SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM N-14

                                                            ----
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933    /_X__/
                                                            ----
         Pre-Effective Amendment No. __                    /____/
                                                            ----
         Post-Effective Amendment No. ___                  /____/

                        (Check appropriate box or boxes)

                        JOHN HANCOCK INVESTMENT TRUST III
- --------------------------------------------------------------------------------
               (Exact name of registrant as specified in charter)

             101 Huntington Avenue, Boston, Massachusetts 02199-7603
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                (Address of principal executive office) Zip Code

                                 (617) 375-1702
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              (Registrant's Telephone Number, including Area Code)

                              Susan S. Newton, Esq.
                           John Hancock Advisers, LLC
                              101 Huntington Avenue
                                Boston, MA 02199
- --------------------------------------------------------------------------------
                     (Name and address of agent for service)

Title of Securities Being Registered: shares of beneficial interest of John
Hancock Investment Trust II.

Approximate Date of Proposed Public Offering: As soon as practicable after the
effectiveness of the registration statement.

No filing fee is required because an indefinite number of shares has previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended. This Registration Statement relates to shares previously registered
on Form N-1A (File Nos. 33-4559 and 811-4630).

It is proposed  that this filing will become effective on April 8, 2002
pursuant to Rule 488 under the Securities Act of 1933.


JHF LOGO
April 15, 2002
Dear Shareholder:

I am writing to ask for your vote on important matters concerning your
investment in certain funds within the John Hancock Institutional Series Trust.

You may be aware that in addition to the institutional series of mutual funds
John Hancock offers a series of retail mutual funds that have the same
investment process and style as the institutional funds. Your fund's trustees
are proposing the merger of certain funds within the John Hancock Institutional
Series Trust into similar retail John Hancock Funds. As a result of the merger
of your fund(s), you will receive Class I shares of the similar retail fund(s).
(Class I shares have the same institutional expense structure as your current
fund(s), and are not subject to sales charges or 12b-1 distribution fees.) The
fund merger proposals have been unanimously approved by each fund's board of
trustees, who believe the mergers will benefit you through increased
diversification and economics of scale. These merges will allow your
investments(s) to be part of a larger investment pool while maintaining its low
institutional expense structure.

The proposed mergers are detailed in the enclosed proxy statement and summarized
in the questions and answers on the following page. I suggest you read both
thoroughly before voting.

Your Vote Makes a Difference!

No matter what the size your investment may be, your vote is critical. I urge
you to review the enclosed materials and to complete, sign and return the
enclosed proxy ballot to us immediately. Your prompt response will help avoid
the need for additional mailings at your fund's expense. For your convenience
you may vote:

|_|   By mail - a postage paid envelope in enclosed
|_|   By Phone - 1-800-755-4371
|_|   By email - www.
|_|   By Internet - www.jhfunds.com
      |_|   Select shareholder entryway and click on the proxy-voting link

If you have any questions or need additional information, please contact your
investment professional or call your Customer Service Representative at
1-800-755-4371, Monday through Friday between 8:00 a.m. and 5:30 p.m. Eastern
time. I thank you for your prompt vote on this matter.

                                   Sincerely,

                                   Maureen R. Ford
                                   Chairman and Chief Executive Officer


Q: What are the changes being proposed?

A: Generally, these proposals focus on merging the institutional funds into
Class I shares of similar John Hancock funds. Since the Class I shares are part
of a larger mutual fund portfolio, each Aquiring Fund has significantly larger
assets and may offer a greater opportunity for future growth.

Specifically, the trustees of your fund(s) are proposing the following mergers:
- --------------------------------------------------------------------------------
                 Acquired Fund                             Acquiring Fund
- --------------------------------------------------------------------------------
Proposal 1       Active Bond Fund                          Bond Fund
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Proposal 2       Independence Balanced Fund                Balanced Fund
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Proposal 3       International Equity                      International Fund
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Proposal 4       Medium Capitalization Growth Fund         Mid Cap Growth Fund
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Proposal 5       Small Cap Equity Fund Y                   Small Cap Equity Fund
- --------------------------------------------------------------------------------

Q: What are the benefits of merging the institutional funds into a Class I share
?

A: Your trustees firmly believe these mergers will eliminate the duplication of
the legal, administration and portfolio management responsibilities associated
with managing different mutual funds with the same investment style and process.
In addition your investments will benefit from being part of a larger pool of
assets, providing increased diversification and economics of scale.

Q: Will this change affect the number of shares I currently have? Will there be
any tax implications?

A: While the market value of your shares will remain the same, the number of
shares you own in the Acquiring Fund will differ from those in the Acquired
Fund. There are no tax implications (no Form 1099R will be generated).

