HANCOCK JOHN TAX EXEMPT SERIES FUND, N-30D, 1995-04-28

HANCOCK JOHN TAX EXEMPT SERIES FUND
N-30D, 1995-04-28

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<PAGE> 1

JOHN HANCOCK FUNDS

TAX-EXEMPT

SERIES FUND

SEMI-ANNUAL REPORT

FEBRUARY 28, 1995
<PAGE> 2

TRUSTEES
Edward J. Boudreau, Jr.
Chairman
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Gail D. Fosler*
Bayard Henry*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Michael P. DiCarlo
Senior Vice President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
James K. Ho
Senior Vice President
Andrew St. Pierre
Senior Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
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
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109

CHAIRMAN'S MESSAGE

DEAR FELLOW SHAREHOLDERS:

Now that we are into 1995, early returns on New Year's resolutions are
coming in. Dieting and saving money -- Americans' long-time favorites -- are
often the most difficult resolutions to keep. This year, however, Congress may
give savers an additional incentive to stick to their guns.

[PHOTO - SEE APPENDIX]

Both the Republicans and Democrats want to revive Individual Retirement
Accounts (IRAs). In an effort to encourage savings, IRAs were made available to
all working Americans in 1981. Anyone with earned income could contribute up
to $2,000 annually. The contributions were fully tax-deductible, and the
earnings weren't taxed until withdrawal. IRAs became the most successful
savings program in the U.S., drawing in more than $250 billion and 13 million
new participants by 1985.

Sweeping tax reforms in 1986, however, changed all that. As it stands
now, the full deduction only applies to individuals who earn less than $25,000,
married couples who earn less than $40,000 and people without
employer-sponsored retirement plans. The result of this congressional
tinkering: the number of IRA contributors declined dramatically, from 16.2
million in 1985 to 4.2 million in 1992.

Legislators are now taking a closer look at expanding the
accessibility of IRAs once again. Several proposals are on the table: (1) the
Republicans' "Contract with America" includes the American Dream Savings
Account, a type of IRA; (2) President Clinton has proposed expanding
eligibility by raising income limits; and (3) several congressional
representatives have introduced legislation to restore the universal
availability of a fully tax-deductible IRA.

We enthusiastically support restoring IRAs to their original luster.
Not only will it provide a tax break to middle-income Americans, but it will go
a long way toward raising the nation's dangerously low personal savings rate,
which is the lowest of any major industrialized country. There's an increasing
awareness that Social Security and pension plans will no longer provide for the
retirement needs of middle-income Americans. Increasing IRA accessibility for
more working individuals and families is one of the most sensible ways to help
Americans take responsibility for their future financial needs. We urge you to
support the expanded IRA by contacting your congressional representative or
senator.

Sincerely,

EDWARD J. BOUDREAU, JR.
- -------------------------------------------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER

2
<PAGE> 3

BY DIANNE SALES-SINGER, PORTFOLIO MANAGER

JOHN HANCOCK

TAX-EXEMPT SERIES FUND

Municipal bonds bounce back after tough 1994;
positive industry fundamentals bode well for future

1994 certainly didn't turn out the way many municipal bond investors expected.
A year ago, strong demand and shrinking supply was supposed to push municipal
bond prices higher. But instead, the Federal Reserve's six interest-rate hikes
sent muni bonds reeling along with the rest of the fixed-income market.
Redemptions from municipal bond funds, coupled with tax-loss selling, then ex-
acerbated their decline. And to top things off, Orange County, California
declared bankruptcy in December after sustaining huge losses in its investment
portfolio.

[PHOTO - SEE APPENDIX]
DIANNE SALES-SINGER, PORTFOLIO MANAGER

This year, however, muni bonds seem to be trying to make up for lost
ground. So far, they're doing a good job. Rising demand and diminishing supply
are finally driving muni bonds higher. Evidence of a slower economy and tame
inflation is also boosting prices. Through the end of February, municipal
bonds, as measured by the Lehman Brothers Municipal Bond Index, are up 7.07%,
making them one of the top performing groups so far this year.

"RISING DEMAND AND DIMINISHING SUPPLY ARE FINALLY DRIVING MUNI BONDS HIGHER."

Despite the volatile climate, John Hancock Tax-Exempt Series Fund
managed to finish the period with gains. For the six months ended February 28,
1995, the California, Massachusetts and New York portfolios posted total
returns of 3.34%, 3.12% and 2.41%, respectively, at net asset value. By
comparison, the average California municipal bond fund had a total return of
2.44%; the average Massachusetts municipal bond fund,

3
<PAGE> 4

John Hancock Funds - Tax-Exempt Series Fund

2.59%; and the average New York municipal bond fund, 1.84%, according to Lipper
Analytical Services.(1)

SHIFT TO OFFENSE

Throughout most of 1994, we stayed defensive by keeping the portfolios'
durations relatively short. Duration is a measure of how much a fund's share
price will vary in response to changing rates. In general, the shorter the
duration, the less volatile the share price. To the extent that we outperformed
our peers, one reason may be our defensive posture in the fourth quarter of
1994 when muni bonds were hit especially hard.

"THE ONE BRIGHT SPOT IS CALIFORNIA'S BUDDING ECONOMIC RECOVERY."

As interest rates looked like they were close to peaking late last
year, we started to shift to a more offensive strategy. We extended the
duration in all three portfolios, mostly by selling shorter duration
prerefunded bonds and using the proceeds to buy longer duration bonds. (A bond
is prerefunded when an issuer issues new bonds to pay off the older bonds.
Because they trade to their call date -- or first date the issuer can redeem
the bond -- prerefunded bonds have shorter durations.) In retrospect, we
probably didn't lengthen our durations as much as we could have, given this
year's strong rally, but it was enough to give the portfolios an advantage over
their peers. In the paragraphs that follow, we'll discuss in more detail our
strategy and holdings in each portfolio.

CALIFORNIA

The Orange County bankruptcy has dominated the news in California over the last
several months. Only one holding in the California portfolio is exposed to the
County's investment pool. It's the San Joaquin Hill Transportation Corridor
Agency, representing less than 2% of the portfolio. We're confident, however,
that the Orange County situation will not negatively impact the issuer's
ability to meet its debt service payments. The San Joaquin bonds are part of a
large and widely held financing -- a fact that provides good liquidity for
these bonds. What's more, because the project is under construction, interest
payments have been capitalized for several years.

Orange County isn't the only one suffering from financial
difficulties; the state's fiscal situation is still somewhat tenuous. The
Governor's recent budget proposal is more conservative than in prior years, but
the legislature continues to grapple with a persistent budget deficit. The test
will be whether the State can pass a credible budget in June that makes real
progress in trimming the deficit.

[SEE APPENDIX]

<TABLE>
<CAPTION>
SCORECARD

STATES A LOOK AT THE CURRENT ECONOMIC ENVIRONMENT
<S> <C> <C>
CALIFORNIA -- Turning the corner/anticipate slow recovery
MASSACHUSETTS -- Continued stability/sound fiscal management
NEW YORK -- Slowdown on Wall Street/reduced gov't spending
</TABLE>

The one bright spot is California's budding economic recovery. The
State's economy is by no means robust, but it has definitely turned the corner.
Exports are increasing, personal income is rising and the State is creating
more jobs than it's losing. As we've said before, the turnaround is likely to
be slow and gradual. But we firmly believe the State's large, diverse economy
will eventually make a full recovery.

4
<PAGE> 5

John Hancock Funds - Tax-Exempt Series Fund

FUND PERFORMANCE
For the six months ended February 28, 1995
[GRAPH - SEE APPENDIX]

Total returns for the California, Massachusetts and New
York portfolios are at net asset value with all
distributions reinvested. Total returns for the average
peer funds are tracked by Lipper Analytical Services.(1)
See page 7 for historical performance information.

Against that backdrop, we've stayed somewhat cautious, maintaining our
core holdings in revenue bonds. These are backed by user fees from essential
services rather than taxes. As such, they're well insulated from the State's
fiscal problems. Looking forward, we may start to look at some state
appropriation bonds. While appropriation bonds aren't backed directly by tax
revenues like general obligation bonds, they're similar in that they rely on
state appropriations to meet their principal and interest payments. And those
appropriations are indirectly tied to tax revenues. We cut back our position in
appropriation bonds last year prior to the State's credit downgrade. But if the
economy continues to pick up and the State takes steps to address its fiscal
problems, we may consider re-establishing some of our holdings in this sector.

MASSACHUSETTS

The story hasn't changed much in Massachusetts. The state's economy continues
to move along at a steady pace with employment rising, real estate improving
and the service sectors growing. In addition, Massachusetts' fiscal situation
is still improving with a string of successful spending cuts and balanced
budgets.

We haven't made any major changes to the portfolio's holdings during
the last six months. With the lack of new issuance, it has been difficult to
add new holdings. One sector where we've found some opportunities, however, is
state housing bonds. At the end of February, they made up nearly 10% of the
portfolio's total investments.

"...MASSACHUSETTS' FISCAL SITUATION
IS STILL IMPROVING..."

Though our health-care weighting has remained steady at roughly 22%,
we've made some adjustments to our holdings. We sold lower quality hospitals
and, in turn, moved into stronger hospitals that we believe will be able to
compete in the new cost-conscious, health-care environment. Our focus is on
hospitals with strong profits, leading market share and successful managed-care
contracts. One of our favorites is New England Deaconess Hospital, which has a
favorable cash position, good HMO relationships and a strong management team.
What's more, it's working on strengthening its network of care by forming
alliances with other hospitals in the Boston area.

(1) Figures from Lipper Analytical Services include reinvested dividends
and do not take into account sales charges. Actual load-adjusted
performance would be different.

5
<PAGE> 6

John Hancock Funds - Tax-Exempt Series Fund

NEW YORK

The election of a new governor in New York has clouded the State's fiscal
outlook. In his recent budget proposal, Governor Pataki announced a significant
reorganization of spending priorities, including spending cutbacks and a
proposed tax cut. While analysts are encouraged by the attempts to reduce
spending, many are concerned about the impact these cuts could have on programs
with outstanding bonds as well as the revenue impact of the proposed tax cuts.
The question now is: What budget will the legislature finally pass and when?
Extended negotiations could once again push back a timely budget passage,
resulting in uncertainty in the market. Until the fiscal picture becomes more
clear, we're staying a bit cautious. We still have a sizable stake in New York
state appropriation bonds, but we've upgraded our holdings.

"...WE SEE AMPLE CAUSE FOR OPTIMISM."

