved. The proposal would also amend the investment management contract for
each fund to eliminate a contractual expense limitation which was originally
imposed by state law but which is no longer required and which has never been
triggered.
Current Calculation of Management Fees Under the Investment Management Contract
Each fund pays a quarterly investment management fee approximately
equivalent on an annual basis to a stated percentage of the average of the
weekly net asset of the fund as set forth below:
--------------------------------------------------------------------------
Net Asset Value Annual Rate
--------------------------------------------------------------------------
First $150 million 0.650%
--------------------------------------------------------------------------
Next $50 million 0.375%
--------------------------------------------------------------------------
Next $100 million 0.350%
--------------------------------------------------------------------------
Amount over $300 million 0.300%
In addition, each fund has a contractual expense limitation imposed under
state law which provides for the reduction of investment management fees to the
extent normal operating costs and expenses of the fund exceed 1.5 percent of the
first $30 million of the fund's average weekly net asset value and 1 percent of
the fund's average weekly net asset value in excess of $30 million. The expense
limitation has not been triggered for either fund in recent years.
Proposed Calculation of Management Fees Under the Investment Management Contract
Proposal 2 seeks to amend the calculation of investment management fees
from "net asset value" to "managed assets". Managed Assets would be defined as
the fund's total assets (including any assets
10
attributable to any leverage that may be outstanding) minus the sum of the
fund's accrued liabilities (other than liabilities representing financial
leverage) The proposal would not change the management fee rate or the
applicable breakpoints in the fee. However, the assets upon which such fee is
calculated would be increased to include the effect of leveraging the fund. If
preferred shares are not issued, the amendment will not result in any change to
a fund's management fee. If preferred shares are issued, the effective
management fee incurred by the common shares would increase even though the fee
rate would remain the same. Consequently, each fund and the adviser may have
differing interests in determining whether to leverage a fund's assets. The
Trustees will monitor this potential conflict of interest. As an illustration,
assuming that a fund issued preferred shares with a liquidation preference equal
to 33 1/3% of the fund's total assets and the fund's assets are less than $150
million, the effective management fee as a percentage of assets attributable to
common shares would be 0.975%.
Without this amendment, the assets that the adviser would be required to
manage if either fund is leveraged would increase, together with the costs to
the adviser associated with managing a larger asset base. However, the fee paid
to the adviser would not increase and would no longer be directly aligned with
the amount of assets that the adviser would be managing on behalf of a fund in
the event the fund issues preferred shares. The amendment will allow the adviser
to be paid at the same rate on the assets representing both the fund's common
and preferred assets.
For its services under the current investment management contracts, each
dated April 1, 1995 (the "Current Contracts"), the adviser is entitled to
receive a monthly investment management fee at the annual rate set forth above.
At the meeting, shareholders will be asked to approve an amendment to the
Current Contract (the "Amendment") to change the base amount used to calculate
the adviser's investment management fee and to eliminate the expense limitation
as a provision of the investment management contracts. Under each Current
Contract, the investment management fee is calculated by multiplying the
specified annual percentage rate by a base amount equal to the fund's average
weekly net assets. A fund's net assets consist of its total assets minus its
liabilities.
If the Amendment is approved, the investment management fee would be
calculated by multiplying the specified annual percentage rate by an amount
equal to the average weekly value of each fund's "Managed Assets". Managed
Assets are defined as the fund's total assets (including any assets attributable
to any leverage that may be outstanding) minus the sum of the fund's accrued
liabilities (other than liabilities representing financial leverage). The
liquidation preference of the preferred shares would not be considered a
liability for these purposes. Consequently, if a fund issues preferred shares
and does not borrow, managed assets would generally be approximately equal to
the fund's net assets attributable to common shares plus the liquidation
preference of any outstanding preferred shares. The foregoing specified annual
percentage rates would be unchanged from the Current Contracts, but the dollar
amount of fees payable under the Amendment will be higher from those payable
under the Current Contracts to the extent that a fund engages in leverage. The
proposed change to the investment management fee structure may provide the
adviser with an incentive to increase the Managed Assets upon which it is
compensated by leveraging the fund.