Q: Will my contact information and service team change?

A: No. You will still be serviced through a dedicated Institutional Service team
within John Hancock Signature Services, the fund's transfer agent. You Client
Relationship Contact at John Hancock Funds will also remain the same.

Q: How do I vote?

A: In order to facilitate the proxy voting process you may vote using one of
four methods.

|_|   By mail - a postage paid envelope in enclosed
|_|   By Phone - 1-800-755-4371
|_|   By email - www.
|_|   By Internet - www.jhancock.com/funds/NEED MORE INFORMATION

Q: Does my vote make a difference?

A: Whether you are a large or small investor, your vote is important, and we
urge you to participate in this process. The board of trustees of your fund(s)
voted unanimously to recommend these changes, and your approval is needed to
implement the changes.


                                       2


DRAFT 2/27/02

JOHN HANCOCK ACTIVE BOND FUND
JOHN HANCOCK INDEPENDENCE BALANCED FUND
JOHN HANCOCK INTERNATIONAL EQUITY FUND
JOHN HANCOCK MEDIUM CAPITALIZATION GROWTH FUND
JOHN HANCOCK SMALL CAP EQUITY FUND Y
(each a "fund," and each a series of John Hancock Institutional Series Trust)
101 Huntington Avenue
Boston, MA 02199

NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR MAY 29, 2002

This is the formal agenda for each fund's shareholder meeting. It tells you what
matters will be voted on and the time and place of the meeting, in case you want
to attend in person.

To the shareholders of each fund:

A joint shareholder meeting for your fund(s) will be held at 101 Huntington
Avenue, Boston, Massachusetts on Wednesday, May 29, 2002 at 9:00 a.m., Eastern
Time, to consider the following:

1.    A proposal to approve an Agreement and Plan of Reorganization between John
      Hancock Active Bond Fund ("Active Bond Fund") and John Hancock Bond Fund
      ("Bond Fund"). Under this Agreement, your fund would transfer all of its
      assets to Bond Fund in exchange for Class I shares of Bond Fund. These
      shares would be distributed proportionately to you and the other
      shareholders of Active Bond Fund. Bond Fund would also assume Active Bond
      Fund's liabilities. Active Bond Fund's board of trustees recommends that
      you vote FOR this proposal.

2.    A proposal to approve an Agreement and Plan of Reorganization between John
      Hancock Independence Balanced Fund ("Independence Balanced Fund") and John
      Hancock Balanced Fund ("Balanced Fund"). Under this Agreement, your fund
      would transfer all of its assets to Balanced Fund in exchange for Class I
      shares of Balanced Fund. These shares would be distributed proportionately
      to you and the other shareholders of Independence Balanced Fund. Balanced
      Fund would also assume Independence Balanced Fund's liabilities.
      Independence Balanced Fund's board of trustees recommends that you vote
      FOR this proposal.

3.    A proposal to approve an Agreement and Plan of Reorganization between John
      Hancock International Equity Fund ("International Equity Fund") and John
      Hancock International Fund ("International Fund"). Under this Agreement,
      your fund would transfer all of its assets to International Fund in
      exchange for Class I shares of International Fund. These shares would be
      distributed proportionately to you and the other shareholders of
      International Equity Fund. International Fund would also assume
      International Equity Fund's liabilities. International Equity Fund's board
      of trustees recommends that you vote FOR this proposal.

4.    A proposal to approve an Agreement and Plan of Reorganization between John
      Hancock Medium Capitalization Growth Fund ("Medium Capitalization Growth
      Fund") and John Hancock Mid Cap Growth Fund ("Mid Cap Growth Fund"). Under
      this Agreement, your fund would transfer all of its assets to Mid Cap
      Growth Fund in exchange for Class I shares of Mid Cap Growth Fund. These
      shares would be distributed proportionately to you and the other
      shareholders of Medium Capitalization Growth Fund. Mid Cap Growth Fund
      would also assume Medium Capitalization Growth Fund's liabilities. Medium
      Capitalization Growth Fund's board of trustees recommends that you vote
      FOR this proposal.

5.    A proposal to approve an Agreement and Plan of Reorganization between John
      Hancock Small Cap Equity Fund Y ("Small Cap Equity Fund Y") and John
      Hancock Small Cap Equity Fund ("Small Cap Equity Fund"). Under this
      Agreement, your fund would transfer all of its assets to Small Cap Equity
      Fund in exchange for Class I shares of Small Cap Equity Fund. These shares
      would be distributed proportionately to you and the other shareholders of
      Small Cap Equity Fund Y. Small Cap Equity Fund would also assume Small Cap
      Equity Fund Y's liabilities. Small Cap Equity Fund Y's board of trustees
      recommends that you vote FOR this proposal.


