<PAGE>
John Hancock Sovereign Bond Fund, May 1, 1994
John Hancock Growth Fund, May 1, 1994
John Hancock Special Value Fund, April 1, 1994
John Hancock Sovereign Investors Fund, May 1, 1994
John Hancock Sovereign Balanced Fund, May 1, 1994
John Hancock Limited Term Government Fund, May 1, 1994
John Hancock Global Technology Fund, May 1, 1994
John Hancock National Aviation & Technology Fund, May 1, 1994
John Hancock Tax-Exempt Income Fund, May 1, 1994
Supplement to Class A and Class B Prospectus
The "Qualifying for a Reduced Sales Charge" section under SHARE PRICE is
supplemented as follows:
Effective March 15, 1995, participant directed defined contribution
plans with at least 100 eligible employees at the inception of the Fund
account may purchase Class A shares of the Fund without an initial sales
charge but if the shares are redeemed within 12 months after the end of the
calendar year in which the purchase was made, a contingent deferred sales
charge will be imposed at the rate for Class A shares described in the
prospectus.
March 15, 1995
<PAGE>
JOHN HANCOCK
TAX-EXEMPT
INCOME FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MAY 1, 1994
- --------------------------------------------------------------------------------
TABLE OF CONTENTS Page
Expense Information ....................................................... 2
The Fund's Financial Highlights ........................................... 3
Investment Objective and Policies ......................................... 4
Organization and Management of the Fund ................................... 7
Alternative Purchase Arrangements ......................................... 8
The Fund's Expenses ....................................................... 9
Dividends and Taxes ....................................................... 10
Performance ............................................................... 11
How to Buy Shares ......................................................... 12
Share Price ............................................................... 13
How to Redeem Shares ...................................................... 17
Additional Services and Programs .......................................... 20
This Prospectus sets forth information about John Hancock Tax-Exempt Income
Fund (the"Fund") that you should know before investing. Please read and retain
it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC"). You can obtain a copy of the Fund's Statement
of Additional Information, dated May 1, 1994, which is incorporated by reference
into this Prospectus, free of charge by writing or telephoning: John Hancock
Fund Services, Inc., P.O. Box 9116, Boston, Massachusetts 02205-9116,
1-800-225-5291, (1-800-554-6713 TDD).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
The purpose of the following information is to help you understand the
various fees and expenses that you will bear, directly or indirectly when you
purchase shares of the Fund. The operating expenses included in the table and
hypothetical example below are based on fees and expenses for the Class A shares
of the Fund for the fiscal year ended December 31, 1993, adjusted to reflect
current fees and expenses. No Class B shares were actually outstanding during
that period. Actual fees and expenses of Class A shares and Class B shares may
be greater or less than those indicated.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES<F2> SHARES<F2>
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as
a percentage of offering price) .............................................. 4.50%<F1> None
Maximum sales charge imposed on reinvested dividends ........................... None None
Maximum deferred sales charge .................................................. None<F1> 5.00%
Redemption fee<F4> ............................................................. None None
Exchange fee ................................................................... None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fee ................................................................. 0.55% 0.55%
12b-1 fee<F3> .................................................................. 0.30% 1.00%
Other expenses ................................................................. 0.27% 0.29%
Total Fund operating expenses .................................................. 1.12% 1.84%
<FN>
<F1> No sales charge is payable at the time of purchase on investments in Class
A shares of $1 million or more, but for these investments a contingent
deferred sales charge may be imposed, as described under the caption "Share
Price," in the event of certain redemption transactions within one year of
purchase.
<F2> The information set forth in the foregoing table relates only to the Class
A shares and Class B shares. The Fund has been operating since its
organization primarily with only one class of shares (now designated as
Class A shares). As of the date of this Prospectus, the Board of Trustees
has authorized the issuance of two classes of shares of the Fund,
designated Class A and Class B. See "Organization and Management of the
Fund."
<F3> The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of the Fund's average net assets, and the remaining portion will be
used to cover distribution expenses. See "The Fund's Expenses."
<F4> Redemption by wire fee (currently $4.00) not included.
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a
hypothetical $1,000 investment, assuming a 5% annual return: ............... $ 56 $ 79 $104 $175
Class A shares
Class B shares
--Assuming complete redemption at end of period ........................... $ 69 $ 88 $120 $197
--Assuming no redemption .................................................. $ 19 $ 58 $100 $197
</TABLE>
(This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.)
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the maximum
front-end sales charge permitted under the National Association of Securities
Dealers Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully explained in
this Prospectus under the caption "The Fund's Expenses" and in the Statement of
Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contract."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of Financial Highlights for Class A Shares has been
audited by Ernst & Young, the Fund's independent auditors. Ernst & Young's
report on the Fund's financial statements and financial highlights is included
in the Statement of Additional Information. Class B shares are a new class of
shares of the Fund. Accordingly, no historical financial highlights exist for
Class B shares.
Selected data for each class of shares outstanding throughout each period
indicated are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $10.96 $11.01 $10.59 $10.68 $10.49 $10.07 $11.10 $10.35 $ 9.32 $ 9.26
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Investment Income.................. 0.58 0.63 0.68 0.68 0.72 0.72 0.71 0.77 0.81 0.78
Net Realized and Unrealized Gain (Loss)
on Investments and Financial Futures
Contracts............................. 0.66 0.26 0.57 (0.05) 0.20 0.40 (0.67) 1.23 1.10 0.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations... 1.24 0.89 1.25 0.63 0.92 1.12 0.04 2.00 1.91 0.81
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income (0.58) (0.63) (0.68) (0.68) (0.73) (0.70) (0.77) (0.75) (0.88) (0.75)
Distributions from Net Realized Gain
on Investments Sold and Financial
Futures Contracts................... (0.41) (0.31) (0.15) (0.04) -- -- (0.30) (0.50) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions................ (0.99) (0.94) (0.83) (0.72) (0.73) (0.70) (1.07) (1.25) (0.88) (0.75)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period......... $11.21 $10.96 $11.01 $10.59 $10.68 $10.49 $10.07 $11.10 $10.35 $ 9.32
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Investment Return at Net Asset
Value<F1>........................... 11.53% 8.35% 12.18% 6.15% 9.06% 11.38% 0.47% 20.42% 21.51% 9.17%
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted).....................$541,281 $481,730 $422,311 $377,738 $382,421 $361,011 $357,624 $341,670 $238,558 $186,777
Ratio of Expenses to Average Net Assets 1.27% 1.28% 1.21% 1.23% 0.94% 0.84% 0.78% 0.71% 0.72% 0.72%
Ratio of Net Investment Income to
Average Net Assets.................. 5.06% 5.71% 6.23% 6.43% 6.76% 6.95% 6.96% 7.17% 8.30% 8.65%
Portfolio Turnover Rate................ 81% 93% 56% 59% 44% 94% 129% 114% 131% 63%
<FN>
- ----------
<F1> Does not reflect sales load.