The aggregate amount of the investment management fee that the John Hancock
Investors Trust paid to the adviser during the fiscal year ended December 31,
2002 was $1,038,580. The aggregate amount of the investment management fee that
the John Hancock Income Securities Trust paid to the adviser during the fiscal
year ended December 31, 2002 was $1,068,302. If the Amendments had been in
effect during 2002, the aggregate amount of the investment management fee would
have been the same because neither fund was leveraged and because neither fund's
expense limitation was triggered.
The following table shows the fund's expenses expressed as a percentage of
average assets attributable to common stock: (i) based on actual expenses
incurred during the fiscal year ended December 31, 2002 under the Current
Contracts; and (ii) on a pro-forma basis as if the Amendment had been in effect
during 2002 and each fund had issued preferred shares with a liquidation
preference equal to 33 1/3% of the fund's total assets. If the proposal is
approved a fund's actual annual expenses may be substantially higher or lower
than the estimated amount.
11
ANNUAL EXPENSES (as a percentage of net assets attributable to common stock)
------------------------------------------------------------------------------------------------------------
John Hancock Investors Trust John Hancock Income Securities Trust
------------------------------------------------------------------------------------------------------------
2002 2002 2002 2002
(ACTUAL) (PRO FORMA) (ACTUAL) (PRO FORMA)
Based on Net Based on Based on Net Based on
Assets Managed Assets Assets Managed Assets
------------------------------------------------------------------------------------------------------------
Management Fees.............. 0.62% 0.81% 0.61% 0.79%
------------------------------------------------------------------------------------------------------------
Other Expenses............... 0.22% 0.46% 0.23% 0.47%
------------------------------------------------------------------------------------------------------------
Total Annual Expenses........ 0.84% 1.27% 0.84% 1.26%
------------------------------------------------------------------------------------------------------------
EXAMPLE: The following table shows the expenses a shareholder of a fund would
pay on an investment of $1,000, assuming a 5% annual return and redemption at
the end of each period, on an actual basis and on a pro forma basis as if the
Amendment had been in effect during 2002 and each fund had issued preferred
shares with a liquidation preference equal to 33 1/3% of the fund's total assets
with an assumed dividend yield of 1.50%. This example should not be considered a
representation of future return or expenses. Annual return or expenses may be
greater or less than those shown.
------------------------------------------------------------------------------------------------------------
John Hancock Investors Trust John Hancock Income Securities Trust
------------------------------------------------------------------------------------------------------------
Period 2002 2002 2002 2002
(ACTUAL) (PRO FORMA) (ACTUAL) (PRO FORMA)
Based on Net Based on Based on Net Based on
Assets Managed Assets Assets Managed Assets
------------------------------------------------------------------------------------------------------------
1 year....................... $86 $129 $86 $128
------------------------------------------------------------------------------------------------------------
3 years...................... $268 $400 $268 $397
------------------------------------------------------------------------------------------------------------
5 years...................... $466 $688 $466 $683
------------------------------------------------------------------------------------------------------------
10 years..................... $1,037 $1,495 $1,037 $1,484
------------------------------------------------------------------------------------------------------------
Elimination of the Expense Limitation
The expense limitations in each Current Contract were required by old state
"blue sky" laws. They provide for the reduction of investment management fees to
the extent normal operating costs and expenses of the fund exceed 1.5 percent of
the first $30 million of the fund's average weekly net asset value and 1 percent
of the fund's average weekly net asset value in excess of $30 million. The
expense limitations has never been triggered for either fund as neither fund's
total operating expenses as a percentage of fund net assets exceeded the expense
limitation percentages. The following table shows the ratio of expenses to
average net assets for each fund for the past five fiscal years.
