<PAGE>
John Hancock Pacific Basin Equities Fund, January 1, 1995
John Hancock Global Rx Fund, January 1, 1995
John Hancock Tax-Exempt Series Fund, January 1, 1995
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 SERIES
FUND --
CALIFORNIA PORTFOLIO
MASSACHUSETTS PORTFOLIO
NEW YORK PORTFOLIO
PROSPECTUS
JANUARY 1, 1995
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
--
Expense Information .................................................... 2
The Fund's Financial Highlights ........................................ 3
Investment Objective and Policies ...................................... 6
Organization and Management of the Fund ................................ 13
The Portfolios' Expenses ............................................... 14
Dividends and Taxes .................................................... 14
Performance ............................................................ 16
How to Buy Shares ...................................................... 17
Share Price ............................................................ 19
How to Redeem Shares ................................................... 22
Additional Services and Programs ....................................... 24
This Prospectus sets forth information about John Hancock Tax-Exempt Series
Fund (the "Fund") and its series portfolios, the California Portfolio, the
Massachusetts Portfolio and the New York Portfolio (each "a Portfolio" and
collectively "the Portfolios"), that an investor should know before
investing.Please read and retain it for future reference.
Additional information about the Fund and the Portfolios has been filed with
the Securities and Exchange Commission (the "SEC"). You can obtain a copy of the
Statement of Additional Information, dated January 1, 1995, and incorporated by
reference into this Prospectus, free of charge upon request by writing or
telephoning: John Hancock Investor Services Corporation, 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 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 to understand the
various fees and expenses that you will bear directly or indirectly when you
purchase shares of the Portfolios. The operating expenses are based on actual
expenses for each Portfolio's fiscal year ended August 31, 1994, adjusted to
reflect current fees and expenses. Actual fees and expenses may in the future be
greater or less than those indicated.
<TABLE>
<CAPTION>
CALIFORNIA MASSACHUSETTS NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ----------------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSE
Maximum sales charge imposed on purchases (as a
percentage of offering price) .................... 4.50% 4.50% 4.50%
Maximum sales charge imposed on reinvested
dividends ....................................... None None None
Maximum deferred sales load** ...................... None None None
Redemption fees+ ................................... None None None
Exchange fee ....................................... None None None
ANNUAL PORTFOLIO OPERATING EXPENSES
(As a percentage of average net assets)
Management fees (after expense limitation) ......... .17% .15% .14%
12b-1 fee*** ....................................... .30% .30% .30%
Other expenses* (after expense limitation) ......... .23% .25% .26%
Total Portfolio operating expenses* (after expense
limitation) ...................................... .70% .70% .70%
- ---------
</TABLE>
*Expenses reflect a voluntary limitation by the Fund's Adviser. Without this
limitation, the expense categories as a percentage of average net assets
would be: California Portfolio: management fee -- 0.50%; other expenses --
0.23%; and total Portfolio operating expenses -- 1.03%; Massachusetts
Portfolio: management fee -- 0.50%; other expenses -- 0.25% and total
Portfolio operating expenses -- 1.05%; New York Portfolio: management fee --
0.50%; other expenses -- 0.26% and total Portfolio operating expenses --
1.06%.
**No sales charge is payable at the time of purchase on investments 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.
***The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of average net assets, and the remaining portion will be used to cover
distribution expenses. See "The Portfolios" Expenses."
+Redemption by wire fee (currently $4.00) not included.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
This example illustrates the expenses you would incur on a $1,000 investment in
each of the Portfolios over the following periods, assuming a hypothetical 5%
annual rate of return and a voluntary 0.7%
expense limitation ................................. $52 $66 $82 $128
</TABLE>
(This example should not be considered a representation of 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 section "The Portfolios" 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 information has been audited by the Fund's independent
accountants, Price Waterhouse LLP, whose unqualified report on the Fund's
financial statements and financial highlights for the year ended August 31, 1994
is included in the Annual Report which is included in the Statement of
Additional Information ("SAI") for each Portfolio. 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
Investor Services Corporation, at the address or telephone number listed on the
front page of this Prospectus.
CALIFORNIA PORTFOLIO
Selected data for a Fund share outstanding throughout each period indicated,
investment returns, key ratios and supplemental data are listed as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988<F3>
---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $12.36 $11.68 $11.25 $10.72 $10.93 $10.36 $ 9.91
------ ------ ------ ------ ------ ------ ------
Net Investment Income<F2> 0.62 0.67 0.70 0.70 0.67 0.68 0.61
Net Realized and Unrealized
Gain (Loss) on Investments (0.76) 0.82 0.43 0.53 (0.21) 0.57 0.45
------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations (0.14) 1.49 1.13 1.23 0.46 1.25 1.06
------ ------ ------ ------ ------ ------ ------
Dividends from Net
Investment Income (0.62) (0.67) (0.70) (0.70) (0.67) (0.68) (0.61)
------ ------ ------ ------ ------ ------ ------
Distributions from Net
Realized Gain on
Investments Sold (0.22) (0.14) -- -- -- -- --
Total Distributions (0.84) (0.81) (0.70) (0.70) (0.67) (0.68) (0.61)
------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Year $11.38 $12.36 $11.68 $11.25 $10.72 $10.93 $10.36
====== ====== ====== ====== ====== ====== ======
Total Investment Return
at Net Asset Value<F5> (1.13%) 13.36% 10.34% 11.83% 4.24% 12.32% 9.99%<F1>
------ ------ ------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $49,042 $47,624 $33,896 $25,914 $13,618 $10,682 $5,018
Ratio of Expenses to Average
Net Assets<F2> 0.70% 0.67% 0.60% 0.60% 1.00% 1.00% 1.00%<F1>
Ratio of Net Investment
Income to Average Net
Assets<F2> 5.27% 5.62% 6.09% 6.35% 6.11% 6.11% 6.26%<F1>
Portfolio Turnover Rate 38% 93% 50% 7% 2% 0% 10%
Ratio of Adjusted Expenses to
Average Net Assets(a) 1.26% 1.55% 1.64% 1.72% 1.57% 1.39% 3.92%<F1>
Ratio of Adjusted Net
Investment Income to
Average Net Assets<F4> 4.71% 4.74% 5.05% 5.23% 5.54% 5.87% 3.34%<F1>
- ---------
<FN>
<F1>On an annualized basis.
<F2>Reflects expense limitations in effect during the years. As a result of such
limitations, expenses of the Portfolio for the years ended August 31, 1994,
1993, 1992, 1991, 1990, 1989, and 1988 reflect reductions of $0.07, $0.10,
$.12, $.12, $.06, $.10 and $.29, respectively.
<F3>For the period from the date shares of beneficial interest were initially
sold to the public which was September 9, 1987.
<F4>Percentages on an unreimbursed basis reflect what the actual ratio of
expenses to average net assets and the ratio of net investment income to
average net assets would have been.
<F5>Does not reflect sales charge.
