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Important Information
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[JOHN HANCOCK LOGO]
JOHN HANCOCK FUNDS
July 12, 2004
Dear Fellow Shareholder:
I am writing to ask for your vote on important matters concerning your
investment in the John Hancock High Yield Municipal Bond Fund, John Hancock
Tax-Free Bond Fund or John Hancock California Tax-Free Income Fund.
Your fund's trustees are asking you to amend some of your fund's investment
restrictions in order to provide your fund with greater flexibility to respond
to changes in the market for municipal securities, as well as with investment
policies that reflect the current legal requirements and investment environment.
Modernizing these restrictions will make them substantially consistent with the
investment restrictions of the other John Hancock funds.
No Change in Investment Objective or Strategies
It is important to note that these proposals do not in any way signal a change
in your fund's investment objective or strategies. None of the changes are
expected to have a material effect on the way your fund is managed but will
better position the fund to respond to changes in the market for tax free and
municipal securities.
These proposals have been unanimously approved by your fund's board of trustees,
who believe they will benefit you and your fellow shareholders. They are
detailed in the enclosed proxy statement and summarized in the questions and
answers on the following pages. I suggest you read both thoroughly before
voting.
Your Vote Makes a Difference!
No matter what size your investment may be, your vote is critical. I urge you to
review the enclosed materials and to complete, sign and return the enclosed
proxy ballot to us immediately. Your prompt response will help avoid the need
for additional mailings. For your convenience, we have provided a postage-paid
envelope.
If you have any questions or need additional information, please contact your
financial professional or call your Customer Service Representative at
1-800-225-5291, Monday through Friday between 8:00 A.M. and 7:00 P.M. Eastern
Time. I thank you for your prompt vote on this matter.
Sincerely,
/s/ James A. Shepherdson
James A. Shepherdson
Chief Executive Officer
[Q&A LOGO]
Q: Why are you modifying the investment restrictions?
A: The proposed modifications, which have been unanimously approved by the
funds' trustees, would (1) eliminate some restrictions that are no longer
legally required, (2) allow the funds greater flexibility by expanding the
range of investment opportunities and techniques available to the funds, (3)
produce a clearer and more concise set of investment restrictions, and (4)
promote uniformity among the John Hancock funds.
Q: Do these changes to the funds' investment restrictions signify a change in
investment objective and strategy?
A: No, these proposals do not in any way signal a change in your fund's
investment objective or strategy. None of the changes are expected to have a
material effect on the way your fund is managed but will better position the
fund to respond to changes in the market for municipal securities.
Q: Will there be any changes to the funds' management fees or expenses if these
proposals are adopted?
A: No, the proposed changes only affect the funds' investment restrictions. They
will not affect the funds' fees or expenses.
Q: How do I vote?
A: Most shareholders vote by completing, signing and returning the enclosed
proxy card using the postage-paid envelope provided. If you prefer to vote in
person, you are cordially invited to attend a meeting of shareholders of your
fund, which will be held at 9:00 A.M. on August 25, 2004, at our 101
Huntington Avenue headquarters in Boston, Massachusetts. You may also vote by
calling our toll-free number from a touch-tone phone or via the Internet by
utilizing a program provided through a vendor. Please refer to the proxy card
for more information and voting instructions. If you choose to vote
electronically, you do not need to mail your proxy card. If you vote now, you
will help avoid further solicitations.
JOHN HANCOCK HIGH YIELD MUNICIPAL BOND FUND
(a series of John Hancock Tax-Free Bond Trust)
JOHN HANCOCK TAX-FREE BOND FUND
(a series of John Hancock Tax-Free Bond Trust)
JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND
101 Huntington Avenue
Boston, MA 02199
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 25, 2004
This is the formal agenda for your funds' joint special meeting. It tells you
what matters will be voted on and the time and place of the meeting, in case you
want to attend in person.
To the shareholders of John Hancock High Yield Municipal Bond Fund, John Hancock
Tax-Free Bond Fund and John Hancock California Tax-Free Income Fund (each, a
"fund"):
A special meeting of shareholders of the funds will be held at 101 Huntington
Avenue, Boston, Massachusetts on Wednesday, August 25, 2004 at 9:00 A.M.,
Eastern Time, to consider the following:
1.(a)-(l) Proposals to amend certain investment restrictions of your fund.
Your board of trustees recommends that you vote FOR these proposals.
2. Any other business that may properly come before the meeting.
Shareholders of record as of the close of business on June 17, 2004 are entitled
to vote at the meeting and any related follow-up meetings.
Whether or not you expect to attend the meeting, please complete and return the
enclosed proxy card. Please take a few minutes to vote now.
By order of the board of trustees,
Susan S. Newton
Secretary
July 12, 2004
TXFPX 7/04
PROXY STATEMENT OF
JOHN HANCOCK HIGH YIELD MUNICIPAL BOND FUND ("High Yield Municipal Bond")
(a series of John Hancock Tax-Free Bond Trust)
JOHN HANCOCK TAX-FREE BOND FUND ("Tax-Free Bond")
(a series of John Hancock Tax-Free Bond Trust)
JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND ("California Tax-Free Income")
This proxy statement contains the information you should know before voting on
the proposals as summarized below.
High Yield Municipal Bond, Tax-Free Bond and California Tax-Free Income will
furnish without charge a copy of their most recent semiannual and annual reports
to any shareholder upon request. Shareholders who want to obtain a copy of these
reports should direct all written requests to the attention of the fund, 101
Huntington Avenue, Boston, Massachusetts 02199 or should call John Hancock Funds
at 1-800-225-5291.
INTRODUCTION
This proxy statement is being used by the board of trustees of each fund to
solicit proxies to be voted at a special meeting of shareholders of the funds.