</TABLE>
<PAGE>
THE INVESTMENT OBJECTIVE OF THE FUND IS TO SEEK AS HIGH A LEVEL OF DIVIDEND
INCOME EXEMPT FROM FEDERAL INCOME TAX AS IS CONSISTENT WITH PRESERVATION OF
CAPITAL.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide its shareholders with as high
a level of dividend income exempt from Federal income tax as is consistent with
preservation of capital and the Fund's requirements for liquidity. The Fund
seeks to achieve its objective by investing in a diversified portfolio of
municipal bonds and other securities (including certain industrial development
or private activity bonds), the interest on which is, at the time of issue,
excludable from gross income for Federal income tax purposes in the opinion of
bond counsel to the issuer (all of which are commonly known as "Tax-Exempt
Bonds"). There is no assurance that the Fund will achieve its investment
objective.
The Fund's assets may consist of Tax-Exempt Bonds, short-term municipal debt
instruments (Tax-Exempt Bonds issued for terms of less than one year), cash,
receivables, and short-term taxable investments which include securities such as
(1) U.S. Treasury obligations; (2) obligations of agencies and instrumentalities
of the United States government; and (3) money market instruments, such as
domestic bank certificates of deposit, repurchase agreements, finance company
and other corporate commercial paper and bankers' acceptances. It is not
expected that the portion of the Fund's total assets consisting of short-term
taxable investments will exceed 15%.
It is expected that at least 85% of the Fund's total assets will consist of
Tax-Exempt Bonds the interest on which is not treated as a tax preference item
under the Federal alternative minimum tax, and that at least 65% of the Fund's
investments in Tax-Exempt Bonds will consist of bonds falling into either of two
categories:
1. Tax-Exempt Bonds that, at the time of investment, have a rating within the
three highest ratings determined by Moody's Investors Service, Inc.
("Moody's") (Aaa, Aa, and A), by Standard and Poor's Corporation ("Standard &
Poor's") (AAA, AA, and A) or by Fitch Investor Services, Inc. ("Fitch") (AAA,
AA, A), and
2. Tax-Exempt Bonds issued for terms of less than one year (short-term municipal
debt instruments) that (a) have a rating within the three highest ratings as
determined by Moody's (MIG 1, MIG 2, or MIG 3), by Standard & Poor's
(SP-1,SP-2, SP-3) or by Fitch (F-1, F-2, F-3) or (b) bear no rating but are,
in the judgment of John Hancock Advisers, Inc. ("the Adviser"), of equivalent
quality to aMIG 3, SP-3 or F-3 rating or better. Not more than 25% of the
value of the Fund's total assets shall consist of short-term Tax-Exempt
instruments.
The portion of the Fund's investment in Tax-Exempt Bonds not falling within
either of the two foregoing categories may consist of Tax-Exempt Bonds that, at
the time of investment, are rated within the next three highest ratings (Baa,
Ba, B or BBB, BB or B) or their equivalent, and unrated Tax-Exempt Bonds of
comparable quality as determined by the Adviser. The Fund's investment in
long-term Tax-Exempt Bonds that are not rated will not, however, exceed 20% of
the Fund's investments in Tax-Exempt Bonds. It will be limited to those which,
in the judgment of the Adviser, are of equivalent quality to Tax-Exempt Bonds in
the rating categories noted above. Bonds which have a rating of BBB or lower,
Baa or lower or an equivalent rating and unrated bonds of comparable quality are
considered speculative and, while generally providing greater income than
investments in higher quality securities, involve greater risk of loss of
principal and income, including the possibility of default. These bonds may have
greater price volatility, especially during periods of economic uncertainty or
change. Bonds rated B are currently meeting debt service requirements but
provide a limited margin of safety and are vulnerable to default in the event of
adverse business, financial or economic conditions. The bonds are considered
highly speculative. In addition, the market for bonds rated BBB, Baa or lower
may be less liquid than the market for higher rated securities. Therefore, the
Adviser's judgment may at times play a greater role in the performance and
valuation of the Fund's investments in these bonds.
The two principal classifications of municipal securities in which the Fund may
invest are "general obligation" and "revenue" bonds. General obligation bonds
are secured by the issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. Revenue bonds are payable only from
the revenues derived from a particular facility or class of facilities or a
specific revenue source, and generally are not payable from the unlimited
revenues of the issuer. The Fund may also invest up to 5% of its net assets in
certificates of participation in municipal lease obligations.
The Fund's investments in Tax-Exempt Bonds entail certain risks, including
adverse income and principal value fluctuation associated with economic
conditions affecting the market for Tax-Exempt Bonds in general, the
creditworthiness of issuers and guarantors of such securities and the facilities
financed by such securities and adverse interest rate changes. The value of the
Fund's investments in Tax-Exempt Bonds, and thus the net asset value of the
Fund's shares can generally be expected to vary inversely with changes in
interest rates.
It is expected that, under normal market conditions, the Fund's average
portfolio maturity will range from 20 to 25 years. Portfolio securities with
longer maturities generally are more susceptible to adverse interest rate
changes than securities with shorter maturities.
THE FUND MAY EMPLOY CERTAIN INVESTMENT STRATEGIES TO ACHIEVE ITS INVESTMENT
OBJECTIVE.
RESTRICTED SECURITIES. The Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to Rule
144A under the Securities Act of 1933 (the "Securities Act"), subject to an
investment restriction limiting the Fund's illiquid securities to not more than
15% of its net assets. Since it is not possible to predict with assurance
exactly how this market for restricted securities will develop, the Trustees
will carefully monitor the Fund's investments in these securities, focusing on
certain factors, including valuation, liquidity and availability of information.
This investment practice could have the effect of reducing the level of
liquidity in the Fund if qualified institutional buyers become for a time
uninterested in purchasing these securities for a time.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. In a
repurchase agreement, the Fund buys a security subject to the right and
obligation to sell it back at a higher price. These transactions must be fully
collateralized at all times, but involve some credit risk to the Fund if the
other party defaults on its obligation and the Fund is delayed or prevented from
liquidating the collateral.
FINANCIAL FUTURES CONTRACTS. The Fund may buy and sell stock index and other
financial futures contracts and options on futures contracts to hedge against
changes in securities prices, interest rates or for speculative purposes. The
futures contracts may be based upon various securities, securities indices, and
other financial instruments and indices. The Fund will engage in futures
transactions and related options only to the extent permitted by the Commodity
Futures Trading Commission. Consequently, the Fund may not purchase or sell
futures contracts or related options for speculative purposes, except for
closing purchase and sale transactions, if immediately thereafter the sum of the
amount of initial margin deposits on the Fund's outstanding speculative
positions in futures and related options and the amount of premiums paid for
outstanding options on futures exceeds 5% of the market value, except for
closing purchase and sale transactions, of the Fund's net assets. The potential
loss from writing options on futures transactions is potentially unlimited and
may exceed the amount of the premium received.
VARIABLE AND FLOATING-RATE OBLIGATIONS. The Fund may invest in variable rate and
floating rate obligations on which the interest may fluctuate based on changes
in market rates. The interest rates payable on variable rate obligations are
adjusted at designated periodic intervals. The interest rates payable on
floating rate obligations are adjusted whenever there is a change in the market
rate of interest on which the interest payable is based.
WHEN-ISSUED BONDS. Purchasing Tax-Exempt Bonds on a when-issued basis may
increase the Fund's overall investment exposure, and involves a risk of loss if
the value of the securities declines prior to the settlement date.