</TABLE>
<PAGE>
MASSACHUSETTS PORTFOLIO
Selected data for a Fund share outstanding throughout each period indicated,
investment returns, key ratios and supplemental data are listed as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988<F3>
---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.43 $11.75 $11.15 $10.63 $10.94 $10.63 $10.00
------ ------ ------ ------ ------ ------ ------
Net Investment Income<F2> 0.63 0.67 0.71 0.73 0.69 0.70 0.65
Net Realized and Unrealized Gain
(Loss) on Investments (0.75) 0.82 0.60 0.53 (0.31) 0.31 0.63
------ ------ ------ ------ ------ ------ ------
Total from Investment Operations (0.12) 1.49 1.31 1.26 0.38 1.01 1.28
------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment
Income (0.63) (0.67) (0.71) (0.73) (0.69) (0.70) (0.65)
------ ------ ------ ------ ------ ------ ------
Distributions from Net
Realized Gain on
Investments Sold (0.12) (0.14) -- (0.01) -- -- --
Total Distributions (0.75) (0.81) (0.71) (0.74) (0.69) (0.70) (0.65)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Year $11.56 $12.43 $11.75 $11.15 $10.63 $10.94 $10.63
====== ====== ====== ====== ====== ====== ======
Total Investment Return at Net
Asset Value<F5> (0.97%) 13.29% 12.11% 12.10% 3.49% 9.67% 13.13%<F1>
------ ------ ------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $54,122 $50,019 $29,113 $15,015 $9,968 $9,138 $4,757
Ratio of Expenses to Average
Net Assets<F2> 0.70% 0.67% 0.60% 0.60% 1.00% 1.00% 1.00%<F1>
Ratio of Net Investment Income
to Average Net Assets<F2> 5.28% 5.61% 6.18% 6.64% 6.31% 6.35% 6.28%<F1>
Portfolio Turnover Rate 29% 79% 56% 29% 2% 2% 20%
Ratio of Adjusted Expenses to
Average Net Assets<F4> 1.23% 1.58% 1.78% 2.04% 1.77% 1.51% 3.75%<F1>
Ratio of Adjusted Net Investment
Income to Average Net Assets<F4> 4.75% 4.70% 5.00% 5.20% 5.54% 5.84% 3.53%<F1>
- ---------
<FN>
<F1>On an annualized basis.
<F2>Reflects expense limitations in effect during the years. As a result of such limitations, expenses of the Portfolio for the
years ended August 31, 1994, 1993, 1992, 1991, 1990, 1989, and 1988 reflect reductions of $.06, $.11, $.14, $.16, $.08, $.11
and $.28, respectively.
<F3>For the period from the date shares of beneficial interest were initially sold to the public which was September 3, 1987.
<F4>Percentages on an unreimbursed basis reflect what the actual ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been.
<F5>Does not reflect sales charge.
</TABLE>
<PAGE>
NEW YORK PORTFOLIO
Selected data for a Fund share outstanding throughout each period indicated,
investment returns, key ratios and supplemental data are listed as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988<F3>
---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year $12.63 $11.90 $11.29 $10.74 $11.01 $10.48 $10.00
------ ------ ------ ------ ------ ------ ------
Net Investment Income<F2> 0.64 0.68 0.72 0.72 0.67 0.68 0.61
Net Realized and Unrealized Gain
(Loss) on Investments (0.77) 0.87 0.63 0.55 (0.25) 0.55 0.48
------ ------ ------ ------ ------ ------ ------
Total from Investment Operations (0.13) 1.55 1.35 1.27 0.42 1.23 1.09
------ ------ ------ ------ ------ ------ ------
Dividends from Net
Investment Income (0.64) (0.68) (0.72) (0.72) (0.67) (0.68) (0.61)
------ ------ ------ ------ ------ ------ ------
Distributions from Net Realized
Gain on Investments Sold (0.13) (0.14) (0.02) -- (0.02) (0.02) --
Total Distributions (0.77) (0.82) (0.74) (0.72) (0.69) (0.70) (0.61)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Year $11.73 $12.63 $11.90 $11.29 $10.74 $11.01 $10.48
====== ====== ====== ====== ====== ====== ======
Total Investment Return at Net
Asset Value<F5> (1.05%) 13.70% 12.17% 12.24% 3.74% 11.87% 11.40%<F1>
------ ------ ------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of Period
(000's omitted) $55,690 $52,444 $33,806 $20,878 $13,357 $8,795 $4,306
Ratio of Expenses to Average
Net Assets<F2> 0.70% 0.67% 0.60% 0.60% 1.00% 1.00% 1.00%<F1>
Ratio of Net Investment Income
to Average Net Assets<F2> 5.28% 5.63% 6.22% 6.57% 6.17% 6.30% 6.11%<F1>
Portfolio Turnover Rate 23% 56% 48% 12% 10% 10% 16%
Ratio of Adjusted Expenses to
Average Net Assets<F4> 1.23% 1.54% 1.68% 1.82% 1.69% 1.65% 4.84%<F1>
Ratio of Adjusted Net Investment
Income to Average Net Assets<F4> 4.75% 4.76% 5.14% 5.35% 5.48% 5.65% 2.26%<F1>
- ---------
<FN>
<F1>On an annualized basis.
<F2>Reflects expense limitations in effect during the years. As a result of such limitations, expenses of the Portfolio for the
years ended August 31, 1994, 1993, 1992, 1991, 1990, 1989, and 1988 reflect reductions of $.06, $.11, $.13, $.13, $.08, $.13
and $.38, respectively.
<F3>For the period from the date shares of beneficial interest were initially sold to the public which was September 11, 1987.
<F4>Percentages on an unreimbursed basis reflect what the actual ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been.
<F5>Does not reflect sales charge.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
THE PORTFOLIOS SEEK TO PROVIDE INCOME THAT IS EXCLUDABLE FROM FEDERAL AND STATE
TAX.
The investment objective of the Portfolios is to provide current income that is
excludable from gross income for Federal income tax purposes and, for the
California, Massachusetts and New York Portfolios, respectively, is, exempt from
the personal income tax of California, Massachusetts and New York, and from New
York City personal income taxes. The Portfolios seek to provide the maximum
level of tax exempt income that is consistent with preservation of capital.
There is no assurance that the Portfolios will achieve their investment
objective.
As a fundamental policy, at least 80% of each Portfolio's net assets (taken at
market value) will consist of municipal bonds and notes and other debt
instruments, whose interest is excludable from Federal gross income and exempt
from the personal income tax of California, Massachusetts or New York State and
New York City, as the case may be ("Tax-Exempt Bonds").
From time to time, however, limited availability of these obligations may result
from market conditions. As a temporary defensive posture, a Portfolio may seek
to invest its assets in debt securities whose interest is excludable for Federal
income tax purposes during these periods, but not necessarily exempt from the
personal income tax of the applicable State and New York City, and subject to
the possible application of alternative minimum taxes.
When John Hancock Advisers, Inc. (the "Adviser") determines that unfavorable
investment conditions warrant a temporary defensive posture, each Portfolio may
invest up to 50% of its net assets in cash or in short-term obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, or in
commercial paper and bank obligations (as limited below). Dividends derived from
interest earned on these obligations generally are taxable to shareholders for
Federal purposes. They may also be taxable for state and local purposes unless
treated as derived from interest on direct obligations of the U.S. Government
under the laws of certain states, including California and Massachusetts.
Municipal bonds generally are classified as either general obligation bonds or
revenue bonds. General obligation bonds are backed by the credit of an issuer
having taxing power and are payable from the issuer's general unrestricted
revenues. Their payment may depend on an appropriation of the issuer's
legislative body. Revenue bonds, by contrast, are payable only from the revenues
derived from a particular project, facility or a specific revenue source. They
are not generally payable from the unrestricted revenues of the issuer.
Municipal notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes, and project notes.
Municipal commercial paper obligations are unsecured promissory notes issued by
municipalities to meet short-term credit needs.
All of the investments of each Portfolio will be made in:
(1) Tax-exempt bonds which are rated A or better by Standard & Poor's Ratings
Group ("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's")
or Fitch Investors Services, Inc. ("Fitch"). Alternatively, the bonds may
be unrated but considered by the Adviser to be of comparable quality, and
issued by issuers which have other securities rated not lower than A by
Standard & Poor's, Moody's or Fitch.