New York City has also been under increased fiscal pressure as a sharp
slowdown on Wall Street has hurt tax revenues. The result: The City is facing a
larger-than-expected budget shortfall in 1995 as well as a projected budget gap
in 1996. The bright side, however, is that Mayor Guiliani has been successful
in implementing spending cuts and his proposed budget for fiscal year 1996
continues to emphasize spending cuts and operating efficiencies. While the City
is still addressing long-term structural problems, we believe it will be able
to continue managing its annual spending to achieve a balanced budget. What's
more, there are institutional safeguards in place to ensure that the City meets
its debt payments. Of course, we'll continue to closely monitor the fiscal
progress. But we're confident in the City's commitment to fiscal stability, and
we're comfortable with our holding there.

OUTLOOK

In the short term, we could see some volatility in the municipal market. The
Fed is close to finishing its tightening cycle, but it could raise rates again.
Concerns about another rate hike could keep investors nervous and the market
choppy. What's more, after such a strong run in the last few months, we could
possibly see the municipal market stop to catch its breath.

Longer-term, however, we see ample cause for optimism. The main reason
is the positive supply and demand story. Demand continues to rise as investors
look for ways to shelter income from taxes. At the same time, supply continues
to shrink dramatically. In fact, not only will we see new issuance drop off
sharply in 1995, but we'll also see the total amount of outstanding municipal
bonds decline. Those positive fundamentals should continue to drive municipal
bond prices higher throughout 1995 and into 1996.

6
<PAGE> 7
NOTES TO PERFORMANCE INFORMATION

John Hancock Funds - Tax-Exempt Series Fund

In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the periods ended December 31,
1994, with all distributions reinvested in shares and reflect payments of the
maximum sales charge of 4.50%. Prior to September 28, 1989, a higher sales
charge was in effect. For the 1-year, 5-year periods and since inception, the
average annualized total returns were (10.33%), 5.36% and 7.04% for the
California Portfolio, (9.76%), 5.79% and 7.35% for the Massachusetts Portfolio,
and (10.68%), 5.78% and 7.46% for the New York Portfolio, respectively. SEC
yields for the 30-day period ended February 28, 1995 for the CA, MA, NY
Portfolios were 5.18%, 5.33% and 5.29%, respectively. Prior to January 1, 1993,
the Adviser voluntarily limited each Portfolio's expenses to 0.60% of the
Portfolio's average daily net asset value. That limit was changed to 0.70% as
of January 1, 1993, and could be modified at any time. Without the limitation
of expenses, the average annualized total returns for the 1-year and 5-year
periods and since inception would have been (10.89%), 4.53% and 6.57% for the
California Portfolio, (10.29%), 4.87% and 6.84% for the Massachusetts
Portfolio, and (11.21%), 4.93% and 6.87% for the New York Portfolio,
respectively. All performance data shown represent past performance and should
not be considered indicative of future performance. Returns and principal
values of Fund investments will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. A portion of the
income for this Fund may be taxable, and some investors may be subject to the
alternative minimum tax. Performance is affected by a 12b-1 plan, which
commenced on January 1, 1990 for each portfolio.

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND

CALIFORNIA PORTFOLIO
[GRAPH - SEE APPENDIX]

MASSACHUSETTS PORTFOLIO
[GRAPH - SEE APPENDIX]

NEW YORK PORTFOLIO
[GRAPH - SEE APPENDIX]

7
<PAGE> 8
FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund

STATEMENT OF ASSETS AND LIABILITIES
February 28, 1995 (Unaudited)

<TABLE>
<CAPTION>
CALIFORNIA MASSACHUSETTS NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS: ----------- ----------- -----------
<S> <C> <C> <C>
Investments at value - Note C:
Tax-exempt long-term bonds (cost - $45,705,074, $50,749,129 and
$52,480,830, respectively)............................................. $46,474,451 $51,620,637 $52,962,554
Cash...................................................................... 1,058,990 713,302 920,098
Receivable for shares sold................................................ 7,178 22,100 --
Receivable for investments sold........................................... 525,942 515,764 --
Interest receivable....................................................... 760,772 809,993 713,861
Receivable from John Hancock Advisers, Inc. - Note B...................... 17,139 26,425 17,217
Segregated assets for financial futures contracts......................... 37,500 37,500 37,500
----------- ----------- -----------
Total Assets........................................... 48,881,972 53,745,721 54,651,230
-----------------------------------------------------------------------------------------------

LIABILITIES:
Dividend payable.......................................................... 141,543 162,147 165,141
Payable for futures variation margin - Note A............................. 10,938 10,938 10,938
Payable for shares repurchased............................................ -- -- --
Payable for investments purchased......................................... 937,196 -- --
Payable to John Hancock Advisers, Inc. and affiliates - Note B............ 21,610 25,925 23,287
Accounts payable and accrued expenses..................................... 11,753 11,659 9,580
----------- ----------- -----------
Total Liabilities...................................... 1,123,040 210,669 208,946
-----------------------------------------------------------------------------------------------

NET ASSETS:
Capital paid-in........................................................... 47,043,205 53,230,115 53,909,837
Accumulated net realized gain (loss) on investments and financial
futures contracts........................................................ ( 7,556) ( 520,477) 96,817
Net unrealized appreciation of investments and financial futures
contracts................................................................ 723,283 825,414 435,630
----------- ----------- -----------
Net Assets............................................. $47,758,932 $53,535,052 $54,442,284
===============================================================================================

NET ASSET VALUE PER SHARE ($NAV)
(based on 4,193,576, 4,637,089 and 4,681,988 shares, respectively, of
beneficial interest outstanding - unlimited number of shares authorized
with no par value)....................................................... $ 11.39 $ 11.54 $ 11.63
=================================================================================================================
MAXIMUM OFFERING PRICE PER SHARE*
($NAV x 104.71%)......................................................... $ 11.93 $ 12.08 $ 12.18
=================================================================================================================
</TABLE>

* On single retail sales of less than $100,000. On sales of $100,000 or more
and on group sales the offering price is reduced.

THE STATEMENT OF ASSETS AND LIABILITIES IS THE PORTFOLIO'S BALANCE SHEET AND
SHOWS THE VALUE OF WHAT THE PORTFOLIO OWNS, IS DUE AND OWES AS OF FEBRUARY 28,
1995. YOU'LL ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER
SHARE AS OF THAT DATE.

SEE NOTES TO FINANCIAL STATEMENTS.

8
<PAGE> 9

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund

STATEMENT OF OPERATIONS
Six months ended February 28, 1995 (Unaudited)

<TABLE>
<CAPTION>
CALIFORNIA MASSACHUSETTS NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest.................................................................... $1,510,441 $1,697,448 $1,730,031
---------- ---------- ----------
Expenses:
Investment management fee - Note B........................................ 116,042 128,612 131,326
Distibution/service fee - Note B.......................................... 69,625 77,167 78,796
Transfer agent fee - Note B............................................... 45,758 54,013 52,603
Custodian fee............................................................. 26,998 28,178 27,033
Auditing fee.............................................................. 10,134 10,134 10,134
Printing.................................................................. 3,835 3,892 3,760
Trustees' fees............................................................ 2,709 3,043 3,209
Miscellaneous............................................................. 1,593 1,545 1,638
Registration and filing fees.............................................. 1,017 1,957 1,124
Legal fees................................................................ 1,011 1,082 966
---------- ---------- ----------
Total Expenses........................................... 278,722 309,623 310,589
Less Expense Reimbursements and Reductions - Note B...... ( 116,264) ( 129,566) ( 126,733)
---------- ---------- ----------
Net Expenses............................................. 162,458 180,057 183,856
-----------------------------------------------------------------------------------------------
Net Investment Income.................................... 1,347,983 1,517,391 1,546,175
-----------------------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FINANCIAL FUTURES CONTRACTS:
Net realized gain (loss) on investments sold................................ 117,332 ( 214,119) 263,315
Net realized loss on financial futures contracts............................ ( 48,239) ( 48,239) ( 48,239)
Change in net unrealized appreciation/depreciation of investments........... ( 75,783) 191,611 ( 717,369)
Change in net unrealized appreciation/depreciation of financial futures
contracts.................................................................. ( 24,688) ( 24,688) ( 24,688)
---------- ---------- ----------
Net Realized and Unrealized Loss on Investments and
Financial Futures Contracts............................. ( 31,378) ( 95,435) ( 526,981)
-----------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations..... $1,316,605 $1,421,956 $1,019,194
===============================================================================================
</TABLE>

THE STATEMENT OF OPERATIONS SUMMARIZES FOR EACH OF THE PORTFOLIOS, THE
INVESTMENT INCOME EARNED AND EXPENSES INCURRED IN OPERATING THE PORTFOLIO. IT
ALSO SHOWS NET GAINS (LOSSES) FOR THE PERIOD STATED.

THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF NET ASSETS FOR
EACH PORTFOLIO OF THE FUND HAVE CHANGED SINCE THE END OF THE PREVIOUS PERIOD.
THE DIFFERENCE REFLECTS NET INVESTMENT INCOME, ANY INVESTMENT GAINS AND LOSSES,
DISTRIBUTIONS PAID TO SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY
SHAREHOLDERS INVESTED IN EACH PORTFOLIO. THE FOOTNOTES ILLUSTRATE THE NUMBER OF
PORTFOLIO SHARES SOLD, REINVESTED AND REDEEMED DURING THE LAST TWO PERIODS,
ALONG WITH THE PER SHARE AMOUNT OF DISTRIBUTIONS MADE TO SHAREHOLDERS OF EACH
PORTFOLIO FOR THE PERIOD INDICATED.

SEE NOTES TO FINANCIAL STATEMENTS.