------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998
------------------------------------------------------------------------------------------
John Hancock 0.84% 0.82% 0.83% 0.81% 0.82%
Investors Trust
------------------------------------------------------------------------------------------
John Hancock Income 0.84% 0.80% 0.84% 0.80% 0.81%
Securities Trust
------------------------------------------------------------------------------------------
12
These state law imposed expense limitations are no longer required in fund
investment management contracts. Since a proposal is being presented to
shareholders to amend the Current Contracts with respect to the issuance of
senior securities as described above, it was determined to be an appropriate
time to seek to amend the Current Contracts to also remove these expense
limitation provisions.
Terms of the Investment Management Contract
The adviser serves as investment adviser to each fund pursuant to the
Current Contracts. The Current Contracts were approved by each fund's
shareholders at a special meeting held on[February 8, 1995. The Trustees
approved the continuance of each Current Contract on February 11, 2003, when the
Trustees, including a majority of the disinterested Trustees, approved its
continuation for a twelve-month period commencing April 1, 2003.
In each Current Contract, the adviser agrees, subject to the supervision of
the Trustees, to provide a continuous investment program and strategy for the
fund, including investment research and management with respect to all of its
securities, other investments, and cash equivalents and to make decisions with
respect to and place orders for all purchases and sales of portfolio securities.
The Current Contract also requires the adviser to prepare or supervise the
preparation of reports to the SEC or any other governmental authority; provide
personnel to act as officers of the fund and pay the salaries of such officers;
assist to the extent requested by the fund with the fund's preparation of its
annual and semi-annual reports to shareholders; transmit information concerning
purchases and sales of the fund's portfolio securities to the custodian for
proper settlement; supply the fund and its Trustees with reports and statistical
data as requested; and prepare a quarterly brokerage allocation summary.
Each Current Contract provides that the adviser will not be liable for any
error of judgment or mistake of law or for any loss suffered by the fund in
connection with the performance of the investment management contract, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of the adviser in the performance of its
duties or from reckless disregard of its obligations and duties under the
Current Contract.
If approved at the meeting, each Amendment will become effectively
immediately. If the Amendment is not approved, the Current Contract will remain
in effect until April 1, 2004, subject to further continuation or earlier
termination in accordance with its terms.
Information about the adviser
The adviser, located at 101 Huntington Avenue, Boston, Massachusetts
02199-7603, was organized in 1968 and as of March 31, 2003 has approximately $26
billion in assets under management in its capacity as investment adviser to the
funds and other funds in the John Hancock group of funds as well as retail and
institutional privately managed accounts. The adviser is an indirect
wholly-owned subsidiary of John Hancock Life Insurance Company (the "Life
Company"), one of the most recognized and respected financial institutions in
the nation. With total assets under management of approximately $130 billion,
the Life Company is one of the ten largest life insurance companies in the
United States, and carries a high rating from Standard & Poor's and A.M. Best.
Founded in 1862, the Life Company has been serving clients for over 130 years.
The principal executive officer of the adviser is Maureen R. Ford. Maureen
R. Ford and John M. DeCiccio are directors and/or officers of the Adviser and/or
its affiliates, as well as Trustees of each fund. Their business address is also
101 Huntington Avenue, Boston, Massachusetts 02199-7603.
During 2002, neither fund paid brokerage commissions to any broker-dealer
which was affiliated with the adviser.
13
Other services performed by the adviser for the funds
Each fund has an agreement with the adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the year was at
an annual rate of approximately 0.03% of the average net assets of each fund.
The amount paid to the adviser by each fund pursuant to this agreement for the
fiscal year ended December 31, 2002 was $50,168 for the John Hancock Investors
Trust and $52,579 for the John Hancock Income Securities Trust.
Management of similar funds
The following table lists each fund currently managed by the adviser with
an investment objective that is similar to John Hancock Investors Trust or John
Hancock Income Securities Trust, as well as the size of each fund, the fee rate
payable to adviser and indicates whether the adviser has agreed to waive or
reduce a portion of its fee.