This meeting will be held at 101 Huntington Avenue, Boston, Massachusetts on
Wednesday, August 25, 2004 at 9:00 A.M., Eastern Time. The purpose of the
meeting is to consider:
1.(a)-(l) Proposals to amend certain investment restrictions of your fund.
Your board of trustees recommends that you vote FOR these each of
these proposals.
2. Any other business that may properly come before the meeting.
This proxy statement and the proxy card are being mailed to fund shareholders on
or about July 12, 2004.
Who is Eligible to Vote?
Shareholders of record on June 17, 2004 are entitled to attend and vote on each
proposal at the meeting or any adjourned meeting. Each share is entitled to one
vote. The shareholders of each fund will vote separately on each proposal. The
shareholders of each class of a fund vote together as a single class on each
proposal. Shares represented by properly executed proxies, unless revoked before
or at the meeting, will be voted according to shareholder instructions. If you
sign a proxy, but do not fill in a vote, your shares will be voted to approve
the proposals. If any other business comes before the meeting, your shares will
be voted at the discretion of the persons named as proxies.
1
PROPOSALS 1(a) through 1(l):
AMENDMENTS TO THE FUNDS' INVESTMENT RESTRICTIONS
The Investment Company Act of 1940 (the "1940 Act") requires mutual funds to
adopt fundamental investment restrictions covering certain types of investment
practices. These policies may only be changed with shareholder approval. Your
fund's board of trustees and John Hancock Advisers, LLC (the "adviser")
recommend that some of your fund's fundamental restrictions be liberalized as
permitted under the 1940 Act and current interpretive positions of the
Securities and Exchange Commission (the "SEC"). In addition, your fund's
trustees and the adviser recommend the elimination of certain fundamental
restrictions that your fund previously adopted but which are not required by the
1940 Act or any other current laws. Many of these restrictions were adopted in
the past to reflect certain state regulatory requirements which are no longer in
effect. The board of trustees and the adviser are recommending these changes in
order to provide each fund with greater flexibility to respond to changes in the
market for municipal securities, and with investment restrictions that reflect
the current legal and investment environment. The modernized restrictions are
similar to those of the other John Hancock funds.
The adviser expects that you will benefit from these proposed changes to your
funds' fundamental investment restrictions in several ways.
First, the proposed changes to the funds' fundamental restrictions expand the
range of investment opportunities and techniques available to manage the fund's
portfolio. The adviser carefully evaluates all new investment opportunities to
determine whether any would be suitable for a fund given its investment
objective, policies and risk profile. The adviser believes that the proposed
changes to the funds' fundamental restrictions will provide the funds with
additional flexibility to respond more quickly to new developments and changing
trends in the marketplace whenever the adviser determines that a response is
both appropriate and prudent.
Second, the proposed changes to each fund's investment restrictions are designed
to produce a clearer and more concise set of restrictions. These revised
restrictions parallel the investment restrictions of other funds managed by the
adviser, which will facilitate the adviser's compliance efforts. Also, these
revised restrictions should assist investors in understanding the
characteristics and risks associated with the funds and will allow for more
effective comparison to other mutual funds with similar investment objectives.
The funds have no current intention of changing their actual investment
strategies as a result of these amendments.
2
Proposals
Set forth below are 12 separate proposals, numbered 1(a)-1(l), each relating to
a different investment restriction proposed to be amended or eliminated. Each
proposal includes a table setting forth the applicable funds' current
fundamental restrictions in the left-hand column and the proposed amended
restriction in the right-hand column. Below each table is the rationale for the
proposed changes.
3
Proposal 1(a): Borrowing
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Current Fundamental Amended Fundamental
Fund Restriction Restriction
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High Yield The fund will not borrow The fund will not borrow
Municipal Bond money except from banks for money, except: (i) for
temporary or emergency (not temporary or short-term
Tax-Free Bond leveraging) purposes, purposes or for the clearance
including the meeting of of transactions in amounts
California redemption requests that not to exceed 33 1/3% of the
Tax-Free Income might otherwise require the value of the fund's total assets
untimely disposition of (including the amount
securities, in an amount up borrowed) taken at market
to 15% of the value of the value; (ii) in connection with
fund's total assets (including the redemption of fund
the amount borrowed) valued shares or to finance failed
at market less liabilities (not settlements of portfolio trades
including the amount without immediately
borrowed) at the time the liquidating portfolio
borrowing was made. While securities or other assets, (iii)
borrowings exceed 5% of the in order to fulfill
value of the fund's total commitments or plans to
assets, the fund will not purchase additional securities
purchase any additional pending the anticipated sale
securities. Interest paid on of other portfolio securities
borrowings will reduce the or assets; (iv) in connection
fund's net investment income. with entering into reverse
repurchase agreements and
In addition, High Yield dollar rolls, but only if after
Municipal Bond's policy each such borrowing there is
provides that the borrowing asset coverage of at least
restriction set forth above 300% as defined in the 1940
does not prohibit the use of Act; and (v) as otherwise
reverse repurchase permitted under the 1940
agreements, in an amount Act. For purposes of this
(including any borrowings) investment restriction, the
not to exceed 33 1/3% of deferral of trustees' fees and
net assets. transactions in short sales,
futures contracts, options on
futures contracts, securities
or indices and forward
commitment transactions
shall not constitute
borrowing.
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4
Reasons for the proposed change:
The 1940 Act requires that each fund adopt a fundamental policy regarding
borrowing. This amendment would promote uniformity among the John Hancock funds
by increasing the funds' percentage limitation on borrowing to 33 1/3% of each
fund's total assets, as allowed by the 1940 Act. With this change, the funds
would have the maximum flexibility to borrow money permitted under the 1940 Act
if the adviser and the board of trustees determine that such borrowing is in the
best interests of a fund and is consistent with both the fund's investment
objective and with the requirements of the 1940 Act. The amendment also would
clarify exceptions for reverse repurchase agreements, mortgage dollar rolls and
certain other transactions. The proposed amendment does not reflect a change in
any fund's anticipated borrowing activity.