9
<PAGE> 10

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
CALIFORNIA PORTFOLIO MASSACHUSETTS PORTFOLIO NEW YORK PORTFOLIO
----------------------------- ----------------------------- -----------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1995 AUGUST 31, FEBRUARY 28, 1995 AUGUST 31, FEBRUARY 28, 1995 AUGUST 31,
(UNAUDITED) 1994 (UNAUDITED) 1994 (UNAUDITED) 1994
----------- ---- ----------- ---- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................ $ 1,347,983 $ 2,521,862 $ 1,517,391 $ 2,763,249 $ 1,546,175 $ 2,906,252
Net realized gain (loss) on
investments sold and financial
futures contracts................... 69,093 49,982 (262,358) (258,100) 215,076 (40,700)
Change in net unrealized
appreciation/depreciation of
investments......................... ( 100,471) ( 3,123,300) 166,923 ( 3,052,218) ( 742,057) ( 3,532,063)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations.... 1,316,605 (551,456) 1,421,956 (547,069) 1,019,194 (666,511)
----------- ----------- ----------- ----------- ----------- -----------

DISTRIBUTIONS TO SHAREHOLDERS: *
Dividends from net investment
income.............................. ( 1,347,983) ( 2,521,862) ( 1,517,391) ( 2,763,249) ( 1,546,175) ( 2,906,252)
Distributions from net realized
gain on investments sold and
financial futures contracts......... -- (881,280) -- (524,451) -- (580,857)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions to
Shareholders...................... ( 1,347,983) ( 3,403,142) ( 1,517,391) ( 3,287,700) ( 1,546,175) ( 3,487,109)
----------- ----------- ----------- ----------- ----------- -----------

FROM PORTFOLIO SHARE TRANSACTIONS: **
Shares sold.......................... 2,412,761 11,239,290 2,915,345 15,050,941 3,932,287 13,602,510
Shares issued to shareholders in
reinvestment of distributions....... 879,415 2,175,583 1,028,699 2,294,219 1,145,465 2,650,147
----------- ----------- ----------- ----------- ----------- -----------
3,292,176 13,414,873 3,944,044 17,345,160 5,077,752 16,252,657
Less shares repurchased.............. ( 4,543,496) ( 8,042,576) ( 4,435,994) ( 9,407,294) ( 5,798,785) ( 8,852,991)
----------- ----------- ----------- ----------- ----------- -----------
Net Capital Increase (Decrease).... ( 1,251,320) 5,372,297 ( 491,950) 7,937,866 ( 721,033) 7,399,666
----------- ----------- ----------- ----------- ----------- -----------

NET ASSETS:
Beginning of period.................. 49,041,630 47,623,931 54,122,437 50,019,340 55,690,298 52,444,252
----------- ----------- ----------- ----------- ----------- -----------
End of period........................ $47,758,932 $49,041,630 $53,535,052 $54,122,437 $54,442,284 $55,690,298
=========== =========== =========== =========== =========== ===========

* DISTRIBUTIONS TO SHAREHOLDERS:
Per share dividends from net
investment income................... $ 0.3163 $ 0.6241 $ 0.3261 $ 0.6315 $ 0.3284 $ 0.6421
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold
and financial futures contracts..... -- $ 0.2232 -- $ 0.1246 -- $ 0.1319
----------- ----------- ----------- ----------- ----------- -----------

** ANALYSIS OF PORTFOLIO SHARE
TRANSACTIONS:
Shares sold.......................... 218,731 956,177 260,848 1,234,833 349,064 1,112,508
Shares issued to shareholders in
reinvestment of distributions....... 80,346 183,733 92,535 216,441 101,999 217,546
----------- ----------- ----------- ----------- ----------- -----------
299,077 1,139,910 353,383 1,451,274 451,063 1,330,054
Less shares repurchased.............. ( 415,681) ( 683,714) ( 399,507) ( 791,757) ( 518,346) ( 732,616)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease)............ ( 116,604) 456,196 ( 46,124) 659,517 ( 67,283) 597,438
=========== =========== =========== =========== =========== ===========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

10
<PAGE> 11

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - California Portfolio

FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1995 --------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period................... $ 11.38 $ 12.36 $ 11.68 $ 11.25 $ 10.72 $ 10.93
------- ------- ------- ------- ------- -------
Net Investment Income.................................. 0.32 0.62 0.67 0.70 0.70 0.67
Net Realized and Unrealized Gain (Loss) on
Investments........................................... 0.01 ( 0.76) 0.82 0.43 0.53 ( 0.21)
------- ------- ------- ------- ------- -------
Total from Investment Operations................... 0.33 ( 0.14) 1.49 1.13 1.23 0.46
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income................. ( 0.32) ( 0.62) ( 0.67) ( 0.70) ( 0.70) ( 0.67)
Distributions from Net Realized Gain on Investments
Sold................................................ -- ( 0.22) ( 0.14) -- -- --
------- ------- ------- ------- ------- -------
Total Distributions................................ ( 0.32) ( 0.84) ( 0.81) ( 0.70) ( 0.70) ( 0.67)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period......................... $ 11.39 $ 11.38 $ 12.36 $ 11.68 $ 11.25 $ 10.72
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value ............ 3.34%(b) ( 1.13%) 13.36% 10.34% 11.83% 4.24%
Total Adjusted Investment Return at Net Asset
Value (a)............................................. 3.12%(b) ( 1.69%) 12.48% 9.30% 10.71% 3.67%

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).............. $47,759 $49,042 $47,624 $33,896 $25,914 $13,618
Ratio of Expenses to Average Net Assets................ 0.70%* 0.70% 0.67% 0.60% 0.60% 1.00%
Ratio of Adjusted Expenses to Average Net Assets (a)... 1.20%* 1.26% 1.55% 1.64% 1.72% 1.57%
Ratio of Net Investment Income to Average Net Assets... 5.81%* 5.27% 5.62% 6.09% 6.35% 6.11%
Ratio of Adjusted Net Investment Income to Average
Net Assets (a)........................................ 5.31%* 4.71% 4.74% 5.05% 5.23% 5.54%
Portfolio Turnover Rate................................ 8% 38% 93% 50% 7% 2%
Expense Reimbursement Per Share........................ $ 0.03 $ 0.07 $ 0.10 $ 0.12 $ 0.12 $ 0.06
</TABLE>

* On an annualized basis.
(a) On an unreimbursed basis without expense reduction.
(b) Not annualized.

THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT INCOME, DIVIDENDS,
GAINS (LOSSES) AND TOTAL INVESTMENT RETURN OF THE PORTFOLIO. IT SHOWS HOW THE
PORTFOLIO'S NET ASSET VALUE FOR A SHARE HAS CHANGED SINCE THE END OF THE
PREVIOUS PERIOD. ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS
PRESENTED IN THE FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.

SEE NOTES TO FINANCIAL STATEMENTS.

11
<PAGE> 12

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - Massachusetts Portfolio

FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1995 -------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period...................... $ 11.56 $ 12.43 $ 11.75 $ 11.15 $ 10.63 $ 10.94
------- ------- ------- ------- ------- -------
Net Investment Income..................................... 0.33 0.63 0.67 0.71 0.73 0.69
Net Realized and Unrealized Gain (Loss) on
Investments.............................................. ( 0.02) ( 0.75) 0.82 0.60 0.53 ( 0.31)
------- ------- ------- ------- ------- -------
Total from Investment Operations...................... 0.31 (0.12) 1.49 1.31 1.26 0.38
------- ------- ------- ------- ------- -------

Less Distributions:
Dividends from Net Investment Income.................... ( 0.33) ( 0.63) ( 0.67) ( 0.71) ( 0.73) ( 0.69)
Distributions from Net Realized Gain on
Investments Sold....................................... -- ( 0.12) ( 0.14) -- ( 0.01) --
------- ------- ------- ------- ------- -------
Total Distributions.................................... ( 0.33) ( 0.75) ( 0.81) ( 0.71) ( 0.74) ( 0.69)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period............................ $ 11.54 $ 11.56 $ 12.43 $ 11.75 $ 11.15 $ 10.63
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value ............... 3.12%(b) ( 0.97%) 13.29% 12.11% 12.10% 3.49%
Total Adjusted Investment Return at Net Asset
Value (a)................................................ 2.90%(b) ( 1.50%) 12.38% 10.93% 10.66% 2.72%

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................. $53,535 $54,122 $50,019 $29,113 $15,015 $ 9,968
Ratio of Expenses to Average Net Assets................... 0.70%* 0.70% 0.67% 0.60% 0.60% 1.00%
Ratio of Adjusted Expenses to Average Net
Assets (a)............................................... 1.20%* 1.23% 1.58% 1.78% 2.04% 1.77%
Ratio of Net Investment Income to Average Net
Assets................................................... 5.90%* 5.28% 5.61% 6.18% 6.64% 6.31%
Ratio of Adjusted Net Investment Income to Average
Net Assets (a)........................................... 5.40%* 4.75% 4.70% 5.00% 5.20% 5.54%
Portfolio Turnover Rate................................... 8% 29% 79% 56% 29% 2%
Expense Reimbursement Per Share........................... $ 0.03 $ 0.06 $ 0.11 $ 0.14 $ 0.16 $ 0.08
</TABLE>

* On an annualized basis.
(a) On an unreimbursed basis without expense reduction.
(b) Not annualized.

SEE NOTES TO FINANCIAL STATEMENTS.

12
<PAGE> 13

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - New York Portfolio

FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1995 ------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period...................... $ 11.73 $ 12.63 $ 11.90 $ 11.29 $ 10.74 $ 11.01
------- ------- ------- ------- ------- -------
Net Investment Income..................................... 0.33 0.64 0.68 0.72 0.72 0.67
Net Realized and Unrealized Gain (Loss) on Investments.... ( 0.10) ( 0.77) 0.87 0.63 0.55 ( 0.25)
------- ------- ------- ------- ------- -------
Total from Investment Operations...................... 0.23 ( 0.13) 1.55 1.35 1.27 0.42
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income.................... ( 0.33) ( 0.64) ( 0.68) ( 0.72) ( 0.72) ( 0.67)
Distributions from Net Realized Gain on Investments
Sold................................................... -- ( 0.13) ( 0.14) ( 0.02) -- ( 0.02)
------- ------- ------- ------- ------- -------
Total Distributions.................................... ( 0.33) ( 0.77) ( 0.82) ( 0.74) ( 0.72) ( 0.69)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period............................ $ 11.63 $ 11.73 $ 12.63 $ 11.90 $ 11.29 $ 10.74
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value ............... 2.41%(b) ( 1.05%) 13.70% 12.17% 12.24% 3.74%
Total Adjusted Investment Return at Net Asset Value (a)... 2.20%(b) ( 1.58%) 12.83% 11.09% 11.02% 3.05%

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................. $54,442 $55,690 $52,444 $33,806 $20,878 $13,357
Ratio of Expenses to Average Net Assets **............... 0.70%* 0.70% 0.67% 0.60% 0.60% 1.00%
Ratio of Adjusted Expenses to Average Net Assets (a)...... 1.18%* 1.23% 1.54% 1.68% 1.82% 1.69%
Ratio of Net Investment Income to Average Net Assets **.. 5.89%* 5.28% 5.63% 6.22% 6.57% 6.17%
Ratio of Adjusted Net Investment Income to Average Net
Assets (a)............................................... 5.41%* 4.75% 4.76% 5.14% 5.35% 5.48%
Portfolio Turnover Rate................................... 16% 23% 56% 48% 12% 10%
** Expense Reimbursement Per Share........................ $ 0.03 $ 0.06 $ 0.11 $ 0.13 $ 0.13 $ 0.08
</TABLE>

* On an annualized basis.
(a) On an unreimbursed basis without expense reduction.
(b) Not annualized.

SEE NOTES TO FINANCIAL STATEMENTS.