----------------------------------------------------------------------------------------------------------
Fund Fund net assets as of 12/31/02 Fee rate (as a percentage of
average weekly managed assets)
----------------------------------------------------------------------------------------------------------
John Hancock Patriot Premium $189,746,347 0.50% (a)(b)
Dividend Fund I
----------------------------------------------------------------------------------------------------------
John Hancock Patriot Premium $246,555,703 0.50% (a)(b)
Dividend Fund II
----------------------------------------------------------------------------------------------------------
John Hancock Patriot Select $191,566,372 0.80% (a)
Dividend Trust
----------------------------------------------------------------------------------------------------------
John Hancock Patriot Preferred $134,342,682 0.80% (a)
Dividend Fund
----------------------------------------------------------------------------------------------------------
John Hancock Patriot Global $154,945,159 0.80% (a)
Dividend Fund
----------------------------------------------------------------------------------------------------------
John Hancock Preferred Income Fund $878,952,389 0.75% (a)(c)
----------------------------------------------------------------------------------------------------------
John Hancock Preferred Income
Fund II $459,182,094 0.75% (c)
----------------------------------------------------------------------------------------------------------
(a) Includes assets attributable to leverage
(b) Plus 5.00% of the fund's weekly gross income. The adviser's total fee is
limited to a maximum amount equal to 1.00% annually.
(c) The adviser has contractually agreed to limit the fund's management fee to
the following: 0.55% of the fund's average daily managed assets until the
fifth anniversary of the fund's operations, 0.60% of such assets in the
sixth year, 0.65% of such assets in the seventh year, and 0.70% of such
assets in the eighth year. After the eighth year, the adviser will no
longer waive a portion of the management fee.
Trustees Evaluation and Recommendation
On May 20, 2003, the Trustees of each fund met in person to consider
whether it would be in the best interests of each fund and their respective
shareholders to enter into the Amendment to the Current Agreement. In
considering the best interests of the funds and their shareholders, the Trustees
took into account all factors that they deemed relevant. The factors considered
included the potential benefits that the funds and their common shareholders may
realize from a leveraging strategy and the fact that the adviser would be
unwilling to manage the fund on a leverage basis unless the increase costs to
the adviser in managing such a fund was reflected in the fee that the adviser
receives. The Trustees also considered the nature, quality and extent of the
services furnished to each fund by the adviser; the adviser's experience in
managing leveraged closed-end funds; the investment record of each fund; the
expense ratio of each fund on a historical basis and after giving effect to
leverage; and the benefits to the adviser from the revised fee calculation in
the Amendments.
14
After reviewing and discussing the terms and provisions of the Amendments
in light of the foregoing factors, the Trustees, including all of the Trustees
who are not interested persons of either fund or the adviser, concluded that the
proposed fee change is in the best interests of each fund and their shareholders
because it aligns the adviser's compensation more closely with the actual value
of all of the potential assets under management. The Trustees also concluded
that it was appropriate to ask shareholders to eliminate the expense limitation
provisions because they are no longer required and have never been triggered.
The Trustees unanimously recommend that shareholders vote FOR the proposals to
amend the investment management contract.
Required Vote
Proposal 2 must be approved by the vote of a majority of the fund's shares
(as described below). If shareholders do not approve Proposal 2, the investment
management contract will not be amended. The Trustees will consider what further
action, if any, to take in the event Proposal 2 is not approved.
MISCELLANEOUS
The adoption by each fund's shareholders of Proposal 1(a) and 1(b) and 2
requires the affirmative vote of a majority of the shares of each fund with
respect to each proposal. A majority of the fund's shares is defined as the
lesser of: (i) 67% or more of the shares present at the meeting, if the holders
of more than 50% of the shares are present or represented by proxy; or (ii) more
than 50% of the outstanding shares of the fund. Proposals 1 (a) and 1 (b) will
not be adopted even if they receive the affirmative vote of a majority of the
shares unless proposal 2 is approved.
The following table summarizes how the quorum and voting requirements are
determined.
Shares Quorum Voting
------ ------ ------
In General All shares "present" in person Shares present in person will be voted in person by
or by proxy are counted in deter- the shareholder at the meeting. Shares present by
mining whether a quorum exists. proxy will be voted by the proxyholder in accor-
dance with instructions supplied in the proxy.