                                       3


7.    Any other business that may properly come before the meeting.

Shareholders of record as of the close of business on March 15, 2002 are
entitled to vote at the meeting and any related follow-up meetings.

Whether or not you expect to attend the meeting, please complete and return the
enclosed proxy card. If shareholders do not return their proxies in sufficient
numbers, your fund will incur the cost of extra solicitations, which is
indirectly borne by shareholders.

                                    By order of the board of trustees,

                                    Susan S. Newton
                                    Secretary

April 15, 2002
420PX 11/01


                                       4


PROXY STATEMENT OF
JOHN HANCOCK ACTIVE BOND FUND
JOHN HANCOCK INDEPENDENCE BALANCED FUND
JOHN HANCOCK INTERNATIONAL EQUITY FUND
JOHN HANCOCK MEDIUM CAPITALIZATION GROWTH FUND
JOHN HANCOCK SMALL CAP EQUITY FUND Y
(each an "Acquired Fund" or "your fund" and each a series of John Hancock
Institutional Series Trust)
101 Huntington Avenue
Boston, MA 02199

PROSPECTUS FOR
JOHN HANCOCK BOND FUND (a series of John Hancock Sovereign Bond Fund) JOHN
HANCOCK BALANCED FUND (a series of John Hancock Investment Trust) JOHN HANCOCK
INTERNATIONAL FUND (a series of John Hancock Investment Trust III) JOHN HANCOCK
MID CAP GROWTH FUND (a series of John Hancock Investment Trust III) JOHN HANCOCK
SMALL CAP EQUITY FUND (a series of John Hancock Investment Trust II) (each an
"Acquiring Fund" and together the "Acquiring Funds") 101 Huntington Avenue
Boston, MA 02199

This proxy statement and prospectus contains the information shareholders should
know before voting on the proposed reorganizations. Please read it carefully and
retain it for future reference.

How Each Reorganization Will Work



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                 Acquired Fund                          Acquiring Fund                   Shareholders Entitled to Vote
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Proposal 1       Active Bond Fund                       Bond Fund                        Active Bond Fund shareholders
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Proposal 2       Independence Balanced Fund             Balanced Fund                    Independence Balanced Fund shareholders
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Proposal 3       International Equity Fund              International Fund               International Equity Fund shareholders
- ------------------------------------------------------------------------------------------------------------------------------------
Proposal 4       Medium Capitalization Growth Fund      Mid Cap Growth Fund              Medium Capitalization Growth Fund
                                                                                         shareholders
- ------------------------------------------------------------------------------------------------------------------------------------
Proposal 5       Small Cap Equity Fund Y                Small Cap Equity Fund            Small Cap Equity Fund Y shareholders
- ------------------------------------------------------------------------------------------------------------------------------------


o     Each Acquired Fund will transfer all of its assets to the corresponding
      Acquiring Fund. Each Acquiring Fund will assume the corresponding Acquired
      Fund's liabilities.

o     Each Acquiring Fund will issue Class I shares to the corresponding
      Acquired Fund in an amount equal to the value of the Acquired Fund's
      shares. These shares will be distributed to Acquired Fund shareholders in
      proportion to their holdings on the reorganization date.

o     Each Acquired Fund will be liquidated and fund shareholders will become
      shareholders of the corresponding Acquiring Fund.

o     The reorganization will be tax-free to shareholders.

Shares of the Acquiring Funds are not deposits or obligations of, or guaranteed
or endorsed by, any bank or other depository institution. These shares are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency.

Shares of the Acquiring Funds have not been approved or disapproved by the
Securities and Exchange Commission. The Securities and Exchange Commission has
not passed upon the accuracy or adequacy of this prospectus. Any representation
to the contrary is a criminal offense.


                                       5


Why Each Acquired Fund's Trustees are Recommending the Reorganizations

The Acquired Funds' trustees believe that reorganizing each fund into a larger
fund with similar investment policies will enable the shareholders of the funds
to benefit from increased diversification, the ability to achieve better net
prices on securities trades and economies of scale that may contribute to a
lower expense ratio. Therefore, the trustees recommend that Acquired Fund
shareholders vote FOR the reorganization.

- --------------------------------------------------------------------------------
Where to Get More Information
- --------------------------------------------------------------------------------
Prospectuses for the Acquiring           In the same envelope as this proxy
Funds dated March 1, 2002.               statement and prospectus.
                                         Incorporated by reference into
                                         this proxy statement and prospectus.
- ---------------------------------------
Acquiring Fund annual report and
Bond Fund's semi-annual report to
shareholders.
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Prospectuses for the Acquired            On file with the Securities and
Funds dated July 2, 2001. The            Exchange Commission ("SEC") and
Acquired Funds' annual and               available at no charge by calling
semiannual reports to                    1-888-972-8696. Incorporated by
shareholders.                            reference into this proxy
                                         statement and prospectus.
- ---------------------------------------
A statement of additional
information dated April 15, 2002.
It contains additional information
about the Acquired Funds and the
Acquiring Fund.
- --------------------------------------------------------------------------------

       The date of this proxy statement and prospectus is April 15, 2002.