13
<PAGE> 14

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - California Portfolio

SCHEDULE OF INVESTMENTS
February 28, 1995 (Unaudited)

THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY EACH
PORTFOLIO OF THE TAX-EXEMPT SERIES FUND ON FEBRUARY 28, 1995. EACH SCHEDULE
CONSISTS OF ONE MAIN CATEGORY: TAX-EXEMPT LONG-TERM BONDS. THE TAX-EXEMPT BONDS
ARE FURTHER BROKEN DOWN BY STATE. UNDER EACH STATE IS A LIST OF THE SECURITIES
OWNED BY THE PORTFOLIO.

<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ -------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
TAX-EXEMPT LONG-TERM BONDS
CALIFORNIA (94.35%)
Alameda, County of,
Cert of Part 1992 Cap Proj.......................... 6.750% 06-01-16 A+ $ 500 $ 510,260 6.61%
California Educational Facilities Auth,
Rev 1993 Ser B Pooled College & Univ Proj........... 6.125 06-01-09 Baa** 1,000 990,980 6.18
California Health Facilities Financing Auth,
Hosp Rev 1991 Ser A San Diego Hosp Assoc............ 6.950 10-01-21 A 250 254,825 6.82
Hosp Rev Ref Ser 1990 Cedars-Sinai Medical Center... 7.000 11-01-15 A1** 400 444,072 6.31
Ins Hosp Rev Ser 1990 Children's Hosp San Diego..... 6.500 07-01-20 AAA 500 513,125 6.33
Rev 1990 Ser A Kaiser Permanente.................... 7.000 12-01-10 AA 600 623,886 6.73
Rev Ser 1994A Scripps Research Institute............ 6.300 07-01-09 A** 500 493,915 6.38
Sec Rev 1991 Ser Hosp of the Good Samaritan......... 7.000 09-01-21 A 250 253,025 6.92
California Housing Finance Agency,
Home Mtg Rev 1986 Ser A............................. 8.100 08-01-16 AA- 75 78,190 7.77
Home Mtg Rev 1988 Ser B............................. 8.600 08-01-19 AA- 45 48,399 8.00
Home Mtg Rev 1988 Ser D............................. 8.000 08-01-19 AA- 100 105,791 7.56
Home Mtg Rev 1989 Ser A............................. 7.625 08-01-09 AA- 85 90,322 7.18
Home Mtg Rev 1989 Ser B............................. 8.000 08-01-29 AA- 100 105,703 7.57
Home Mtg Rev 1989 Ser D............................. 7.500 08-01-29 AA- 150 156,249 7.20
Home Mtg Rev 1990 Ser D............................. 7.875 08-01-31 AA- 25 25,998 7.57
Home Mtg Rev 1991 Ser A............................. 7.375 08-01-17 AA- 165 174,237 6.98
Home Mtg Rev 1991 Ser C............................. 7.450 08-01-11 AA- 70 74,943 6.96
Home Mtg Rev 1993 Ser C............................. 5.650 08-01-14 AA- 1,205 1,100,249 6.19
Home Mtg Rev 1994 Ser C............................. 6.650 08-01-14 AA- 1,000 1,015,910 6.55
Hsg Rev 1991 Ser E.................................. 7.000 08-01-26 AAA 525 542,881 6.77
California Pollution Control Financing Auth,
Poll Control Rev 1991 Ser Southern Calif Edison Co.. 6.900 12-01-17 A+ 500 513,795 6.71
Poll Control Rev 1992 Ser A Pacific Gas & Elec Co... 6.625 06-01-09 A 500 512,965 6.46
California State Public Works Board,
Lease Rev Depart of Corrections 1994 Ser A
Calif State Prison-Monterey County (Soledad II)..... 6.875 11-01-14 A- *500 518,840 6.63
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

14
<PAGE> 15
FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - California Portfolio

<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
California Statewide Communities Development Auth,
Cert of Part the Trustees of the J. Paul Getty Trust...... 5.000% 10-01-13 AAA $ 500 $ 440,830 5.67%
Campbell, City of,
1991 Cert of Part Civic Center Proj....................... 6.750 10-01-17 A- 155 171,383 6.10
1991 Cert of Part Civic Center Proj....................... 6.750 10-01-17 A- 1,565 1,577,520 6.70
Carson Redevelopment Agency,
Tax Alloc Ser 1992 Area No. 1 Redevel Proj................ 6.375 10-01-12 BBB+ 500 487,845 6.53
Tax Alloc Ser 1993B Area No. 1 Redevel Proj............... 6.000 10-01-16 BBB+ 500 454,495 6.60
Castaic Lake Water Agency,
Cert of Part Ser 1990 Wtr Sys Imp Proj.................... 7.350 08-01-20 A 200 224,640 6.54
Central California Joint Powers Health Financing Auth,
Cert of Part Ser 1993 Community Hosp of Central
California Proj........................................... 5.250 02-01-13 A** 750 642,337 6.13
Central Coast Water Auth,
Rev State Wtr Proj Regional Facil Ser 1992................ 6.600 10-01-22 AAA 500 519,380 6.35
Central Valley Financing Auth,
Cogeneration Proj Rev Carson Ice-Gen Proj 1993 Ser........ 6.100 07-01-13 BBB- 2,300 2,169,107 6.47
Cogeneration Proj Rev Carson Ice-Gen Proj 1993 Ser........ 6.200 07-01-20 BBB- 1,000 933,540 6.64
Contra Costa Water Auth,
Wtr Treatment Rev Ref 1993 Ser A.......................... 5.750 10-01-20 AAA 1,000 957,360 6.01
Contra Costa Water District,
Wtr Treatment Rev Ser E................................... 6.250 10-01-12 AAA 1,000 1,045,740 5.98
Wtr Treatment Rev Ser G................................... 5.750 10-01-14 AAA 500 485,670 5.92
Costa Mesa Public Financing Auth,
1991 Local Agency Rev Ser A............................... 7.100 08-01-21 NR 250 230,513 7.70
Desert Hospital District,
Hosp Rev Cert of Part Ser 1990 Desert Hosp Corp Proj...... 8.000 07-01-10 AAA 300 345,564 6.95
Fontana Public Financing Auth,
Sub Lien Tax Alloc Rev 1991 Ser A North Fontana Redevel
Proj...................................................... 7.750 12-01-20 BBB 195 226,988 6.66
Tax Alloc Rev Ser 1990 Ser A North Fontana Redevel Proj... 7.250 09-01-20 A 325 335,797 7.02
Fresno, City of,
Health Facil Rev Ser 1991 Saint Agnes Medical Center...... 6.625 06-01-21 AA- 250 248,885 6.65
Los Angeles City Department of Water and Power,
Elec Plant Ref Rev Second Iss of 1993..................... 5.400 11-15-12 AA 1,000 917,630 5.88
Elec Plant Rev Iss of 1990................................ 7.125 05-15-30 AA 200 218,988 6.51
Elec Plant Rev Iss of 1991................................ 7.100 01-15-31 AA 350 384,738 6.46
Elec Plant Rev Second Iss of 1989......................... 6.750 12-15-29 AA 250 269,267 6.27
Los Angeles County Health Facilities Auth,
Lease Rev Ref Olive View Medical Center Proj.............. 7.500 03-01-08 NR 450 491,985 6.86
Los Angeles County Transportation Commission,
Sales Tax Rev Ref Ser 1991-B.............................. 5.750 07-01-18 AAA 2,000 1,882,500 6.11
Los Angeles Metropolitan Transportation Auth,
Sales Tax Rev Ref Proposition A Ser A.................... 5.625 07-01-18 AAA *500 472,965 5.95
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

15
<PAGE> 16

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - California Portfolio

<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
Metropolitan Water District,
Waterworks Ref Rev Iss of 1986............................ 6.750% 06-01-22 AA+ $ 155 $ 158,235 6.61%
Wtr Rev Iss of 1991....................................... 6.625 07-01-12 AA 750 777,338 6.39
Mount Diablo Hospital District,
Hosp Rev Ser A............................................ 6.000 12-01-05 AAA 1,640 1,713,882 5.74
Mountain View City Capital Improvements Financing Auth,
1992 Rev City Hall/Community Theatre Complex & Shoreline
Regional Park Community Tax Alloc Refinancing............. 6.500 08-01-16 AAA 600 617,574 6.32
Northern California Transmission Agency,
Rev 1990 Ser A Calif-Oregon Transm Proj................... 7.000 05-01-13 AAA 100 112,753 6.21
Rev 1992 Ser A Calif-Oregon Transm Proj................... 6.500 05-01-16 AAA 1,000 1,033,350 6.29
Oakland, Port of,
Port Rev Ser E............................................ 6.400 11-01-07 AAA 1,000 1,053,670 6.07
Spec Facil Rev 1992 Ser A Mitsui O.S.K. Lines Ltd Proj.... 6.800 01-01-19 A+ 500 499,930 6.80
Orange, County of,
Ser A of 1990 Spec Tax of Community Facil Dist No. 87-3
Mission Viejo............................................ 7.800 08-15-15 A** 350 400,799 6.81
Ser A of 1992 Spec Tax of Community Facil Dist No. 88-1
Aliso Viejo.............................................. 7.350 08-15-18 AAA 1,000 1,148,560 6.40
Pasadena, City of,
1993 Ref Cert of Part Old Pasadena Parking Facil Proj..... 6.250 01-01-18 A+ 1,000 997,480 6.27
Rancho Mirage, City of, Joint Powers Financing Auth,
Civic Center Rev Ref Ser 1991A............................ 7.500 04-01-17 BBB 195 221,109 6.61
Civic Center Rev Unref Ser 1991A.......................... 7.500 04-01-17 BBB 55 56,740 7.27
Riverside County Asset Leasing Corp,
Leasehold Rev 1993 Ser A County of Riverside Hosp Proj.... 6.500 06-01-12 A+ 1,000 991,670 6.55
Sacramento City Financing Auth,
Lease Rev Ref Ser A....................................... 5.375 11-01-14 AAA 500 465,780 5.77
Sacramento Municipal Utility District,
Elec Rev Ref 1992 Ser A................................... 5.750 08-15-13 AAA 1,000 970,110 5.93
San Bernardino, County of,
Cert of Part Ser B Cap Facil Proj......................... 6.875 08-01-24 AAA 350 396,294 6.07
Trans Auth Sales Tax Rev Ser A............................ 5.400 03-01-10 AAA 1,000 948,750 5.69
San Diego County Regional Transportation Commission,
Sales Tax Rev 1991 Ser A.................................. 7.000 04-01-06 AA- 90 98,046 6.43
San Diego, City of,
Ind'l Dev Rev 1986 Ser A San Diego Gas & Elec Co.......... 7.625 07-01-21 A+ 300 310,167 7.38
San Diego, City of, Metropolitan Transit Development
Board's Auth, 1989 Lease Rev San Diego Bayside Light
Rail Transit Ext.......................................... 6.900 06-01-09 AA- 250 266,130 6.48
San Francisco State Building Auth,
Lease Ref Rev 1993 Ser A Dept of Gen Serv................. 5.000 10-01-13 A- 500 419,240 5.96
San Joaquin Hill Tranportation Corridor Agency,
Sr Lien Toll Road Rev..................................... 6.750 01-01-32 BBB** 1,000 964,440 7.00
San Jose Financing Auth,
Reassessment Rev 1994 Ser C............................... 6.750 09-02-11 NR 980 987,762 6.70
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

16
<PAGE> 17

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - California Portfolio

*Securities, other than short term investments, newly added to the portfolio
during the period ended February 28, 1995.
**Rated by Moody's Investors Services or John Hancock Adviser's, Inc. where
Standard & Poor's ratings are not available. NR not rated.
+The yield is not calculated in accordance with guidelines established by the
U.S. Securities and Exchange Commission.