The amended restriction would permit the fund to borrow for leveraging
purposes, which could cause its net assets to fluctuate at a greater rate with
market changes than if leverage was not used. Furthermore, purchasing
securities while borrowing exceeds 5% of the fund's net assets would increase
the risk inherent to borrowing, such as reduced total returns.
5
Proposal 1(b): Pledging Assets
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Current Fundamental Amended Fundamental
Fund Restriction Restriction
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High Yield The fund will not pledge, Eliminate as a fundamental
Municipal Bond hypothecate, mortgage or restriction.
otherwise encumber its assets,
Tax-Free Bond except in an amount up to
10% of the value of its total
California assets but only to secure
Tax-Free Income borrowing for temporary or
emergency purposes or as
may be necessary in
connection with maintaining
collateral in connection with
writing put and call options
or making initial margin
deposits in connection with
the purchase or sale of
financial futures, index futures
contracts and related options.
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Reasons for the proposed change:
This restriction, which was previously required by state blue sky laws, is no
longer required. Eliminating this restriction promotes uniformity among the John
Hancock funds. The elimination of this fundamental restriction will not result
in a material change to the investment operation of the funds. In addition, the
concepts underlying the current restriction are included in the funds'
fundamental restrictions on borrowing, which is proposed to be amended as
described in proposal 1(a) above, and issuing senior securities, which will
remain unchanged.
6
Proposal 1(c): Diversification
(High Yield Municipal Bond and California Tax-Free Income)
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Current Fundamental Amended Fundamental
Fund Restriction Restriction
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High Yield The fund will not purchase Eliminate as a fundamental
Municipal Bond securities (except obligations restriction. As a result, each
issued or guaranteed by the fund would become a "non-
U.S. Government, its agencies diversified" fund.
or instrumentalities) if the
purchase would cause the
fund at the time to have
more than 5% of the value of
its total assets invested in the
securities of any one issuer or
to own more than 10% of the
outstanding debt securities of
any one issuer; provided,
however, that up to 25% of
the value of the fund's asset
may be invested without
regard to these restrictions.
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California With respect to 75% of its
Tax-Free Income total assets, the fund will not
purchase securities (other
than obligations issued or
guaranteed by the United
States government, its
agencies or instrumentalities
and shares of other
investment companies) of any
issuer if the purchase would
cause immediately thereafter
more than 5% of the value of
the fund's total assets to be
invested in the securities of
such issuer or the fund
would own more than 10%
of the outstanding voting
securities of such issuer.
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Reasons for the proposed change:
Eliminating the funds' diversification restriction would allow the funds to
operate as "non-diversified" funds. Being classified as non-diversified would
provide the funds with greater flexibility to invest in a more concentrated
7
portfolio of issuers. Because the funds are tax exempt and municipal funds, the
universe of issuers in which the funds may invest is limited. The
adviserbelieves that eliminating the requirement that the funds maintain a
diversified portfolio will enable the funds to take advantage of investment
opportunities that in the adviser's view may offer the best potential return but
which are unavailable to the funds because of this restriction. This change
would also bring the funds in line with other John Hancock tax exempt and
municipal funds, which are managed as "non-diversified" funds. Each fund would
continue to be required to meet the minimum diversification requirements
necessary to qualify as a regulated investment company under the Internal
Revenue Code.
Because a relatively high percentage of a "non-diversified" fund's assets may be
invested in the obligations of a limited number of issuers, the value of a
"non-diversified" fund's shares may be more susceptible to a single economic,
political or regulatory event than the shares of a "diversified" fund.
8
Proposal 1(d): Trustee and Officer Ownership
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Current Fundamental Amended Fundamental
Fund Restriction Restriction
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High Yield The fund will not purchase Eliminate as a fundamental
Municipal Bond or retain the securities of any restriction.
issuer, if to the knowledge of
the fund, any officer or
director of the fund or its
Adviser owns more than 1/2
of 1% of the outstanding
securities of such issuer, and
all such officers and directors
own in the aggregate more
than 5% of the outstanding
securities of such issuer.
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Tax-Free Bond The fund will not purchase or
retain the securities of any
California issuer, if those officers and
Tax-Free Income Trustees of the fund or the
Adviser who own beneficially
more than 1/2 of 1% of the
securities of such issuer,
together own more than 5%
of the securities of such issuer.
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Reasons for the proposed change:
This restriction, which was previously required by state blue sky laws, is no
longer required. Eliminating this restriction promotes uniformity among the John
Hancock funds. Potential conflicts of interest of this nature are addressed in
the funds' Code of Ethics.
9
Proposal 1(e): Restricted and Illiquid Securities
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Current Fundamental Amended Restriction
Fund Restriction (Non-Fundamental)
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High Yield The fund will not purchase Eliminate as a fundamental
Municipal Bond the securities of any issuer if investment restriction.
as a result more than 10% of
the value of the fund's total The following would be
assets would be invested in added as a "non-
securities that are subject to fundamental" restriction:
legal or contractual The fund will not invest
restrictions on resale more than 15% of its net
("restricted securities") and in assets in securities xx
securities for which there are which are illiquid.
no readily available market
quotations; or enter into a
repurchase agreement
maturing in more than seven
days, if as a result such
repurchase agreement
together with restricted
securities and securities for
which there are no readily
available market quotations
would constitute more than
10% of the fund's total assets.
