UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ____)
Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Rule 14a-12
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THE JOHN HANCOCK FINANCIAL TRENDS FUND, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a) (2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Date Filed:
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THE JOHN
HANCOCK FINANCIAL TRENDS FUND, INC.
325 John J. McConnell Boulevard,
Suite 200
Columbus, Ohio 43215
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
TO BE HELD ON JANUARY 3, 2008
To Shareholders of The John Hancock Financial Trends Fund, Inc.:
NOTICE IS GIVEN THAT a Special Meeting of Shareholders (the
“Meeting”) of The John Hancock Financial Trends Fund,
Inc. (the “Fund”), will be held at 325 John J.
McConnell Boulevard, Suite 200, Columbus, Ohio 43215, on
January 3, 2008, at 10:00 a.m. Eastern Time, for
the following purposes:
(1) To approve a new Investment Advisory Agreement between
the Fund and Diamond Hill Capital Management, Inc.;
(2) To amend the Fund’s Investment Restriction
No. 6 to permit the Fund to make short sales of securities;
(3) To amend the Fund’s Articles of Incorporation to
delete Article Tenth in its entirety; and
(4) To transact such other business as may properly come
before the meeting or any adjournment(s) thereof.
The Board of Directors recommends that you vote in favor of
the proposals.
Shareholders of record as of the close of business on
October 3, 2007, are entitled to notice of, and to vote at,
the Meeting or any adjournment or postponement thereof. If you
attend the Meeting, you may vote your shares in person. If you
do not expect to attend the Meeting, please complete, date, sign
and return promptly in the enclosed envelope the accompanying
proxy ballot(s). This is important to ensure a quorum at the
Meeting.
In addition to voting by mail, you may also vote by either
telephone or via the Internet, as follows:
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To Vote by Telephone:
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To Vote by the Internet:
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(1) Read the Proxy Statement and have the enclosed proxy
card at hand.
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(1) Read the Proxy Statement and have the enclosed proxy
card at hand.
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(2) Call the toll-free number that appears on the enclosed
proxy card.
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(2) Go to the website that appears on the enclosed proxy
card.
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(3) Enter the control number set forth on the enclosed
proxy card and follow the simple instructions.
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(3) Enter the control number set forth on the enclosed
proxy card and follow the simple instructions.
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We encourage you to vote by telephone or via the Internet using
the control number that appears on your enclosed proxy card. Use
of telephone or Internet voting will reduce the time and costs
associated with this proxy solicitation. Whichever method you
choose, please read the enclosed Proxy Statement carefully
before you vote.
We need
your proxy vote immediately.
Your vote is important. By law, the Meeting will have to be
adjourned without conducting any business if a majority of the
shares of the Fund entitled to vote in person or by proxy at the
Meeting are not represented at the Meeting. In that event, the
Fund would continue to solicit votes for a certain period of
time in an attempt to achieve a quorum. Your vote could be
critical in allowing the Fund to hold the Meeting as scheduled,
so please return your proxy ballot(s) immediately or vote
on-line or by telephone.
If your completed proxy ballet is not received, you may be
contacted by representatives of the Fund or by our proxy
solicitor, The Altman Group, Inc. (“Altman”). Altman
has been engaged to assist the Fund in soliciting proxies.
Representatives of Altman will remind you to vote your shares.
By Order of the Board of Directors,
Thomas M. Kinzler
Secretary of the Fund
Dated: November , 2007
INSTRUCTIONS FOR
SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense to the Fund
involved in validating your vote if you fail to sign your proxy
card properly.
1.
Individual Accounts
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Sign your
name exactly as it appears in the registration on the proxy card.
2.
Joint Accounts
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Either party
may sign, but the name of the party signing should conform
exactly to the name shown in the registration on the proxy card.
3.
Other Accounts
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The capacity of
the individual signing the proxy card should be indicated unless
it is reflected in the form of registration. For example:
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Corporate Accounts
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Valid Signature
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ABC Corp.
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ABC Corp. (by John Doe, Treasurer)
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ABC Corp.
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John Doe, Treasurer
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ABC Corp.
c/o John
Doe, Treasurer
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John Doe
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ABC Corp. Profit Sharing Plan
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John Doe, Trustee
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Trust Accounts
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ABC Trust
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Jane B. Doe, Trustee
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Jane B. Doe, Trustee u/t/d 12/28/78
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Jane B. Doe
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Custodial or Estate Accounts
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John B. Smith, Cust. f/b/o John B. Smith, Jr. UGMA
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John B. Smith
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John B. Smith
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John B. Smith, Jr., Executor
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YOUR VOTE
IS IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY, NO MATTER
HOW MANY SHARES YOU OWN.
THE JOHN
HANCOCK FINANCIAL TRENDS FUND, INC.
325 John J. McConnell Boulevard,
Suite 200
Columbus, Ohio 43215
PROXY STATEMENT DATED
NOVEMBER , 2007, FOR THE
SPECIAL MEETING OF
SHAREHOLDERS
TO BE HELD ON JANUARY 3, 2008
This Proxy Statement is being furnished to shareholders of The
John Hancock Financial Trends Fund, Inc. (the “Fund”)
in connection with the solicitation by the Fund’s Board of
Directors of proxies to be used at the Special Meeting of
Shareholders of the Fund, and at any adjournment or postponement
thereof (the “Meeting”), to be held at 325 John J.
McConnell Boulevard, Suite 200, Columbus, Ohio 43215, on
January 3, 2008, at 10:00 a.m. Eastern Time.
This Proxy Statement is being first mailed to shareholders on or
about November , 2007. At the Meeting,
shareholders will vote on the following proposals:
(1) To approve a new Investment Advisory Agreement between
the Fund and Diamond Hill Capital Management, Inc.
(“Diamond Hill”);
(2) To amend the Fund’s Investment Restriction
No. 6 to permit the Fund to make short sales of securities;
(3) To amend the Fund’s Articles of Incorporation to
delete Article Tenth in its entirety; and
(4) To transact such other business as may properly come
before the meeting or any adjournment(s) thereof.
The close of business on October 3, 2007, has been fixed as
the record date for the determination of shareholders entitled
to notice of and to vote at the Meeting. Each shareholder is
entitled to one vote for each full share and an appropriate
fraction of a vote for each fractional share held.
Shareholders who execute proxies retain the right to revoke them
in person at the Meeting or by written notice received by the
Secretary of the Fund at any time before the proxies are voted.
Unrevoked proxies will be voted as specified on the proxy and,
unless specified to the contrary, will be voted “FOR”
each Proposal.
Under the By-Laws of the Fund, a quorum is constituted by the
presence in person or by proxy of the record holders of at least
a majority of the outstanding shares of the Fund entitled to
vote at the Meeting. In the event a quorum is not present at the
Meeting, or in the event that sufficient votes to approve or
reject the proposal are not received, the persons named as
proxies may propose one or more adjournments of the Meeting to a
date not more than 120 days after the original record date
to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those shares
represented at the Meeting in person or by proxy. A shareholder
vote may be taken on any of the proposals in this proxy
statement prior to any such adjournment if sufficient vote have
been received for approval or rejection.
The persons named as proxies will vote, in their discretion,
those proxies which they are entitled to vote “FOR” or
“AGAINST” any proposal. Approval of Proposals 1
and 2 each require the affirmative vote of “a majority of
the outstanding securities” of the Fund. Under the
Investment Company Act of 1940, as amended (the “1940
Act”), the vote of “a majority of the outstanding
securities” means the vote of (1) the holders of 67%
or more of the shares represented at the Meeting, if the holders
of more than 50% of the shares of the Fund are represented at
the Meeting, or (2) more than 50% of the outstanding shares
of the Fund, whichever is less. Proposal 3 requires the
affirmative vote of a majority of the shares voted at the
Meeting, assuming the existence of a quorum.
Abstentions [and broker non-votes] will be counted as shares
present at the Meeting for quorum purposes but will not be
(1) considered votes cast at the Meeting or (2) voted
for or against any adjournment or proposal. [Broker non-votes
are shares held in “street name” for which the broker
indicates that instructions have not been received
from the beneficial owners or other persons entitled to vote and
for which the broker does not have discretionary voting
authority.] Abstentions [and broker non-votes] are effectively
votes against the proposals.
Additional information regarding outstanding shares, voting your
proxy card and attending the Meeting are included at the end of
this Proxy Statement in the section entitled “Voting
Information.”
The Fund is a Maryland corporation that is registered with the
Securities and Exchange Commission (the “SEC”), under
the 1940 Act, as a closed-end management investment company. The
Fund’s shares of common stock are referred to as
“shares,” and the holders of the shares are
“shareholders.” The Fund’s Board of Directors is
referred to as the “Board,” and the directors are
“Directors.”
John Hancock Advisers, LLC (“JHA”), a Delaware limited
liability company, whose principal business address is 601
Congress Street, Boston, Massachusetts 02210, is the Fund’s
investment adviser and administrator. MFC Global Investment
Management (U.S.), LLC (“MFC”), a Delaware limited
liability company, whose principal address is 101 Huntington
Avenue, Boston, Massachusetts 02199, is the Fund’s
investment sub-adviser. JHA and MFC [are affiliates under the
common control of the Manulife Financial Corporation]. The
Fund’s custodian is The Bank of New York
(“BONY”), whose principal business address is One Wall
Street, New York, New York 10286. The Fund’s transfer agent
and registrar is Mellon Investor Services (“Mellon”),
whose principal business address is Newport Office Center VII,
480 Washington Boulevard, Jersey City, New Jersey 07310.
The shares of the Fund trade on the NASDAQ Stock Market, Inc.