(2) Tax-exempt bonds which are rated BBB or BB by Standard & Poor's, Baa or Ba
by Moody's or BBB or BB by Fitch, or which are unrated but are considered by
the Adviser to be of comparable quality. Not more than one-third of the
Portfolio's total assets will be invested in such tax-exempt bonds rated
lower than A or determined to be of comparable quality.
(3) Notes of issuers having an issue of outstanding tax-exempt bonds rated not
lower than A by Standard & Poor's, Moody's or by Fitch, or notes which are
guaranteed by the U.S. Government or rated MIG-1 or MIG-2 by Moody's or
unrated notes which are determined to be of comparable quality by the
Adviser.
(4) Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Some obligations issued by an agency or instrumentality
may be supported by the full faith and credit of the U.S. Treasury while
others may be supported only by the credit of the particular Federal agency
or instrumentality.
(5) Commercial paper which is rated A-1 or A-2 by Standard & Poor's, P-1 or P-
2 by Moody's, or at least F-1 by Fitch, or which is not rated, but is
considered by the Adviser to be of comparable quality; obligations of banks
with $1 billion of assets and cash equivalents, including certificates of
deposit, bankers acceptances and repurchase agreements. Ratings of A-2 or
P-2 on commercial paper indicate a strong capacity for timely payment,
although the relative degree of safety is not as high as for issues
designated A-1 or P-1.
The Portfolio may invest in certain types of tax-exempt bonds whose interest
income may be treated as a tax preference item under the Federal alternative
minimum tax. The Portfolios will not include tax-exempt bonds generating this
income for purposes of measuring compliance with the 80% fundamental investment
policy described above.
Debt obligations rated in the lower rating categories, or which are unrated,
involve greater price volatility and risk of loss of principal and income. In
addition, the issuer of lower rated debt obligations may have more difficulty
making principal and interest payments in adverse financial conditions. The
market price and liquidity of lower rated securities generally responds to
short-term market developments to a greater extent than for higher rated
securities, because these developments are perceived to have a more direct
relationship to the issuer's ability to meet its ongoing debt obligations. Bonds
rated BB or Ba are generally referred to as junk bonds. See "Appendix."
The Fund has registered as a "non-diversified" investment company permitting the
Adviser to invest more than 5% of the assets of each Portfolio in the
obligations of any one issuer. Since a relatively high percentage of a
Portfolio's assets may be invested in the obligations of a limited number of
issuers, the value of Portfolio shares may be more susceptible to any single
economic, political or regulatory event than would the shares of a diversified
investment company.
THE FUND MAY EMPLOY CERTAIN INVESTMENT STRATEGIES TO HELP 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"). These purchases
are subject to a fundamental restriction limiting all illiquid securities held
by the Fund to not more than 10% of the Portfolio's net assets. The Trustees
will carefully monitor the Fund's investments in Rule 144A securities, focusing
on certain factors, including valuation, liquidity and availability of
information. Investing in Rule 144A securities could have the effect of reducing
the level of liquidity in the Fund, to the extent that qualified institutional
buyers lose interest in purchasing these securities for a time.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Portfolio buys a security
subject to the right and obligation to sell it back to the seller at a higher
price. These transactions must be fully collateralized at all times, but involve
some credit risk to the Portfolio if the other party defaults on its obligation
and the Portfolio is delayed in or prevented from liquidating the collateral.
WHEN-ISSUED SECURITIES. Purchasing tax-exempt bonds on a when-issued basis may
increase a Portfolio's overall investment exposure and involves a risk of loss
if the value of the securities declines before the settlement date.
SHORT-TERM TRADING. Short-term trading might be utilized to take advantage of
market developments, yield disparities and variations in the creditworthiness of
issuers. A high turnover rate involves greater transaction expenses to a
Portfolio, and could involve a higher proportion of short-term capital gains,
distributions of which are taxable to shareholders at ordinary income rates.
Portfolio turnover rates are shown in the section "The Fund's Financial
Highlights."
VARIABLE AND FLOATING RATE OBLIGATIONS. A Portfolio may invest in variable rate
and floating rate obligations, whose interest payments 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 on floating
rate obligations are adjusted whenever there is a change in the market interest
rate on which the obligation's interest is based.
FINANCIAL FUTURES CONTRACTS. A Portfolio may buy and sell futures contracts and
options on futures contracts to hedge against changes in securities prices and
interest rates or for speculative purposes. A Portfolio's ability to hedge
successfully through futures transactions will depend on the Adviser's ability
to predict accurately the future direction of interest rate changes and other
market factors. There is no assurance that a liquid market for futures and
options will always exist. In addition, a Portfolio could be prevented from
opening or realizing the benefits of closing out a futures or options position
because of position limits or exchange imposed limits on daily price
fluctuations. The potential loss incurred by a Portfolio in writing options on
futures is unlimited and may exceed the premium received.
All of the Portfolios' futures contracts and options will be traded on a U.S.
commodity exchange or board of trade. A Portfolio will not engage in a futures
or related option transaction, except for closing purchase and sale
transactions, if immediately thereafter the sum of the amount of initial margin
deposits on the Portfolio's outstanding speculative positions in futures and
related options, plus the amount of premiums paid for outstanding options on
futures, exceeds 5% of the market value of the Portfolio's net assets.
THE PORTFOLIOS FOLLOW CERTAIN POLICIES WHICH MAY HELP REDUCE INVESTMENT RISK.
The Portfolios have adopted certain fundamental investment restrictions which
are detailed in the Statement of Additional Information. The Portfolios'
investment objective and restrictions are fundamental and may not be changed
without shareholder approval.
BROKERS ARE CHOSEN BASED ON BEST PRICE AND EXECUTION.
When choosing brokerage firms to carry out each Portfolio's transactions
involving a broker, the Adviser gives primary consideration to 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
Portfolio 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.
THE STATE PORTFOLIOS: CONSIDERATIONS AND RISKS
CALIFORNIA PORTFOLIO. The California Portfolio's ability to achieve its
investment objective depends on the ability of the issuers of tax-exempt bonds
of California and its political subdivisions, municipalities, agencies,
instrumentalities or public authorities ("California tax-exempt bonds") to meet
their continuing obligations for the payment of principal and interest.
In 1978, California passed Proposition 13, limiting the level of property taxes.
This and subsequent legislation limiting taxation and spending may affect the
creditworthiness of the state or local agencies in the future. If either
California or any of its local governmental entities is unable to meet its
financial obligations, the income derived by the Portfolio, the Portfolio's net
asset value, the Portfolio's ability to preserve or realize capital appreciation
or the Portfolio's liquidity could be adversely affected.
On December 7, 1994, Orange County, California (the "County"), together with its
pooled investment fund (the "Fund"), filed for protection under Chapter 9 of the
federal Bankruptcy Code. This filing occured after reports that the Fund had
suffered significant market losses in its investments caused a liquidity crisis
for the Fund and the County. Approximately 180 other public entities, most but
not all located in the County, were also depositors in the Fund. As of December
13, 1994, the County indicated that the Fund had lost about 27% of its initial
deposits of around $7.4 billion. The County may suffer further losses as it
sells investments to restructure the Fund. Many of the entities which kept
moneys in the Fund, including the County, are facing cash flow difficulties
because of the bankruptcy filing and may be required to reduce programs or
capital projects. The County and some of these entities have, and others may in
the future, default in payment of their obligations. Moody's and Standard &
Poor's have suspended, reduced to below investment grade levels, or placed on
"Credit Watch" various securities of the County and the entities participating
in the Fund.