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Tax-Free Bond The fund will not purchase
illiquid securities, including
securities subject to
restrictions on disposition
under the Securities Act of
1933, repurchase agreements
maturing in more than seven
days, and securities which do
not have readily available
market quotations, if such
purchase would cause the
fund to have more than 10%
of its net assets invested in
such types of securities.
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10
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Current Fundamental Amended Restriction
Fund Restriction (Non-Fundamental)
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California The fund will not purchase
Tax-Free Income securities subject to
restrictions on disposition
under the Securities Act of
1933 or securities which are
not readily marketable if such
purchase would cause the
fund to have more than 10%
of its net assets invested in
such types of securities.
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Reasons for the proposed change:
The 1940 Act does not require that this restriction be a fundamental investment
policy of the funds. This change would promote uniformity among the John Hancock
funds by increasing the percentage limitation on illiquid securities to 15% as
allowed by the 1940 Act. As a non-fundamental policy, the funds' trustees could
in the future amend the policy if, for example, the 1940 Act requirements
change, without the fund incurring the costs of shareholder approval.
Illiquid securities may be difficult to dispose of at a fair price at the times
when the Adviser believes it is desirable to do so. The market price of
illiquid securities generally is more volatile than that of more liquid
securities, which may adversely affect the price that the Fund pays for or
recovers upon the sale of illiquid securities. Illiquid securities are also
more difficult to value, and the Adviser's judgment may play a greater role in
the valuation process. Investment of the Fund's assets in illiquid securities
may restrict the Fund's ability to take advantage of market opportunities. The
risks associated with illiquid securities may be particularly acute in
situations in which the Fund's operations require cash and could result in the
Fund borrowing to meet its short-term needs or incurring losses on the sale of
illiquid securities.
11
Proposal 1(f): Commodities and Derivatives
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Current Fundamental Amended Fundamental
Fund Restriction Restriction
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High Yield The fund will not . . . The fund will not invest in
Municipal Bond purchase or sell . . . commodities or commodity
commodities or commodity futures contracts, other than
Tax-Free Bond contracts, except commodities financial derivative contracts.
and commodities contracts Financial derivatives include
California which are necessary to enable forward currency contracts;
Tax-Free Income the fund to engage in financial futures contracts
permitted futures and options and options on financial
transactions necessary to futures contracts; options
implement hedging strategies, and warrants on securities,
or oil and gas interests. currencies and financial
indices; swaps, caps, floors,
The fund will not write, collars and swaptions; and
purchase or sell puts, calls or repurchase agreements
combinations thereof, except entered into in accordance
put and call options on debt with the fund's investment
securities, futures contracts policies.
based on debt securities,
indices of debt securities and
futures contracts based on
indices of debt securities. . .
* * * * *
These are the relevant excerpts
from the funds' current
investment restrictions.
Language regarding margin
and short sales is addressed
separately in proposal 1(g)
below and language regarding
real estate will remain
unchanged.
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Reasons for the proposed change:
The 1940 Act requires that each fund adopt a fundamental policy with respect to
commodities. This change promotes uniformity among the John Hancock funds and
clarifies the funds' ability to invest in financial derivatives contracts and
options on financial derivatives contracts, but not traditional commodities or
commodity contracts. Furthermore, the amended restriction used by other John
Hancock funds incorporates two of your fund's current investment restrictions
into one.
12
Your fund currently: (1) combines the commodities restriction with a real estate
restriction and (2) has a separate restriction combining options/ derivatives,
futures, margin and short sales. All other John Hancock funds combine the
commodities and options/derivatives restrictions, and have a separate
fundamental restriction on real estate. Accordingly, if this proposal is
approved, the portion of your funds' existing fundamental restriction on real
estate will remain unchanged, but as a separate restriction. The portion of the
restriction on short sales and margin is addressed in proposal 1(g) below.
13
Proposal 1(g): Margin and Short Sales
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Current Fundamental Amended
Fund Restriction Restriction
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High Yield The fund will not sell Eliminate as a fundamental
Municipal Bond securities on margin or make investment restriction.
short sales of securities or
Tax-Free Bond maintain a short position, The following would be
unless at all times when a added as a "non-
short position is open it owns fundamental" restriction:
California an equal amount of such The fund will not purchase
Tax-Free Income securities or securities securities on margin, except
convertible into or that the fund may obtain
exchangeable, without such short-term credits as
payment of any further may be necessary for the
consideration, for securities of clearance of securities
the same issue as, and equal transactions.
in amount to, the securities
sold short, and unless not
more than 10% of the fund's
net assets (taken at current
value) is held as collateral for
such sales at any one time.
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Reasons for the proposed change:
The change will promote uniformity among the John Hancock funds while complying
with the requirements of the 1940 Act. Although the SEC staff's current position
restricts mutual funds from purchasing securities on margin, as a
non-fundamental policy the funds' trustees could in the future amend the policy
if the regulatory restrictions change without causing the fund to incur the
costs of shareholder approval. In addition, the restriction on short sales would
be eliminated to improve uniformity and flexibility, although there is no
current intention for the funds to engage in short sales.
14
Proposal 1(h): Loans
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Current Fundamental Amended Fundamental
Fund Restriction Restriction
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High Yield The fund will not make loans The fund will not make
Municipal Bond to others, except insofar as loans, except that the fund
the fund may enter in may (i) lend portfolio
repurchase agreements as set securities in accordance
forth in the Prospectus or this with the fund's investment
Statement of Additional policies up to 33 1/3% of the
Information. The purchase of fund's total assets taken at
an issue of publicly market value, (ii) enter into
distributed bonds or other repurchase agreements, and
securities, whether or not the (iii) purchase all or a
purchase was made upon the portion of an issue of
original issuance of securities, publicly distributed debt
is not to be considered the securities, interests in bank
making of a loan. loans, including without
limitation, participation
- ---------------------------------------------------- interests, bank certificates
Tax-Free Bond The fund will not make loans of deposit, bankers'
to others, except through the acceptances, debentures or
California purchase of obligations in other securities, whether or
Tax-Free Income which the fund is authorized not the purchase is made
to invest, entering in upon the original issuance
repurchase agreements and of the securities.
lending portfolio securities in
an amount not exceeding
33 1/3% of its total assets.