Broker Non-Vote Considered "present" at meeting. Not voted. Same effect as a vote "against" a
proposal.
Proxy with No Voting Considered "present" for deter- Will be voted "for" the proposal by the proxy-
Instruction (other than mining whether a quorum exists. holder.
Broker Non-Vote)
Vote to Abstain Considered "present" for deter- Not voted. Same effect as a vote "against" a proposal.
mining whether a quorum exists.
If a quorum is not present, the persons named as proxies may vote their
proxies to adjourn the meeting to a later date. If a quorum is present, but
there are insufficient votes to approve any proposal, the persons named as
proxies may propose one or more adjournments of the meeting to permit further
solicitation. Shareholder action may be taken on one or more proposal prior to
such adjournment. Proxies instructing a vote for a proposal will be voted in
favor of an adjournment with respect to that proposal, and proxies instructing a
vote against a proposal will be voted against an adjournment with respect to
that proposal.
Expenses and Methods of Solicitation
The costs of the meetings, including the solicitation of proxies, will be
paid by the adviser. Persons holding shares as nominees will be reimbursed by
the relevant fund, upon request, for their reasonable expenses in sending
soliciting material to the principals of the accounts. In addition to the
solicitation of proxies by mail, Trustees, officers and employees of the funds
or of the funds' investment adviser may solicit proxies in person or by
telephone and via the Internet. John Hancock Advisers, LLC serves as each fund's
investment adviser and administrator. _________________________ has been
retained to assist in the solicitation of proxies at a cost of approximately
$_______, plus reasonable expenses.
15
Telephone Voting
In addition to soliciting proxies by mail, by fax or in person, the funds
may also arrange to have votes recorded by telephone by officers and employees
of the funds or by the personnel of the adviser or the 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, the telephone votes would not be counted at the meeting. The funds
have not obtained an opinion of counsel about telephone voting, but it is
currently not aware of any challenge.
o A shareholder will be called on a recorded line at the telephone
number in the funds' 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.
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.
Internet Voting
You will also have the opportunity to submit your voting instructions via
the Internet by utilizing a program provided through a vendor. Voting via the
Internet will not affect your right to vote in person if you decide to attend
the meeting. Do not mail the proxy card if you are voting via the Internet. To
vote via the Internet, you will need the "control number" that appears on your
proxy card. These Internet voting procedures are designed to authenticate
shareholder identities, to allow shareholders to give their voting instructions
and to confirm that shareholders' instructions have been recorded properly. If
you are voting via the Internet you should understand that there may be costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies, that must be borne to you.
o Read the proxy statement and have your card on hand.
o Go to the website listed on the card.
o Enter the control number found on the proxy card.
o Follow the directions on the website. Please call 1-800-852-0218 if
you have any problems.
o To insure that your instructions have been recorded correctly, you
will receive a confirmation of your voting instructions immediately
after your submission and also by e-mail if chosen.
Other Matters
The management of the funds knows of no business to be brought before the
special meetings except as described above. If, however, any other matters were
properly to come before the special meetings, the persons named on the proxy
card intend to vote on those matters in accordance with their best judgment. If
any shareholder desires additional information about the matters proposed for
action, the management of the funds will provide further information.
The meeting is scheduled as a joint meeting of the shareholders of both
funds because the shareholders of the funds are expected to consider and vote on
similar matters. The Boards of Trustees of the funds have determined that the
use of this joint proxy statement for the special meetings is in the best
interest of each fund's shareholders. In the event that any shareholder present
at the special meetings
16
objects to the holding of a joint meeting and moves for an adjournment of the
special meeting with respect to his or her fund to a time immediately after the
special meetings so that his or her fund's meeting may be held separately, the
persons named as proxies will vote in favor of that adjournment.