(ticker symbol: JHFT).
The date of this Proxy Statement is November ,
2007.
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TABLE OF
CONTENTS
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A-1
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B-1
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3
DISCUSSION
OF PROPOSALS
PROPOSAL 1 — APPROVAL OF A NEW INVESTMENT
ADVISORY
AGREEMENT BETWEEN THE JOHN HANCOCK FINANCIAL TRENDS FUND,
INC.
AND DIAMOND HILL CAPITAL MANAGEMENT, INC.
At the Meeting, you will be asked to approve a new Investment
Advisory Agreement (the “New Advisory Agreement”)
between the Fund and Diamond Hill. Diamond Hill will act as the
Fund’s interim investment adviser beginning on
December 1, 2007. A general description of the proposed New
Advisory Agreement is included below. The form of the New
Advisory Agreement is attached hereto as Exhibit A.
After careful consideration of the history of the Fund’s
relationship with JHA and MFC and possible alternatives to the
Fund’s investment advisory arrangements, the Directors,
including a majority of the Directors who are not interested
persons (as defined in the 1940 Act) of the Fund (the
“Independent Directors”), who were present at a
meeting held in-person on September 5, 2007, determined
that it would be in the best interest of the Fund and its
shareholders to appoint Diamond Hill as the new investment
adviser for the Fund. At this meeting, the Directors, including
a majority of the Independent Directors, approved, subject to
shareholder approval, the New Advisory Agreement, pursuant to
which Diamond Hill would become the Fund’s new investment
adviser. At this meeting, the Directors also approved an interim
advisory agreement between the Fund and Diamond Hill (the
“Interim Agreement”), pursuant to which Diamond Hill
would serve as interim investment adviser to the Fund, and a new
administrative services agreement, pursuant to which Diamond
Hill would serve as administrator to the Fund, all as described
more fully below. Following that meeting, on September 26,
2007, JHA submitted its resignation to the Fund as investment
adviser and administrator, effective November 30, 2007, and
MFC submitted it resignation to the Fund as investment
sub-adviser, also effective November 30, 2007.
Description
and Comparison of the New Advisory Agreement and the Current
Advisory Agreement
The following description of the New Advisory Agreement is
qualified in its entirety by reference to the form of New
Advisory Agreement attached hereto as Exhibit A. The
Current Advisory Agreement, dated July 6, 1991, was most
recently approved by the Board on July 23, 2007, and by
shareholders on [July 6, 1991]. The current
Sub-Advisory
Agreement (as defined herein), dated December 31, 2005, was
most recently approved by the Board on July 23, 2007. The
New Advisory Agreement with Diamond Hill is substantially
identical to the current agreement between the Fund and JHA (the
“Current Advisory Agreement”) except for the name of
the investment adviser, the effective date and term of the
agreement, and the state law governing said agreement.
Investment Advisory Services.
Pursuant to the
New Advisory Agreement, Diamond Hill will manage the investment
and reinvestment of the Fund’s assets and continuously
review, supervise, and administer the Fund’s investment
program. Diamond Hill will also determine, in its discretion,
the securities to be purchased or sold, subject to the ultimate
supervision of the officers and Directors of the Fund and in
compliance with such policies as the Directors may from time to
time establish, and in compliance with the objectives, policies,
and limitations of the Fund set forth in the Fund’s
prospectus and reports, as amended from time to time, and with
all applicable laws and regulations. Pursuant to the New
Advisory Agreement, Diamond Hill, at its own expense and at the
Fund’s request, will provide the foregoing services and the
office space, furnishings and equipment, and the personnel as
may be reasonably required in the judgment of the Board to
perform such services. The services to be provided under the New
Advisory Agreement are identical to those provided under the
Current Advisory Agreement.
Expenses and Advisory Fees.
As compensation
for its investment advisory services, the Fund will pay Diamond
Hill, as promptly as possible, after the last day of each month,
but in no event later than fifteen (15) business days after
such last day of each month, a fee at the annual rate of 0.65%
of the Fund’s average weekly net assets or a flat fee of
$50,000, whichever is higher.
In addition, if, in any given year, the sum of the Fund’s
expenses exceed two percent (2%) of the value of the Fund’s
average net assets during the year, the Fund may require Diamond
Hill to reimburse the Fund for such excess expenses promptly
and, in any event, prior to the publication of the Fund’s
annual report to shareholders; provided,
4
however, that, if after such reimbursement, Diamond Hill’s
annual compensation would be less than $50,000, then a minimum
advisory fee of $50,000 will be paid. Interest, taxes and
extraordinary items such as litigation costs are not deemed
expenses for purposes of the foregoing limitations and shall be
borne by the Fund in any event. Certain expenditures, including
costs incurred in connection with the purchase or sale of
portfolio securities, are capitalized in accordance with
generally accepted accounting principles applicable to
investment companies, and therefore, are not accounted for as
expenses.
The fees and expenses to be paid under the New Advisory
Agreement are the same as those paid under the Current Advisory
Agreement.
The following table sets forth the aggregate amount of advisory
fees paid by the Fund to JHA during the last fiscal year ended
December 31, 2006, pursuant to the Current Advisory
Agreement with the Fund:
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Aggregate Fee Paid
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During the Last Fiscal Year
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Advisory Fee paid to JHA
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$
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[537,542]
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Services to Other Clients.
The services of
Diamond Hill to the Fund shall not be deemed to be exclusive,
and nothing in the New Advisory Agreement prevents Diamond Hill,
or any affiliate thereof, from providing similar services to
other investment companies and other clients (whether or not
their investment objective and policies are similar to those of
the Fund) or from engaging in other activities so long as its
services to the Fund are not impaired thereby. Diamond Hill acts
as investment adviser to another registered investment company
with similar investment objectives and policies as the Fund.
The following table sets forth the name, asset size and
compensation received by Diamond Hill for providing advisory
services to such fund:
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Advisory Fee Rate
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(As a Percentage of
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Net Assets as of
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Average Daily
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Name of Similar Fund
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September 30, 2007
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Net Assets)
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Diamond Hill Financial Long-Short Fund
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$
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41.0 million
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1.00
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%
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Limitation of Liability.
The New Advisory
Agreement provides that Diamond Hill shall not be liable for any
error of judgment or for any loss suffered by the Fund in
connection with the performance of its obligations under the New
Advisory Agreement, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the
performance of, or from reckless disregard by it or its
obligations and duties under the New Advisory Agreement, or a
loss resulting from a breach of fiduciary duty with respect to
receipt of compensation for services. The liability provisions
set forth under the New Advisory Agreement are identical to
those set forth under the Current Advisory Agreement.
Term of the New Advisory Agreement.
The New
Advisory Agreement will take effect the date on which it is
approved by the shareholders of the Fund. The New Advisory
Agreement provides that it will remain in effect for an initial
term of two (2) years from its effective date, and will
remain in effect from year to year thereafter if specifically
approved at least annually by (i) the vote, cast in person
at a meeting called for such purpose, of a majority of the
Fund’s Independent Directors; and (ii) the vote of the
holders of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, or by the Fund’s
Board.
Termination.
The New Advisory Agreement may be
terminated, without penalty, at any time by either party to the
Agreement upon at least sixty (60) days’ prior written
notice to the other party; provided that in the case of
termination by the Fund, the termination has been authorized
(i) by a majority of the Fund’s Directors or
(ii) by a vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund. The New
Advisory Agreement terminates automatically in the event of its
assignment (as defined in the 1940 Act). The termination
provisions under the New Advisory Agreement are identical to
those under the Current Advisory Agreement.
Governing Law.
The Current Advisory Agreement
is governed by and construed in accordance with the internal
laws of the State of Georgia. The New Advisory Agreement is
governed by and construed in accordance with the internal laws
of the State of Ohio.
5
Description
of the Current Sub-Advisory Agreement
Investment Sub-Advisory Services.
Under the
current sub-advisory agreement among the Fund, JHA and MFC (the
“Current Sub-Advisory Agreement), MFC is responsible for
managing the investment and reinvestment of the Fund’s
assets, subject to oversight by JHA and the Board. As part of
the services it provides, MFC is responsible for, among other
things: (i) obtaining and evaluating pertinent economic,
statistical, financial and other information affecting the
economy generally and individual companies or industries, the
securities of which are included in the Fund or are under
consideration for inclusion; (ii) formulating and
implementing a continuous investment program for the Fund that
is consistent with the investment objectives and related
investment policies of the Fund as described in the Fund’s
registration statement; (iii) arranging for the purchase
and sale of securities and other investments;
(iv) providing reasonable assistance in determining the
fair value of all securities and other assets held by the Fund
for which market quotations are not readily available; and
(v) regularly reporting to the Board and to JHA with
respect to the implementation of the investment program. MFC is
also authorized to select broker-dealers to execute purchase and
sale transactions for the Fund. MFC is directed at all times to
seek to execute brokerage transactions for the Fund in
accordance with such policies or practices as may be established
by the Board and described in the Fund’s registration
statement, as amended.
Sub-Advisory Fees.