The percentage shown for each category is the total value of that category as a
percentage of the net assets of the Portfolio.

SEE NOTES TO FINANCIAL STATEMENTS.

17
<PAGE> 18

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - Massachusetts Portfolio

SCHEDULE OF INVESTMENTS
February 28, 1995 (Unaudited)

<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
TAX-EXEMPT LONG-TERM BONDS
MASSACHUSETTS (90.17%)
Boston City Industrial Development Financing Auth,
Sewage Facil Rev 1991 Ser Harbor Elec Energy Co Proj...... 7.375% 05-15-15 BBB $ 250 $ 259,370 7.11%
Boston Water and Sewer Commission,
Gen Rev 1991 Ser A Sr Ser................................. 7.000 11-01-18 AAA 500 558,160 6.27
Gen Rev 1992 Ser A Sr Ser................................. 5.750 11-01-13 A 500 484,380 5.94
Boston, City of,
GO 1990 Ser A............................................. 7.375 02-01-10 A 350 389,249 6.63
GO 1991 Ser A............................................. 6.750 07-01-11 AAA 350 384,608 6.14
GO 1992 Ser A............................................. 6.500 07-01-12 AAA 500 525,285 6.19
Rev Boston City Hosp FHA Ins Mtg Ser A.................... 7.625 02-15-21 Aaa** 500 566,100 6.73
Brockton, City of,
State Qualified Municipal Purpose Ln of 1993.............. 6.125 06-15-18 A- 1,000 963,300 6.36
Greater New Bedford Regional Refuse Management District,
MA GO Landfill............................................ 5.875 05-01-13 Baa** 915 859,057 6.26
Holyoke, City of,
GO School Proj Ln Act of 1948............................. 7.650 08-01-09 Baa** *1,000 1,079,640 7.09
Lynn Water & Sewer Commission,
Gen Rev Ref Ser 1993...................................... 5.300 12-01-06 AAA 690 670,535 5.45
Massachusetts Bay Transportation Auth,
Gen Trans Sys Rev Ref 1993 Ser A.......................... 5.500 03-01-22 AAA 750 692,640 5.96
Gen Trans Sys Rev Ref 1994 Ser A.......................... 7.000 03-01-14 A+ *1,000 1,125,910 6.22
Massachusetts Educational Financing Auth,
Ed Ln Rev Iss D Ser 1991A................................. 7.250 01-01-09 AAA 525 561,892 6.77
Massachusetts Health and Educational Facilities Auth,
Rev Anna Jaques Hosp Iss Ser B............................ 6.875 10-01-12 Baa1** 1,250 1,209,700 7.10
Rev Bentley College Iss Ser H............................. 6.875 07-01-12 AAA 250 265,002 6.49
Rev Boston College Iss Ser J.............................. 6.625 07-01-21 AAA 1,000 1,037,770 6.38
Rev Brigham & Women's Hosp Iss Ser D...................... 6.750 07-01-24 A+ 645 653,108 6.67
Rev Charlton Memorial Hosp Iss Ser B...................... 7.250 07-01-13 A- 2,250 2,329,245 7.00
Rev Community Colleges Prog Iss Ser A..................... 6.600 10-01-22 AAA 250 255,135 6.47
Rev Faulkner Hosp Iss Ser C............................... 6.000 07-01-13 Baa1** 750 662,527 6.79
Rev Faulkner Hosp Iss Ser C............................... 6.000 07-01-23 Baa1** 1,000 851,430 7.05
Rev Lowell Gen Hosp Iss Ser A............................. 8.400 06-01-11 Baa1** 600 648,726 7.77
Rev Melrose-Wakefield Hosp Iss Ser B...................... 6.350 07-01-06 A- 500 513,395 6.18
Rev Melrose-Wakefield Hosp Iss Ser B...................... 5.875 07-01-18 A- 1,000 881,820 6.66
Rev New England Baptist Hosp Iss Ser B.................... 7.350 07-01-17 BBB+ 250 253,847 7.24
Rev New England Deaconess Hosp Iss Ser D.................. 6.875 04-01-22 A 2,710 2,730,677 6.82
Rev New England Medical Center Hosp Iss Ser D............. 7.200 07-01-10 A- 280 294,123 6.85
Rev Northeastern Univ Iss Ser E........................... 6.550 10-01-22 AAA 1,000 1,036,640 6.32
Rev Ref Worcester Polytechnic Institute Iss Ser E......... 6.625 09-01-17 A+ 250 256,282 6.46
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

18
<PAGE> 19

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - Massachusetts Portfolio

<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
MASSACHUSETTS (CONTINUED)
Rev Saint Elizabeth's Hosp of Boston Iss Ser B FHA Ins
Proj....................................................... 7.750% 08-01-27 AA $ 350 $ 379,925 7.14%
Rev Smith College Iss Ser D ................................ 5.750 07-01-16 AA- 900 865,710 5.98
Rev Smith College Iss Ser D ................................ 5.750 07-01-24 AA- 500 474,550 6.06
Rev Suffolk Univ Iss Ser B ................................. 6.350 07-01-22 AAA 1,350 1,359,288 6.31
Rev Tufts Univ Iss Ser C ................................... 7.400 08-01-18 A+ 90 96,207 6.92
Rev Tufts Univ Iss Ser C ................................... 7.400 08-01-18 AAA 430 470,631 6.76
Rev Wentworth Institute of Technology Iss Ser B ............ 5.625 10-01-13 AAA 340 318,934 6.00
Rev Williams College Iss Ser D ............................. 5.500 07-01-12 AA 1,000 956,850 5.75
Massachusetts Housing Finance Agency,
Rev Insured Rental Hsg 1994 Ser A .......................... 6.600 07-01-14 AAA 1,100 1,129,029 6.43
Rev Residential Devel FNMA Coll Ser C ...................... 6.875 11-15-11 AAA 2,000 2,090,540 6.58
Rev Residential Devel FNMA Coll Ser D ...................... 6.800 11-15-12 AAA 500 518,625 6.56
Single Family Hsg Rev Ser 5 ................................ 8.375 06-01-15 A+ 50 53,035 7.90
Single Family Hsg Rev Ser 7 ................................ 8.400 12-01-16 A+ 100 106,649 7.88
Single Family Hsg Rev Ser 7 ................................ 8.100 06-01-20 A+ 90 95,044 7.67
Single Family Hsg Rev Ser 9 ................................ 8.100 12-01-21 A+ 100 106,367 7.62
Single Family Hsg Rev Ser 13 ............................... 7.950 06-01-23 A+ 200 213,446 7.45
Single Family Hsg Rev Ser 16 ............................... 7.900 06-01-14 A+ 100 106,414 7.42
Single Family Hsg Rev Ser 18 ............................... 7.350 12-01-16 A+ 550 581,224 6.96
Massachusetts Industrial Finance Agency,
Resource Recovery Rev Ref Ser 1993 A Mass Refusetech Inc
Proj..................................................... 6.300 07-01-05 BBB 1,825 1,817,937 6.32
Rev Phillips Academy...................................... 5.375 09-01-23 AA 500 451,900 5.95
Rev Ref Emerson College Iss Ser 1991A..................... 8.900 01-01-18 NR 250 271,870 8.18
Rev Ref Holy Cross College Iss II Ser 1992................ 6.375 11-01-15 A+ 500 508,050 6.27
Massachusetts Municipal Wholesale Electric Co,
Pwr Supply Sys Rev 1992 Ser B A Pub Corp of the
Commonwealth of Mass..................................... 6.750 07-01-05 BBB+ 500 538,645 6.27
Pwr Supply Sys Rev 1992 Ser B A Pub Corp of the
Commonwealth of Mass..................................... 6.750 07-01-06 BBB+ 1,500 1,588,200 6.38
Pwr Supply Sys Rev 1992 Ser B A Pub Corp of the
Commonwealth of Mass..................................... 6.750 07-01-17 BBB+ 400 412,520 6.55
Pwr Supply Sys Rev Ser C A Pub Corp of the Commonwealth
of Mass.................................................. 6.625 07-01-10 AAA 1,000 1,046,990 6.33
Pwr Supply Sys Rev Ser D A Pub Corp of the Commonwealth
of Mass.................................................. 6.000 07-01-06 AAA 1,000 1,037,530 5.78
Massachusetts Port Auth,
Rev Ref Ser 1993 B........................................ 5.000 07-01-13 AA- 500 431,320 5.80
Rev Ser A................................................. 6.000 07-01-13 AA- 1,000 982,460 6.11
Massachusetts Water Resource Auth,
Gen Rev Ref 1993 Ser B.................................... 5.500 03-01-17 A 400 369,312 5.96
Massachusetts, the Commonwealth of,
GO Consol Ln of 1991 Ser D................................ 6.875 07-01-10 A+ 1,750 1,933,715 6.22
GO Consol Ln of 1992 Ser D................................ 5.750 05-01-12 A+ 500 485,615 5.92
Spec Oblig Rev 1994 Ser A................................. 5.800 06-01-14 AA- 1,000 969,470 5.98
Nantucket, Town of,
GO Municipal Purpose Ln of 1991........................... 6.800 12-01-11 A** 450 476,703 6.42
Palmer, City of,
Ref Iss 1993.............................................. 5.500 10-01-10 AAA 750 724,080 5.70
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

19
<PAGE> 20

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - Massachusetts Portfolio

<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
MASSACHUSETTS (CONTINUED)
Plymouth, County of,
Cert of Part Ser A Plymouth County Correctional Facil
Proj..................................................... 7.000% 04-01-22 A- $ 750 $ 791,723 6.63%
Springfield, City of,
GO School Proj Ln Act of 1992 Ser B....................... 7.100 09-01-11 Baa** 500 514,950 6.89
-----------
48,275,011
-----------
PUERTO RICO (6.25%)
Puerto Rico Infrastructure Financing Auth,
Spec Tax Rev Ser 1988A.................................... 7.750 07-01-08 BBB+ 450 485,546 7.18
Puerto Rico Ports Auth,
Spec Facil Rev 1993 Ser A American Airlines Inc Proj...... 6.300 06-01-23 BB+ 1,000 905,110 6.96
Puerto Rico, Commonwealth of,
GO Pub Imp Unltd Ref Ser 1993............................. 5.500 07-01-13 A 1,000 931,600 5.90
GO Pub Imp Unltd Ref Ser 1994............................. 6.400 07-01-11 A 1,000 1,023,370 6.25
-----------
3,345,626
-----------
TOTAL TAX-EXEMPT LONG-TERM BONDS
(Cost $50,749,129) (96.42%) $51,620,637
====== ===========
</TABLE>
*Securities, other than short-term investments, newly added to the
portfolio during the period ended February 28, 1995.
**Rated by Moody's Investors Services or John Hancock Advisers, Inc. where
Standard & Poor's ratings are not available. NR not rated.
+The yield is not calculated in accordance with guidelines established by the
U.S. Securities and Exchange Commission.