The shareholders of each fund will vote separately on each proposal, and
voting by shareholders of one fund will have no effect on the outcome of voting
by shareholders of the other fund.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY
JOHN HANCOCK INVESTORS TRUST
JOHN HANCOCK INCOME SECURITIES TRUST
Dated: June 26, 2003
17
ANNEX A
Amendment No. 2 to Declaration of Trust
dated October 5, 1984, as Amended April 27, 1989 of
John Hancock Investors Trust
and John Hancock Income Securities Trust?
WHEREAS, there has heretofore been established a trust for the investment and
reinvestment of funds contributed thereto;
WHEREAS, the Trustees and Shareholders desire to amend the Declaration of Trust
to provide for the issuance of additional classes of shares, including shares
with preferential rights, including voting, dividend and distribution rights,
relative to the Common Shares;
WHEREAS, pursuant to Section 8.2, the Trustees and Shareholders have considered
and approved this amendment to the Declaration of Trust.
NOW THEREFORE, the Declaration of Trust is hereby amended as follows:
First, the Declaration of Trust is hereby amended to authorize the Board of
Trustees to establish and authorize the issuance of one or more class of
beneficial interest in the Trust in addition to the Common Shares, which classes
of shares may have rights and limitations that differ from, and are preferential
to, the rights and limitations of the Common Shares. In addition to the specific
amendments set forth below, any provision of the Declaration of Trust that
conflicts or is inconsistent with the authority to establish and issue
additional classes of shares, including shares with rights preferential to the
Common Shares, are hereby amended to the extent the Trustees or officers of the
Trust determine to be necessary to eliminate such conflict or inconsistency.
Second, the following provisions of the Declaration of Trust are hereby amended:
Section 2.1. Section 1.2 of the Declaration of Trust is amended by amending the
definition of "Shareholder" and by adding the following definitions of "Class,"
"Preferred Shares," "Shares" and "Outstanding":
"Class" or "Class of Shares" means any division of Shares into two or more
Classes in accordance with the provisions of Article V.
"Preferred Shares" means the Trust's preferred shares or any Class thereof. The
provisions of this Declaration of Trust relating to the Preferred Shares shall
have no force and effect unless and until one or more Classes of Preferred
Shares are first duly authorized, issued and outstanding.
"Shareholder" means a record owner of Outstanding Shares.
"Shares" means the equal proportionate transferable units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
including any Class which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares.
"Outstanding" Shares means those Shares shown from time to time on the books of
the Trust or its Transfer Agent as then issued and outstanding, but shall not
include Shares which have been redeemed or repurchased by the Trust and which
are at the time held in the treasury of the Trust.
Section 2.2. The enumerated powers of the Trustees in Section 2.1 of the
Declaration of Trust are hereby supplemented by adding a new clause (z) which
shall read as follows:
18
"(z) To establish multiple Classes of Shares (as authorized herein at
Section 5.11), and to the extent necessary or appropriate to give effect to
preferences, special or relative rights and privileges of any Class of Shares,
to allocate assets, liabilities, income and expenses of the Shares or to
apportion the same among two or more Classes."
Section 2.3. Article II of the Declaration of Trust is hereby amended by adding
a new Section 2.13 as follows:
"Section 2.13. Effect of Issuance of Preferred Shares on provisions
relating to the Board of Trustees. Notwithstanding anything to the contrary in
Sections 2.3, 2.5, 2.6 and 2.7, the provision relating to the number and
election of Trustees, their removal and the filling of any vacancy on the Board
of Trustees shall be subject to the voting and other rights established with
respect to a particular Class."
Section 2.4. Section 5.1 of the Declaration of Trust is replaced in its entirety
as set forth below:
"Section 5.1 Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest, with
or without par value, as determined by the Trustees. The number of such Shares
of beneficial interest authorized hereunder is unlimited. The Trustees shall
have the exclusive authority without the requirement of Shareholder approval to
establish and designate one or more Classes of Shares as the Trustees deem
necessary or desirable. Subject to the rights, preferences and limitations
applicable to a specific Class, each Share shall represent an equal
proportionate share in the assets of the Trust. All Shares issued hereunder
including, without limitation, Shares issued in connection with a dividend in
Shares or a split in Shares and any Shares currently Outstanding, shall be fully
paid and non-assessable."