JHA (not the Fund) pays MFC
a sub-advisory fee based on the Fund’s average daily net
assets. The sub-advisory fee is equal to an annual rate equal to
0.35% of the Fund’s average daily net assets.
Expenses.
Under the Current Sub-Advisory
Agreement, MFC is responsible for furnishing, at its expense,
all necessary investment and management facilities, including
salaries of personnel required for MFC to faithfully perform
their duties under the agreement.
Services to Other Clients.
Under the Current
Sub-Advisory Agreement, MFC may act as an investment adviser to
others and may engage in other investment adviser-related
activities.
Limitation of Liability.
The Current
Sub-Advisory Agreement provides that neither MFC nor any of its
officers, directors or employees shall be liable to JHA or the
Fund for any error of judgment or mistake of law or for any loss
suffered by JHA or the Fund in connection with the matters to
which the Current Sub-Advisory Agreement relates, except for
losses resulting from willful misfeasance, bad faith, or gross
negligence in the performance of, or the reckless disregard of,
the duties of MFC or any of its directors.
Term of Agreement.
The Current Sub-Advisory
Agreement provides that it will continue in effect for a period
more than two (2) years from its effective date only so
long as such continuance is specifically approved at least
annually by (i) the Board, including by a vote of a
majority of the Independent Directors cast in person at a
meeting called for the purpose of voting on such approval, or
(ii) by a majority of the Fund’s outstanding voting
securities.
Termination.
The Current Sub-Advisory
Agreement may be terminated at any time, without the payment of
any penalty, by the Board, including a majority of the
Independent Directors, or by the vote of a majority of the
Fund’s outstanding voting securities, on sixty
(60) days’ written notice to JHA and MFC, or by JHA or
MFC on sixty (60) days’ written notice to the Fund and
the other party. The agreement also will automatically
terminate, without the payment of any penalty, (i) in the
event of its “assignment” (as defined in the 1940
Act), or (ii) in the event the Current Advisory Agreement
between JHA and the Fund is assigned (as defined in the 1940
Act) or terminates for any reason.
Other
Agreements/Arrangements Relating to the Fund
Interim Agreement and Expense Limitation.
The
Fund and Diamond Hill have entered into an Interim Agreement to
permit Diamond Hill to provide uninterrupted investment advisory
services to the Fund after the resignation of JHA and MFC. The
terms of the Interim Agreement are substantially similar to the
Current Advisory Agreement except with respect to the name of
the adviser, the effective date and term of the agreement, and
the state law governing said agreement. Although the fees
payable pursuant to the Interim Agreement are identical to those
payable under the Current Advisory Agreement and New Advisory
Agreement, Diamond Hill has entered into, and the Board has
approved, a separate, interim expense limitation agreement (the
“Interim Expense Limitation Agreement”) with the Fund
whereby Diamond Hill has agreed to waive a portion of its fees
so that its services will be provided to the Fund at cost for
the duration of the Interim Agreement. After such waiver, the
Fund’s advisory fee
6
payable pursuant to the Interim Expense Limitation Agreement
will be at the annual rate of 0.512% of the Fund’s average
weekly net assets. The Interim Agreement will take effect on
December 1, 2007, and will terminate on the earlier of the
date on which the Fund’s shareholders approve the New
Advisory Agreement, or at any time, without the payment of any
penalty, by vote of a majority of the Directors of the Fund in
office at the time or by vote of the holders of a majority of
the voting securities of the Fund at the time outstanding and
entitled to vote or, on sixty (60) days’ written
notice to Diamond Hill (which notice may be waived by Diamond
Hill), or by Diamond Hill at any time, without the payment of
any penalty, on sixty (60) days’ written notice to the
Fund (which notice may be waived by the Fund). This Interim
Agreement will automatically and immediately terminate in the
event of its assignment. Diamond Hill has agreed and represented
to the Board that it will take all appropriate measures to
ensure that the scope and quality of investment advisory
services provided under the terms of the Interim Agreement
during the interim period will be at least equivalent, in the
judgment of the Board, to the scope and quality of services JHA
and MFC provide under the Current Advisory Agreement and
Sub-Advisory Agreement, respectively. The Board contemplated the
approval of the Interim Agreement and the New Advisory Agreement
at the same time and took into consideration information
regarding the management, financial position and business of
Diamond Hill, as well as the experience of its portfolio
management team, as more fully described below. On
November 7, 2007, the Board considered and approved the
Interim Expense Limitation Agreement.
New Advisory Agreement Expense Limitation.
In
the interest of limiting the expenses of the Fund following the
transition of advisory and administrative services from JHA to
Diamond Hill, Diamond Hill has entered into, and the Board has
approved, an expense limitation agreement (the “Expense
Limitation Agreement”) with the Fund whereby Diamond Hill
has agreed to waive its fees or reimburse certain expenses of
the Fund for a period of two (2) years after the New
Advisory Agreement takes effect so that the total annual
operating expense ratio of shares of the Fund does not exceed
1.15%. The Expense Limitation Agreement does not cover interest,
dividends on short securities, acquired fund fees and expenses,
taxes and extraordinary expenses.
Transition Expenses.
Pursuant to a separate
letter agreement between the Fund and Diamond Hill, Diamond Hill
has agreed to absorb reasonable transition expenses associated
with the conversion of advisory services from JHA to Diamond
Hill, including, but not limited to: proxy costs including any
solicitation, special board meeting fees and expenses related to
the search for a new investment adviser, attorneys’ fees
and expenses related to the search and transition activities
(the “Transaction Expenses”) up to a maximum amount of
$200,000 (the “Maximum Amount”). After Diamond Hill
has paid the Maximum Amount, the Fund shall bear (100%) one
hundred percent of the Transaction Expenses. Also pursuant to
this Letter Agreement, Diamond Hill will not be responsible for
any extraordinary fees such as exit or termination fees charged
by any current service provider. The Transaction Expenses are
currently estimated to be approximately $175,000 to $200,000.
Retention of Sub-Adviser.
Unlike the current
sub-advisory arrangement among the Fund, JHA and MFC, it
currently is not expected that Diamond Hill will retain an
investment sub-adviser for the Fund.
Administration Services.
As noted above, upon
the resignation of JHA, Diamond Hill will provide administrative
services to the Fund pursuant to a written agreement with the
Fund (the “New Administration Agreement”), and may
delegate, at its discretion, any or all of its responsibilities
under the New Administration Agreement to one or more
third-party service providers. As compensation for its
administrative services, Diamond Hill will receive from the Fund
a fee at the annual rate of $22,000, or 0.15% of the Fund’s
average weekly assets, whichever is higher. The New
Administration Agreement is substantially identical to the
current administrative services agreement between JHA and the
Fund (the “Current Administration Agreement”), except
for the name of the administrator, the effective date and term
of the agreement, and the state law governing said agreement.
The New Administration Agreement will take effect on
December 1, 2007, and may be terminated at any time,
without payment of any penalty, upon sixty (60) days’
written notice to Diamond Hill, or by Diamond Hill at any time,
without the payment of any penalty, on sixty
(60) days’ written notice to the Fund. The Current
Administration Agreement is governed by and construed in
accordance with the internal laws of the State of Georgia. The
New Administration Agreement is governed by and construed in
accordance with the internal laws of the State of Ohio.
7
The following table sets forth the aggregate amount of
administrative fees paid by the Fund to JHA during the last
fiscal year ended December 31, 2006, pursuant to the
Current Administration Agreement (as defined herein):
|
|
|
|
|
|
|
|
|
Aggregate Fee Paid
|
|
|
|
|
During the Last
|
|
|
|
|
Fiscal Year
|
|
|
|
|
Administrative Services Fee paid to JHA
|
|
|
$[124,048]
|
|
Pursuant to the Service Agreement for Transfer Agency Services,
as amended, with the Fund, Mellon serves as the transfer agent
and registrar for the Fund, and as such, acts as the Fund’s
agent in processing orders for the purchase and sale of shares
and for tracking ownership of the Fund’s shares. It is
expected that Mellon will continue to serve as the Fund’s
transfer agent after the resignation of JHA and MFC. Pursuant to
the Custody Agreement, as amended, with the Fund, BONY serves as
the custodian of the Fund’s assets. At a meeting on
November 7, 2007, the Board approved a new custody
agreement with JPMorgan Chase Bank, N.A., effective on or about
December 1, 2007. The fees to be paid pursuant to the new
custodian agreement are expected to be no higher than those
payable under the current Custody Agreement.
Reasons
for Approving the New Advisory Agreement and the Board’s
Recommendations
The Board had been informally considering the future of the Fund
as part of the JHA organization since the spring of 2006. The
Board’s consideration of the Fund’s future was
accelerated in the summer and fall of 2006 by a variety of
factors, including most significantly, the announcement that
Mr. James Schmidt, the Fund’s long-time portfolio
manager, would be retiring effective April 30, 2007. In
addition, the Board also had several conversations with
representatives of JHA who expressed to the Board that JHA did
not envision the Fund, in its current form, remaining as part of
the JHA organization. During these conversations, JHA had
discussed with the board several proposed changes to the
Fund’s operations that were designed to bring the Fund more
in line with JHA’s proprietary funds. As a result, in the
summer of 2006, the Board appointed an Advisory Firm Search
Committee (the “Committee”) to consider the
possibility and viability of selecting a suitable alternative
investment adviser to JHA. The Board thought it prudent and
appropriate in exercising its duty of care to objectively
compare the resources, capabilities and performance of JHA with
those of other potential investment advisory organizations in
order for it to make an informed decision as to whether JHA
remaining as the Fund’s investment adviser would be in the
best interests of the Fund and its shareholders or whether those
interests would be better served by the engagement of another
investment advisory organization. Therefore, the Board charged
the Committee with researching and interviewing prospective
investment advisory firms with experience in financial stocks
and asked that it report back to the Board with its findings.