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Reasons for the proposed change:
The 1940 Act requires that each fund adopt a fundamental policy with respect to
making loans. This amendment promotes uniformity among the John Hancock funds.
These changes would afford the funds the maximum flexibility to make loans to
the extent permitted under the 1940 Act and clarify certain exceptions to the
lending restriction.
Loans may be subject to restrictions on resale. Purchasers of loans and other
forms of debt instruments depend primarily upon the credit worthiness of the
borrower for payment of interest and principal. If scheduled interest or
principal payments are not made, the value of the instrument may be adversely
affected. Loans, loan participations and other forms of direct debt instruments
involve a risk of loss in the case of default or insolvency of the borrower,
lending bank or other intermediary. When the Fund lends portfolio securities,
there is a risk that the borrower may fail to return the loaned securities
involved in the transaction. As a result, the Fund may incur a loss or, in the
event of the borrower's bankruptcy, the Fund may be delayed in or prevented
from liquidating the collateral.
15
Proposal 1(i): Industry Concentration
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Current Fundamental Amended Fundamental
Fund Restriction Restriction
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High Yield The fund will not invest more The fund may not invest
Municipal Bond than 25% of its assets in the 25% or more of the value of
securities of "issuers" in any its assets in any one industry,
Tax-Free Bond single industry; provided that provided that this limitation
there shall be no limitation on does not apply to (i) tax-exempt
California the purchase of obligations municipal securities other
Tax-Free Income issued or guaranteed by the than those tax-exempt municipal
United States Government, its securities backed only by
agencies or instrumentalities or assets and revenues of non-
tax-exempt obligations issued governmental issuers and
by any state or political (ii) obligations of the U.S.
subdivision thereof. For Government or any of its
purposes of this limitation agencies, instrumentalities
when the assets and revenues or authorities.
of an agency, authority,
instrumentality or other
political subdivision are
separate from those of the
government creating the
issuing entity and a security is
backed only by the assets and
revenues of the entity, the
entity would be deemed to be
the sole issuer of the security.
Similarly, in the case of an
industrial development or
pollution control bond, if that
bond is backed only by the
assets and revenues of the
nongovernmental user, then
such nongovernmental user
would be deemed to be the
sole issuer. If, however, in
either case, the creating
government or some other
entity guarantees a security,
such a guarantee would be
considered a separate security
and would be treated as an
issue of such government or
other entity [unless the value of
all securities issued or
guaranteed by the government
- ----------------------------------------------------------------------------------------
16
- ---------------------------------------------------------------
Current Fundamental Amended Fundamental
Fund Restriction Restriction
- ---------------------------------------------------------------
or other entity owned by the
fund does not exceed 10% of
the fund's total assets]*.
*Bracketed text applies only to
Tax-Free Bond and California
Tax-Free Income.
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Reasons for the proposed change:
The 1940 Act requires that each fund adopt a fundamental policy regarding
concentration. None of the funds concentrates its investments in a single
industry. This amendment promotes uniformity among the John Hancock funds.
17
Proposal 1(j): Investing in New Issuers
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Current Fundamental Amended Fundamental
Fund Restriction Restriction
- -----------------------------------------------------------------------------------
High Yield The fund will not invest more Eliminate as a fundamental
Municipal Bond than 5% of the value of its restriction.
total assets in the securities of
California issuers having a record,
Tax-Free Income including predecessors, of
fewer than three years of
continuous operation, except
obligations issued or
guaranteed by the United
States Government, its
agencies or instrumentalities,
unless the securities are rated
by a nationally recognized
rating service.
- ----------------------------------------------------
Tax-Free Bond The fund will not invest more
than 5% of its total assets in
securities of any issuers if the
party responsible for
payment, together with any
predecessor, has been in
operation for less than three
years (except U.S.
government and agency
obligations and obligations
backed by the faith, credit
and taxing power of any
person authorized to issue
tax exempt securities).
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Reasons for the proposed change:
This restriction, which was previously required by state blue sky laws, is no
longer required. Eliminating this restriction promotes uniformity among the John
Hancock funds.
18
Proposal 1(k): Investing for Control or Management
(High Yield Municipal Bond only)
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Current Fundamental Amended
Fund Restriction Restriction
- -------------------------------------------------------------------------------
High Yield The fund will not invest for Eliminate as a fundamental
Municipal Bond the purpose of exercising restriction.
control or management of This restriction would be
another company. reclassified as "non-
fundamental."
- -------------------------------------------------------------------------------
Reasons for the proposed change:
The 1940 Act does not require a fund to have a policy on investing for control
or management unless the fund intends to invest for the purpose of exercising
control or management of another company. As a "non-fundamental" restriction,
the funds' trustees could in the future amend the restriction if, for example,
the 1940 Act requirements change, without the fund incurring the costs of
shareholder approval. In addition, reclassifying the restriction as
non-fundamental would promote uniformity among the John Hancock funds.
19
Proposal 1(l): Investing in Other Investment Companies
(Tax-Free Bond and California Tax-Free Income)
- ----------------------------------------------------------------------------------
Current Fundamental Amended
Fund Restriction Restriction
- ----------------------------------------------------------------------------------
Tax-Free Bond The fund will not invest in Eliminate as a fundamental
common stock or in restriction.