The State of California has no obligation with respect to any obligations or
securities of the County or any of the other participating entities, although
under existing legal precedents, the State may be obligated to ensure that
school districts have sufficient funds to operate.
The recession starting in mid-1990 was the deepest and longest in California
since the 1930's, and caused a sharp drop in State revenues. As a result, the
State accumulated a budget deficit of almost $3 billion at its peak at June 30,
1992. Each budget in the last four years has required the Governor and
Legislature to undertake multibillion dollar cuts in program expenditures,
transfers of fiscal responsibilities to local governments, various one-time
adjustments, accounting changes and tax increases in an effort to balance
revenues and expenditures. The difficulties in reaching a consensus approach to
this persistent imbalance produced a two-month delay in passing the June 1992
budget which forced the State to issue registered warrants to pay its bills. In
June 1994, the State passed a timely budget which proposed eliminating the
accumulated budget deficit of about $2 billion by the end of Fiscal Year
1995-96.
The persistent budget deficits, combined with about $1.7 billion of off-budget
payments made to schools and reductions of internally borrowable funds, severely
depleted the State's cash resources, so that it has had to resort to repeated
external borrowing to meet its cash needs since 1992. In order to meet cash flow
requirements for the 1994-95 fiscal year and to defer repayment of part of the
budget deficit, the State issued $7 billion of short-term securities in July and
August, 1994, of which $4 billion mature in April, 1996. In order to assure
repayment of this borrowing, the State enacted legislation which can lead to
automatic, across-the-board cuts in certain General Fund expenditures in the
1995-96 fiscal year if cash flow projections made in October, 1995 show
deterioration from projections made in July, 1994 when the borrowings were made.
This plan places the burden upon the Legislature to maintain on-going control
over the annual budget and could place additional financial pressure on local
governments' reliance on program expenditures. The State will continue to have
to rely on access to the short-term debt markets to meet its cash flow
requirements in the foreseeable future.
The California economy began to show signs of growth during the first half of
1994. After four consecutive years of on-going job losses, company relocations
out of state, and unemployment rates exceeding 9% at times, the State has
registered net job growth. Over the next two years, modest growth is expected to
continue with the economy generating momentum going into 1996. After recovering
from the losses inflicted by the January 1994 Los Angeles earthquake, personal
income is expected to rebound in 1995. Any setbacks to this recovery could lead
to weaker than expected collections of State and local revenues and continued
budget pressures.
As a result of the ongoing budget imbalance, growing deficits and sluggish
recovery, the State credit ratings have been recently downgraded. In July 1994,
both Moody's and Standard and Poors lowered their credit ratings on California
General Obligation debts. Moody's dropped its Aa ratings to A1 and Standard and
Poors reduced A+ ratings to A. Fitch Investors Service also lowered the State's
rating from Aa to A. Continued financial stress and failure by the State to
directly address its deficit could lead to further downgrades.
MASSACHUSETTS PORTFOLIO. The Massachusetts Portfolio's ability to achieve its
investment objective depends on the ability of the issuers of tax-exempt bonds
issued by the Commonwealth of Massachusetts (the "Commonwealth") and its
political subdivisions, municipalities, agencies, instrumentalities or public
authorities ("Massachusetts tax-exempt bonds") to meet their continuing
obligations to pay principal and interest.
Between 1982 and 1988, the Commonwealth had a strong economy which was evidenced
by low unemployment and high personal income growth as compared to national
trends. However in the late 80's and early 1990's, the Commonwealth experienced
a significant economic slowdown, with particular deterioration in the
construction, real estate, financial and manufacturing sectors, including
certain high technology areas. The Commonwealth's diverse economy has recently
stabilized, with unemployment dropping to 5.4% in May, 1994, below the national
rate of 6%. This expansion reflects gains in the service and construction
sectors, aided in part by major highway and harbor cleanup projects in Boston.
As a result of the economic downturn, the Commonwealth's finances were
negatively impacted. Prior to 1992, the Commonwealth had posted operating
deficits for five consecutive years. More recently, Massachusetts has benefited
from a combination of more conservative fiscal policy and budgetary practices as
well as increased tax revenues. Over the past three years, the Commonwealth has
posted positive results, closing each year with a positive operating fund
balance. Fiscal 1992 closed with an operating fund balance of $549 million,
followed by a 1993 balance of $563 million. Fiscal year 1994 ended with an
operating fund balance of $580.7 million (unaudited). Fiscal year 1995 is
currently estimated to end with an operating fund balance of $463 million. On
July 10, 1994, the Governor signed into law the 1995 budget. The current budget
provides for total expenditures of $16.9 billion, an increase of 6.1% over the
1994 budget. The final composition of the budget may be altered by Legislative
reconsideration of some $298 million in expenditures vetoed by the Governor.
In October, 1993, Standard and Poor's and Fitch raised their Massachusetts
general obligation ratings from "A" to "A+", citing continued improvement in the
Commonwealth's budgeting and financial management and the apparent stabilization
of the Massachusetts economy. Roughly $2.1 billion of related agency and other
Commonwealth debt were affected, most notably, the Massachusetts Bay
Transportation Authority, the Massachusetts Convention Center Authority, and the
Plymouth County Correctional Facility Project.
Commonwealth funded local aid is an important component of the operating budgets
of cities and towns, and decreases in funding can negatively impact their
ratings. These changes could also negatively impact their ability to pay
assessments of certain Commonwealth agencies, including the Massachusetts Bay
Transportation Authority and the Massachusetts Water Resources Authority. If a
locality incurs substantial financial difficulties, the Commonwealth may
intervene and place the locality under State receivership.
The tax on personal property and real estate is virtually the only source of tax
revenues available to the Commonwealth's cities and towns to meet local costs.
"Proposition 2 1/2", an initiative petition adopted by the voters in November
1980, limits the power of Massachusetts cities and towns and certain
tax-supported districts and public agencies to raise revenue from property taxes
to support their operations, including the payment of debt service. Proposition
2 1/2 required many cities and towns to reduce their property tax levies to a
stated percentage of the full and fair cash value of their taxable real estate
and personal property, and limited the amount that all cities and towns might
increase their property tax from year to year.
Growth of tax revenues in the Commonwealth is limited by law. Effective July 1,
1990, limitations were placed on the amount of direct bonds the Commonwealth
could have outstanding in a fiscal year, and the amount of the total
appropriation in any fiscal year that may be expected for general obligation
debt service was limited to ten percent. Moreover, Massachusetts local
governmental entitites are subject to certain limitations on their taxing power.
These could affect their ability, or the ability of the Commonwealth, to meet
their respective financial obligations.
If either Massachusetts or any of its local governmental entities is unable to
meet its financial obligations, the income derived by the Portfolio, the
Portfolio's net asset value, the Portfolio's ability to preserve or realize
capital appreciation or the Portfolio's liquidity could be adversely affected.
NEW YORK PORTFOLIO. The New York Portfolio's ability to achieve its investment
objective is dependent upon the ability of the issuers of tax-exempt bonds of
New York State (the "State") and its political subdivisions and authorities
("New York tax-exempt bonds") to meet their continuing obligations for the
payment of principal and interest. The New York tax-exempt bonds can be affected
by political and economic developments within the State, or by the financial
condition of the State, its public authorities (the "Authorities") and political
subdivisions, particularly the City of New York ("New York City"). A brief
summary of these risks and special considerations follows.