SHORT-TERM TRADING. Short-term trading means the purchase and subsequent sale of
a security after it has been held for a relatively brief period of time. The
Fund engages in short-term trading in response to changes in interest rates or
other economic trends and developments, or to take advantage of yield
disparities between various fixed-income securities in order to realize capital
gains or improve income. Portfolio turnover rates of the Fund for recent years
are shown in the section "The Fund's Financial Highlights."
CERTAIN INVESTMENTS MAY BE SUBJECT TO THE ALTERNATIVE MINIMUM TAX.
The Fund may invest in certain types of Tax-Exempt Bonds on which the interest
income is treated as an item of tax preference for purposes of the Federal
alternative minimum tax. To the extent the Fund invests in these Tax-Exempt
Bonds as described above, shareholders will be required to treat as an item of
tax preference for Federal income tax purposes that part of the Fund's
distributions which is derived from interest on these Tax-Exempt Bonds.
Dividends derived from interest income from all Tax-Exempt Bonds are included in
corporate "adjusted current earnings" for purposes of computing the alternative
minimum taxable income of corporate shareholders of the Fund.
THE FUND FOLLOWS CERTAIN POLICIES, WHICH MAY HELP REDUCE INVESTMENT RISK.
The Fund has adopted certain investment restrictions which are detailed in the
Statement of Additional Information, where they are classified as fundamental or
non-fundamental. The Fund's fundamental investment restrictions may not be
changed without shareholder approval. All other restrictions, investment
objective and investment policies are nonfundamental and can be changed by a
vote of the Trustees without shareholder approval. If there is a change in the
Fund's investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their current financial position
and needs.
BROKERS ARE CHOSEN ON BEST PRICE AND EXECUTION.
When choosing brokerage firms to carry out the Fund's transactions, the primary
consideration is execution at the most favorable prices, taking into account the
broker's professional ability and quality of service. Consideration may also be
given to the broker's sales of Fund shares. Pursuant to procedures determined by
the Trustees, the Adviser may place securities transactions with brokers
affiliated with the Adviser. These brokers include Tucker Anthony Incorporated
and Sutro & Company, Inc. They are indirectly owned by John Hancock Mutual Life
Insurance Company, which in turn indirectly owns the Adviser.
ORGANIZATION AND MANAGEMENT OF THE FUND
THE TRUSTEES ELECT OFFICERS AND RETAIN THE INVESTMENT ADVISER WHO IS RESPONSIBLE
FOR THE DAY-TO-DAY OPERATIONS OF THE FUND, SUBJECT TO THE TRUSTEES' POLICIES AND
SUPERVISION.
The Fund is a diversified open-end management investment company organized as a
Massachusetts business trust in 1976. The Fund has an unlimited number of
authorized shares of beneficial interest. The Fund's Declaration of Trust
permits the Trustees without shareholder approval, to create and classify shares
of beneficial interest into separate series of the Fund. As of the date of this
Prospectus, the Trustees have not authorized the creation of any new series of
the Fund. Although additional series may be added in the future, the Trustees
have no current intention of creating additional series of the Fund. The Trust's
Declaration of Trust also permits the Trustees to classify and reclassify any
series or portfolio of shares into one or more classes. Accordingly, the
Trustees have authorized the issuance of two classes of the Fund, designated
Class A and Class B. The shares of each class represent an interest in the same
portfolio of investments of the Fund. Each class has equal rights as to voting,
redemption, dividends and liquidation. However, each class bears different
distribution and transfer agent fees and other expenses. Also, Class A and Class
B shareholders have exclusive voting rights with respect to their distribution
plans.
Shareholders have certain rights to remove Trustees. The Fund is not required
and does not intend to hold annual shareholder meetings, although special
meetings may be held for such purposes as electing or removing Trustees,
changing fundamental restrictions and policies or approving a management
contract. The Fund, under certain circumstances, will assist in shareholder
communications with other shareholders.
JOHN HANCOCK ADVISERS, INC. ADVISES INVESTMENT COMPANIES HAVING TOTAL ASSETS OF
APPROXIMATELY $10 BILLION.
John Hancock Advisers, Inc., (the "Adviser"), was organized in 1968 and is a
wholly-owned indirect subsidiary of the John Hancock Mutual Life Insurance
Company, a financial services company. The Adviser manages the investment
operations of the Fund and provides the Fund, and other investment companies in
the John Hancock group of funds, with investment research and portfolio
management services.
John Hancock Broker Distribution Services, Inc. ("Broker Services") distributes
shares for all of the John Hancock mutual funds through selected broker-dealers
("Selling Brokers"). Certain Fund officers are also officers of the Adviser and
Broker Services.
Frank A. Lucibella is Second Vice President and portfolio manager of the Fund
and of John Hancock Managed-Tax Exempt Fund. He is assisted by a team of
analysts in the day to day management of the Fund. He joined the Adviser in 1988
after six years of investment experience with Eaton Vance and The Travelers
Corporation.
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of the Fund at a price equal to their net asset value
per share, plus a sales charge. At your election, this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge Alternative--
Class A Shares") or on a contingent deferred basis (see "Contingent Deferred
Sales Charge Alternative--Class B Shares"). If you do not specify on your
account application which class of shares you are purchasing, it will be assumed
that you are investing in Class A shares.
INVESTMENTS IN CLASS A SHARES OF THE FUND ARE SUBJECT TO AN INITIAL SALES
CHARGE.
CLASS A SHARES. If you elect to purchase Class A shares, you will incur an
initial sales charge unless your purchase is $1 million or more. If you purchase
$1 million or more of Class A shares, you will not be subject to an initial
sales charge, but you will incur a sales charge if you redeem your shares within
one year of purchase. Class A shares are subject to ongoing distribution and
service fees at a combined annual rate of up to 0.30% of the Fund's average
daily net assets attributable to the Class A shares. Certain purchases of Class
A shares qualify for reduced initial sales charges. See "Share Price --
Qualifying for a Reduced Sales Charge."
INVESTMENTS IN CLASS B SHARES ARE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.
CLASS B SHARES. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them within
six years of purchase (the"contingent deferred sales charge" or the "CDSC").
Class B shares are subject to ongoing distribution and service fees at a
combined annual rate of up to 1.00% of the Fund's average daily net assets
attributable to the Class B shares. Investing in Class B shares permits all of
your dollars to work from the time you make your investment, but the higher
ongoing distribution fee will cause these shares to have a higher expense ratio
than that of Class A shares. To the extent that any dividends are paid by the
Fund, these higher expenses will result in lower dividends than those paid on
Class A shares.
YOU SHOULD CONSIDER WHICH CLASS OF SHARES WILL BE A MORE BENEFICIAL INVESTMENT
FOR YOU.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE
The alternative purchase arrangement allows you to choose the most beneficial
way to buy shares, given the amount of your purchase, the length of time you
expect to hold your shares and other circumstances. You should consider whether,
during the anticipated life of your Fund investment, the accumulated fees on
Class B shares would be less than the initial sales charge and accumulated fees
on Class A shares purchased at the same time, and to what extent this
differential would be offset by the Class A shares' lower expenses. To help you
make this determination, the table under the caption "Expense Information" on
page 2 of this Prospectus gives examples of the charges applicable to each class
of shares. Class A shares will normally be more beneficial if you qualify for a
reduced sales charge. See "Share Price-- Qualifying for a Reduced Sales Charge."
Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent that
any dividends are paid. However, because initial sales charges are deducted at
the time of purchase, you would not have all of your funds invested initially
and, therefore, would initially own fewer shares. If you do not qualify for
reduced initial sales charges and expect to maintain your investment for an
extended period of time, you might consider purchasing Class A shares because
the accumulated distribution and service charges on Class B shares may exceed
the initial sales charge and accumulated distribution and service charges on
Class A shares during the life of your investment.
Alternatively, you might determine that it would be more advantageous to
purchase Class B shares in order to have all your funds invested initially,
although remaining subject to higher distribution fees and, for a six-year
period, a CDSC.
In the case of Class A shares, distribution expenses that Broker Services incurs
in connection with the sale of shares will be paid from the proceeds of the
initial sales charge and the ongoing distribution and service fees. In the case
of Class B shares, expenses will be paid from the proceeds of the ongoing
distribution and service fees, as well as the CDSC incurred upon redemption
within six years of purchase. The purpose and function of the Class B shares'
CDSC and ongoing distribution and service fees are the same as those of the
Class A shares' initial sales charge and ongoing distribution and service fees.
Sales personnel distributing the Fund's shares may receive different
compensation for selling each class of shares.
Dividends, if any, on Class A and Class B shares will be calculated in the same
manner, at the same time and on the same day and will be in the same amount.
However, each class will bear only its own distribution and service fees,
shareholder meeting expenses and any incremental transfer agency costs. See
"Dividends and Taxes."
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a fee to the
Adviser which for the 1993 fiscal year, was 0.47% of the Fund's average daily
net asset value.
THE FUND PAYS DISTRIBUTION AND SERVICE FEES FOR MARKETING AND SALES-RELATED
SHAREHOLDER SERVICING.
The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
these Plans, the Fund will pay distribution and service fees at an aggregate
annual rate of 0.30% of the Class A shares' average daily net assets and an
aggregate annual rate of 1.00% of the Class B shares' average daily net assets.
In each case, up to 0.25% is for service expenses and the remaining amount is
for distribution expenses. The distribution fees will be used to reimburse
Broker Services for its distribution expenses including but not limited to: (i)
initial and ongoing sales compensation to Selling Brokers and others (including
affiliates of Broker Services) engaged in the sale of Fund shares; (ii)
marketing, promotional and overhead expenses incurred in connection with the
distribution of Fund shares; and (iii) with respect to Class B shares only,
interest expenses on unreimbursed distribution expenses. The service fees will
be used to compensate Selling Brokers for providing personal and account
maintenance services to shareholders. In the event Broker Services is not fully
reimbursed for payments made or expenses incurred by it under the Class A Plan,
these expenses will not be carried beyond twelve months from the date they were
incurred. Unreimbursed expenses under the Class B Plan will be carried forward
together with interest on the balance of these unreimbursed expenses.
The Fund's total expenses for the year ended December 31, 1993, were 1.27% of
average daily net asset value.
DIVIDENDS AND TAXES
Dividends from the Fund's net investment income are generally declared daily and
distributed monthly. Capital gains, if any, are generally distributed annually.
Dividends are reinvested in additional shares of your class unless you elect the
option to receive them in cash. If you elect the cash option and the U.S. Postal
Service cannot deliver your checks, your election will be converted to the
reinvestment option. Because of the higher expenses associated with Class B
shares, any dividend on Class B shares will be lower than that on Class A
shares. See "Share Price."
IN 1991, 1992 AND 1993, 99.78%, 99.80% AND 99.78%, RESPECTIVELY, OF THE FUND'S
INCOME DIVIDENDS WERE EXEMPT FROM FEDERAL INCOME TAX.
TAXATION. The Fund intends to satisfy applicable tax requirements so that
interest earned by the Fund from Tax-Exempt Bonds will be federally tax-free
when paid to you as income distributions. Dividends derived from interest on
certain Tax-Exempt Bonds that are "private activity bonds" may, however,
increase the Federal alternative minimum tax liability of shareholders that are
subject to the individual alternative minimum tax, and all tax-exempt dividends
may increase a corporate shareholder's liability, if any, for the federal
alternative minimum tax.
Shareholders receiving social security benefits and certain railroad retirement
benefits may be subject to federal income tax on up to 85 percent of such
benefits as a result of receiving investment income, including tax-exempt income
(such as exempt-interest) and other dividends paid by the Fund. The Fund may not
be an appropriate investment for persons who are "substantial users" of
facilities financed by industrial development or private activity bonds or
persons related to substantial users. Consult your tax adviser if you think this
may apply to you.
Dividends from any net short-term capital gains or any taxable income the Fund
earns, including accrued market discount income are taxable to you as ordinary
income and dividends from the Fund's net long-term capital gains are taxable as
long-term capital gains. These dividends are taxable, whether you take them in
cash or reinvest in additional shares. Certain dividends may be paid by the Fund
in January of a given year, but they may be taxable to shareholders as if
received the prior December. The Fund will send you a statement by January 31
showing the tax status of the dividends you received for the prior year.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As a regulated investment company, the Fund will not be
subject to Federal income taxes on any net investment income and net realized
capital gains that are distributed to its shareholders at least annually.
When you redeem (sell) or exchange shares, you may realize a gain or loss.
On the account application, you must certify that the social security or other
taxpayer identification number you provide is correct and that you are not
subject to Federal backup withholding tax. If you do not provide this
information or are otherwise subject to such withholding, the Fund may be
required to withhold 31% of your taxable dividends, redemptions and exchanges.
In addition to Federal taxes with respect to certain dividends, you may be
subject to state, local or foreign taxes, depending on your residence. Some
states and localities exempt Fund distributions of interest on their own
municipal obligations. You will receive tax information each year showing the
percentage of the Fund's dividends attributable to obligations of each state.
You should consult your tax adviser for specific advice.
PERFORMANCE
THE FUND MAY ADVERTISE ITS YIELD AND TOTAL RETURN.
Yield reflects the Fund's rate of income on portfolio investments as a
percentage of its share price. Yield is computed by annualizing the result of
dividing the net investment income per share over a 30 day period by the maximum
offering price per share on the last day of that period. Yield is calculated
according to accounting methods that are standardized for all stock and bond
funds. Because yield accounting methods differ from the methods used for other
accounting purposes, the Fund's yield may not equal the income paid on your
shares or the income reported in the Fund's financial statements. The Fund may
also quote a tax-equivalent yield, which shows the taxable yield you would have
to earn before taxes to equal the Fund's tax-free yield. A tax- equivalent yield
is calculated by dividing the Fund's tax-free yield by one minus a stated tax
rate.
TOTAL RETURN IS BASED ON THE OVERALL CHANGE IN VALUE OF A HYPOTHETICAL
INVESTMENT IN THE FUND.
The Fund's total return shows its overall dollar or percentage change in value,
assuming the reinvestment of all dividends. Cumulative total return shows the
Fund's performance over a period of time. Average annual total return shows the
cumulative return divided over the number of years included in the period.