From February 2007 to September 2007, the Committee investigated
and interviewed, both formally and informally, six prospective
investment advisory firms that were deemed by the Committee to
be most appropriate for the Fund and which expressed an interest
in becoming the Fund’s investment adviser. After completion
of its initial due diligence, by August 2007, the Committee had
narrowed the potential candidates to two firms, including
Diamond Hill. The Committee requested and received information
and materials from both organizations and sought to familiarize
itself with, among other things, each organization’s
structure, personnel, investment philosophy and performance,
financial condition, organizational capability and compliance,
and overall commitment to the Fund.
At a board meeting of the Fund held on July 23, 2007, the
Board approved the continuation of the Current Advisory
Agreement and the Current Sub-Advisory Agreement for another one
year period as the Board continued to believe that it was
appropriate and in the best interests of the Fund to do so until
the Committee had completed its due diligence and reported its
findings to the Board. Also at this board meeting, JHA had
recommended that the Board, including all of the Independent
Directors, consider a proposal to reorganize and merge the Fund
into an open-end fund also managed by JHA (the
“Reorganization”). The Board, consistent with its
fiduciary duties, considered the Reorganization
vis à
vis
its search for a new investment adviser. In connection
with the Reorganization, the Board considered, among other
things, that the Reorganization would eliminate the Fund’s
current market value discount to net asset value by affording
shareholders the opportunity to redeem their shares at net asset
8
value; that the surviving, combined fund would be larger and
managed by the same JHA portfolio management personnel; and that
the combined fund would have a lower expense ratio than the
Fund. The Board then thought it prudent and appropriate to
consider further the Reorganization at a special meeting to be
held at such time when the Committee was ready to report its
findings to the Board with respect to its investment advisory
search. Overall, the Board held three (3) special meetings
to consider the information received from such firms, which
meetings were in addition to the Board’s regular quarterly
meetings and informal discussions and telephone conference calls.
At an in-person meeting on September 5, 2007, the Board met
to consider further the Reorganization as well as the findings
of the Committee. The Committee presented to the Board all of
the information it had received thus far from both potential
firms, including Diamond Hill. The Committee ultimately
recommended Diamond Hill as the successor investment adviser to
JHA and urged the Board to consider its recommendation. The
Board then reviewed additional materials provided by Diamond
Hill and representatives of Diamond Hill were available at the
meeting to respond to questions from the Board. The Independent
Directors then met in executive session with their counsel to
consider the Reorganization as well as the materials and
information provided to the Committee and the Board by Diamond
Hill. After careful consideration and review of, and discussion
about, all the materials and information received from all
parties, and such other considerations as they deemed relevant,
the Board determined that it would be in the best interests of
the Fund and its shareholders to reject the Reorganization as
proposed by JHA and appoint Diamond Hill as the Fund’s
investment adviser. Furthermore, the Board determined that it
would be in the best interests of the Fund and its shareholders
to approve the New Advisory Agreement. In rejecting the
Reorganization, the Board considered, among other things, the
retirement of the Fund’s former portfolio manager, the
overall performance of the Fund, and the potential for better
performance under the proposed management of Diamond Hill.
Although the past performance of Diamond Hill is not indicative
of future performance, the Board believed that the potential for
improved performance of the Fund outweighed the immediate
benefit of eliminating the Fund’s current market discount.
The Board ultimately believed that, at this time, the Fund and
its shareholders would be better served by appointing Diamond
Hill to serve as investment adviser to the Fund, given Diamond
Hill’s qualifications, investment philosophy, size and
proposed commitment to the Fund and its shareholders.
In approving the New Advisory Agreement and determining to
submit it to shareholders for approval, the Directors considered
a wide variety of factors. Among other things, the Directors
considered:
(i)
The qualifications of Diamond Hill, including the
nature, extent and quality of services to be provided and the
investment performance of the Fund and the portfolio
manager:
The Board first considered whether
Diamond Hill was qualified to assume the management of the Fund.
The Board considered the reputation, financial strength, key
services and operations, resources and expertise of Diamond Hill
as a firm, including the structure of its organization, its
relationships, reputation and financial strength, its access to
existing shared knowledge in capital markets and trends, and its
ability to attract and maintain highly-qualified, professional
talent. The Board noted particularly Diamond Hill’s
considerable experience in managing assets of various clients,
including annuity funds, endowment funds, foundations,
registered investment companies and private investment funds.
The Board considered the quality and nature of the proposed
investment advisory and administrative services to be provided
to the Fund by Diamond Hill as compared to those provided by JHA.
Next, the Board considered the qualifications and experience of
the investment advisory personnel at Diamond Hill. In
particular, the Board considered the performance, track record
and reputation of Christopher M. Bingaman, CFA, as the successor
portfolio manager of the Fund, with day-to-day responsibility
for the management of the Fund. The Board was impressed with
Diamond Hill’s and Mr. Bingaman’s investment
model for analyzing banks and other financial stocks. The Board
also considered the relative performance of the Diamond Hill
Financial Long-Short Fund (the “DH Fund”), a fund
managed similarly to the Fund for which Mr. Bingaman serves
as the portfolio manager, and its benchmark stock index for each
of the second quarter 2007, one-year, three-year, five-year and
since inception periods ended June 30, 2007. The Board
considered this performance
vis à vis
the
Fund’s performance and the relevant market indices for the
second quarter 2007, one-year, three-year, five-year and
ten-year periods, (noting that the since inception period for
the DH Fund was August 1, 1997), and found the performance
of the DH Fund to be generally better than that of the Fund. The
Board recognized that past performance is not an indicator of
future performance, but
9
concluded that Mr. Bingaman’s experience and
credentials made him extremely well qualified to manage the
Fund’s portfolio in accordance with its investment
objectives and strategies, and that there was potential that
Fund shareholders would benefit from his management of the Fund.
The Board further considered Diamond Hill’s methodology for
compensating the Fund’s portfolio manager and the rest of
the portfolio management, trading and research team. The Board
also considered that the employee turnover rate for the
portfolio management trading and research team was zero for the
past five years. The Board then considered Diamond Hill’s
investment philosophy with respect to and its investment outlook
for the Fund and discussed whether changes would be made to the
way investment decisions would be made, executed and recorded.
The Board also considered that Diamond Hill’s portfolio
managers are precluded from investing in domestic equity
securities other than DHIL (as defined herein) common stock and
shares of its affiliated funds.
The Board also considered whether Diamond Hill would be able to
meet the compliance demands set forth under various regulations.
The Board also reviewed materials regarding Diamond Hill’s
compliance program and discussed in detail Diamond Hill’s
methods of dealing with potential conflicts of interest.
Finally, the Board also considered the administration of the
Fund, noting that Diamond Hill would also be providing
administrative services to the Fund pursuant to the New
Administration Agreement.
The Board concluded that the intended scope of such services was
satisfactory and comparable to those currently provided by JHA
and that there would be no diminution of the scope or quality of
the advisory services provided to the Fund under the New
Advisory Agreement. The Board further concluded that Diamond
Hill’s advisory personnel, including the successor
portfolio manager to the Fund, demonstrated a genuine commitment
to the success of the Fund, and that Diamond Hill’s
personnel resources were adequate based on its management model.
(ii)
The reasonableness of the advisory
fees:
In evaluating the costs of the services to
be provided by Diamond Hill under the New Advisory Agreement and
the profitability of Diamond Hill with the Fund, the Board
considered, among other things, whether advisory and
administrative services fees or other expenses would change as a
result of the new arrangements. Based on their review of the
materials provided and the assurances they had received from
Diamond Hill, the Board noted that the fees payable under the
New Advisory Agreement and the New Administration Agreement
would be the same as those payable under the Current Advisory
Agreement and the Current Administration Agreement,
respectively. As part of their analysis, the Board noted that
the proposed advisory fee under the New Advisory Agreement was
generally lower than that of the Fund’s peer group. The
Board then considered the overall expense ratio of the Fund,
both before and after any waivers or reimbursements, and found
that it was generally comparable with that of the Fund’s
peer group. The Board further noted that pursuant to the Expense
Limitation Agreement, Diamond Hill has agreed to waive its fees
and reimburse certain expenses of the Fund for a period of two
years after the New Advisory Agreement takes effect so that the
total annual operating expense ratio of the Fund does not exceed
1.15%. The Board noted that the total annual operating expenses
of the Fund would actually be expected to decrease slightly as a
result of the Expense Limitation Agreement, as the total annual
operating expenses for the fiscal years ended 2005 and 2006 were
l.18% and 1.21%, respectively, and are expected to be 1.26% for
the fiscal year ending 2007.
The Board then considered Diamond Hill’s management of the
DH Fund, which is a fund managed similarly to the way in which
the Fund would be managed by Diamond Hill, and the advisory fees
paid thereby. The Board noted that the advisory fee paid by the
DH Fund was higher than the proposed advisory fee to be paid by
the Fund. The Board was unable to compare the proposed advisory
fee with fees charged by Diamond Hill to other large
institutional and other client accounts with comparable
objectives, as Diamond Hill did not have any other clients
(other than the DH Fund) that have investment objectives
comparable to those of the Fund. The Board concluded that the
level of advisory fee to be charged to the Fund was reasonable
in light of these factors.