The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Portfolio.

SEE NOTES TO FINANCIAL STATEMENTS.

20
<PAGE> 21

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund - New York Portfolio

SCHEDULE OF INVESTMENTS
February 28, 1995 (Unaudited)

<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
TAX-EXEMPT LONG-TERM BONDS
NEW YORK (94.29%)
34th Street Partnership, Inc,
34th Street Business Imp Dist Cap Imp Bonds Ser 1993...... 5.500% 01-01-23 A1** $ 500 $ 438,880 6.27%
Albany, County of,
Ref Ser 1993.............................................. 5.000 10-01-12 AAA 600 545,010 5.50
Battery Park City Auth,
Jr Rev Ref Ser 1993B...................................... 5.000 11-01-13 AA 1,000 849,570 5.89
Dutchess County Resource Recovery Agency,
Solid Waste Mgmt Sys Rev Ser 1990 A....................... 7.500 01-01-09 AAA 250 274,145 6.84
Grand Central District Management Association Inc,
Business Imp District Cap Imp Ser 1994.................... 5.125 01-01-14 A 500 438,180 5.85
Metropolitan Transportation Auth,
Commuter Facil 1987 Serv Contract Ser 3................... 7.375 07-01-08 BBB 1,000 1,099,730 6.71
Commuter Facil 1992 Serv Contract Ser N................... 7.125 07-01-09 BBB 1,000 1,057,460 6.74
New York City Housing Development Corp,
Multi-Family Mtg Rev FHA Ins Mtg Ln 1993 Ser A............ 6.550 10-01-15 AAA 1,000 1,013,910 6.46
New York City Industrial Development Agency,
Spec Facil Rev 1990 American Airlines Inc Proj............ 8.000 07-01-20 BB+ 400 417,880 7.66
Spec Facil Rev 1994 Terminal One Group Assn L.P. Proj..... 6.000 01-01-19 A *1,000 936,260 6.41
New York City Municipal Water Finance Auth,
Wtr & Swr Sys Rev 1992 Ser A.............................. 5.500 06-15-20 A- 500 454,550 6.05
Wtr & Swr Sys Rev 1994 Ser B.............................. 5.500 06-15-19 A- 500 456,135 6.03
New York Local Government Assistance Corp,
Ser 1991 A Pub Benefit Corp............................... 7.250 04-01-18 A 1,000 1,126,060 6.44
Ser 1992 A Pub Benefit Corp............................... 6.875 04-01-19 A *2,000 2,096,820 6.56
Ser 1993 B Pub Benefit Corp............................... 5.375 04-01-16 A 1,430 1,303,059 5.90
Ser 1993 E Pub Benefit Corp............................... 5.250 04-01-16 A 500 448,550 5.85
New York State Dormitory Auth,
City Univ Rev Iss Ser U................................... 6.375 07-01-08 BBB 500 511,050 6.24
City Univ Sys Consol Rev Ser 1990A........................ 7.625 07-01-20 BBB+ 485 550,237 6.72
City Univ Sys Rev Construction 2nd Generation Ser A....... 6.000 07-01-20 BBB 1,000 952,460 6.30
Genesee Valley Presbyterian Nursing Center FHA Ins Mtg
Rev Ser 1992B............................................ 6.850 08-01-16 AA 250 262,303 6.53
KMH Homes Inc FHA Ins Mtg Rev Ser 1991.................... 6.950 08-01-31 AA 1,200 1,224,396 6.81
Manhattanville College Ins Rev Ser 1990................... 7.500 07-01-22 AAA 305 344,263 6.64
New York Univ Ins Rev Ser 1991............................ 6.000 07-01-15 AAA 500 500,595 5.99
Rev State Univ Ed Facil Ser A............................. 5.875 05-15-11 BBB+ 1,000 955,140 6.15
Rev State Univ Ed Facil Ser 1994B......................... 6.250 05-15-20 BBB+ *1,340 1,314,821 6.37
Skidmore College Rev Ser 1993............................. 5.250 07-01-13 AAA 1,000 936,170 5.61
State Univ Ed Facil Rev Ser 1990A......................... 7.700 05-15-12 BBB+ 300 340,650 6.78
United Hlth Serv Inc FHA Ins Mtg Rev Ser 1989............. 7.350 08-01-29 AAA 200 213,104 6.90
Univ of Rochester Rev Ser 1987............................ 6.500 07-01-09 A+ 625 641,544 6.33
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

21
<PAGE> 22

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund -- New York Portfolio

<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
Upstate Community Colleges 1988A Iss...................... 7.750% 07-01-18 Baa1** $ 300 $ 332,013 7.00%
Vassar College Rev Ser 1990............................... 7.250 07-01-15 AA- 250 267,480 6.78
New York State Energy Research and Development Auth,
Elec Facil Rev Ser 1986 A Consol Edison Co of NY Inc
Proj..................................................... 7.500 11-15-21 A+ 200 207,242 7.24
Elec Facil Rev Ser 1989 A Consol Edison Co of NY Inc
Proj..................................................... 7.750 01-01-24 A+ 200 210,778 7.35
Elec Facil Rev Ser 1989 A Long Island Lighting Co Proj.... 7.150 09-01-19 BB+ 500 474,615 7.53
Elec Facil Rev Ser 1989 B Consol Edison Co of NY Inc
Proj..................................................... 7.375 07-01-24 A+ 200 207,134 7.12
Elec Facil Rev Ser 1990 A Consol Edison Co of NY Inc
Proj..................................................... 7.500 07-01-25 A+ 260 271,034 7.19
Elec Facil Rev Ser 1990 A Long Island Lighting Co Proj.... 7.150 06-01-20 BB+ 500 474,810 7.53
Elec Facil Rev Ser 1991 A Consol Edison Co of NY Inc
Proj..................................................... 7.500 01-01-26 A+ 420 439,165 7.17
Elec Facil Rev Ser 1992 B Long Island Lighting Co Proj.... 7.150 02-01-22 BB+ 1,000 947,550 7.55
Elec Facil Rev Ser 1992 C Long Island Lighting Co Proj.... 6.900 08-01-22 BB+ 500 459,325 7.51
Elec Facil Rev Ser 1993 Consol Edison Co of NY Inc Proj... 6.000 03-15-28 A+ 500 457,350 6.56
New York State Environmental Facilities Corp,
State Wtr Poll Control Revolving Fund Rev Ser 1990 A...... 7.500 06-15-12 A 630 680,866 6.94
State Wtr Poll Control Revolving Fund Rev Ser 1991 E...... 6.875 06-15-10 A 400 423,096 6.50
New York State Housing Finance Agency,
Ins Multi-Family Mtg Hsg 1992 Ser C....................... 6.450 08-15-14 AAA 500 507,395 6.36
Ins Multi-Family Mtg Hsg 1994 Ser C....................... 6.450 08-15-14 Aa** 1,000 1,016,450 6.35
State Univ Construction 1986 Ser A........................ 8.000 11-01-16 AAA 250 264,467 7.56
New York State Medical Care Facilities Finance Agency,
FHA Ins Mtg St Lukes Roosevelt Rev Ser A.................. 5.600 08-15-13 AAA 500 477,300 5.87
Hosp & Nursing Home FHA Ins Mtg Rev 1988 Ser C............ 7.700 02-15-22 AAA 450 497,930 6.96
Hosp & Nursing Home Ins Mtg Rev 1992 Ser B................ 6.950 02-15-32 AA 1,000 1,047,440 6.64
Mental Hlth Serv Facil Imp Rev 1990 Ser B................. 7.875 08-15-20 AAA 150 172,139 6.86
Mental Hlth Serv Facil Imp Rev 1990 Ser B................. 7.875 08-15-20 BBB+ 90 97,876 7.24
Mental Hlth Serv Facil Imp Rev 1991 Ser A................. 7.750 08-15-11 AAA 165 189,313 6.75
Mental Hlth Serv Facil Imp Rev 1991 Ser A................. 7.750 08-15-11 BBB+ 60 65,189 7.13
Mental Hlth Serv Facil Imp Rev 1991 Ser B................. 7.625 08-15-17 BBB+ 245 262,990 7.10
Mental Hlth Serv Facil Imp Rev 1991 Ser C................. 7.300 02-15-21 AAA 300 340,290 6.44
Mental Hlth Serv Facil Imp Rev 1991 Ser C................. 7.300 02-15-21 BBB+ 100 105,940 6.89
Mental Hlth Svcs Facil Imp Rev 1993 Ser A................. 5.500 08-15-09 AAA 910 886,959 5.64
Mental Hlth Svcs Facil Imp Rev 1993 Ser F................. 5.375 02-15-14 BBB+ 1,500 1,321,980 6.10
Mental Hlth Serv Facil Imp Rev 1994 Ser A................. 5.250 08-15-23 BBB+ 1,000 834,300 6.29
Sec Hosp Rev 1991 Ser A................................... 7.350 08-15-11 BBB 250 259,705 7.08
New York State Mortgage Agency,
Homeowner Mtg Rev Ser 28.................................. 7.050 10-01-23 Aa** 500 514,810 6.85
Homeowner Mtg Rev Ser 31A................................. 5.375 10-01-17 Aa** 500 425,445 6.32
Homeowner Mtg Rev Ser EE-4................................ 7.800 10-01-13 Aa** 300 318,810 7.34
Homeowner Mtg Rev Ser JJ.................................. 7.500 10-01-17 Aa** 330 348,338 7.11
Homeowner Mtg Rev Ser VV.................................. 7.375 10-01-11 Aa** 195 206,474 6.97
Homeownership Ser BB-2.................................... 7.950 10-01-15 Aa** 230 243,009 7.52
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