The State economy has started to slowly recover from the national recession of
1990. After lagging the nation's modest recovery by almost two years, expansion
in health and business services and additions to the construction and finance
sectors netted the State 120,000 new jobs during Fiscal Years 1993 and 1994.
This marked the reversal of three straight years of job losses which produced an
unemployment rate of 8.5% in 1992. Personal income during Fiscal Year 1994
increased by over 6% following three years with increases averaging 3.5%.
Both the State and the City have experienced serious financial difficulties and
recent declines in their credit standings. Moody's, S&P and Fitch have currently
assigned ratings of "A", "A-" and "A+", respectively, to the State's general
obligation bonds. There is no assurances that any of these ratings will continue
for any given period of time or will not be revised downward or withdrawn
entirely by a rating agency. Any downward revision or withdrawal of any
application rating may have an adverse impact on the New York tax-exempt bonds
held in the New York Portfolio.
New York cities and towns have experienced financial stress due to the State's
slow recovery from the 1990 recession and cutbacks to local assistance. The
fiscal 1995 budget calls for the delivery of an additional $700 million in local
education and tax relief funds. These new monies provide some assistance to
local budgets but do not alleviate all of the accumulated fiscal strain on local
governments.
The revised State financial plan calls for the continuation of moderate growth
during 1994 which then is expected to slacken during 1995. This moderate
recovery of the State economy may or may not generate sufficient tax revenue
growth to meet the budgeted requirements for social service expenditures. If
either New York or any of its local governmental entities is unable to meet its
financial obligations, the income derived by the Portfolio, the Portfolio's net
asset value, the Portfolio's ability to preserve or realize capital appreciation
or its liquidity could be adversely affected.
For a further discussion of tax-exempt bonds held by the Portfolios, the risks
to which they are subject and the special considerations associated with
investing in California, Massachusetts and New York, see the Statement of
Additional Information.
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.
Each of the Portfolios is a non-diversified series portfolio of the Fund. The
Fund is an open-end investment management company organized as a Massachusetts
business trust in 1987. The Fund has an unlimited number of authorized shares
which are divided into three series of shares. The shares of each portfolio are
of one class and have equal rights as to voting, redemption, dividends, and
liquidation in their respective portfolio. The Portfolios are not required to
hold annual shareholder meetings, although special meetings may be called for
such purposes as electing or removing Trustees, changing fundamental policies or
approving a management contract.
JOHN HANCOCK ADVISERS, INC. ADVISES INVESTMENT COMPANIES HAVING A TOTAL VALUE OF
APPROXIMATELY $10 BILLION.
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. It
provides the Portfolios and other investment companies in the John Hancock group
of funds with investment research and portfolio management services. John
Hancock Funds, Inc. ("John Hancock Funds") distributes shares for all of the
John Hancock funds directly and through selected broker-dealers ("Selling
Brokers"). Certain Fund officers are also officers of the Adviser and John
Hancock Funds.
Dianne Sales-Singer is the Fund's portfolio manager and is responsible for the
day-to-day management of the Fund. Ms. Sales-Singer has been with the Adviser
since 1989. Prior to joining the Adviser, she was employed at Bear Stearns &
Co. Inc.
In order to avoid any conflict with portfolio trades for the Fund, the Adviser
and the Fund have adopted extensive restrictions on personal securities trading
by personnel of the Adviser and its affiliates. Some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
FOR THE 1994 FISCAL YEAR, THE ADVISER VOLUNTARILY DID NOT IMPOSE A MANAGEMENT
FEE.
THE PORTFOLIOS' EXPENSES
For managing its investment and business affairs, each Portfolio pays a monthly
fee to the Adviser which is based on a stated percentage of the Portfolio's
average daily net asset value.
THE PORTFOLIOS PAY DISTRIBUTION AND SERVICE FEES FOR MARKETING AND SALES-RELATED
SHAREHOLDER SERVICING.
The Fund has adopted a distribution plan under Rule 12b-1 (the "Plan") under the
Investment Company Act of 1940. Under the Plan, the Fund will pay distribution
and service fees at an aggregate annual rate of 0.30% of each Portfolio's
average daily net assets, provided that the amount of the service fee will not
exceed 0.25% of average daily net assets. The distribution fees will be used to
reimburse John Hancock Funds for its distribution expenses.
These include, but are not limited to: (i) initial and ongoing sales
compensation to Selling Brokers and others (including affiliates of John Hancock
Funds) engaged in the sale of Fund shares, and (ii) marketing, promotional and
overhead expenses incurred in connection with the distribution of Fund shares.
The service fees will be used to compensate Selling Brokers for providing
personal and account maintenance services to shareholders. Any unreimbursed
expenses will not be carried beyond one year from the date incurred.
The Adviser may, from time to time, agree that all or a portion of its fee will
not be imposed for specified periods or make other arrangements to limit a
Portfolio's expenses to not more than a specified percentage of average net
assets. The Adviser retains the right to impose such fee and recover any other
payments to the extent annual expenses fall below the limit at the end of the
fiscal year. For the year ended August 31, 1990, the Adviser voluntarily agreed
to limit each Portfolio's total expenses to 1.00% of average net assets.
Effective September 1, 1990, this expense limitation was voluntarily changed to
0.60% of average net assets and on January 1, 1993, was changed to 0.70% of
average net assets.
DIVIDENDS AND TAXES
DIVIDENDS. Dividends from each Portfolio's net investment income are declared
daily and paid monthly. Capital gains, if any, are generally declared and
distributed annually. Dividends are reinvested in additional shares 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.
TAXATION. The Portfolios intend to comply with certain Federal tax requirements
so that interest earned by the Portfolios from tax-exempt bonds will be
Federally tax-free when paid to you as "exempt-interest dividends". Dividends
derived from interest on certain tax-exempt bonds that are "private activity
bonds" may, however, increase the alternative minimum tax liability of
shareholders.
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 dividends) and other dividends paid by the Portfolios.
Shares of the Portfolios 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 a Portfolio's net taxable income, if any, including any market
discount included in a Portfolio's income and dividends from any net short-term
capital gains are taxable to you as ordinary income. Dividends from a
Portfolio's net long-term capital gains are taxable as long-term capital gains.
These dividends are taxable, whether received in cash or reinvested in
additional shares. Certain dividends may be paid by a Portfolio in January of a
given year, but they may be taxable as if you received them the previous
December. The Portfolios will send you a statement by January 31 showing the tax
status of the dividends you received for the prior year.
The Portfolios have qualified and intend to continue to qualify as regulated
investment companies under Subchapter M of the Internal Revenue Code. As a
regulated investment company, each Portfolio 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. Additionally, you may
realize a gain or loss, when you redeem (sell) or exchange shares.
On the account application, you are asked to certify that the social security or
other taxpayer identification number you provided is your correct number and
that you are not subject to backup withholding of Federal income tax. If you do
not provide this information or are otherwise subject to this withholding, the
Portfolio may be required to withhold 31% of your taxable dividends, redemptions
and exchanges.
CALIFORNIA TAXES
The California Portfolio intends to comply with certain California tax
requirements so that dividends paid by the California Portfolio which are
derived from interest on obligations, the interest on which is exempt from
California income tax, will be exempt from California personal income tax in the
hands of shareholders of the California Portfolio. Dividends from other sources,
including capital gain dividends, if any, will not be exempt from California
personal income tax. Dividends paid by the California Portfolio are not exempt
from California franchise or corporate income taxes. California does not treat
tax-exempt interest (or dividends paid by the California Portfolio attributable
to such interest) as a tax preference item for purposes of its alternative
minimum tax.