(iii)
The profitability of Diamond Hill with respect to
their relationship to the Fund:
The Board
considered what benefits Diamond Hill would derive from the
management of the Fund and whether it would have a financial
interest in the matters that were being considered. The Board
reviewed information regarding
10
the estimated profitability to Diamond Hill of its relationship
with the Fund and considered whether the profits would be
reasonable. The profitability analysis took into consideration
fall-out benefits from Diamond Hill’s relationship with the
Fund, including fees to be received under the New Advisory
Agreement and fees to be received pursuant to the New
Administration Agreement, although the Board noted that any such
benefits were difficult to quantify with certainty at this time,
and indicated that they would continue to evaluate them going
forward. The Board found that the estimated profits to be
realized by Diamond Hill from its relationship with the Fund
were likely to be reasonable and consistent with fiduciary
duties.
(iv)
The extent to which economies of scale will be
realized as the Fund grows and whether fee levels reflect those
economies of scale:
The Board considered whether
economies of scale would be realized by the Fund at higher asset
levels. The Board also assessed whether certain of Diamond
Hill’s costs would increase if asset levels rise. The Board
considered the Fund’s current asset size and concluded that
under foreseeable conditions, they were unable to assess at this
time whether economies of scale would be realized if the Fund
was to experience significant asset growth. In the event the
Fund were to experience significant asset growth, the Board
determined to reassess whether the advisory fee appropriately
took into account any economies of scale that had been realized
as a result of such growth.
(v)
Portfolio transactions:
The Board
evaluated the policies and procedures of the Fund and considered
the policies and procedures of Diamond Hill in effecting
portfolio transactions. The Board inquired as to how Diamond
Hill intended to ensure that portfolio transactions would be
carried out competently and within the scope of applicable
governmental and Fund policy limitations. The Board inquired of
Diamond Hill about possible future transactions with affiliates,
portfolio turnover rates, the recapture of brokerage commissions
and the consideration of research services in placing portfolio
transactions. The Board noted that Diamond Hill has no
“soft dollar” arrangements for its services and does
not intend to use “soft dollars” in connection with
portfolio transactions for the Fund.
(vi)
Diamond Hill’s commitment to the
Fund:
The Board considered Diamond Hill’s
commitment to the Fund and to the smooth and seamless potential
transition of advisory and administrative services from JHA to
Diamond Hill. The Board also noted that because of the
Fund’s and Diamond Hill’s size and focus, the Fund
would be an important part of the Diamond Hill organization.
(vii)
Alternatives to the New Advisory
Agreement:
The Board also considered possible
alternatives to the new management arrangements with Diamond
Hill, including particularly the Reorganization. As discussed
above under “Background,” the Board undertook an
extensive review and evaluation of prior management and
carefully considered a variety of alternatives. The Board
considered the relative advantages and disadvantages of
retaining a new investment adviser as compared with the relative
advantages and disadvantages of the Reorganization. In
connection with their examination of these alternatives, the
Board considered all the factors described above.
Board
Approval and Recommendation
As a result of the considerations described above, the Board
determined to approve the New Advisory Agreement with Diamond
Hill. In considering whether to approve the New Advisory
Agreement, the Board did not identify any particular information
that was all-important or controlling. The Board did not
identify any single factor that was determinative to its
decision and each Director may have attributed different weights
to the various factors. The Independent Directors were also
assisted by the advice of independent counsel in making this
determination. The Directors, including a majority of the
Independent Directors, concluded that the terms of the New
Advisory Agreement are fair and reasonable, that the fees stated
therein are reasonable in light of the services to be provided
to the Fund, and for these reasons they therefore have concluded
that the New Advisory Agreement should be approved and
recommended to the Fund’s shareholders. Based on the
foregoing, the Directors, including a majority of the
Independent Directors, who were present at the meeting held in
person on September 5, 2007 unanimously voted to approve
and to recommend to the shareholders of the Fund that they
approve the New Advisory Agreement.
Following the communication and discussion of the Board’s
decision, under cover of letter dated September 26, 2007,
JHA provided notice to the Board that it would resign as the
investment adviser to the Fund, effective
11
November 30, 2007. In addition, pursuant to separate
letters also dated September 26, 2007, JHA provided further
notice that it would resign as the Fund’s administrator
under the Current Administration Agreement and, that its
affiliate, MFC, would resign as investment sub-adviser to the
Fund under the Sub-Advisory Agreement. Under the 1940 Act,
however, a mutual fund cannot enter into a new investment
advisory agreement unless the shareholders of such fund vote to
approve a new investment advisory agreement. As such, the
Meeting is being held, among other things, to seek shareholder
approval of the New Advisory Agreement. If the Fund’s
shareholders approve the New Advisory Agreement, the New
Advisory Agreement will take effect on the date on which it is
approved by the shareholders of the Fund. As discussed earlier
herein, following the resignation of JHA and MFC, Diamond Hill
will serve as the interim investment adviser to the Fund,
pursuant to the Interim Agreement. During such time as the
Interim Agreement is in effect, Diamond Hill will provide its
services to the Fund at cost, as discussed above under the
section entitled “Other Agreements/Arrangements Relating to
the Fund — Interim Agreement”.
Information
Concerning Diamond Hill
Diamond Hill is a corporation organized and existing under the
laws of the State of Ohio and is a wholly-owned subsidiary of
Diamond Hill Investment Group, Inc. (“DHIL”), both of
which are located at 325 John H. McConnell Boulevard,
Suite 200, Columbus, Ohio 43215.
Diamond Hill serves as the investment adviser or sub-adviser for
eight (8) open-end investment companies, separately managed
accounts and private investment funds with aggregate assets in
excess of $4.4 billion as of September 30, 2007.
Diamond Hill is a registered investment adviser under the
Investment Advisers Act of 1940, as amended. DHIL is a publicly
traded holding company which wholly-owns Diamond Hill, its only
operating subsidiary.
The names, titles and principal occupations of key personnel of
Diamond Hill are set forth in the following table. The business
address of each person listed below is 325 John H. McConnell
Boulevard, Suite 200, Columbus, Ohio 43215.
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Name
|
|
Title and Principal Occupation
|
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|
Roderick (“Ric”) H. Dillon, Jr.
|
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Chief Executive Officer and Chief Investment Officer
|
|
James F. Laird
|
|
Chief Financial Officer and Chief Compliance Officer
|
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Charles Bath
|
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Managing Director, Equities
|
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Christopher M. Bingaman
|
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Portfolio Manager
|
For additional information about Diamond Hill, you may visit
their website at
www.diamond-hill.com
. For text-only
copies of Diamond Hill’s or DHIL’s public filings, you
may visit the EDGAR Database on the SEC’s website at
www.sec.gov
.
Approval of this Proposal 1 will require the affirmative
vote of a “majority of the outstanding voting
securities” (as defined in the 1940 Act) of the Fund, which
means the affirmative vote of the lesser of (i) more than
50% of the outstanding shares of the Fund, or (ii) 67% or
more of the shares of the Fund present at the Meeting if more
than 50% of the Fund’s outstanding shares are present at
the Meeting in person or by proxy. If the New Advisory Agreement
is not approved, Diamond Hill will continue to serve as the
Fund’s interim investment adviser pursuant to the terms of
the Interim Agreement and the Interim Expense Limitation
Agreement, and the Board will consider possible alternatives,
including the liquidation and termination of the Fund.
THE DIRECTORS RECOMMEND THAT SHAREHOLDERS OF THE
FUND VOTE “FOR” PROPOSAL 1.
12
PROPOSAL 2 —
APPROVAL TO AMEND INVESTMENT RESTRICTION NO. 6
TO PERMIT THE FUND TO MAKE SHORT SALES OF SECURITIES
The Fund’s Investment Restriction No. 6, relating to
permissible investments, provides that the Fund may not, among
other things, “make short sales of securities.” In a
short sale, a fund sells a security, which it does not own, in
anticipation of a decline in the market value of the security.
To complete the sale, the fund must borrow the security
(generally from the broker through which the short sale is made)
in order to make delivery to the buyer. The fund is then
obligated to replace the security borrowed by purchasing it at
the market price at the time of replacement. The fund is said to
have a “short position” in the securities sold until
it delivers them to the broker. The period during which the fund
has a short position can range from as little as one day to more
than a year. Until the security is replaced, the proceeds of the
short sale are retained by the broker, and the fund is required
to pay to the broker a negotiated portion of any dividends or
interest which accrues during the period of the loan. To meet
current margin requirements, a fund is also required to deposit
with the broker additional cash or securities so that the total
deposit with the broker is maintained daily at 150% of the
current market value of the securities sold short (100% of the
current market value if a security is held in the account that
is convertible or exchangeable into the security sold short
within 90 days without restriction other than the payment
of money).
Short sales by a fund create opportunities to increase the
fund’s return but, at the same time, involve specific risk
considerations and may be considered a speculative technique.