22
<PAGE> 23

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund -- New York Portfolio

<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
New York State Power Auth,
Gen Purpose Ser W......................................... 6.500% 01-01-08 AA- $ 250 $ 267,070 6.08%
Gen Purpose Ser X......................................... 7.200 01-01-22 AA- 210 226,890 6.66
Gen Purpose Ser Y......................................... 6.500 01-01-11 AA- 250 258,175 6.29
Gen Purpose Ser Y......................................... 6.750 01-01-18 AA- 250 259,505 6.50
Gen Purpose Ser CC........................................ 5.000 01-01-14 AA- 1,000 875,160 5.71
New York State Thruway Auth,
Local Highway & Bridge Serv Contract Ser 1991............. 7.250 01-01-10 BBB 300 314,550 6.91
Local Highway & Bridge Serv Contract Ser 1994 A........... 6.000 04-01-14 A- 500 491,600 6.10
New York State Urban Development Corp,
Correctional Facil Rev 1993 Ref Ser....................... 5.500 01-01-15 BBB 1,000 889,290 6.18
Proj Rev Onondaga County Convention Center Ser 1990....... 7.875 01-01-20 BBB 250 271,290 7.26
New York, City of,
GO Fiscal 1991 Ser B...................................... 8.250 06-01-07 A- 200 230,332 7.16
GO Fiscal 1991 Ser D...................................... 8.000 08-01-04 A- 250 276,623 7.23
GO Fiscal 1991 Ser F...................................... 8.200 11-15-03 A- 250 282,070 7.27
GO Fiscal 1992 Ser A...................................... 5.750 08-01-10 AAA 1,000 994,880 5.78
GO Fiscal 1992 Ser A...................................... 7.750 08-15-12 A- 250 266,977 7.26
GO Fiscal 1992 Ser B...................................... 7.000 10-01-13 A- *500 506,910 6.90
GO Fiscal 1992 Ser C...................................... 7.500 08-01-21 A- 250 262,362 7.15
GO Fiscal 1992 Ser H...................................... 7.000 02-01-22 A- 620 627,316 6.92
GO Fiscal 1993 Ser A...................................... 6.375 08-01-06 A- 1,000 999,530 6.38
GO Fiscal 1994 Ser E...................................... 5.625 08-01-14 A- 1,000 878,190 6.41
New York State of,
GO Environmental Quality Fiscal 1994...................... 6.500 12-01-14 A- *1,000 1,032,250 6.30
North Country Development Auth,
Solid Waste Mgt Sys Rev Ser 1992A......................... 6.750 07-01-12 Baa** 500 500,185 6.75
Onondaga County Industrial Development Agency,
Civic Facil Rev 1993 Ser B Community Gen Hosp of Greater
Syracuse Proj............................................ 6.625 01-01-18 BBB 1,000 947,640 6.99
Onondaga County Resource Recovery Agency,
Proj Rev Resource Recovery Facil 1992 Ser................. 6.875 05-01-06 Baa** 1,000 980,440 7.01
Triborough Bridge And Tunnel Auth,
Gen Purpose Rev Ser 1994A................................. 4.750 01-01-19 A+ 250 206,225 5.76
Spec Oblig Ref Ser 1991B.................................. 6.875 01-01-15 A- 500 527,630 6.51
-----------
51,333,029
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

23
<PAGE> 24

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund -- New York Portfolio

<TABLE>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
PUERTO RICO (2.99%)
Puerto Rico Public Buildings Auth,
Pub Ed & Hlth Facil Ref Ser L............................. 6.875% 07-01-21 A $1,000 $ 1,117,840 6.15%
Puerto Rico, Commonwealth of,
GO Pub Imp Unltd Ref Ser 1994............................. 6.400 07-01-11 A 500 511,685 6.25
-----------
1,629,525
-----------
TOTAL TAX-EXEMPT LONG-TERM BONDS
(Cost $52,480,830) (97.28%) $52,962,554
====== ===========
</TABLE>

*Securities, other than short term investments, newly added to the portfolio
during the period ended February 28, 1995.
**Rated by Moody's Investors Services or John Hancock Adviser's, Inc. where
Standard & Poors ratings are not available. NR not rated.
+The Yield is not calculated in accordance with guidelines established by The
U.S. Securities and Exchange Commission.

The percentage shown for each category is the total value of that category as a
percentage of the net assets of the Portfolio.

SEE NOTES TO FINANCIAL STATEMENTS.

24
<PAGE> 25

FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund

Portfolio Concentration (Unaudited)

THE CALIFORNIA, MASSACHUSETTS, AND NEW YORK PORTFOLIOS INVEST PRIMARILY IN
SECURITIES ISSUED BY THE STATES OF CALIFORNIA, MASSACHUSETTS AND NEW YORK,
RESPECTIVELY, AND THEIR VARIOUS POLITICAL SUBDIVISIONS. THE PERFORMANCE OF
THESE PORTFOLIOS IS CLOSELY TIED TO ECONOMIC CONDITIONS WITHIN THE APPLICABLE
STATE AND THE FINANCIAL CONDITION OF THE STATES AND ITS AGENCIES AND
MUNICIPALITIES. THE CONCENTRATION OF INVESTMENTS BY STATES AND CREDIT RATINGS
FOR INDIVIDUAL SECURITIES HELD BY EACH PORTFOLIO ARE SHOWN IN THE SCHEDULE OF
INVESTMENTS. IN ADDITION, THE CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY
VARIOUS SECTOR CATEGORIES.

THE TABLE BELOW SHOWS THE PERCENTAGES OF EACH PORTFOLIO'S INVESTMENTS AT
FEBRUARY 28, 1995 ASSIGNED TO THE VARIOUS SECTOR CATEGORIES.

<TABLE>
<CAPTION>
MARKET VALUE AS A PERCENTAGE OF EACH
PORTFOLIO'S NET ASSETS:
------------------------------------
CALIFORNIA MASSACHUSETTS NEW YORK
SECTOR DISTRIBUTION PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------- ---------- --------- ---------
<S> <C> <C> <C>
General Obligation......................................................................... -- % 16.52% 13.62%
Revenue Bonds - Certificate of Participation............................................... 13.28 1.48 --
Revenue Bonds - Education.................................................................. 2.07 19.17 14.04
Revenue Bonds - Electric Power............................................................. 13.95 8.64 4.34
Revenue Bonds - Health..................................................................... 14.01 22.37 16.91
Revenue Bonds - Housing.................................................................... 7.47 9.34 8.93
Revenue Bonds - Industrial Development Bond................................................ 3.59 5.57 12.46
Revenue Bonds - Other...................................................................... 16.31 1.80 16.49
Revenue Bonds - Pollution Control Facilities............................................... 2.15 1.60 --
Revenue Bonds - Transportation............................................................. 12.42 6.04 6.79
Revenue Bonds - Water & Sewer.............................................................. 12.06 3.89 3.70
----- ----- -----
TOTAL TAX-EXEMPT LONG-TERM BONDS 97.31% 96.42% 97.28%
===== ===== =====
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

25
<PAGE> 26

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund

(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES

John Hancock Tax-Exempt Series Fund (the "Fund") is an open-end non-diversified
investment management company, registered under the Investment Company Act of
1940. The Fund is organized as a Massachusetts business trust under the laws of
the Commonwealth of Massachusetts. The Fund currently consists of three
separate series portfolios: the California Portfolio, the Massachusetts
Portfolio, and the New York Portfolio (the "Portfolios"). The Trustees may
authorize the creation of additional portfolios from time to time to satisfy
various investment objectives. Significant accounting policies of each
portfolio are as follows:

VALUATION OF INVESTMENTS Securities in the Fund's portfolios are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.

JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial
Group, may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.

INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.

FEDERAL INCOME TAXES Federal Income Taxes The Fund's policy is to comply with
the requirements of the Internal Revenue Code that are applicable to regulated
investment companies and to distribute all its taxable income, including any
net gains on investments, to its shareholders. Therefore, no federal income
tax provision is required. For federal income tax purposes, the Massachusetts
Portfolio has $2,465 of a capital loss carryforward available, to the extent
provided by regulations, to offset future net realized capital gains. To the
extent that such carryforward is used by the Portfolio, no capital gain
distribution will be made. The carryforward expires August 31, 2002. Expired
capital loss carryforwards are reclassified to capital paid-in, in the year of
expiration.

Additionally, federal income tax regulations require that net capital
losses attributed to security transactions which occurred after October 31,
1993 be treated as arising on the first day (September 1, 1994) of the
Portfolio's next taxable year. For the California Portfolio, the Massachusetts
Portfolio, and the New York Portfolio the losses amounted to $76,261, $254,759,
and $118,180, respectively.

DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis.

Each Portfolio records all distributions to shareholders from net
investment income and realized gains on the ex-dividend date. Each portfolio
records dividends from net investment income daily and distributes monthly.

EXPENSES The majority of the expenses of the Fund are directly identifiable to
an individual Portfolio. Expenses which are not identifiable to a specific
Portfolio are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Portfolios.

PREMIUM AND DISCOUNT For tax-exempt issues, the Portfolios amortize the amount
paid in excess of par value on securities purchased from either the date of
purchase or date of issue to date of sale, maturity or to next call date, if
applicable. The Portfolios accrete original issue discount from par value on
securities purchased from either the date of issue or the date of purchase over
the life of the security, as required by

26
<PAGE> 27

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund

the Internal Revenue Code. The portfolios record market discount on bonds
purchased after April 30, 1993 at the time of disposition.

FINANCIAL FUTURES CONTRACTS The Portfolios may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates and other market conditions. At the time the
Portfolio enters into a financial futures contract, it is required to deposit
with its custodian a specified amount of cash or U.S. government securities,
known as "initial margin", equal to a certain percentage of the value of the
financial futures contract being traded. Each day, the futures contract is
valued at the official settlement price of the board of trade or U.S.
commodities exchange. Subsequent payments, known as "variation margin", to and
from the broker are made on a daily basis as the market price of the financial
futures contract fluctuates. Daily variation margin adjustments, arising from
this "mark to market", are recorded by the Portfolio as unrealized gains or
losses.

When the contracts are closed, the Portfolio recognizes a gain or
loss. Risks of entering into futures contracts include the possibility that
there may be an illiquid market and/or that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. In addition, the Portfolios could be prevented from opening or
realizing the benefits of closing out futures positions because of position
limits or limits on daily price fluctuations imposed by an exchange.

For federal income tax purposes, the amount, character and timing of
the Portfolio's gains and/or losses can be affected as a result of futures
transactions.