                                       6


TABLE OF CONTENTS

                                                                            Page

INTRODUCTION
PROPOSAL 1 - ACTIVE BOND FUND
      Summary
      Investment risks
      Proposal To Approve The Agreement And Plan Of Reorganization
PROPOSAL 2 - INDEPENDENCE BALANCED FUND
      Summary
      Investment risks
      Proposal To Approve The Agreement And Plan Of Reorganization
PROPOSAL 3 - INTERNATIONAL FUND
      Summary
      Investment risks
      Proposal To Approve The Agreement And Plan Of Reorganization
PROPOSAL 4 - MEDIUM CAPITALIZATION GROWTH FUND
      Summary
      Investment risks
      Proposal To Approve The Agreement And Plan Of Reorganization
PROPOSAL 5 - SMALL CAP EQUITY FUND Y
      Summary
      Investment risks
      Proposal To Approve The Agreement And Plan Of Reorganization
FURTHER INFORMATION ON EACH REORGANIZATION
CAPITALIZATION
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES
BOARDS' EVALUATION AND RECOMMENDATION
VOTING RIGHTS AND REQUIRED VOTE
INFORMATION CONCERNING THE MEETING
OWNERSHIP OF SHARES OF THE FUNDS
EXPERTS
AVAILABLE INFORMATION
EXHIBIT A - FORM OF AGREEMENT AND PLAN OF REORGANIZATION

INTRODUCTION

This proxy statement and prospectus is being used by the Acquired Funds' board
of trustees to solicit proxies to be voted at a special meeting of each Acquired
Fund's shareholders. This meeting will be held at 101 Huntington Avenue, Boston,
Massachusetts on Wednesday, May 29, 2002 at 9:00 a.m., Eastern Time. The purpose
of the meeting is to consider proposals to approve Agreements and Plans of
Reorganization providing for the reorganization of the Acquired Funds into the
Acquiring Funds. This proxy statement and prospectus is being mailed to your
fund's shareholders on or about April 15, 2002.

For each proposal, this proxy statement and prospectus includes information that
is specific to that proposal, including a summary of more complete information
appearing later in the proxy statement. The information beginning on page ___ is
relevant to all proposals. Please read the sections of the proxy statement
related specifically to your fund(s), as well as the information relevant to all
proposals, carefully, as well as Exhibit A and the enclosed documents.

Who is Eligible to Vote?

Shareholders of record on March 15, 2002 are entitled to attend and vote at the
meeting or any adjourned meeting. Each share is entitled to one vote. Shares
represented by properly executed proxies, unless revoked before or at the
meeting, will be voted according to shareholders' instructions. If you sign a
proxy but do not fill in a vote, your shares will be voted to approve the
Agreement and Plan of Reorganization. If any other business comes before the
meeting, your shares will be voted at the discretion of the persons named as
proxies.


                                       7


PROPOSAL 1
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN ACTIVE BOND FUND AND
BOND FUND

A proposal to approve an Agreement and Plan of Reorganization between Active
Bond Fund and Bond Fund. Under this Agreement, Active Bond Fund would transfer
all of its assets to Bond Fund in exchange for Class I shares of Bond Fund.
These shares would be distributed proportionately to the shareholders of Active
Bond Fund. Bond Fund would also assume Active Bond Fund's liabilities. Active
Bond Fund's Board of Trustees recommends that shareholders vote FOR this
proposal.

SUMMARY

Comparison of Active Bond Fund to Bond Fund



- ------------------------------------------------------------------------------------------------------------------------------------
                                      Active Bond Fund                                     Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                      
Business               The fund is a diversified series of John             The fund is a diversified series of John
                       Hancock Institutional Series Trust. The trust        Hancock Sovereign Bond Fund (the "Trust"). The
                       is an open-end investment company organized as       trust is an open-end investment company
                       a Massachusetts business trust.                      organized as a Massachusetts business trust.
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Net assets as of       $9.1 million                                         $1,433.5 million
December 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Investment adviser     Investment Adviser:                                  Investment Adviser:
and portfolio          John Hancock Advisers, LLC                           John Hancock Advisers, LLC
managers
                       Portfolio managers:                                  Portfolio managers:
                       James K. Ho, CFA                                     James K. Ho, CFA
                       -Executive Vice President of adviser                 -Executive Vice President of adviser
                       -Joined fund team in 1995                            -Joined fund team in 1988
                       -Joined adviser in 1985                              -Joined adviser in 1985
                       -Began business career in 1977                       -Began business career in 1977