Since the fund in effect profits from a decline in the price of
the securities sold short without the need to invest the full
purchase price of the securities on the date of the short sale,
the fund’s net asset value per share will tend to increase
more when the securities it has sold short decrease in value,
and to decrease more when the securities it has sold short
increase in value, than would otherwise be the case if it had
not engaged in such short sales. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount
of any premium, dividends or interest the fund may be required
to pay in connection with the short sale. Furthermore, under
adverse market conditions the fund might have difficulty
purchasing securities to meet its short sale delivery
obligations, and might have to sell portfolio securities to
raise the capital necessary to meet its short sale obligations
at a time when fundamental investment considerations would not
favor such sales.
The Board is proposing that this restriction be amended to
permit the Fund to make short sales of securities. The Board has
determined that such amendment is advisable and in the best
interests of the Fund and its shareholders. This investment
policy will be non-fundamental and may be changed by the Board
at any time without shareholder vote.
Board
Approval and Recommendation
The Directors who were present at a meeting held on
September 5, 2007, including a majority of the Independent
Directors, unanimously voted to approve and recommend to
shareholders of the Fund that they approve an amendment to the
Fund’s Investment Restriction No. 6 to permit the fund
to make short sales of securities.
Approval of this Proposal 2 requires the affirmative vote
of a “majority of the outstanding voting securities”
(as defined in the 1940 Act) of the Fund, which means the
affirmative vote of the lesser of (i) more than 50% of the
outstanding shares of the Fund, or (ii) 67% or more of the
shares of the Fund present at the Meeting if more than 50% of
the Fund’s outstanding shares are present at the Meeting in
person or by proxy. If the proposed changes to Investment
Restriction No. 6 are not approved, the Fund will continue
to operate within its existing policies and restrictions, and
the Board will consider such alternative action as it deems
appropriate.
THE DIRECTORS RECOMMEND THAT SHAREHOLDERS OF THE
FUND VOTE “FOR” PROPOSAL 2
13
PROPOSAL 3 —
APPROVAL OF AMENDMENT TO THE FUND’S ARTICLES OF
INCORPORATION TO DELETE ARTICLE TENTH
Background
and Description of the Proposal
Article Tenth of the Fund’s (sometimes referred to
herein as the “Corporation”) Articles of Incorporation
(“Articles”) provides in pertinent part:
TENTH:
Notwithstanding any other provision of
the charter of the Corporation, there shall be submitted to the
stockholders prior to the dissolution of the Corporation, a
proposal to convert the Corporation from a “closed-end
company” to an “open-end company,” as those terms
are defined in sections 5(a)(2) and 5(a)(1), respectively,
of the 1940 Act, and amendments to the charter of the
Corporation required to effectuate such proposal. The Board of
Directors of the Corporation has approved the Articles of
Amendment which include the amendments necessary to convert the
Corporation from a “closed-end company” to an
“open-end company”... The Board of Directors has
declared such amendments advisable and has directed that such
amendments be submitted to the stockholders of the Corporation
at either an annual or a special meeting of stockholders to be
held prior to the dissolution of the Corporation, and no action
to rescind or alter the foregoing may be taken without approval
of an amendment of this Article TENTH by the stockholders
of the Corporation.
In accordance with Article Tenth, a proposal is required to
be submitted to shareholders to approve the conversion of the
Fund from a “closed-end company” to an “open-end
company” prior to its dissolution. The Board is proposing
that this provision be eliminated. In order to accomplish this,
however, shareholder approval is expressly required to amend the
Fund’s Articles as proposed. The Board has determined that
such amendment to the Fund’s Articles is advisable and in
the best interests of the Fund and its shareholders. The
proposed Amendment to the Fund’s Articles which reflects
the proposed change is attached hereto as Exhibit B.
Board
Approval and Recommendation
The Directors who were present at a meeting held on
September 28, 2007, including a majority of the Independent
Directors, unanimously voted to approve and recommend to
shareholders of the Fund that they approve an amendment to the
Fund’s Articles to delete Article Tenth in its
entirety. If the proposed amendment is not approved, the Fund
will continue to be required to submit a proposal to
shareholders to approve the conversion or the Fund from a
“closed-end company” to an “open-end
company” prior to its dissolution.
Approval of this Proposal 3 requires the affirmative vote
of a majority of the shares voted at the Meeting, provided a
quorum is present.
THE DIRECTORS RECOMMEND THAT SHAREHOLDERS OF THE
FUND VOTE “FOR” PROPOSAL 3.
Security
Ownership of Management
[As of September 30, 2007, the holdings of no Director or
executive officer, nor the Directors and executive officers of
the Fund as a group, represented more than 1% of the outstanding
shares of the Fund. At September 30, 2007, no Director or
Nominee, nor any immediate family member of such person, owned
beneficially or of record any shares of JHA or MFC, or any
person or entity (other than the Fund) directly or indirectly
controlling, controlled by, or under common control with JHA or
MFC, respectively.]
14
Beneficial
Share Ownership
[As of September 30, 2007, there were no beneficial owners
of more than 5% of the outstanding shares of the Fund, by each
person (including any “group” as that term is used in
Section 13(d)(3) of the Exchange Act) who is known to the
registrant to be the beneficial owner of more than 5% of the
outstanding shares of the Fund.]
Shareholder
Communications with the Board of Directors
The Board has provided for a process by which shareholders may
send communications to the Board. If a shareholder wishes to
send a communication to the Board, or to a specified Director,
the communication should be submitted in writing to the
Secretary of the Fund, who will forward such communication to
the Director(s).
Householding
Shareholders of the Fund may have family members living in the
same home who also own shares of the Fund. In order to reduce
the amount of duplicative mail that is sent to homes with more
than one Fund account, the Fund will, until notified otherwise,
send only one copy of the prospectus, shareholder report and
proxy statement to each household address. If you would like to
receive separate documents for each account holder, please call
the Fund at
614-255-4080
or write to the Fund at 325 John J. McConnell Boulevard,
Suite 200, Columbus, Ohio 43215. If you currently share a
household with one or more other shareholders of the Fund and
are receiving duplicate copies of prospectuses, shareholder
reports or proxy statements and would prefer to receive a single
copy of such documents, please call or write the Fund at the
phone number or address listed above.
Under Maryland law and pursuant to an exemption received from
the NASDAQ Stock Market, Inc. (“NASDAQ”) in connection
with the formation of the Fund, the Fund is not required to hold
annual meetings of shareholders if the election of Directors is
not required under the 1940 Act. It is the present intention of
the Board not to hold annual meetings of shareholders unless
shareholder action is required.
In January 2003, the Board adopted several amendments to the
Fund’s By-Laws, including provisions relating to the
calling of a special meeting and requiring advance notice of
shareholder proposals for nominees for Director. The advance
notice provisions in the By-Laws require shareholders to notify
the Fund in writing of any proposal to nominate a person or
persons, as the case may be, for the purpose of electing one or
more Directors at a special meeting of shareholders, between 90
and 120 days prior to the special meeting or the
10th day following the day on which public announcement is
first made of the date of the special meeting and the nominees
proposed by the Directors to be elected at such meeting. The
notification must be in the form prescribed by the By-Laws. The
advance notice provisions provide the Fund and its Directors
with the opportunity to thoughtfully consider and address the
matters proposed before the Fund prepares and mails its proxy
statement to shareholders. In no event shall the public
announcement of a postponement or adjournment of a special
meeting to a later date or time commence a new time period for
giving of a shareholder’s notice as described above. Please
contact the Secretary of the Fund (“Secretary”) for
additional information about the advance notice requirements or
the other amendments to the By-Laws.
Shareholder proposals that are submitted in a timely manner, as
described above, will not necessarily be included in the
Fund’s proxy materials. Inclusion of such proposals is
subject to limitations under the federal securities laws.
Record
Date and Share Ownership
Shareholders of record as of the close of business on
October 3, 2007 (the “Record Date”), are entitled
to vote at the Meeting. The presence, in person or by proxy, of
a majority of the shares of the Fund outstanding and entitled to
vote as of the Record Date will constitute a quorum for the
transaction of business at the Meeting. In the absence
15
of a quorum or in the event that a quorum is present at the
Meeting, but votes sufficient to approve the proposals are not
received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote
of a majority of those shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote “FOR” the
proposals in favor of such an adjournment and will vote those
proxies required to be voted “AGAINST” the proposals
against such adjournment. A shareholder vote may be taken on one
or more of the proposals in this Proxy Statement prior to any
such adjournment if sufficient votes have been received and it
is otherwise appropriate. As of the Record Date, there were
[3,993,124] shares of Common Stock outstanding.
Submitting
and Revoking Your Proxy
All properly executed and unrevoked proxies received in time for
the Meeting will be voted as instructed by shareholders. If you
execute your proxy but give no voting instructions, your shares
that are represented by proxies will be voted “FOR”
approval of the New Advisory Agreement set forth in
Proposal 1, “FOR” the proposal to amend the
Fund’s Investment Restriction No. 6 set forth in
Proposal 2, and “FOR” the proposal to amend the
Fund’s Articles of Incorporation to delete
Article Tenth in its entirety set forth in Proposal 3.
In addition, if other matters are properly presented for voting
at the Meeting, the persons named as proxies will vote on such
matters in accordance with their best judgment. We have not
received notice of other matters that may properly be presented
for voting at the Meeting.