California securities of other investment This restriction would be
Tax-Free Income companies, except that incorporated into the funds'
securities of investment "non-fundamental"
companies may be acquired restriction regarding
as part of a merger, investments in other
consolidation or acquisition investment companies.
of assets and units of
registered unit investment
trusts whose assets consist
substantially of tax-exempt
securities may be acquired to
the extent permitted by
Section 12 of the Act or
applicable rules.
- ----------------------------------------------------------------------------------
Reasons for the proposed change:
The funds are not required to have a fundamental investment restriction on
investing in other investment companies, but the funds are subject to such
restrictions under the 1940 Act. As part of the funds' existing
"non-fundamental" restriction on investments in other investment companies, the
funds' trustees could in the future amend the restriction if, for example, the
1940 Act requirements change, without the fund incurring the costs of
shareholder approval. In addition, reclassifying the restriction as
non-fundamental would promote uniformity among the John Hancock funds.
20
BOARD EVALUATION AND RECOMMENDATION
The trustees believe that the proposed amendments to the funds' restrictions
will more clearly reflect current regulatory practice, will expand the
investment opportunities available to each fund and will promote clarity and
consistency among the John Hancock funds. Accordingly, the trustees recommend
that you approve each of the proposed amendments to the funds' restrictions set
forth in proposals 1(a)-(l) above.
Each proposal will be treated as a separate proposal for each applicable fund.
Accordingly, if one or more proposals is not approved for any fund, the current
investment restriction(s) will continue in effect.
The trustees of your fund recommend that you vote FOR each proposal to amend the
fund's investment restrictions.
VOTING RIGHTS AND REQUIRED VOTE
For each proposal applicable to a fund, each share of that fund, regardless of
class, is entitled to one vote and each fractional share shall be entitled to a
proportionate fractional vote. Approval of each proposal requires the
affirmative vote of a majority of the shares of that fund outstanding and
entitled to vote with respect to the proposal. For this purpose, a majority of
the outstanding shares of a fund means with respect to each proposal the vote of
the lesser of
(1) 67% or more of the shares present at the meeting, if the holders of more
than 50% of the shares of the fund are present or represented by proxy,
or
(2) more than 50% of the outstanding shares of the fund.
21
The following table describes the effect of different voting instructions on
the quorum and voting requirements for each proposal.
- --------------------------------------------------------------------------------------
Shares Quorum (Shares Present) Voting
- --------------------------------------------------------------------------------------
In General All shares "present" in person In person. Shares present in
or by proxy are counted person will be voted in
toward a quorum person at the meeting.
By proxy. Shares present by
proxy will be voted by
proxy in accordance with
instructions on the proxy
card.
- --------------------------------------------------------------------------------------
Broker Non-Vote Considered "present" at the Broker non-votes do not
(where the meeting for purposes of count as a vote "for" and
underlying quorum effectively count as a vote
holder has not against.
voted and the
broker does not
have discretionary
authority to vote
the shares)
- --------------------------------------------------------------------------------------
Proxy Without Considered "present" at the Voted "for" each proposal
Voting meeting for purposes of without voting instructions.
Instruction quorum
(other than a
Broker Non-Vote)
- --------------------------------------------------------------------------------------
Vote to Abstain Considered "present" at the Abstentions do not
meeting for purposes of constitute a vote "for" and
quorum effectively result in a vote
"against."
- --------------------------------------------------------------------------------------
If the required approval of shareholders is not obtained, the meeting may be
adjourned as more fully described in this proxy statement.
INFORMATION CONCERNING THE MEETING
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, electronically, by fax or in person by the trustees, officers and
employees of your fund; by personnel of the funds' adviser and the funds'
transfer agent, John Hancock Signature Services, Inc. ("JHSS"), or broker-dealer
firms. JHSS, together with a third party solicitation firm, will provide proxy
solicitation services to the funds, at a cost of approximately $12,000 per fund,
which will be paid by the funds.
22
Revoking Proxies
A shareholder signing and returning a proxy has the power to revoke it at any
time before it is exercised:
o By filing a written notice of revocation with the funds' transfer agent, John
Hancock Signature Services, Inc., 1 John Hancock Way, Suite 1000, Boston,
Massachusetts 02217-1000,
o By returning a duly executed proxy with a later date before the time of the
meeting, or
o If a shareholder has executed a proxy but is present at the meeting and
wishes to vote in person, by notifying the secretary of the fund (without
complying with any formalities) at any time before it is voted.
Being present at the meeting alone does not revoke a previously executed and
returned proxy.
Outstanding Shares and Quorum
As of June 17, 2004, the following number of shares of beneficial interest of
each fund were outstanding:
Fund Class A Shares Class B Shares Class C Shares
- --------------------- ---------------- ---------------- ---------------
High Yield Municipal
Bond 8,247,902 4,036,561 935,460
Tax-Free Bond 48,605,342 3,997,100 756,893
California Tax-Free
Income 28,079,882 4,089,536 653,768
Only shareholders of record on the record date are entitled to notice of and to
vote at the meeting. A majority of the outstanding shares of each fund that are
entitled to vote will be considered a quorum for the transaction of business.
Other Business
Each fund's board of trustees knows of no business to be presented for
consideration at the meeting other than the proposal. If other business is
properly brought before the meeting, proxies will be voted according to the best
judgment of the persons named as proxies.