                       Benjamin A. Matthews                                 Benjamin A. Matthews
                       -Vice President of adviser                           -Vice President of adviser
                       -Joined fund team in 1995                            -Joined fund team in 1995
                       -Joined adviser in 1995                              -Joined adviser in 1995
                       -Began business career in 1970                       -Began business career in 1970
- ------------------------------------------------------------------------------------------------------------------------------------
Investment objective   The fund seeks a high rate of total return           The fund seeks to generate a high level of
                       consistent with prudent investment risk. This        current income consistent with prudent
                       objective can be changed without shareholder         investment risk.
                       approval.
- ------------------------------------------------------------------------------------------------------------------------------------
Primary investments    The fund normally invests at least 80% of            The fund normally invests at least 80% of its
                       assets in a diversified portfolio of                 assets in a diversified portfolio of bonds and
                       investment-grade debt securities. These              other debt securities. These include corporate
                       include corporate bonds and debentures as well       bonds and debentures as well as U.S.
                       as U.S. government and agency securities.            government and agency securities. Most of
                                                                            these securities are investment grade.
- ------------------------------------------------------------------------------------------------------------------------------------
Junk bonds             The fund may invest up to 20% of assets in           The fund may invest up to 25% of assets in
                       junk bonds rated as low as CC/Ca and their           junk bonds rated as low as CC/Ca and their
                       unrated equivalents.                                 unrated equivalents.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign securities     The fund may invest up to 25% of total assets        The fund may invest up to 25% of total assets
                       in U.S. dollar (excluding U.S.                       in U.S. dollar-denominated foreign securities
                       dollar-denominated Canadian securities) and          (excluding U.S. dollar-denominated Canadian
                       foreign currency denominated securities of           securities).
                       foreign issuers.
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Mortgage-backed        Each fund invests in mortgage-backed and asset-backed securities.
and asset-backed
securities
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Cash and cash          Under normal conditions, each fund does not invest more than 10% of assets in cash or cash equivalents.
equivalents
- ------------------------------------------------------------------------------------------------------------------------------------



                                        8



                                                                      
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Average maturity       There is no limit on either fund's average maturity.
- ------------------------------------------------------------------------------------------------------------------------------------
Diversification        The fund is diversified and, with respect to         The fund is diversified and cannot invest more
                       75% of total assets, cannot invest more than         than 5% of total assets in securities of a
                       5% of total assets in securities of a single         single issuer.
                       issuer.
- ------------------------------------------------------------------------------------------------------------------------------------
Derivatives            The funds may invest in certain derivatives (investments whose value is based on indexes, securities or
                       currencies).
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary defensive    In abnormal market conditions, the fund may          In abnormal circumstances, the fund may invest
positions              temporarily invest in investment-grade short-term    extensively in investment-grade short-term
                       securities.  In these and other cases, the fund      securities.  In these and other cases, the fund
                       might not achieve its goal.                          might not achieve its investment goal.
- ------------------------------------------------------------------------------------------------------------------------------------


- ------------------------------------------------------------------------------------------------------------------------------------
SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
                                          Active Bond Fund                                    Bond Fund - Class I
- ------------------------------------------------------------------------------------------------------------------------------------
                    
Sales charge           Shares are offered with no sales charge.

- ------------------------------------------------------------------------------------------------------------------------------------
Distribution and       Shares are not subject to a 12b-1 distribution fee.
Service (12b-1) fee
- ------------------------------------------------------------------------------------------------------------------------------------


- ------------------------------------------------------------------------------------------------------------------------------------
BUYING, SELLING AND EXCHANGING SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
                                        Both Active Bond Fund and Bond Fund - Class I
- ------------------------------------------------------------------------------------------------------------------------------------
                
Buying shares      Investors may buy shares at their public offering price through a financial representative or the funds'
                   transfer agent, John Hancock Signature Services, Inc. After March 15, 2002, investors will not be allowed to
                   open new accounts in Active Bond Fund but can add to existing accounts.
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum initial    $10,000. No minimum investment for retirement plans with at least 350 eligible employees.
investment
- ------------------------------------------------------------------------------------------------------------------------------------
Exchanging         Shareholders may exchange their shares for Class I shares of other John Hancock funds, or for shares of any John
shares             Hancock Institutional Fund.
- ------------------------------------------------------------------------------------------------------------------------------------
Selling shares     Shareholders may sell their shares by submitting a proper written or telephone request to John Hancock Signature
                   Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value    All purchases, exchanges and sales are made at a price based on the next determined net asset value per share
                   (NAV) of the fund. Both funds' NAVs are determined at the close of regular trading on the New York Stock
                   Exchange, which is normally 4:00 p.m. Eastern Time.
- ------------------------------------------------------------------------------------------------------------------------------------