Because average annual total return tends to smooth out variations in
performance, you should recognize that it is not the same as actual year-to-year
results.
Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge (except as shown in "The Fund's
Financial Highlights"). Investments at lower sales charges would result in
higher performance figures. Yield and total return for the Class B shares
reflect the deduction of the applicable CDSC imposed on a redemption of shares
held for the applicable period. All calculations assume that all dividends are
reinvested at net asset value on the reinvestment dates during the periods.
Yield and total return of Class A and Class B shares will be calculated
separately, and, because each class is subject to different expenses, the yield
or total return with respect to that class for the same period may differ. The
relative performance of the Class A and Class B shares will be affected by a
variety of factors, including the higher operating expenses attributable to the
Class B shares, whether the Fund's investment performance is better in the
earlier or later portions of the period measured and the level of net assets of
the Classes during the period. The Fund will include the total return of both
classes in any advertisement or promotional materials including the Fund's
performance data. The value of Fund shares, when redeemed, may be more or less
than their original cost. Both yield and total return are historical
calculations, and are not indications of future performance. See "Factors to
Consider in Choosing an Alternative." Further information about the performance
of the Fund is contained in the Fund's Annual Report to Shareholders which may
be obtained free of charge by writing or telephoning John Hancock Fund Services,
Inc. at the address or telephone number listed on the front page of this
Prospectus.
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
The minimum initial investment in Class A and Class B shares is $1,000 ($250 for
group investments).Complete the Account Application attached to this Prospectus.
Indicate whether you are purchasing Class A or Class B shares. If you do not
specify which class of shares you are purchasing, Fund Services will assume you
are investing in Class A shares.
- --------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to John Hancock Fund Services, Inc.
("Fund Services").
2. Deliver the completed application and check to your registered
representative or Selling Broker, or mail it directly to Fund
Services.
- --------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered
representative or Selling Broker, or by calling
1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Tax-Exempt Income Fund
(Class A or Class B shares)
Your account number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative or Selling Broker, or mail it directly to Fund
Services.
- --------------------------------------------------------------------------------
BUYING ADDITIONAL SHARES
MONTHLY
AUTOMATIC 1. Complete the "Automatic Investing" and "Bank Accumulation
ACCUMULATION Information" sections on the Account Privileges Application
PROGRAM (MAAP) designating a bank account from which funds may be drawn.
2. The amount you elect to invest will be automatically withdrawn
from your bank or credit union account.
- --------------------------------------------------------------------------------
BY TELEPHONE 1. Complete the "Invest-By-Phone" and "Bank Information" sections
on the Account Privileges Application designating a bank
account from which funds may be drawn. Note that in order to
invest by phone, your account must be in a bank or credit
union that is a member of the Automated Clearing House system
(ACH).
2. After your authorization form has been processed, you may
purchase Class A or Class B shares by calling Fund Services
toll-free at 1-800-225-5291.
3. Give the Fund Services representative the name(s) in which
your account is registered, the Fund name, the class of shares
you own, your account number and the amount you wish to
invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
- --------------------------------------------------------------------------------
BY CHECK 1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund, the class of shares you own, your account
number and the name(s) in which the account is registered.
2. Make your check payable to John Hancock Fund Services, Inc.
3. Mail the account information and check to:
John Hancock Fund Services, Inc.
P.O. Box 9115
Boston,MA 02205-9115
or deliver it to your registered representative or Selling
Broker.
- --------------------------------------------------------------------------------
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For Credit To: John Hancock Tax-Exempt Income Fund
(Class A or Class B shares)
Your account number
Name(s) under which account is registered
- --------------------------------------------------------------------------------
Other Requirements: All purchases must be made in U.S. dollars. Checks written
on foreign banks will delay purchases until U.S. funds are received, and a
collection charge may be imposed. Shares of the Fund are priced at the offering
price based on the net asset value computed after Broker Services receives
notification of the dollar equivalent from the Fund's custodian bank. Wire
purchases normally take two or more hours to complete and, to be accepted the
same day, must be received by 4:00 p.m. New York time. Your bank may charge a
fee to wire funds. Telephone transactions are recorded to verify information.
Certificates are not issued unless a request is made in writing to Fund
Services.
- --------------------------------------------------------------------------------
YOU WILL RECEIVE STATEMENTS REGARDING YOUR ACCOUNT WHICH YOU SHOULD KEEP TO HELP
WITH YOUR PERSONAL RECORDKEEPING.
You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends and automatic investment/withdrawal plans will be sent to you
quarterly). A tax information statement will be mailed to you by January 31 of
each year.
THE OFFERING PRICE OF SHARES IS THEIR NET ASSET VALUE PLUS A SALES CHARGE, IF
APPLICABLE, WHICH WILL VARY WITH THE PURCHASE ALTERNATIVE YOU CHOOSE.
SHARE PRICE
The net asset value ("NAV") is the value of one share. The NAV per share is
calculated by dividing the net assets of each class by the number of shares
outstanding of that class. The NAV will be different for each class to the
extent that different amounts of undistributed income are accrued on shares of
each class between dividend declarations. Securities in the Fund's portfolio are
generally valued by a pricing service which utilizes electronic pricing
techniques based on general institutional trading. Some securities are valued at
fair value based on procedures approved by the Trustees and, for certain other
securities, the amortized cost method is used if the Trustees determine in good
faith that this approximates fair value as described more fully in the Statement
of Additional Information. The NAV is calculated once daily as of the close of
regular trading on the New York Stock Exchange (generally at 4:00 p.m., New York
time) on each day that the Exchange is open.
Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by Broker Services. If
you buy shares of the Fund through a Selling Broker, the Selling Broker must
receive your investment before the close of regular trading on the New York
Stock Exchange and transmit it to Broker Services before its close of business
to receive that day's offering price.
The Fund offers two classes of shares in this Prospectus: Class A shares, which
are subject to an initial sales charge and Class B shares, which are subject to
a contingent deferred sales charge. If you do not specify a particular class of
shares, it will be assumed that you are purchasing Class A shares and an initial
sales charge will be assessed.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge as follows:
<TABLE>
<CAPTION>
COMBINED
SALES CHARGE SALES CHARGE REALLOWANCE REALLOWANCE TO
AS A PERCENTAGE AS A PERCENTAGE AND SERVICE FEE SELLING BROKER AS
AMOUNT INVESTED OF THE OF THE AS A PERCENTAGE A PERCENTAGE OF
(INCLUDING SALES CHARGE) OFFERING PRICE AMOUNT INVESTED OF OFFERING PRICE<F4> OFFERING PRICE<F1>
- ------------------------ --------------- --------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00% 3.76%
$100,000 to $249,999 3.75% 3.90% 3.25% 3.01%
$250,000 to $499,999 3.00% 3.09% 2.50% 2.26%
$500,000 to $999,999 2.00% 2.04% 1.75% 1.51%
$1,000,000 and over 0.00%<F2> 0.00%<F2> <F3> 0.00%<F3>
<FN>
<F1>Upon notice to Selling Brokers with whom it has sales agreements, Broker
Services may reallow an amount up to the full applicable sales charge. A
Selling Broker to whom substantially the entire sales charge is reallowed or
who receives these incentives may be deemed to be an underwriter under the
Securities Act of 1933.