Shareholders are entitled to one vote for each full share held
and a fractional vote for each fractional share held. To ensure
that your vote is recorded promptly, please vote as soon as
possible, even if you plan to attend the Meeting in person. Most
shareholders have three options for submitting their votes:
(1) via the Internet, (2) by phone or (3) by
mail. We encourage you to vote by Internet or by phone. It is
convenient, and it saves the Fund significant postage and
processing costs. In addition, when you vote via the Internet or
by phone prior to the date of the Meeting, your vote is recorded
immediately and there is no risk that postal delays will cause
your vote to arrive late and therefore not be counted. If you
attend the Meeting, you may also submit your vote in person, and
any previous votes that you submitted, whether by Internet,
phone or mail, will be superseded by the vote that you cast at
the Meeting.
You may revoke your proxy at any time prior to its exercise by:
(1) submitting a properly executed, later-dated proxy;
(2) attending the Meeting in person and voting; or
(3) submitting a written notice of revocation to the
Secretary. To be effective, such revocation must be received by
the Secretary prior to the Meeting and must indicate your name
and account number.
To pass, Proposals 1 and 2 each require the affirmative
vote of the lesser of (1) 67% or more of the shares of the
Fund present at the Meeting, if more than 50% of the outstanding
shares are represented at the Meeting in person or by proxy, or
(2) more than 50% of the outstanding shares entitled to
vote at the Meeting. To pass, Proposal 3 requires the
affirmative vote of a majority of the shares voted at the
Meeting, provided a quorum is present.
For purposes of determining whether shareholders have approved a
proposal, abstentions and broker non-votes will be counted as
shares present at the Meeting for quorum purposes but will not
be voted for or against any adjournment or proposal.
Accordingly, abstentions [and broker non-votes] effectively will
be votes “AGAINST” Proposals 1, 2 and 3 because
each Proposal requires the affirmative vote of a specified
majority of the Fund’s outstanding shares.
Diamond Hill will bear the Transaction Expenses, which include
the expenses associated with the preparation and solicitation of
proxies, up to the Maximum Amount disclosed herein. After
Diamond Hill has paid the Maximum Amount, the Fund shall bear
(100%) one hundred percent of the Transaction Expenses. Diamond
Hill has retained The Altman Group, Inc. to solicit proxies for
a fee of $ plus a reasonable
amount to cover expenses. Certain directors, officers and other
employees of the Fund, Diamond Hill or its affiliates, without
additional compensation, also may solicit proxies personally or
in writing, by telephone,
e-mail
or
otherwise. The Fund will request that brokers and nominees who
hold shares of the Fund in their names forward these proxy
16
materials to the beneficial owners of those shares. Diamond Hill
or one of its affiliates may reimburse such brokers and nominees
for their reasonable expenses incurred in connection therewith.
Management knows of no business to be presented at the Meeting
other than the matters set forth in this Proxy Statement, but
should any other matter requiring a vote of shareholders arise,
the proxies will vote according to their best judgment in the
interest of the Fund.
The Fund will furnish, without charge, a copy of the
Fund’s most recent annual and semi-annual reports to any
shareholder upon request. A shareholder who wishes to request
copies of the Fund’s annual or
semi-annual
report may do so by calling the Fund’s transfer agent,
Mellon Investor Services,
at .
IT IS
IMPORTANT THAT YOU EXECUTE AND RETURN ALL OF YOUR PROXIES
PROMPTLY.
17
INDEX
TO EXHIBITS TO PROXY STATEMENT
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Exhibit A — Form of Investment Advisory Agreement
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A-1
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Exhibit B — Articles of Amendment
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B-1
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18
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
This AGREEMENT is made as of the day
of ,
2008 by and between The John Hancock Financial Trends Fund,
Inc., a Maryland corporation (the “Fund”) and Diamond
Hill Capital Management, Inc., an Ohio corporation (the
“Investment Adviser”).
WHEREAS, the Fund is a closed-end, diversified management
investment company registered under the Investment Company Act
of 1940, as amended (“1940 Act”), and the shares of
the Fund are registered for sale to the public under the
Securities Act of 1933; and
WHEREAS, the Fund desires to engage the Investment Adviser to
render investment management services to the Fund and the
Investment Adviser is willing to render such services;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1.
Duties of Investment Adviser.
The
Investment Adviser agrees to perform the following services (the
“Services”) for the Fund:
(a) manage the investment and reinvestment of the
Fund’s assets;
(b) continuously review, supervise, and administer the
investment program of the Fund;
(c) determine, in its discretion, the securities to be
purchased, retained or sold (and implement those decisions);
(d) provide the Fund with records concerning the Investment
Adviser’s activities which the Fund is required to maintain;
(e) render regular reports to the Fund’s officers and
Directors concerning the Investment Adviser’s discharge of
the foregoing responsibilities;
The Investment Adviser shall discharge the foregoing
responsibilities subject to the control of the officers and the
Directors of the Fund and in compliance with such policies as
the Directors may from time to time establish, and in compliance
with the objectives, policies, and limitations of the Fund set
forth in the Fund’s prospectus, as amended from time to
time, and with all applicable laws and regulations. All Services
to be furnished by the Investment Adviser under this Agreement
may be furnished through the medium of any directors, officers
or employees of the Investment Adviser or through such other
parties as the Investment Adviser may determine from time to
time.
The Investment Adviser agrees, at its own expense or at the
expense of one or more of its affiliates, to render the Services
and to provide the office space, furnishings and equipment and
the personnel as may be reasonably required in the judgment of
the Board of Directors of the Fund to perform the Services on
the terms and for the compensation provided herein. The
Investment Adviser shall authorize and permit any of its
officers, directors and employees, who may be elected as
directors or officers of the Fund, to serve in the capacities in
which they are elected.
Except to the extent expressly assumed by the Investment Adviser
herein and except to the extent required by law to be paid by
the Investment Adviser, the Fund shall pay all costs and
expenses in connection with its operations and organization.
Without limiting the generality of the foregoing, such costs and
expenses include the following:
(a) all brokers’ commissions, issue and transfer
taxes, and other costs chargeable to the Fund in connection with
securities transactions to which the Fund is a party or with
securities owned by the Fund;
(b) the fees, charges and expenses of any independent
public accountants, custodian and depository, dividend
disbursing agent, dividend reinvestment agent, transfer agent,
registrar, and legal counsel for the Fund;
(c) the interest on indebtedness, if any, incurred by the
Fund;
A-1
(d) the taxes, including franchise, income, issue,
transfer, business license, and other corporate fees payable by
the Fund to Federal, State, County, City, or other governmental
agents;
(e) the fees and expenses involved in maintaining the
registration and qualification of the Fund and of its shares
under laws administered by the Securities and Exchange
Commission or under other applicable regulatory requirements,
including the preparation and printing of prospectuses;
(f) the compensation and expenses of its directors;
(g) the costs of printing and distributing reports, notices
of stockholders’ meetings, proxy statements, dividend
notices, prospectuses and other communications to the
Fund’s stockholders, as well as all expenses of
stockholders and Board of Directors’ meetings;
(h) all costs, fees or other expenses arising in connection
with the organization and Incorporation of the Fund including
initial registration and qualification under the 1940 Act and
under the Securities Act of 1933, as amended, the initial
determination of its tax status and any rulings obtained for
this purpose, the initial registration and qualification of its
securities under the laws of any State and the approval of the
Fund’s operations by any other Federal or State authority;
(i) the expenses of repurchasing and, if applicable,
redeeming shares of the Fund;
(j) insurance premiums;
(k) the costs of designing, printing, and issuing
certificates representing shares of the Fund;
(l) the expenses, including fees and disbursements of
counsel, in connection with litigation by or against the
Fund; and
(m) premiums for the fidelity bond maintained by the Fund
pursuant to Section 17(g) of the 1940 Act and rules
promulgated thereunder.
2.
Portfolio Transactions
. The Investment
Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the
Fund and is directed to use its best efforts to obtain the best
net results as described in the Fund’s prospectus from time
to time. The Investment Adviser may, in its discretion, purchase
and sell portfolio securities from and to brokers and dealers
who provide the fund with research, analysis, advice and similar
services, and the Investment Adviser may pay to these brokers,
in return for research and analysis, a higher commission or
spread than may be charged by other brokers, provided that the
Investment Adviser determines in good faith that such commission
is reasonable in terms either of that particular transaction or
of the overall responsibility of the Investment Adviser to the
Fund and its other clients and that the total commission paid by
the Fund will be reasonable in relation to the benefits to the
Fund over the long-term. The Investment Adviser will promptly
communicate to the officers and the Directors of the Fund such
information relating to portfolio transactions as they may
reasonably request.
3.
Compensation of the Investment
Adviser
. For the Services to be rendered by the
Investment Adviser as provided in Sections 1 and
Section 2 of this Agreement, the Fund shall pay to the
Investment Adviser, as promptly as possible, after the last day
of each month, but in no event later than 15 business days after
such last day of each month, a fee at the annual rate of .65% of
the Fund’s average weekly net assets or a flat fee of
$50,000, whichever is higher. The first payment of the fee shall
be made as promptly as possible at the end of the month next
succeeding the effective date of this Agreement, and shall
constitute a full payment of the fee due the Investment Adviser
for all services rendered pursuant to this Agreement prior to
that date. In the event that the Investment Adviser’s right
to such fee commences to accrue on a date other than the first
day of the month, the fee for such month shall be based on the
average weekly net assets of the Fund in that month from the
date of commencement to the last day of the month. In the event
of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on
the last business day on which this Agreement is in effect
subject to a pro rata adjustment based on the number of days
elapsed in the current month as a percentage of the total number
of days in such month. The weekly net assets of the Fund shall
be determined on the second to last business day of each week,
or on the next business day on which the New York Stock Exchange
is open for business, and be computed as of the time of the
A-2
regular close of business of the New York Stock Exchange, or
such other time as may be determined by the Board of Directors
of the Fund.