MASSACHUSETTS TAXES
To the extent that exempt-interest dividends paid to shareholders by the
Massachusetts Portfolio are derived from interest on tax-exempt bonds of the
Commonwealth of Massachusetts and its political subdivisions or Puerto Rico, the
U.S. Virgin Islands or Guam and are properly designated as such, these
distributions will also be exempt from Massachusetts personal income tax. For
Massachusetts personal income tax purposes, dividends from the Portfolio's
taxable net investment income, tax-exempt income from obligations not described
in the preceding sentence, and short-term capital gains, if any, will generally
be taxable as ordinary income, whether received in cash or additional shares.
However, any dividends that are properly designated as attributable to interest
the Portfolio receives on direct U.S. Government obligations will not be subject
to Massachusetts personal income tax. Dividends properly designated as from net
long-term capital gains are generally taxable as long-term capital gains,
regardless of how long shareholders have held their Portfolio shares. However, a
portion of such a long-term capital gains distribution will be exempt from
Massachusetts personal income tax if it is properly designated as attributable
to gains realized on the sale of certain tax-exempt bonds issued pursuant to
Massachusetts Statutes that specifically exempt such gains from Massachusetts
taxation. Dividends from investment income (including exempt-interest dividends)
and from capital gains will be subject to, and shares of the Portfolio will be
included in the net worth of intangible property corporations for purposes of,
the Massachusetts corporation excise tax if received by a corporation subject to
such tax.
NEW YORK TAXES
Exempt-interest dividends derived from interest on tax-exempt bonds of New York
State and its political subdivisions and authorities and certain other
governmental entities (for example, U.S. possessions), paid by the Portfolio to
New York resident individuals, estates and trusts otherwise subject to these
taxes, will not be subject to New York State and New York City personal income
taxes and certain municipal tax surcharges.
Dividends, whether received in cash or additional shares, derived from the New
York Portfolio's other investment income (including interest on Tax-Exempt Bonds
other than those described in the preceding paragraph), and from the Portfolio's
net realized short-term capital gains, are taxable for New York State and New
York City personal income tax purposes as ordinary income. Tax surcharges will
also apply. Dividends derived from net realized long-term capital gains of the
Portfolio are taxable as long-term capital gains for New York State and New York
City personal income tax purposes regardless of the length of time shareholders
have held their shares.
Dividends derived from investment income and capital gains, including exempt-
interest dividends, will be subject to the New York State franchise tax and the
New York City General Corporation Tax if received by a corporation subject to
those taxes. Certain distributions may, however, be eligible for a 50% dividend
subtraction. Shares of the Portfolio will be included in a corporate
shareholder's investment capital in determining its liability, if any, for these
taxes.
The foregoing description of Federal, State and New York City tax consequences
is based on the law currently in effect for the 1995 taxable year and is subject
to change by legislative, administrative or judicial action, which may have
prospective and/or retroactive effect.
For further information on the tax consequences of ownership of Portfolio
shares, see the Statement of Additional Information.
A PORTFOLIO MAY ADVERTISE ITS YIELD, TAX- EQUIVALENT YIELD AND TOTAL RETURN.
PERFORMANCE
Yield reflects a Portfolio's rate of income on portfolio investments as a
percentage of the Portfolio's 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. Yields are
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, a Portfolio's yield may not equal the income paid
on your shares or the income reported in the Portfolio's financial statements.
Tax-equivalent yield is computed by dividing that portion of the yield of a
Portfolio which is tax-exempt by one minus a stated income tax rate and then
adding the product to any portion of the Portfolio's yield that is not
tax-exempt.
Total return is based on the overall change in value of a hypothetical
investment in a Portfolio. A Portfolio's total return shows the overall dollar
or percentage change in value, assuming the reinvestment of all dividends.
Cumulative total return shows the Portfolio'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 the Portfolio's performance, you should recognize that
it is not the same as actual year-to-year results.
Both total return and yield figures include the effect of paying the maximum
sales charge of 4.5%. Investments at a lower sales charge would achieve higher
returns than those advertised. The value of Portfolio shares, when redeemed, may
be more or less than their original cost. Both yield and total return are
historical calculations, and are not an indication of future performance.
HOW TO BUY SHARES
- ------------------------------------------------------------------------------
OPENING AN ACCOUNT.
The minimum initial investment is $1,000 ($250 for group investments).
Complete the Account application attached to this Prospectus.
- ------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation ("Investor Services").
2. Deliver the completed application and check to your
registered representative, Selling Broker or mail it
directly to Investor Services.
- ------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered
representative, 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 Series
(Specify name of Portfolio)
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative, Selling Broker or mail it directly to
Investor Services.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
BUYING ADDITIONAL SHARES.
MONTHLY AUTOMATIC 1. Complete the "Automatic Investing" and "Bank Information"
ACCUMULATION sections Account Privileges Application, designating a
PROGRAM (MAAP) bank account from which your 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 your 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 additional shares by calling Investor Services
toll-free at 1-800- 225-5291.
3. Give the Investor Services representative the name in
which your account is registered, the Fund and Portfolio
name and 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 in your
account statement or include a note with your investment
listing the name of the Fund and Portfolio, your account
number and the name(s) in which the account is
registered.
2. Make your check payable to John Hancock Investor Services
Corporation.
3. Mail the account information and check to:
John Hancock Investor Services Corporation
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 Series Fund
(Specify name of Portfolio)
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 John Hancock Funds
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 Investor Services.
- ------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT STATEMENTS WHICH YOU SHOULD KEEP TO HELP WITH YOUR
PERSONAL RECORDKEEPING.
You will receive a statement of your account after transactions affecting 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.
SHARE PRICE
THE OFFERING PRICE OF YOUR SHARES IS THEIR NET ASSET VALUE PLUS A SALES CHARGE.
The net asset value ("NAV") is the value of one share. The NAV per share is
calculated by dividing the Portfolio's net assets by the number of outstanding
shares. Securities in a Portfolio are generally valued by a pricing service
which utilizes electronic pricing techniques based on general institutional
trading. If no sale has occurred on the date the assets are valued, some
securities are valued at fair market value based on procedures approved by the
Trustees and for certain other securities, at amortized cost if the Trustees
determine in good faith that this cost 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.
The offering price you pay for shares of a Portfolio equals the NAV plus a sales
charge, as follows:
<TABLE>
<CAPTION>
COMBINED
SALES CHARGE REALLOWANCE REALLOWANCE TO
SALES CHARGE AS A PERCENTAGE AND SERVICE FEE SELLING BROKER AS
AMOUNT INVESTED AS A PERCENTAGE OF THE AS A PERCENTAGE A PERCENTAGE OF
(INCLUDING SALES CHARGE) OF THE 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%<F2>
<FN>
<F1>Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales charge.
A Selling Broker to whom substantially the entire sales charge is reallowed
may be deemed to be an underwriter under the Securities Act of 1933.
<F2>No sales charge is payable at the time of purchase on investments 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>John Hancock Funds may pay a commission and first year's service fee (as
described in <F4> below) to Selling Brokers who initiate and are responsible
for purchases of $1 million or more in the aggregate as follows: 1% on sales
to $4,999,999, 0.50% on the next $5 million and 0.25% on $10 million and
over.
<F4>At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance in an amount up 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.
John Hancock Funds will pay certain affiliated Selling Brokers at an annual rate
up to 0.05% of the daily net assets of accounts attributable to these brokers.