At February 28, 1995 open positions in financial futures contracts
were as follows:

<TABLE>
<CAPTION>
CALIFORNIA MASSACHUSETTS NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
Expiration............... JUN 1995 JUN 1995 Jun 1995
Open Contracts........... 25 Muni Bond 25 Muni Bond 25 Muni Bond
Position................. Short Short Short
----- ----- -----
Unrealized Depreciation.. ($46,094) ($46,094) ($46,094)
========= ========= =========
</TABLE>

At February 28, 1995, each Portfolio has deposited in a segregated
account $37,500 to cover margin requirements on open financial futures
contracts.

NOTE B --
MANAGEMENT FEE, ADMINISTRATIVE
SERVICES AND TRANSACTIONS WITH AFFILIATES
AND OTHERS

Under the present investment management contract, each Portfolio pays a monthly
management fee to the Adviser for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.500% of the first $250,000,000 of each
Portfolio's average daily net asset value, (b) 0.450% of the next $250,000,000,
(c) 0.425% of the next $500,000,000, (d) 0.400% of the next $250,000,000 and
(e) 0.300% of each Portfolio's average daily net asset value in excess of
$1,250,000,000.

In the event normal operating expenses of each Portfolio, exclusive of
certain expenses prescribed by state law, are in excess of the most restrictive
state limit where the Portfolio is registered to sell shares of beneficial
interest, the fee payable to the Adviser will be reduced to the extent of such
excess and the Adviser will make additional arrangements necessary to eliminate
any remaining excess expenses. The current limits are 2.5% of the first
$30,000,000 of the California Portfolio's average daily net asset value, 2.0%
of the next $70,000,000 and 1.5% of the remaining average daily net asset
value.

The Adviser has voluntarily agreed to limit each Portfolio's expenses
further to the extent required to prevent expenses from exceeding 0.70% of each
Portfolio's average daily net asset value, exclusive of certain expenses
prescribed by state law. Accordingly, for the period ended February 28, 1995,
the reduction in the Adviser's fee collectively with any additional amounts not
borne by each Portfolio by virtue of the expense limit for the California
Portfolio, the Massachusetts Portfolio, and the New York Portfolio amounted to
$101,659, $114,053, and $113,563, respectively. This waiver may be discontinued
at any time. Furthermore, custodian fees have been

27
<PAGE> 28

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund

reduced by balance credits applied to each portfolio for the period ended
February 28, 1995. For the California Portfolio, the Massachusetts Portfolio,
and the New York Portfolio the reductions amounted to $14,605, $15,513 and
$13,170, respectively.

The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly-owned subsidiary of the Adviser. Prior to January 1,
1995, JH Funds was known as John Hancock Broker Distribution Services, Inc. For
the period ended February 28, 1995, the table that follows details for each
Portfolio the amount of net sales charges received by the distributor and
dealer of each portfolio's shares and the amount of commissions paid to sales
personnel of affiliated broker-dealers. John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro") are affiliated broker-dealers. The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company, is the indirect sole
shareholder of Distributors and John Hancock Freedom Securities Corporation and
its subsidiaries, which include Tucker Anthony and Sutro, all of which are
broker-dealers. The balance is either retained and used for printing
prospectuses, advertising, sales literature and other purposes, or paid as
sales commissions to sales personnel of unrelated broker-dealers.

<TABLE>
<CAPTION>
CALIFORNIA MASSACHUSETTS NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1995:
Net sales charges received....... $80,026 $73,077 $98,468
Less commissions paid
to affiliated broker-dealers... ( 59,253) ( 59,657) ( 79,250)
to unrelated broker-dealers.... ( 10,318) ( 4,477) ( 7,153)
------- ------- -------
Balance retained............... $10,455 $ 8,943 $12,065
======= ======= =======
</TABLE>

In addition, to compensate JH Funds for the services it provides as
distributor of shares of the three Portfolios, the Fund has adopted a
Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940. Accordingly, each Portfolio will make payments to JH Funds for
distribution and service expenses at an annual rate not to exceed 0.30% of the
Portfolio's average daily net assets to reimburse JH Funds for their
distribution/service costs. Up to a maximum of 0.25% of such payments may be
service fees as defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers, which became effective July 7, 1993. Under
the amended Rules of Fair Practice, curtailment of a portion of the Fund's
12b-1 payments could occur under certain circumstances.

The Fund has a transfer agent agreement with John Hancock Investor
Services Corporation ("Investor Services"), a wholly-owned subsidiary of The
Berkeley Financial Group. Prior to January 1, 1995, Investor Services was known
as John Hancock Fund Services, Inc. Effective January 1, 1995, each Portfolio
pays transfer agent fees based on transaction volume and the number of
shareholder accounts. Prior to January 1, 1995, each Portfolio paid Investor
Services a monthly transfer agent fee equivalent, on an annual basis, to 0.25%
of each Portfolio's average daily net asset value, plus out of pocket expenses
incurred by Investor Services on behalf of the Fund for proxy mailings.

Messrs. Edward J. Boudreau, Jr. and Richard S. Scipione are directors
and/or officers of the Adviser, and/or its affiliates as well as Trustees of the
Fund. The compensation of unaffiliated Trustees is borne by each Portfolio.
Effective with the fees paid for 1995, the unaffiliated Trustees may elect to
defer for tax purposes their receipt of this compensation under the John Hancock
Group of Funds Deferred Compensation Plan. Each Portfolio will make investments
into other John Hancock Funds, as applicable, to cover their liability with
regard to the deferred compensation. Investments to cover each Portfolio's
deferred compensation liability will be recorded on each Portfolio's books as an
other asset. The deferred compensation liability will be marked to market on a
periodic basis and income earned by the investment will be recorded on each
Portfolio's books.

28
<PAGE> 29

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Tax-Exempt Series Fund

NOTE C --
INVESTMENT TRANSACTIONS

<TABLE>
<CAPTION>
CALIFORNIA MASSACHUSETTS NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
FOR THE SIX MONTHS ENDED, FEBRUARY 28, 1995:
Long-term municipal obligations
Purchases ........................... $ 3,626,048 $ 3,845,865 $ 8,129,002
Proceeds ............................ 4,655,047 4,708,758 8,918,399

AT FEBRUARY 28, 1995:
Cost of investments for
Federal income tax
purposes ............................ $ 45,705,074 $50,749,129 $52,480,830
============ =========== ===========
Gross unrealized
appreciation of
investments.......................... $ 1,557,637 $ 1,522,046 $ 1,662,629
Gross unrealized
depreciation of
investments.......................... ( 788,260) ( 650,538) ( 1,180,905)
------------ ----------- ------------
Net unrealized
appreciation of
investments.......................... $ 769,377 $ 871,508 $ 481,724
============ =========== ===========
</TABLE>

29
<PAGE> 30

NOTES

John Hancock Funds - Tax-Exempt Series Fund

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.

30
<PAGE> 31
NOTES

John Hancock Funds - Tax-Exempt Series Fund

31
<PAGE> 32

Bulk Rate
(LOGO) JOHN HANCOCK FUNDS U.S. Postage
A GLOBAL INVESTMENT MANAGEMENT FIRM PAID
Brockton, MA
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 Permit No. 582

This report is for the information of shareholders of the John Hancock
Tax-Exempt Series Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.

[LOGO - Printed on Recycled Paper SEE APPENDIX]

<PAGE> 33
APPENDIX

JOHN HANCOCK TAX-EXEMPT SERIES FUND

Page 2
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.

Page 3
A 2 3/8" x 2 3/8" photo of Dianne Sales-Singer centered at bottom. Caption
reads: "Dianne Sales-Singer, Portfolio Manager."

Page 4
Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "States"; the header for the right column is "A look at the
current economic environment." The first listing is California followed by an
up arrow and the phrase "Turning the corner/anticipate slow recovery." The
second listing is Massachusetts followed by an up arrow and the phrase
"Continued stability/sound fiscal management." The third listing is New York
followed by a down arrow and the phrase "Slowdown on Wall Street/reduced
government spending."

Page 5
Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended February 28, 1995." The
chart is scaled in increments of 1% from bottom to top, with 4% at the top and
0% at the bottom. Within the chart, there are six solid bars. The first
represents the 3.34% total return for John Hancock Tax-Exempt Series Fund: CA
Portfolio. The second represents the 2.44% total return for the average CA
muni bond fund. The third represents the 3.12% total return for John Hancock
Tax-Exempt Series Fund: MA Portfolio. The fourth represents the 2.59% total
return for the average MA muni bond fund. The fifth represents the 2.41% total
return for John Hancock Tax-Exempt Series Fund: NY Portfolio. The sixth
represents the 1.84% total return for the average NY muni bond fund. The
footnote below states: "Total returns for the California, Massachusetts and New
York portfolios are at net asset value with all distributions reinvested. Total
returns for the average peer funds are tracked by Lipper Analytical Services.
(1) See page 7 for historical performance information."

Back Cover
A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."

A recycled logo in lower left hand corner with the caption " Printed on
Recycled Paper."
<PAGE> 34

California Portfolio

Line chart with the heading California Portfolio, representing the growth of a
hypothetical $10,000 investment over the life of the fund. Within the chart
are three lines.

The first line represents the value of the hypothetical $10,000 investment made
in the California Portfolio on September 2, 1987, before sales charge, and is
equal to $18,356 as of February 28, 1995. The second line represents the value
of the Lehman Brothers Municipal Bond Index and is equal to $18,120* as of
February 28, 1995. The third line represents the California Portfolio after
sales charge and is equal to $17,532 as of February 28, 1995.

Massachusetts Portfolio

Line chart with the heading Massachusetts Portfolio, representing the growth of
a hypothetical $10,000 investment over the life of the fund. Within the chart
are three lines.

The first line represents the value of the hypothetical $10,000 investment made
in the Massachusetts Portfolio on September 3, 1987, before sales charge, and
is equal to $18,619 as of February 28, 1995. The second line represents the
value of the Lehman Brothers Municipal Bond Index and is equal to $18,120* as
of February 28, 1995. The third line represents Massachusetts Portfolio after
sales charge and is equal to $17,784 as of December 31, 1994.

New York Portfolio

Line chart with the heading New York Portfolio, representing the growth of a
hypothetical $10,000 investment over the life of the fund. Within the chart
are three lines.

The first line represents the value of the hypothetical $10,000 investment made
in the New York Portfolio on September 13, 1987, before sales charge, and is
equal to $18,732 as of February 28, 1995. The second line represents the value
of the Lehman Brothers Municipal Bond Index and is equal to $18,120* as of
February 28, 1995. The third line represents New York Portfolio after sales
charge and is equal to $17,891 as of February 28, 1995.

*The Lehman Brothers Municipal Bond Index is an unmanaged index that includes
approximately 15,000 bonds and is commonly used as a measure of bond
performance.