If, in any given year, the sum of the Fund’s expenses
exceeds two (2%) percent of the value of the Fund’s average
net assets during such year the Fund may require the Investment
Adviser to reimburse the Fund for such excess expenses promptly
and in any event prior to the publication of the Fund’s
annual report to stockholders; provided, however, that if after
such reimbursement the Investment Adviser’s annual
compensation would be less than $50,000, then a minimum advisory
fee of $50,000 will be paid. Interest, taxes and extraordinary
items such as litigation costs are not deemed expenses for
purposes of the foregoing limitations and shall be borne by the
Fund in any event. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities,
which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, are
accounted for as capital items and not expenses.
4.
Other Services
. At the request of the
Fund, the Investment Adviser in its discretion may make
available to the Fund, office facilities, equipment, personnel,
and other services. Such office facilities, equipment,
personnel, and services shall be provided for or rendered by the
Investment Adviser and billed to the Fund at Investment
Adviser’s cost.
5.
Reports
. The Fund and the Investment
Adviser agree to furnish to each other, if applicable, current
prospectuses, proxy statements, reports to stockholders,
certified copies of their financial statements, and such other
information with regard to their affairs as each may reasonably
request and as may be required by law.
6.
Status of Investment Adviser
. The
services of the Investment Adviser to the Fund are not to be
deemed exclusive, and the Investment Adviser shall be free to
render similar services to others so long as its services to the
Fund are not impaired thereby. The Investment Adviser shall be
deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way or otherwise be deemed
an agent of the Fund. Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the
Investment Adviser, who may also be a director, officer or
employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management
or other aspects of any other business, whether of a similar
nature or a dissimilar nature.
7.
Certain Records
. Any records required
to be maintained and preserved pursuant to the provisions of
Rule 31a-1
and
Rule 31a-2
promulgated under the 1940 Act which are prepared or maintained
by the Investment Adviser on behalf of the Fund are the property
of the Fund and will be surrendered promptly to the Fund on
request.
8.
Liability of Investment Adviser
. The
Investment Adviser assumes no responsibility under this
Agreement other than to render the services called for hereunder
in good faith. The Investment Adviser shall not be liable for
any error of judgment or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates,
except a loss resulting from a breach of fiduciary duty with
respect to receipt of compensation for services (in which case
any award of damages shall be limited to the period and the
amount set forth in Section 36(b)(3) of the 1940 Act) or a
loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of, or from reckless
disregard by it of its obligations and duties under, this
Agreement.
9.
Permissible Interests
. Directors,
agents, and stockholders of the Fund are or may be interested in
the Investment Adviser (or any successor thereof) as Directors,
partners, officers, or stockholders, or otherwise; Directors,
partners, officers, agents, and stockholders of the Investment
Adviser are or may be interested in the Fund as Directors,
stockholders or otherwise; and the Investment Adviser (or any
successor) is or may be interested in the Fund as a stockholder
or otherwise.
10.
Duration and Termination; Notice; Certain
Definitions
. This Agreement shall become
effective as of the date hereof and, unless sooner terminated as
provided herein, shall continue in effect for a period of two
(2) years and thereafter from year to year, but only so
long as such continuation is specifically approved at least
annually (a) by the vote of a majority of those Directors
of the Fund who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (b) by the
Directors of the Fund or by a vote of the holders of a majority
of the outstanding voting securities of the Fund.
A-3
This Agreement may be terminated at any time, without the
payment of any penalty, by vote of a majority of the Directors
of the Fund in office at the time or by vote of the holders of a
majority of the voting securities of the Fund at the time
outstanding and entitled to vote or, on sixty
(60) days’ written notice to the Investment Adviser
(which notice may be waived by the Investment Adviser), or by
the Investment Adviser at any time, without the payment of any
penalty, on sixty (60) days’ written notice to the
Fund (which notice may be waived by the Fund). This Agreement
will automatically and immediately terminate in the event of its
assignment.
Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postage-paid, to the other
party at any office of such party.
As used in this Agreement, the terms “assignment”,
“interested persons”, and a “vote of a majority
of the outstanding voting securities” shall have the
respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exceptions as may be
granted by the Securities and Exchange Commission under the 1940
Act.
11.
Severability
. If any provision of
this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
12.
Amendments
. No provision of this
Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall
be effective until approved by vote of the holders of a majority
of the Fund’s outstanding voting securities.
13.
Counterparts
. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
14.
Application of [Ohio] Law
. This
Agreement shall be governed by and construed in accordance with
the internal laws of the State of Ohio.
A-4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and the year first
written above.
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DIAMOND HILL CAPITAL MANAGEMENT, INC.
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THE JOHN HANCOCK FINANCIAL TRENDS FUND, INC.
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By:
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By:
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Title:
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Title:
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ATTEST:
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ATTEST:
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Secretary
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Secretary
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[Corporate Seal]
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[Corporate Seal]
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A-5
EXHIBIT B
ARTICLES OF AMENDMENT OF
THE JOHN HANCOCK FINANCIAL TRENDS FUND, INC.
THE JOHN HANCOCK FINANCIAL TRENDS FUND, INC., a Maryland
corporation (hereinafter called the “Corporation”),
hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST:
The charter of the Corporation is
hereby amended as follows:
(1) Article TENTH is deleted in its entirety.
SECOND:
The amendment to the charter of the
Corporation as hereinabove set forth has been duly advised by
the Board of Directors and approved by the shareholders of the
Corporation by the vote required by law.
IN WITNESS WHEREOF, The John Hancock Financial Trends Fund, Inc.
has caused these articles to be signed in its name and on its
behalf by its President and attested by its Secretary
on ,
2008.
THE JOHN HANCOCK FINANCIAL TRENDS FUND, INC.
[ ],
President
Attest:
[ ],
Secretary
B-1
THE UNDERSIGNED, President of THE JOHN HANCOCK FINANCIAL TRENDS
FUND, INC., who executed on behalf of said corporation the
foregoing Articles of Amendment, of which this certificate is
made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles of Amendment to be the
corporate act of said corporation and further certifies that, to
the best of his knowledge, information and belief, the matters
and facts set forth therein with respect to the approval thereof
are true in all material respects, under the penalties of
perjury.
President
B-2
PROXY CARD
VOTE VIA THE INTERNET:
www. .com
VOTE VIA THE TELEPHONE: [1-888-###-####]
999 9999 9999 999
THE JOHN HANCOCK FINANCIAL TRENDS FUND, INC.
PROXY CARD
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 3, 2008
This proxy is being solicited by the Board of Directors of The John Hancock Financial Trends
Fund, Inc. (the “Fund”). The undersigned hereby appoints as proxies [James F. Laird] and [Gary
R. Young] each of them (with the power of substitution) to (i) to vote as indicated on the
reverse side on each of the specific proposals that will be considered at the Special Meeting of
the Shareholders of the Fund, or any adjournment or postponement thereof (the “Meeting”), as
described in the Fund’s Proxy Statement, (ii) to vote, in adjournment or postponement thereof,
as described in the Fund’s Proxy Statement, and (iii) to vote, in its discretion, on such other
matters as may properly come before such Meeting, with all the power the undersigned would have
if personally present. The shares represented by this proxy will be voted as instructed on the
reverse side of this proxy card. Unless indicated to the contrary, this proxy shall be deemed
to grant authority to vote “FOR” the proposal.
Receipt of the Notice of Meeting and the Fund’s Proxy Statement accompanying this Proxy Card is
acknowledged by the undersigned.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED
ENVELOPE IF YOU ARE NOT VOTING
BY PHONE OR INTERNET
Dated:
, 2007
Signature(s) (if held jointly)
(Please sign in box)
Note:
Please sign this proxy exactly as your
name or names appears hereon. Joint owners
should each sign personally. Trustees and
other fiduciaries should indicate the
capacity in which they sign, and where more
than one name appears, a majority must sign.
If a corporation, partnership or other
entity, this signature should be that of a
duly authorized individual who should state
his or her title.
Please fill in box(es) as shown using black or blue ink or number 2 pencil.
x
PLEASE DO NOT USE FINE POINT PENS.
Proxies may be revoked at any time before they are exercised by a written revocation received by
the Secretary of the Fund, by properly executing a later-dated proxy or by attending the Meeting
and voting in person.
This proxy card, when properly executed, will be voted in the matter directed herein by the
undersigned.
THE DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE “FOR” THE FOLLOWING PROPOSALS.
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FOR
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AGAINST
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ABSTAIN
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To approve an Investment Advisory Agreement between The John
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Hancock Financial Trends Fund, Inc. and Diamond Hill Capital
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Management, Inc.
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To approve an amendment to Investment Restriction No. 6
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to permit The John Hancock Financial Trends Fund, Inc. to
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make short sales of securities.
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To approve an amendment to the Articles of Incorporation of
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The John Hancock Financial Trends Fund, Inc. to delete
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Article Tenth in its entirety.
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PLEASE DATE AND SIGN THE REVERSE SIDE.
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