Adjournments
If, by the time scheduled for the meeting, a quorum of shareholders is not
present or if a quorum is present but sufficient votes "for" the proposal have
not been received, the persons named as proxies may propose one or more
adjournments of the meeting to another date and time, and the meeting may be
held as adjourned within a reasonable time after the date set for the original
meeting without further notice. Any such adjournment will require
23
the affirmative vote of a majority of the votes cast on the question in person
or by proxy at the session of the meeting to be adjourned. The persons named as
proxies will vote all proxies in favor of the adjournment that voted in favor of
the proposal or that abstained. They will vote against such adjournment those
proxies required to be voted against the proposal. Broker non-voters will be
disregarded in the vote for adjournment. If the adjournment requires setting a
new record date or the adjournment is for more than 60 days from the original
meeting (in which case the board of trustees of your fund will set a new record
date), your fund will give notice of the adjourned meeting to its shareholders.
Telephone Voting
In addition to soliciting proxies by mail, by fax or in person, each fund may
also arrange to have votes recorded by telephone by officers and employees of
the fund or by personnel of the adviser or transfer agent or by a third party
solicitation firm. The telephone voting procedure is designed to verify a
shareholder's identity, to allow a shareholder to authorize the voting of shares
in accordance with the shareholder's instructions and to confirm that the voting
instructions have been properly recorded.
o A shareholder will be called on a recorded line at the telephone number in
the fund's account records and will be asked to provide the shareholder's
social security number or other identifying information.
o The shareholder will then be given an opportunity to authorize proxies to
vote his or her shares at the meeting in accordance with the shareholder's
instructions.
o Read the proxy statement and have your proxy card at hand.
o Call the toll-free number located on your proxy card.
o Enter the 12- or 14-digit "control number" found on your proxy card.
o Follow recorded instructions.
To ensure that the shareholder's instructions have been recorded correctly, the
shareholder will also receive a confirmation of the voting instructions by mail.
A toll-free number will be available in case the voting information contained in
the confirmation is incorrect. If the shareholder decides after voting by
telephone to attend the meeting, the shareholder can revoke the proxy at that
time and vote the shares at the meeting.
Internet Voting
You will have the opportunity to submit your voting instructions via the
Internet by utilizing a program provided through a vendor. Voting via the
Internet will not affect your right to vote in person if you decide to attend
24
the meeting. Do not mail the proxy card if you are voting via the Internet. To
vote via the Internet, you will need the 12- or 14-digit "control number" that
appears on your proxy card. These Internet voting procedures are designed to
authenticate shareholder identities, to allow shareholders to give their voting
instructions, and to confirm that shareholders' instructions have been recorded
properly. If you are voting via the Internet you should understand that there
may be costs associated with electronic access, such as usage charges from
Internet access providers and telephone companies, that must be borne by you.
o Read the proxy statement and have your proxy card at hand.
o Go to the Web site on your proxy card.
o Enter the 12- or 14-digit "control number" found on your proxy card.
o Follow the instructions on the Web site. Please call us at 1-800-225-5291 if
you have any problems.
o To ensure that your instructions have been recorded correctly, you will also
receive a confirmation of the voting instructions immediately after
submission and also by e-mail if chosen.
SHAREHOLDERS' PROPOSALS
The funds are not required, and do not intend, to hold meetings of shareholders
each year. Instead, meetings will be held only when and if required. Any
shareholders desiring to present a proposal for consideration at the next
meeting for shareholders of their respective fund must submit the proposal in
writing, so that it is received by the appropriate fund at 101 Huntington
Avenue, Boston, Massachusetts 02199 within a reasonable time before any
meeting.
25
OWNERSHIP OF SHARES IN THE FUND
To the knowledge of the funds, as of June 17, 2004, the following persons owned
of record or beneficially 5% or more of the outstanding Class A, Class B and
Class C shares of the funds.
Name and Address of Owners of
Fund more than 5% of Shares Class A Class B Class C
- ----------------------------------------------------------------------------------------------------
High Yield Municipal MLPF & S for the Sole Benefit of 11.14% 16.21% --
Bond Fund its Customers
Attn: Fund Administration
4800 Deerlake Drive East 2nd Fl
Jacksonville FL
Citigroup Global Markets Inc 5.41% 12.12% --
333 West 34th Street
New York NY
Prudential Securities Inc -- 5.15% 5.52%
Special Custody Account for
Exclusive Benefit of Customers
Attn: Surpas Omnibus Dept
1 New York Plaza
New York NY
Legg Mason Wood Walker Inc -- -- 13.58%
For Exclusive Benefit of Customers
Attn: Subaccounting
P.O. Box 1476
Baltimore MD
- ----------------------------------------------------------------------------------------------------
Tax-Free Bond Fund MLPF & S for the Sole Benefit of -- 10.15% 16.58%
its Customers
Attn: Fund Administration
4800 Deerlake Drive East 2nd Fl
Jacksonville FL
Citigroup Global Markets Inc -- -- 7.45%
333 West 34th Street
New York NY
Stanley C. Younger -- -- 7.01%
Henrietta Younger JT WROS
4719 Horseshoe Trail
Macungie PA
UBS Financial Services Inc. FBO -- -- 5.68%
Janet Schwartz Feldman
5 Cherry Lane
Kings Point NY
- ----------------------------------------------------------------------------------------------------
26
Name and Address of Owners of
Fund more than 5% of Shares Class A Class B Class C
- ----------------------------------------------------------------------------------------------------
California Tax-Free A G Edwards & Sons Inc. FBO 5.93% -- --
Income Fund Ethel R. Wells
1 N Jefferson Ave
Saint Louis MO
MLPF & S for the Sole Benefit of 5.89% 19.63% 50.66%
its Customers
Attn: Fund Administration
4800 Deerlake Drive East 2nd Fl
Jacksonville FL
Citigroup Global Markets Inc 5.77% 7.98% 8.77%
333 West 34th Street
New York NY
Prudential Securities Inc -- 6.72% 5.24%
Special Custody Account for
Exclusive Benefit of Customers
Attn: Surpas Omnibus Dept
1 New York Plaza
New York NY
As of June 17, 2004, the trustees and officers of each fund owned in the
aggregate less than 1% of the outstanding shares of the fund.