Section 2.5. Section 5.4.1 of the Declaration of Trust is replaced in its
entirety as set forth below:
"Section 5.4.1 General. The Trustees in their discretion may, from time to
time without a vote of the Shareholders, issue Shares, in addition to the then
issued and Outstanding Shares and Shares held in the treasury, to such party or
parties and for such amount and type of consideration, including cash or
property, at such time or times and on such terms as the Trustees may deem best,
and may in such manner acquire other assets (including the acquisition of assets
subject to, and in connection with the assumption of, liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares and Shares held in the treasury. The Trustees may from time to
time divide or combine the Shares of the Trust or, if the Shares be divided into
Classes, of any Class thereof of the Trust, into a greater or lesser number
without thereby changing the proportionate beneficial interests in the Trust or
in the Trust Property allocated or belonging to such Class."
Section 2.6. Section 5.8 of the Declaration of Trust is amended by changing all
reference to Common Shares to Shares, deleting the second and third sentences of
such section and adding the following in the place of those sentences:
"On any matter required or permitted to be voted on by the Shareholders, all
Shares then entitled to vote shall be voted in the aggregate as a single class
without regard to Class, except (i) when required by this Declaration of Trust,
the By-Laws or by the 1940 Act, or when the Trustees shall have determined that
any matter to be submitted to a vote of the Shareholders affects the rights or
interests of the Shareholders of one or more Classes materially differently,
Shares shall be voted by individual Class; and (ii) when the Trustees shall have
determined that the matter affects only the interests of one or more Classes,
then only the Shareholders of such Class shall be entitled to vote thereon. Each
Share shall be entitled to one vote as to any matter on which it is entitled to
vote and each fractional Share shall be entitled to a proportionate fractional
vote. The Trustees may, in conjunction with the establishment of any further
Classes of Shares, establish conditions under which the several Classes of
Shares shall have separate voting rights or no voting rights. There shall be no
cumulative voting in the election of Trustees. The By-laws may include further
provisions for Shareholders' votes and meetings and related matters."
19
Section 2.7. Article V of the Declaration of Trust is hereby amended by adding a
new Section 5.11 as follows:
"Section 5.11 Class Designation. Without limiting the authority of the
Trustees to establish and designate any further Classes, the Trustees hereby
establish a single Class of Shares, designated as the Common Shares. The
Trustees may divide the Shares of the Trust into Classes. Any Shares of any
further Classes that may from time to time be established and designated by the
Trustees shall be established and designated, and the variations in the relative
rights and preferences as between the different Classes shall be fixed and
determined by the Trustees; provided, that all Shares shall be identical except
for such variations as shall be fixed and determined between different Classes
by the Trustees in establishing and designating such Class. Unless otherwise
designated by the Trustees in the By-laws or resolutions establishing a Class,
the purchase price, the method of determining the net asset value, and the
relative liquidation, voting, dividend and other rights and preferences of
holders of a Class shall be as set forth in the Trust's Registration Statement
on Form N-2 under the Securities Act of 1933 and/or the 1940 Act relating to the
issuance of Shares of such Class. To the extent that the Trustees authorize and
issue Preferred Shares, they are hereby authorized and empowered to amend or
supplement this Declaration, including an amendment or modification to the
rights of any Outstanding Shares at the time of such amendment or supplement, as
they deem necessary or appropriate, including to comply with the requirements of
the 1940 Act or requirements imposed by the rating agencies or other persons,
all without the approval of Shareholders. Any such supplement or amendment shall
be filed as is necessary. The Trustees are also authorized to take such actions
and retain such persons as they see fit to offer and sell such securities."