In addition to the reallowance allowed to all Selling Brokers, John Hancock
Funds will pay round trip airfare to a resort for each registered representative
of a Selling Broker (if the Selling Broker has agreed to participate) who sells
certain amounts of John Hancock fund shares. John Hancock Funds 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 fund shares (identical
with "Class A" shares of other John Hancock funds) may be entitled to pay
reduced sales charges. See "Qualifying for a Reduced Sales Charge."
CONTINGENT DEFERRED SALES CHARGE -- INVESTMENTS OF $1 MILLION OR MORE
Purchases of $1 million or more of Fund 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%
Existing full service clients of John Hancock Mutual Life Insurance Company
group annuity contract holders as of September 1, 1994, may purchase shares with
no 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 above rate.
The charge will be assessed on an amount equal to the lesser of the current
market value or the original purchase cost of the 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 shares.
In determining whether a CDSC is applicable 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 redemption is first of any shares in
the shareholder's account not subject to the CDSC. The CDSC is waived on
redemptions in certain circumstances. See "Waiver of Contingent Deferred Sales
Charges" below.
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE ON YOUR INVESTMENT.
QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $100,000 in
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. You may also be able to use the
ACCUMULATION PRIVILEGE and COMBINIATION 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. For the ACCUMULATION
PRIVILEGE and COMBINATION PRIVILEGE, the applicable sales charge will be based
on the total of:
1. Your current purchase of shares of the Fund;
2. The net asset value (at the close of business on the previous day) of (a) all
shares of the Portfolio you hold, and (b) all Class A shares of any other
John Hancock mutual funds you hold; and
3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."
EXAMPLE:
If you hold Class A shares of a John Hancock mutual fund with a net asset value
of $80,000 and, subsequently, invest $20,000 in shares of the Fund, the sales
charge on this subsequent investment would be 3.75% and not 4.50% (the rate that
would otherwise be applicable to investments of less than $50,000. See "Initial
Sales Charge Alternative.")
SHARES MAY BE AVAILABLE WITHOUT A SALES CHARGE TO CERTAIN INDIVIDUALS AND
ORGANIZATIONS.
If you are in one of the following categories, you may purchase shares of the
Fund without paying a sales charge:
* A Trustee or officer of the Fund; 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.
* Any state, county, city or any instrumentality, department, authority, or
agency of these entities which is prohibited by applicable investment law 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 depository
institution, its trust department or its common trust funds 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 John Hancock Funds 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 he/she withdraws from his/her plan and transfers any or all of
his/her plan distributions directly to the Fund.
- ---------
*For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.
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.
UNDER CERTAIN CIRCUMSTANCES, THE CDSC ON SHARE REDEMPTIONS WILL BE WAIVED.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES. The CDSC will be waived on
redemptions of shares that are subject to a CDSC, unless indicated otherwise,
in the circumstances defined below:
* Redemptions of shares made under a Systematic Withdrawal Plan (see "How to
Redeem Shares"), as long as your annual redemptions do not exceed 10% of your
account value at the time you established your Systematic Withdrawal Plan and
10% of the value of subsequent investments (less redemptions) in that account
at the time you notify Investor Services. This waiver does not apply to
Systematic Withdrawal Plan redemptions of shares that are subject to a CDSC.
* Redemptions made to effect distributions from an Individual Retirement Account
either before or after age 59 1/2, as long as the distributions are based on
your life expectancy or the joint-and-last survivor life expectancy of you and
your beneficiary. These distributions must be free from penalty under the
Code.
* Redemptions made to effect mandatory distributions under the Code after age 70
1/2 from a tax-deferred retirement plan.
* Redemptions made to effect distributions to participants or beneficiaries from
certain employer-sponsored retirement plans including those qualified under
Section 401(a) of the Code, custodian accounts under Section 403(b)(7) of the
Code and deferred compensation plans under Section 457 of the Code. The waiver
also applies to certain returns of excess contributions made to these plans.
In all cases, the distributions must be free from penalty under the Code.
* Redemptions due to death or disability.
* Redemptions made under the Reinvestment Privilege, as described in "Additional
Services and Programs" of this Prospectus.
* Redemptions made pursuant to the Fund's right to liquidate your account if you
own fewer than 50 shares.
* Redemptions made in connection with certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions from certain IRA and retirement plans which purchased shares prior
to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you must notify
Investor Services either directly or through your Selling Broker at the time you
make your redemption. The waiver will be granted once Investor Services has
confirmed that you are entitled to the waiver.
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION REQUEST, PLEASE FOLLOW THESE PROCEDURES.
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 Investor Services, less any applicable CDSC. A
Portfolio may withhold payment until reasonably satisfied that investments which
were made by check or Invest-by-Phone have been collected (which may take up to
10 calendar days).
Once your shares are redeemed, the applicable Portfolio generally sends you
payment on the next business day. When you redeem them, you will generally
realize a gain or loss depending generally on the difference between what you
paid for your shares and what you receive for them, subject to tax rules. Under
unusual circumstances, the Portfolio may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities laws.
- ------------------------------------------------------------------------------
BY TELEPHONE All Fund shareholders are automatically eligible for the
telephone redemption privilege. 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. Investor 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.
Neither the Fund nor Investor 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. The EASI-Line telephone number is
1-800-338-8080.
- ------------------------------------------------------------------------------
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 a fee
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 the Prospectus.
- ------------------------------------------------------------------------------
IN WRITING Send a stock power or letter of instruction specifying
the name of the Fund and Portfolio, the dollar amount or
the number of shares to be redeemed, your name, 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 titles
Proprietorship, Custodial where applicable) by all persons authorized
(Uniform Gifts or Transfer to to sign for the account, exactly as it is
Minors Act), General Partners. 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 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 on 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, John Hancock
Funds may guarantee the signature. The following institutions may provide you
with a signature guarantee, provided that any such institution meets credit
standards established by Investor 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.
- ------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
THROUGH YOUR BROKER Your broker may be able to initiate the redemption.
Contact your instructions.
- ------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your stock
power or a letter of instruction. You may not redeem certificated shares by
telephone.
Due to the proportionately high cost of maintaining small accounts, the Fund
reserves the right to redeem 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 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 smaller account may eventually
trigger this policy.
- ------------------------------------------------------------------------------
ADDITIONAL SERVICES AND PROGRAMS
YOU MAY EXCHANGE SHARES OF THE PORTFOLIOS ONLY FOR CLASS A SHARES IN ANOTHER
JOHN HANCOCK FUND.
EXCHANGE PRIVILEGE
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 the Fund
only for shares of the same class of another John Hancock fund. For this
purpose, shares of 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.
Shares of a Portfolio which are subject to a CDSC (see discussion under the
caption "Share Price") may be exchanged into another John Hancock fund at net
asset value without incurring the CDSC; however, the shares acquired in an
exchange may be subject to a CDSC upon redemption. 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.
The Portfolios reserve the right to require you to keep previously exchanged
shares (and reinvested dividends) in a Portfolio for 90 days before you are
permitted to execute a new exchange. The Portfolios 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.
Under exchange agreements with John Hancock Funds, certain dealers, brokers and
investment advisers may exchange their clients' Fund shares, subject to the
terms of those agreements and John Hancock Funds' 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 John Hancock Funds' 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.
BY TELEPHONE
1. When you fill out the application for your purchase of shares of a Portfolio,
you automatically authorize exchanges by telephone unless you check the box
indicating that you do not wish to authorize telephone exchange.
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:
-- name of the Portfolio whose shares you currently own
-- your account number
-- name(s) in which the account is registered
-- name of the Portfolio or 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 Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
IF YOU REDEEM SHARES OF A PORTFOLIO, YOU MAY BE ABLE TO REINVEST THE PROCEEDS IN
THESE PORTFOLIOS OR ANOTHER JOHN HANCOCK FUND WITHOUT PAYING AN ADDITIONAL SALES
CHARGE.