27
AVAILABLE INFORMATION
Your fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 and files reports,
proxy statements and other information with the SEC. These reports, proxy
statements and other information filed by your fund can be inspected and copied
(for a duplication fee) at the public reference facilities of the SEC at 450
Fifth Street, N.W., Washington, D.C., and at the Midwest Regional Office (500
West Madison Street, Suite 1400, Chicago, Illinois). Copies of these materials
can also be obtained by mail from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
copies of these documents may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov.
28
=====================
Thank
You
for mailing
your proxy
card promptly!
=====================
[JOHN HANCOCK LOGO] John Hancock Funds, LLC
WORLDWIDE SPONSOR MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
Mutual Funds
Institutional Services
Private Managed Accounts
Retirement Plans
TXFPX 7/04
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
THE EXPENSE OF ADDITIONAL MAILINGS
------------------------------------------------------------------
THREE EASY WAYS TO VOTE YOUR PROXY
Read the Proxy Statement and have the Proxy card at hand.
TELEPHONE: Call 1-800-690-6903 and follow the simple instructions.
INTERNET: Go to www.jhfunds.com and follow the on-line directions.
MAIL: Vote, sign, date and return your proxy by mail.
If you vote by Telephone or Internet, do not mail your proxy.
-------------------------------------------------------------------
999 999 999 999 99
FUND NAME PRINTS HERE SPECIAL MEETING OF SHAREHOLDERS -- AUGUST 25, 2004
PROXY SOLICITATION BY THE BOARD OF TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) James A.
Shepherdson, Susan S. Newton and William H. King, with full power of
substitution in each, to vote all the shares of beneficial interest of the
above-referenced Fund which the undersigned is (are) entitled to vote at the
Joint Special Meeting of Shareholders (the "Meeting") to be held at 101
Huntington Avenue, Boston, Massachusetts, on August 25, 2004 at 9:00 a.m.,
Eastern time, and any adjournment(s) of the Meeting. All powers may be exercised
by a majority of all proxy holders or substitutes voting or acting, or, if only
one votes and acts, then by that one. Receipt of the Proxy Statement dated July
12, 2004 is hereby acknowledged. If not revoked, this proxy shall be voted FOR
the proposals.
PLEASE SIGN, DATE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE
Date __________________, 2004
--------------------------------
--------------------------------
Signature(s) (Sign in the Box)
NOTE:Signature(s) should agree with the name(s) printed
herein. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full name as such. If a corporation, please sign in
full corporate name by president or other authorized
officer. If a partnership, please sign in partnership
name by authorized person.
TAX FREE 2004 lp
Please fill in box(es) as shown using black or blue ink or number 2 pencil. [X]
PLEASE DO NOT USE FINE POINT PENS.
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS THAT YOU VOTE "FOR" EACH PROPOSAL.
1. Proposals to approve the following changes to fundamental investment
restrictions of your Fund:
a. To amend fundamental restriction on borrowing;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
b. To eliminate fundamental restriction on pledging of assets;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
c. To eliminate fundamental restriction on diversification;
(High Yield Municipal Bond Fund and California Tax-Free Income Fund only);
[ ] FOR [ ] AGAINST [ ] ABSTAIN
d. To eliminate fundamental restriction on Trustee and Officer ownership;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
e. To amend and reclassify fundamental restriction on restricted and illiquid
securities;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
f . To amend fundamental restriction on commodities and derivatives;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
g. To amend and reclassify fundamental restriction on margin and short sales;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
h. To amend fundamental restriction on loans;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
i. To amend fundamental restriction on industry concentration;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
j. To eliminate fundamental restriction on investing in new issuers;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
k. To amend and reclassify fundamental restriction on investing for control or
management (High Yield Municipal Bond Fund only);
[ ] FOR [ ] AGAINST [ ] ABSTAIN
l. To amend and reclassify fundamental restriction on investing in other
investment companies (Tax-Free Bond Fund and California Tax-Free Income Fund
only).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PLEASE SIGN THIS PROXY ON THE REVERSE SIDE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
Internet Proxy Voting Service
Proxy Voting Form
John Hancock Funds
John Hancock California Tax-Free Income Fund
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS THAT YOU VOTE "FOR" EACH PROPOSAL.
Proposal 1. Proposals to approve the following changes to fundamental investment
restrictions of your Fund:
Proposal a. To amend fundamental restriction on borrowing;
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Proposal b. To eliminate fundamental restriction on pledging of assets;
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Proposal c. To eliminate fundamental restriction on diversification;
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Proposal d. To eliminate fundamental restriction on Trustee and Officer
ownership;
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Proposal e. To amend and reclassify fundamental restriction on restricted and
illiquid securities;
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Proposal f. To amend fundamental restriction on commodities and derivatives;
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Proposal g. To amend and reclassify fundamental restriction on margin and short
sales;
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Proposal h. To amend fundamental restriction on loans;
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Proposal i. To amend fundamental restriction on industry concentration;
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Proposal j. To eliminate fundamental restriction on investing in new issuers;
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Proposal k. Not Applicable. Your fund is not seeking a vote for this proposal.
Not Applicable
Proposal l. To amend and reclassify fundamental restriction on investing in
other investment companies.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
Please refer to the proxy statement for discussion of each of these matters. If
no specification is made on a proposal, the proposal will be voted "For".
To receive an optional email confirmation, enter your email address here:
- ------------------------
- ------------------------
Please review your selections carefully before voting.
If you vote more than once on the same Proxy, only your last (most recent) vote
will be considered valid.
Press this button to (submit) your Proxy Vote.
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