<F2>No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a contingent deferred sales charge may be imposed in
the event of certain redemption transactions within one year of purchase.
<F3>Broker Services may pay a commission and first year's service fee (as
described in (+ ) below) to Selling Brokers who initiate and are responsible
for purchases of $1 million or more of shares in aggregate as follows: 1% on
sales to $4,999,999, plus 0.50% on the next $5 million and 0.25% on $10
million and over.
<F4>At the time of sale, Broker Services pays to Selling Brokers the first
year's service fee in advance, in an amount equal to 0.25% of the net assets
invested in the Fund. Thereafter it pays the service fee periodically in
arrears in an amount up to 0.25% of the Fund's average annual net assets.
Selling Brokers receive the fee as compensation for providing personal and
account maintenance services to shareholders.
</TABLE>
Sales charges ARE NOT APPLIED to any dividends which are reinvested in
additional shares of the Fund.
Broker Services will pay certain affiliated Selling Brokers at an annual rate of
up to 0.05% of the daily net assets of the accounts attributable to these
brokers.
In addition to the reallowance allowed to all Selling Brokers, Broker Services
will pay the following: Round trip airfare to a luxury resort will be given to
each registered representative of a Selling Broker who sells certain amounts of
shares of John Hancock funds. Broker Services will make these incentive payments
out of its own resources. Other than distribution fees, the Fund does not bear
distribution expenses.
Under certain circumstances described below, investors in Class A shares may be
entitled to pay reduced sales charges. See "Qualifying For a Reduced Sales
Charge" below.
CONTINGENT DEFERRED SALES CHARGE -- INVESTMENTS OF $1 MILLION OR MORE IN CLASS A
SHARES. Purchases of $1 million or more of Class A shares will be made at net
asset value with no initial sales charge, but if the shares are redeemed within
12 months after the end of the calendar month in which the purchase was made
(the contingent deferred sales charge period), a contingent deferred sales
charge ("CDSC") will be imposed. The rate of the CDSC will depend on the amount
invested as follows:
AMOUNT INVESTED CDSC RATE
--------------- ---------
$1 million to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
The charge will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the Class A shares redeemed.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any dividends which have been reinvested in
additional Class A shares.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
Therefore, it will be assumed that the redemption is first made from any shares
in your account that are not subject to the CDSC. The CDSC is waived on
redemption in certain circumstances. See "Waiver of Contingent Deferred Sales
Charges" below.
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE ON YOUR INVESTMENTS IN CLASS A
SHARES.
QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $50,000 in Class
A shares of the Fund or a combination of funds in the John Hancock family of
funds (except money market funds), you may qualify for a reduced sales charge on
your investments through a LETTER OF INTENTION or through the COMBINATION
PRIVILEGE. You may also be able to use the ACCUMULATION PRIVILEGE to take
advantage of the value of your previous investments in Class A shares of the
John Hancock funds when meeting the breakpoints for a reduced sales charge.
Class A shares of the Fund may be purchased without paying an initial sales
charge by the following:
FUND EMPLOYEES AND AFFILIATES
* A Trustee/Director or officer of the Trust/Company; a Director or officer of
the Adviser and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family of any of
the foregoing; or any Fund, pension, profit sharing or other benefit plan for
the individuals described above.
SPECIAL TRANSACTIONS
* Any state, county, city or any instrumentality, department, authority or
agency of these entities (an "eligible governmental authority") which is
prohibited by applicable investment laws from paying a sales charge or
commission when it purchases shares of any registered investment management
company.
* A bank, trust company, credit union, savings institution or other type of
depository institution, its trust departments or common trust funds (an
"eligible depository institution") if it is purchasing $1 million or more for
non-discretionary customers or accounts.
* A broker, dealer or registered investment adviser that has entered into an
agreement with Broker Services providing specifically for the use of Fund
shares in fee-based investment products made available to their clients.
* A former participant in an employee benefit plan with John Hancock Mutual
Funds, when s/he withdraws from his/her plan and transfers any or all of
his/her plan distributions to the Fund.
* Class A shares of the Fund may also be purchased without an initial sales
charge in connection with certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. Class B shares
are offered at net asset value per share without a sales charge, so that your
entire initial investment will go to work at the time of purchase. However,
Class B shares redeemed within six years of purchase will be subject to a
Contingent Deferred Sales Charge ("CDSC") at the rates set forth below. This
charge will be assessed on an amount equal to the lesser of the current market
value or the original purchase cost of the shares being redeemed. Accordingly,
you will not be assessed a CDSC on increases in account value above the initial
purchase price, including shares derived from dividend reinvestments. In
determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
dividend reinvestment, and next from the shares you have held the longest during
the six-year period.
EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time, your CDSC will be calculated as follows:
* Proceeds of 50 shares redeemed at $12 per share $ 600
* Minus proceeds of 10 shares not subject to CDSC
because they were acquired through dividend reinvestment
(10 x $12) -120
* Minus appreciation on remaining shares, also not subject
to CDSC (40 x $2) - 80
* Amount subject to CDSC $ 400
Proceeds from the CDSC are paid to Broker Services. Broker services uses them in
whole or in part to defray its expenses related to providing the Fund with
distribution services in connection with the sale of the Class B shares, such as
compensating Selling Brokers for selling these shares. The combination of the
CDSC and the distribution and service fees makes it possible for the Fund to
sell Class B shares without deducting a sales charge at the time of the
purchase.
The amount of the CDSC, if any, will vary depending on the number of years from
the time you purchase your Class B shares until the time you redeem them. Solely
for purposes of determining the holding period, any payments you make during the
month will be aggregated and deemed to have been made on the last day of the
month.
YEAR IN WHICH CLASS B CONTINGENT DEFERRED SALES
SHARES REDEEMED CHARGE AS A PERCENTAGE OF
FOLLOWING PURCHASE DOLLAR AMOUNT SUBJECT TO CDSC
- ------------------- -----------------------------
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
A commission equal to 3.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for personal and
account maintenance services provided to shareholders during the twelve months
following the sale. Thereafter the service fee is paid in arrears.
CONVERSION OF CLASS B SHARES. Your Class B shares and an appropriate portion of
reinvested dividends on those shares will be converted into Class A shares
automatically no later than the month following eight years after the shares
were purchased, resulting in lower annual distribution fees. If you exchanged
Class B shares into the Fund from another John Hancock fund, the calculation
will be based on the time the shares in the original fund were purchased.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC is waived on redemptions of
Class B shares (and Class A shares subject to the CDSC) in the following
circumstances: (1) redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies or personal
holding companies; (2) redemptions due to death or disability; and (3)
redemptions made pursuant to the Reinvestment Privilege, as described below.
If you are entitled to a waiver of the CDSC, you must notify Fund Services
either directly or through your Selling Broker at the time you make your
redemption. This waiver will be granted subject to confirmation of your
entitlement to the waiver.
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your shares
will be redeemed at the next NAV calculated after your redemption request is
received in good order by Fund Services, less any applicable CDSC. The Fund may
hold payment until reasonably satisfied that investments which were recently
made by check or Invest-by-Phone have been collected (which may take up to 10
calendar days).