REINVESTMENT PRIVILEGE
1. You will not be subject to a sales charge on investing the proceeds of a
redemption of shares of the Portfolios in any John Hancock funds that are
otherwise subject to a sales charge, as long as you reinvest within 120 days
from 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 the redemption may be reinvested in shares of a Portfolio or
in any of the other John Hancock mutual funds, subject to the minimum
investment limit in any fund.
3. To reinvest, you must notify Investor Services in writing. Include the
Portfolio name and account number from which your shares were originally
redeemed.
YOU CAN PAY ROUTINE BILLS FROM YOUR ACCOUNT OR MAKE PERIODIC DISBURSEMENTS FROM
YOUR RETIREMENT ACCOUNT TO COMPLY WITH IRS REGULATIONS.
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 the 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, on
a selected month basis or annually to yourself or any other designated payee.
4. There is no limit on the number of payments 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 shares, because you may be subject to initial
sales charges on your purchases. In addition, your redemptions are taxable
events.
6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks or if deposits to a bank account are returned for any reason.
YOU CAN MAKE AUTOMATIC INVESTMENTS AND SIMPLIFY YOUR INVESTING.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
1. You may authorize an investment to be automatically drawn each month from
your bank for investment in Portfolio shares under the "Automatic Investing"
and "Bank Information" Sections of the Account Privileges
Application.
2. You may also authorize automatic investment 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 additional charge to you for this program, and there is no cost
to the Portfolios.
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 sales
charge 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. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at any
time.
APPENDIX
As described in the Prospectus, the Portfolios may invest in Tax-Exempt bonds in
the lower rating categories (that is, rated Baa or Ba by Moody's or BBB or BB by
Standard & Poor's, or BBB or BB by Fitch).
Moody's describes its lower rating categories for tax-exempt bonds as follows:
Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
Standard & Poor's describes its lower rating categories for tax-exempt bonds as
follows:
Debt rated "BBB" is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Debt rated "BB" is regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations. While this debt will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
Fitch describes its lower rating categories for tax-exempt bonds as follows:
BBB Bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore,
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
Plus (+) or Minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the "AAA" category.
BB Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
Moody's describes its two highest ratings for commercial paper as follows:
Issuers rated P-1 (or related supporting institutions) have a superior capacity
for repayment of short-term promissory obligations. Issuers rated P-2 (or
related supporting institutions) have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Ratings for state and municipal notes and other short-term obligations will be
designated Moody's Investment Grade ("MIG").
MIG-1 Notes bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2 Notes bearing this designation are of high quality with margins of
protection ample although not so large as in the preceding group.
Standard & Poor's describes its two highest ratings for commercial paper as
follows:
A-1. This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2. Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated A-1.
Fitch describes its two highest ratings for commercial paper as follows:
F-1+. Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1. Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
JOHN HANCOCK TAX-EXEMPT SERIES FUND
For the year ended August 31, 1994 the quality distribution of each Portfolio
was as follows:
CALIFORNIA PORTFOLIO
- --------------------
<TABLE>
<CAPTION>
RATING RATING
% OF ASSIGNED % OF ASSIGNED % OF
QUALITY DISTRIBUTION VALUE PORTFOLIO BY ADVISER PORTFOLIO BY SERVICE PORTFOLIO
- -------------------- ----------- --------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
AAA $15,301,079 31.47% 0 0.0% $15,301,079 31.47%
AA 10,309,490 21.21 0 0.0 10,309,490 21.21
A 12,592,430 25.90 0 0.0 12,592,430 25.90
BAA 8,007,822 16.47 0 0.0 8,007,822 16.47
BA 0 0.00 0 0.0 0 0.00
B 0 0.00 0 0.0 0 0.00
Debt-Unrated 1,247,932 2.57 0 0.0 1,247,932 2.57
----------- ------ - --- ----------- -----
Debt Securities 47,458,753 97.62 0 0.0 $47,458,753 97.62%
- --- ----------- -----
Equity Securities 0 0.00
Short-Term Securities 1,154,881 2.38
----------- ------
Total Portfolio $48,613,634 100.00%
=========== ======
</TABLE>
MASSACHUSETTS PORTFOLIO
- -----------------------
<TABLE>
<CAPTION>
RATING RATING
% OF ASSIGNED % OF ASSIGNED % OF
QUALITY DISTRIBUTION VALUE PORTFOLIO BY ADVISER PORTFOLIO BY SERVICE PORTFOLIO
- -------------------- ----------- --------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
AAA $15,192,841 28.53% 0 0.0% $15,192,841 28.53%
AA 7,370,450 13.84 0 0.0 7,370,450 13.84
A 21,336,203 40.06 0 0.0 21,336,203 40.06
BAA 8,325,205 15.63 0 0.0 8,325,205 15.63
BA 0 0.00 0 0.0 0 0.00
B 0 0.00 0 0.0 0 0.00
Debt-Unrated 281,538 0.53 0 0.0 281,538 0.53
----------- ----- - --- ----------- ----
Debt Securities 52,506,237 98.59 0 0.0 $52,506,237 98.59%
- --- ----------- -----
Equity Securities 0 0.00
Short-Term Securitie 752,359 1.41
----------- ------
Total Portfolio $53,258,596 100.00%
=========== ======
</TABLE>
NEW YORK PORTFOLIO
- ------------------
<TABLE>
<CAPTION>
RATING RATING
% OF ASSIGNED % OF ASSIGNED % OF
QUALITY DISTRIBUTION VALUE PORTFOLIO BY ADVISER PORTFOLIO BY SERVICE PORTFOLIO
- -------------------- ----------- --------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
AAA $13,972,466 25.38% 0 0.0% $13,972,466 25.38%
AA 12,295,339 22.33 0 0.0 12,295,339 22.33
A 11,626,528 21.12 0 0.0 11,626,528 21.12
BAA 13,799,499 25.06 0 0.0 13,799,499 25.06
BA 2,513,530 4.57 0 0.0 2,513,530 4.57
B 0 0.00 0 0.0 0 0.00
Debt-Unrated 0 0.00 0 0.0 0 0.00
----------- ------ - --- ----------- -----
Debt Securities 54,207,362 98.46 0 0.0 $54,207,362 98.46%
- --- ---------- -----
Equity Securities 0 0.00
Short-Term Securities 849,627 1.54
----------- ------
Total Portfolio $55,056,989 100.00%
=========== ======
<PAGE>
JOHN HANCOCK TAX-EXEMPT SERIES FUND
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT AUDITORS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For: Service Information
Telephone Exchange call 1-800-225-5291
Investment-by-Phone
Telephone Redemption
TDD call 1-800-554-6713
JHD-6300P 1/95
JOHN HANCOCK
TAX-EXEMPT
SERIES FUND --
CALIFORNIA PORTFOLIO
MASSACHUSETTS PORTFOLIO
NEW YORK PORTFOLIO
PROSPECTUS
JANUARY 1, 1995
FOR INVESTORS SEEKING TO ACHIEVE CURRENT INCOME EXCLUDABLE FROM GROSS INCOME FOR
FEDERAL INCOME TAX PURPOSES AND EXEMPT FROM THE PERSONAL INCOME TAX OF
CALIFORNIA, MASSACHUSETTS OR NEW YORK STATE AND NEW YORK CITY, CONSISTENT WITH
PRESERVATION OF CAPITAL.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
TELEPHONE 1-800-225-5291
Printed on Recycled Paper
</TABLE>