The Funds' Expenses

Shareholders of both funds pay various expenses, either directly or indirectly.
The expense table appearing below shows the expenses for the twelve-month period
ended November 30, 2001, adjusted to reflect any changes. Bond Fund's Class I
shares began on September 4, 2001 and expenses were projected as if Class I had
been in existence for the entire year. Future expenses may be greater or less.
The examples contained in the expense table show what you would pay if you
invested $10,000 over the various time periods indicated. Each example assumes
that you reinvested all dividends and that the average annual return was 5%. The
examples are for comparison purposes only and are not a representation of either
fund's actual expenses or returns, either past or future.

Pro Forma Expenses

The following expense table shows the pro forma expenses of Bond Fund for the
year ended November 30, 2001 assuming that a reorganization with Active Bond
Fund had occurred December 1, 2000. The expenses shown in the table are based on
fees and expenses incurred during the twelve months ended November 30, 2001,
adjusted to reflect any changes. Bond Fund's Class I shares began on September
4, 2001 and expenses were projected as if Class I had been in existence for the
entire year. Bond Fund's actual expenses after the reorganization may be greater
or less than those shown.


                                       9


The example contained in the pro forma expense table shows what you would have
paid on a $10,000 investment if the reorganization had occurred on December 1,
2000. The example assumes that you had reinvested all dividends and that the
average annual return was 5%. The pro forma example is for comparison purposes
only and is not a representation of Bond Fund's actual expenses or returns,
either past or future.



                                                                                                                Bond Fund
                                                                                                                 Class I
                                                                                                                (PRO FORMA
                                                                                                               for the year
                                                                                                             ended 11/30/01)
                                                                                                                (Assuming
                                                                                     Active                   reorganization
                                                                                      Bond     Bond Fund           with
                                                                                      Fund      Class I     Active Bond Fund)
Shareholder
transaction expenses
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                          
Maximum sales charge (load) imposed on purchases (as a % of purchase price)           none        none             none
Maximum sales charge imposed on reinvested dividends                                  none        none             none
Maximum deferred sales charge (load) as a % of purchase or sale price,                none        none             none
  whichever is less
Redemption fee                                                                        none        none             none
Exchange fee                                                                          none        none             none

Annual fund operating expenses
(as a % of average net assets)
- -------------------------------------------------------------------------------------------------------------------------------
Management fee                                                                        0.50%       0.50%            0.50%
Distribution and service (12b-1) fee                                                  none        none             none
Other expenses                                                                        1.05%       0.11%            0.11%
Total fund operating expenses                                                         1.55%       0.61%            0.61%
Expense reduction(1)                                                                  0.95%       none             none
Net fund operating expenses                                                           0.60%       0.61%            0.61%

Expenses
- -------------------------------------------------------------------------------------------------------------------------------
Year 1                                                                              $   61        $ 62             $ 62
Year 3                                                                              $  502        $195             $195
Year 5                                                                              $  970        $340             $340
Year 10                                                                             $2,264        $762             $762


(1) The Adviser has agreed to limit Active Bond Fund's total operating expenses
to 0.60% of the fund's average daily net assets at least until June 30, 2002.

The Reorganization

o     The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
      June 7, 2002, but may occur on any later date before December 31, 2002.
      Active Bond Fund will transfer all of its assets to Bond Fund. Bond Fund
      will assume Active Bond Fund's liabilities. The net asset value of both
      funds will be computed as of 5:00 p.m., Eastern Time, on the
      reorganization date.

o     Bond Fund will issue to Active Bond Fund Class I shares in an amount equal
      to the net assets attributable to Active Bond Fund's shares. These shares
      will immediately be distributed to Active Bond Fund's shareholders in
      proportion to their holdings on the reorganization date. As a result,
      shareholders of Active Bond Fund will end up as Class I shareholders of
      Bond Fund.

o     After the shares are issued, Active Bond Fund will be terminated.

o     The reorganization will be tax-free and will not take place unless both
      funds receive a satisfactory opinion concerning the tax consequences of
      the reorganization from Hale and Dorr LLP, counsel to the funds.


                                       10


    The following diagram shows how the reorganization would be carried out.