Section 2.8. Section 5.9 of the Declaration of Trust is amended by adding the
following to the end of such section:
"A majority of the Shares entitled to vote shall be a quorum for the transaction
of business at a Shareholders' meeting, except that where the By-Laws so require
or the Trustees provide that holders of any Class or Classes shall vote as a
Class or Classes, then a majority of the aggregate number of Shares of that
Class or Classes entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that Class or Classes. Any lesser number shall be
sufficient for adjournments. Any adjourned session or sessions may be held
within a reasonable time after the date set for the original meeting without the
necessity of further notice. Except when a different vote is required by any
provision of the By-Laws or this Declaration or, when such a different vote is
not specifically provided in this Declaration or the By-Laws, the Trustees shall
in their discretion require a different vote or the vote of a majority of
different percentage of the Shares of one or more particular Classes, a majority
of the Shares voted shall decide any question and a plurality shall elect a
Trustee."
Section 2.9. Section 6.6 of the Declaration of Trust is amended by adding to
each to the beginning of each sentence thereof "Subject to the rights,
preferences and limitations of any Class of Shares."
Section 2.10. Section 8.2 of the Declaration of Trust is hereby amended by
adding a new Section 8.2(d) as follows:
"(d) To the extent that the Trustees authorize and issue Preferred Shares
of any Class, they are hereby authorized and empowered to amend or supplement
this Declaration, including an amendment or modification to the rights of any
Outstanding Shares at the time of such amendment or supplement, as they deem
necessary or appropriate, including to comply with the requirements of the 1940
Act or requirements imposed by the rating agencies or other persons, all without
the approval of Shareholders."
Third, the Board of Trustees may without further Shareholder approval restate
the Declaration of Trust to give effect to the amendments in First and Second
above, including any amendment, although not specifically stated in Section 2,
to any provision of the Declaration of Trust that conflicts or is inconsistent
with the authority to establish and issue additional classes of shares.
IN WITNESS WHEREOF, the Trustees have executed this Amendment No. 2 on this ____
day of ____________, 2003.
20
JOHN HANCOCK INCOME SECURITIES TRUST
Special Meeting of Shareholders
August 21, 2003
The undersigned hereby appoints MAUREEN R. FORD, SUSAN S. NEWTON AND WILLIAM H.
KING, 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 John
Hancock Income Securities Trust to be held at the offices of the Trust, 101
Huntington Avenue, Boston, Massachusetts, on August 21, 2003 at 9:00 a.m.,
Eastern time, and at any adjournment of the meeting. All proxies previously
given by the undersigned for this meeting are hereby revoked.
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PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
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Please complete, sign, date and return this proxy in the enclosed envelope as
soon as possible. Please sign exactly as your name or names appear in the box on
the reverse. When signing as Attorney, Executor, Administrator, Trustee or
Guardian, please give your full title as such. If a corporation, please sign in
full corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
HAS YOUR ADDRESS CHANGED?
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THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
Your Board of Trustees recommends that you vote FOR proposals 1 and 2 and
AGAINST proposal 3.
Please mark votes as in this example /X/.
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JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND
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1. To elect the following nominees to serve as Trustees of the Fund.
(01) Ronald R. Dion (02) Charles L. Ladner
(03) John A. Moore (04) Maureen R. Ford
FOR WITHHOLD
/ / ALL / / FROM ALL
NOMINEES NOMINEES
/ / For all nominees except as noted above
2. To ratify the selection of Deloitte & Touche LLp as Independent public
accountants.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve a shareholder proposal recommending that the Board consider
merging the Fund into the John Hancock Regional Bank Fund.
/ / FOR / / AGAINST / / ABSTAIN
Mark box at right if address change has been noted on the reverse side of this
card. / /
Specify your vote by marking the appropriate spaces. If no specification is
made, this proxy will be voted for the nominees named in the proxy statement, in
favor of proposal 2 and against proposal 3. The persons named as proxies have
discretionary authority, which they intend to exercise as indicated above and
according to their best judgment as to any other matters which may properly come
before the meeting.
Please be sure to sign and date this Proxy.
Signature: _______________
Date: ______________
Signature: _______________
Date: ______________
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Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11PM Eastern Time the
business day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
Internet
http://www.eproxy.com/bto
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.
OR
Mail
Mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back
your proxy card.