Once your shares are redeemed, the Fund generally sends you payment on the next
business day. When you redeem your shares, you will generally realize a gain or
loss depending on the difference between what you paid for them and what you
receive for them, subject to certain tax rules. Under unusual circumstances, the
Fund may suspend redemptions or postpone payment for up to seven days or longer,
as permitted by Federal securities laws.
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION REQUEST, PLEASE FOLLOW THESE PROCEDURES.
- --------------------------------------------------------------------------------
BY TELEPHONE All Fund shareholders are automatically eligible for the
telephone redemptionprivilege. Call 1-800-225-5291, from 8:00 A.M.
to 4:00 P.M.(New York time), Monday through Friday, excluding days
on which the New York Stock Exchange is closed. Fund Services
employs the following procedures to confirm that instructions
received by telephone are genuine. Your name, the account number,
taxpayer identification number applicable to the account and other
relevant information may be requested. In addition, telephone
instructions are recorded.
You may redeem up to $100,000 by telephone, but the address on the
account must not have changed for the last 30 days. A check will be
mailed to the exact name(s) and address shown on the account.
If reasonable procedures, such as those described above, are not
followed, the Fund may be liable for any loss due to unauthorized
or fraudulent telephone instructions. In all other cases, neither
the Fund nor Fund Services will be liable for any loss or expense
for acting upon telephone instructions made in accordance with the
telephone transaction procedures mentioned above.
Telephone redemption is not available for shares of the Fund that
are in certificate form.
During periods of extreme economic conditions or market changes,
telephone requests may be difficult to implement due to a large
volume of calls. During these times you should consider placing
redemption requests in writing or using EASI-Line. EASI-Line is a
telephone number which is listed on account statements.
- --------------------------------------------------------------------------------
BY WIRE If you have a telephone redemption form on file with the Fund,
redemption proceeds of $1,000 or more can be wired on the next
business day to your designated bank account, and a fee (currently
$4.00) will be deducted. You may also use electronic funds transfer
to your assigned bank account, and the funds are usually
collectable after two business days. Your bank may or may not
charge for this service. Redemptions of less than $1,000 will be
sent by check or electronic funds transfer.
This feature may be elected by completing the "Telephone
Redemption" section on the Account Privileges Application attached
to this Prospectus.
- --------------------------------------------------------------------------------
IN WRITING Send a stock power or letter of instruction specifying the name of
the Fund, the dollar amount or the number of shares to be redeemed,
your name, class of shares, your account number, and the additional
requirements listed below that apply to your particular account.
- --------------------------------------------------------------------------------
TYPE OF REGISTRATION REQUIREMENTS
- -------------------- ------------
Individual, Joint Tenants, Sole A letter of instruction signed (with
Proprietorship, Custodial titles, where applicable) by all persons
(Uniform Gifts or Transfer to authorized to sign for the account,
Minors Act), General Partners. exactly as it is registered, with the
signature(s) guaranteed.
Corporation, Association A letter of instruction and a corporate
resolution, signed by person(s) authorized
to act on the account, with the
signature(s) guaranteed.
Trusts A letter of instruction signed by the
Trustee(s), with the signature(s)
guaranteed. (If the Trustee's name is not
registered on your account, also provide a
copy of the trust document, certified
within the last 60 days.)
If you do not fall into any of these registration categories, please call
1-800-225-5291 for further instructions.
- --------------------------------------------------------------------------------
WHO MAY GUARANTEE YOUR SIGNATURE
A signature guarantee is a widely accepted way to protect you and the Fund by
verifying the signatureon your request. It may not be provided by a notary
public. If the net asset value of the shares redeemed is $100,000 or less,
Broker Services may guarantee the signature. The following institutions may
provide you with a signature guarantee, provided that the institution meets
credit standards established by Fund Services: (i) a bank; (ii) a securities
broker or dealer, including a government or municipal securities broker or
dealer, that is a member of a clearing corporation or meets certain net capital
requirements; (iii) a credit union having authority to issue signature
guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association; or (v) a
national securities exchange, a registered securities exchange or a clearing
agency.
- --------------------------------------------------------------------------------
THROUGH YOUR BROKER Your broker may be able to initiate the redemption.
Contact your broker for instructions.
- --------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your stock
power or a letter of instruction. Unless you specify to the contrary, any
outstanding Class A shares will be redeemed before Class B shares. You may not
redeem certificated shares by telephone.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS
Due to the proportionately high cost of maintaining smaller accounts, the Fund
reserves the right toredeem at net asset value all shares in an account which
holds fewer than 50 shares (except accounts under retirement plans) and to mail
the proceeds to the shareholder, or the transfer agent may impose an annual fee
of $10.00. No account will be involuntarily redeemed or additional fee imposed,
if the value of the account is in excess of the Fund's minimum initial
investment. No CDSC will be imposed on involuntary redemptions of shares.
Shareholders will be notified before these redemptions are to be made or this
fee is imposed and will have 30 days to purchase additional shares to bring
their account up to the required minimum. Unless the number of shares acquired
by further purchases and dividend reinvestments, if any, exceeds the number of
shares redeemed, repeated redemptions from a small account may eventually
trigger this policy.
- --------------------------------------------------------------------------------
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
YOU MAY EXCHANGE SHARES OF THE FUND FOR SHARES OF THE SAME CLASS IN ANOTHER JOHN
HANCOCK MUTUAL FUND.
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of investment
goals. Contact your registered representative or Selling Broker and request a
prospectus for the John Hancock funds that interest you. Read the prospectus
carefully before exchanging your shares. You can exchange shares of each class
of the Fund only for shares of the same class of another John Hancock Fund. For
this purpose, John Hancock funds with only one class of shares will be treated
as Class A whether or not they have been so designated.
Exchanges between funds which are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is imposed.
Class B shares of the Fund which are subject to a CDSC may be exchanged for
Class B shares of another John Hancock fund without incurring the CDSC; however
these shares will be subject to the CDSC schedule of the shares acquired (except
that exchanges into John Hancock Short-Term Strategic Income Fund and John
Hancock Limited Term Government Fund will be subject to the initial Fund's
CDSC). For purposes of computing the CDSC payable upon redemption of shares
acquired in an exchange, the holding period of the original shares is added to
the holding period of the shares acquired in an exchange.
You may exchange Class B shares of any John Hancock Fund into shares of John
Hancock Cash Management Fund at net asset value. Shares so acquired will
continue to be subject to a CDSC upon redemption. The rate of the CDSC will be
the rate in effect on the original fund at the time of the exchange.
If you exchange Class B shares purchased prior to January 1, 1994 (except John
Hancock Short-Term Strategic Income Fund) for Class B shares of any other John
Hancock fund, you will continue to be subject to the CDSC schedule that was in
effect when they were purchased. See "Contingent Deferred Sales Charge
Alternative -- Class B shares."
The Fund reserves the right to require you to keep previously exchanged shares
(and reinvested dividends) in the Fund for 90 days before you are permitted a
new exchange.