         ----------------                               ------------------
         Active Bond Fund                               Bond Fund receives
         transfers assets        Active Bond Fund        assets & assumes
          & liabilities            assets and             liabilities of
          To Bond Fund             liabilities           Active Bond Fund
         ----------------                               ------------------

         ----------------                                --------------
         Active Bond Fund                                Issues Class I
           shareholders                                      Shares
         ----------------                                --------------

                        Active Bond Fund receives Bond Fund
                          Class I shares and distributes
                             them to Active Bond Fund
                                   shareholders

Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets:

- ---------------------------------------------------------------------------
Fund Asset Breakpoints                            Active Bond Fund
- ---------------------------------------------------------------------------
First $1.5 Billion                                     0.50%
- ---------------------------------------------------------------------------
Amount over $1.5 Billion                               0.45%
- ---------------------------------------------------------------------------

- ---------------------------------------------------------------------------
Fund Asset Breakpoints                               Bond Fund
- ---------------------------------------------------------------------------
First $1.5 Billion                                     0.50%
- ---------------------------------------------------------------------------
Next $500 Million                                      0.45%
- ---------------------------------------------------------------------------
Next $500 Million                                      0.40%
- ---------------------------------------------------------------------------
Amount over $2.5 Billion                               0.35%
- ---------------------------------------------------------------------------

Bond Fund's management fee rate of 0.50% and its pro forma management fee rate
of 0.50% are the same as Active Bond Fund's management fee rate of 0.50%. Bond
Fund's other expenses of 0.11% and its pro forma other expenses of 0.11% are
lower than your fund's other expenses of 1.05%. Bond Fund's current annual
expense ratio (equal to 0.61% of average net assets) and its pro forma expense
ratio (equal to 0.61% of average net assets) are both slightly higher than
Active Bond Fund's expense ratio (equal to 0.60% of average net assets) after
the expense reduction. However, Active Bond Fund's expense ratio before the
expense reduction is 1.55% and there is no guarantee that the expense reduction
will be extended beyond June 30, 2002.

INVESTMENT RISKS

The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table compares the risks
affecting each fund.



- ------------------------------------------------------------------------------------------------------------------------------------
                                          Active Bond Fund                                         Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
                    
Interest rate risk     When interest rates rise, bond prices usually fall. Generally, an increase in the fund's average maturity
                       will make it more sensitive to interest rate risk.
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment (call)      If interest rate movements cause the fund's mortgage-related and callable securities to be paid off
and extension risks    earlier or later than expected, the fund's share price or yield could be hurt.
- ------------------------------------------------------------------------------------------------------------------------------------
Credit risk            The fund could lose money if the credit rating of any bond in its portfolio is downgraded or if the issuer
                       of the bond defaults on its obligations. In general, lower-rated bonds involve more credit risk. The
                       prices of lower-rated bonds may also be more volatile and more sensitive to adverse economic developments.
- ------------------------------------------------------------------------------------------------------------------------------------
Sector                 If the fund concentrates in certain sectors of the bond market, its performance could be worse than that
concentration risk     of the overall bond market.
- ------------------------------------------------------------------------------------------------------------------------------------



                                       11



                                                                                  
- ------------------------------------------------------------------------------------------------------------------------------------
Manager risk           The manager and its strategy may fail to produce the intended results. The fund could underperform its
                       peers or lose money if the manager's investment strategy does not perform as expected.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign                Foreign investments involve additional risks, including potentially inaccurate financial information and
securities risk        social or political instability. The prices of foreign bonds may also be more volatile and more sensitive
                       to adverse economic developments occuring outside the U.S.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign currency risk  Unfavorable foreign currency exchange rates could                Not applicable because the fund invests only
                       reduce the value of bonds denominated in foreign                 in U.S. dollar-denominated bonds.
                       currencies.
- ------------------------------------------------------------------------------------------------------------------------------------
Derivatives risk       Certain derivative instruments can produce disproportionate gains or losses and are riskier than direct
                       investments. Also, in a down market derivatives could become harder to value or sell at a fair price.
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidity and          In a down or unstable market, the fund's investments could become harder to value accurately or to sell at
valuation risks        a fair price.
- ------------------------------------------------------------------------------------------------------------------------------------
Turnover risk          In general, the greater the volume of buying and selling by a fund (and the higher its "turnover rate"),
                       the greater the impact that transaction costs will have on the fund's performance. The fund's turnover
                       rate may exceed 100%, which is considered relatively high.
- ------------------------------------------------------------------------------------------------------------------------------------


PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION

Description of Reorganization

You are being asked to approve an Agreement and Plan of Reorganization, a form
of which is attached as Exhibit A. The Agreement provides for a reorganization
on the following terms:

o     The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
      June 7, 2002 but may occur on any later date before December 31, 2002.
      Active Bond Fund will transfer all of its assets to Bond Fund and Bond
      Fund will assume all of Active Bond Fund's liabilities. This will result
      in the addition of Active Bond Fund's assets to Bond Fund's portfolio. The
      net asset value of both funds will be computed as of 5:00 p.m., Eastern
      Time, on the reorganization date.

o     Bond Fund will issue to Active Bond Fund Class I shares in an amount equal
      to the net assets attributable to Active Bond Fund's shares. As part of
      the liquidation of Active Bond Fund, these shares will immediately be
      distributed to shareholders of record of Active Bond Fund in proportion to
      their holdings on the reorganization date. As a result, shareholders of
      Active Bond Fund will end up as Class I shareholders of Bond Fund.

o     After the shares are issued, the existence of Active Bond Fund will be
      terminated.

