DEF 14A 1 txfrbond.txt TAX-FREE BOND (3735) ================================================================================ Important Information ================================================================================ [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

------------------------------------------------------------------------------------------ Current Fundamental Amended Fundamental Fund Restriction Restriction ------------------------------------------------------------------------------------------ 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. ------------------------------------------------------------------------------------------

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

---------------------------------------------------------------------------------- Current Fundamental Amended Fundamental Fund Restriction Restriction ---------------------------------------------------------------------------------- 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. ----------------------------------------------------------------------------------

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)

--------------------------------------------------------------------------------------- Current Fundamental Amended Fundamental Fund Restriction Restriction --------------------------------------------------------------------------------------- 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. --------------------------------------------------------------------------------------- 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. ---------------------------------------------------------------------------------------

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

----------------------------------------------------------------------------------- Current Fundamental Amended Fundamental Fund Restriction Restriction ----------------------------------------------------------------------------------- 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. ----------------------------------------------------------------------------------- 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. -----------------------------------------------------------------------------------

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

---------------------------------------------------------------------------------- Current Fundamental Amended Restriction Fund Restriction (Non-Fundamental) ---------------------------------------------------------------------------------- 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. ---------------------------------------------------------------------------------- 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. ----------------------------------------------------------------------------------

10

-------------------------------------------------------------------------- Current Fundamental Amended Restriction Fund Restriction (Non-Fundamental) -------------------------------------------------------------------------- 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. --------------------------------------------------------------------------

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

--------------------------------------------------------------------------------------- Current Fundamental Amended Fundamental Fund Restriction Restriction --------------------------------------------------------------------------------------- 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. ---------------------------------------------------------------------------------------

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

---------------------------------------------------------------------------------- Current Fundamental Amended Fund Restriction Restriction ---------------------------------------------------------------------------------- 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. ----------------------------------------------------------------------------------

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

-------------------------------------------------------------------------------------- Current Fundamental Amended Fundamental Fund Restriction Restriction -------------------------------------------------------------------------------------- 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. --------------------------------------------------------------------------------------

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

---------------------------------------------------------------------------------------- Current Fundamental Amended Fundamental Fund Restriction Restriction ---------------------------------------------------------------------------------------- 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. ---------------------------------------------------------------

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

----------------------------------------------------------------------------------- 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). -----------------------------------------------------------------------------------

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)

------------------------------------------------------------------------------- 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. TAX FREE 2004 lp Internet Proxy Voting Service Proxy Voting Form John Hancock Funds John Hancock High Yield Municipal Bond 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. To amend and reclassify fundamental restriction on investing for control or management. [ ]FOR [ ]AGAINST [ ]ABSTAIN Proposal l. Not Applicable. Your fund is not seeking a vote for this proposal. Not Applicable 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. Copyright 2000, 2001 ADP Financial Information Services, Inc. The MIS logo is a service mark of Automatic Data Processing, Inc. The ADP logo is a registered trademark of ADP of North America, Inc. Terms and Conditions. Privacy Statement. Internet Proxy Voting Service Proxy Voting Form John Hancock Funds John Hancock Tax-Free Bond 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. Not Applicable. Your fund is not seeking a vote for this proposal. Not Applicable 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. Copyright 2000, 2001 ADP Financial Information Services, Inc. The MIS logo is a service mark of Automatic Data Processing, Inc. The ADP logo is a registered trademark of ADP of North America, Inc. Terms and Conditions. Privacy Statement.