Under exchange agreements with Broker Services, certain dealers, brokers and
investment advisers may exchange their clients' Fund shares, subject to the
terms of those agreements and Broker Services' right to reject or suspend those
exchanges at any time. Because of the restrictions and procedures under those
agreements, the exchanges may be subject to timing limitations and other
restrictions that do not apply to exchanges requested by shareholders directly,
as described above.
Because Fund performance and shareholders can be hurt by excessive trading, the
Fund reserves the right to terminate the exchange privilege for any person or
group that, in Broker Services' judgment, is involved in a pattern of exchanges
that coincide with a "market timing" strategy that may disrupt the Fund's
ability to invest effectively according to its investment objective and
policies, or might otherwise affect the Fund and its shareholders adversely. The
Fund may also temporarily or permanently terminate the exchange privilege for
any person who makes seven or more exchanges out of the Fund per calendar year.
Accounts under common control or ownership will be aggregated for this purpose.
Although the Fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
The Fund may also terminate or alter the terms of the exchange privilege, upon
60 days notice to shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares in another for Federal income tax purposes. An exchange may
result in a gain or loss.
When you make an exchange, your account registration must be identical in both
the existing and new account. The exchange privilege is available only in states
where the exchange can be made legally.
BY TELEPHONE
1. When you fill out the application for your purchase of Fund shares, you
automatically authorize exchanges by telephone unless you check the box
indicating that you do not wish to have the telephone exchange privilege.
2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.
IN WRITING
1. In a letter, request an exchange and list the following:
-- the name and class of the fund whose shares you currently own
-- your account number
-- the name(s) in which the account is registered
-- the name of the fund in which you wish your exchange to be invested
-- the number of shares, all shares or the dollar amount you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Fund Services, Inc.
P.O. Box 9116
Boston, Massachusetts 02205-9116
IF YOU REDEEM SHARES OF THE FUND, YOU MAY BE ABLE TO REINVEST THE PROCEEDS IN
THIS FUND OR ANOTHER JOHN HANCOCK FUND WITHOUT PAYING AN ADDITIONAL SALES
CHARGE.
REINVESTMENT PRIVILEGE
1. No sales charge will apply to shares that are reinvested in any of the other
John Hancock funds which are otherwise subject to a sales charge as long as
you reinvest within 120 days of the redemption date. If you paid a CDSC upon
a redemption, you may reinvest at net asset value in the same class of shares
from which you redeemed within 120 days. Your account will be credited with
the amount of the CDSC previously charged, and the reinvested shares will
continue to be subject to a CDSC. For purposes of computing the CDSC payable
upon a subsequent redemption, the holding period of the shares acquired
through reinvestment will include the holding period of the redeemed shares.
2. Any portion of your redemption may be reinvested in the Fund shares or in
shares of any of the other John Hancock funds, subject to the minimum
investment limit of that fund.
3. To reinvest in shares of the Fund, you must notify Fund Services in writing.
Include the account number and class from which your shares were originally
redeemed.
YOU CAN PAY ROUTINE BILLS OR MAKE PERIODIC DISBURSEMENTS FROM YOUR ACCOUNT.
SYSTEMATIC WITHDRAWAL PLAN
1. You may elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges application which is attached to this Prospectus. You can
also obtain this application from your registered representative or by
calling 1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly, semi-annually or
annually or on a selected monthly basis to yourself or any other designated
payee.
4. There is no limit on the number of payees you may authorize, but all payments
must be made at the same time or intervals.
5. It is not advantageous to maintain a systematic withdrawal plan concurrently
with purchases of additional Class A or Class B shares because you may be
subject to an initial sales charge on your purchases of Class A shares or to
a CDSC on your redemptions of Class B shares. In addition, your redemptions
are taxable events.
6. If the U.S. Postal Service cannot deliver your checks, or if deposits to a
bank account are returned for any reason, your redemptions will be
discontinued.
YOU CAN MAKE AUTOMATIC INVESTMENTS AND SIMPLIFY YOUR INVESTING.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
1. You may authorize an investment to be drawn automatically each month from
your bank for investment in Fund shares, under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.
2. You may also authorize automatic investing through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.
3. You may terminate your Monthly Automatic Accumulation Program at any time.
4. There is no charge to you for this program, and there is no cost to the Fund.
5. If you have payments being withdrawn from a bank account and we are notified
that the account has been closed, your withdrawals will be discontinued.
ORGANIZED GROUPS OF AT LEAST FOUR PERSONS MAY ESTABLISH ACCOUNTS.
GROUP INVESTMENT PROGRAM
1. An individual account will be established for each participant, but the
initial sales charge for Class A shares will be based on the aggregate dollar
amount of all participants' investments. To determine how to qualify for this
program, contact your registered representative or call 1-800-225-5291.
2. The initial aggregate investment of all participants in the group must be at
least $250.
3. No additional charge is made in connection with this program. There is no
obligation to make investments beyond the minimum, and you may terminate the
program at any time.
<PAGE>
APPENDIX
QUALITY DISTRIBUTION
The average weighted quality distribution of the securities in the portfolio for
the year ended December 31, 1993:
<TABLE>
<CAPTION>
RATING RATING
AVERAGE % OF ASSIGNED % OF ASSIGNED % OF
SECURITY RATINGS VALUE PORTFOLIO BY ADVISER PORTFOLIO BY SERVICE PORTFOLIO
- ---------------- ------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
AAA $136,561,416 26.4% 91,783 0.0% $136,469,633 26.4%
AA 137,642,490 26.7% 0 0.0% 137,642,490 26.7%
A 160,977,351 31.2% 0 0.0% 160,977,351 31.2%
BAA 70,896,442 13.7% 1,097,511 0.2% 69,798,931 13.5%
BA 0 0.0% 0 0.0% 0 0.0%
B 0 0.0% 0 0.0% 0 0.0%
CAA and below 0 0.0% 0 0.0% 0 0.0%
------------ ------ --------- ---- ------------ -----
Debt Securities 506,077,699 98.0% 1,189,294 0.2% $504,888,405 97.8%
Equity Securities 0 0.0%
Short-Term Securities 10,267,539 2.0%
------------ ------
Total Portfolio $516,345,238 100.0%
------------ ------
Other Assets -- Net $ 3,451,959
------------
Net Assets $519,797,197
============
The ratings are described in the Statement of Additional Information.
<PAGE>
JOHN HANCOCK TAX-EXEMPT
INCOME FUND
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Broker Distribution Services, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Fund Services, Inc.
P.O. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT AUDITORS
Ernst & Young
200 Clarendon Street
Boston, Massachusetts 02116
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information/Telephone Exchange call 1-800-225-5291
Investment-by-Phone
Telephone Redemption
For: TDD call 1-800-554-6713
JHD-2300P 5-94
JOHN HANCOCK
TAX-EXEMPT
INCOME FUND
CLASS A AND CLASS B SHARES
PROSPECTUS
MAY 1, 1994
A MUTUAL FUND SEEKING AS HIGH A LEVEL OF DIVIDEND INCOME EXEMPT FROM FEDERAL
INCOME TAX AS IS CONSISTENT WITH PRESERVATION OF CAPITAL.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
TELEPHONE 1-800-225-5291
Printed on Recycled Paper
</TABLE>