Reasons for the Proposed Reorganization

The board of trustees of Active Bond Fund believes that the proposed
reorganization will be advantageous to the shareholders of Active Bond Fund for
several reasons. The board of trustees considered the following matters, among
others, in approving the proposal.

First, that Active Bond Fund does not have sufficient assets to justify
maintaining this fund as a separate investment portfolio (i.e. this fund had
$9.1 million in assets as of December 31, 2001). Active Bond Fund, which as been
in existence for approximately seven years, has not grown in asset size and in
light of the history of the fund, there is no foreseeable potential for future
growth. The investment adviser has subsidized Active Bond Fund by absorbing
expenses since the inception of the fund. Without these subsidies, Active Bond
Fund would have had a substantially higher expense ratio and lower performance.

Second, that shareholders may be better served by a fund offering greater
diversification. Bond Fund has a larger asset size than your fund and invests in
the same types of securities. Combining the funds' assets into a single
investment portfolio will afford greater diversification, making investors less
vulnerable to weakness in any single sector of the bond market.

Thrid, that a combined fund offers economies of scale that may lead to lower per
share expenses. Both funds incur costs for accounting, legal, transfer agency
services, insurance, and custodial and administrative services. Many of these
expenses are duplicative and there may be an opportunity to reduce Bond Fund's
expense ratio over time because of economies of scale if the funds are combined.


                                       12


The board of trustees of Bond Fund considered that the reorganization presents
an excellent opportunity for Bond Fund to acquire investment assets without the
obligation to pay commissions or other transaction costs that a fund normally
incurs when purchasing securities. This opportunity provides an economic benefit
to Bond Fund and its shareholders.

The boards of both funds also considered that the adviser and the funds'
distributor will benefit from the reorganization. For example, the adviser might
realize time savings from a consolidated portfolio management effort and from
the need to prepare fewer reports and regulatory filings as well as prospectus
disclosure for one fund instead of two. The boards believe, however, that these
savings will not amount to a significant economic benefit to the adviser or
distributor.

Comparative Fees and Expense Ratios. As discussed above, the advisory fee rates
paid by Active Bond Fund are the same as the rates paid by Bond Fund.

Bond Fund's management fee rate of 0.50% and pro forma management fee rate of
0.50% are the same as Active Bond Fund's management fee rate of 0.50%. Bond
Fund's other expenses of 0.11% and its pro forma other expenses of 0.11%, are
lower than Active Bond Fund's other expenses of 1.05%. Bond Fund's current
annual expense ratio (0.61% of average net assets) and pro forma expense ratio
(0.61% of average net assets) are both slightly higher than Active Bond Fund's
current expense ratio (0.60% of average net assets) after the expense reduction.
However, Active Bond Fund's expense ratio before the expense reduction is 1.55%
and there is no guarantee that the expense reduction will be extended beyond
June 30, 2002.

Comparative Performance. The trustees also took into consideration the relative
performance of Active Bond Fund and Bond Fund as of November 30, 2001.


                                       13


PROPOSAL 2

APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN INDEPENDENCE BALANCED
FUND AND BALANCED FUND

A proposal to approve an Agreement and Plan of Reorganization between
Independence Balanced Fund and Balanced Fund. Under this Agreement, Independence
Balanced Fund would transfer all of its assets to Balanced Fund in exchange for
Class I shares of Balanced Fund. These shares would be distributed
proportionately to the shareholders of Independence Balanced Fund. Balanced Fund
would also assume Independence Balanced Fund's liabilities. Independence
Balanced Fund's Board of Trustees recommends that shareholders vote FOR this
proposal.

SUMMARY

Comparison of Independence Balanced Fund to Balanced Fund



- -----------------------------------------------------------------------------------------------------------------------------------
                                      Independence Balanced Fund                                  Balanced Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                           
Business                  A diversified series of John Hancock                   A diversified series of John Hancock Investment
                          Institutional Series Trust.  The Trust is an           Trust.  The Trust is an open-end investment
                          open-end investment management company organized       management company organized as a Massachusetts
                          as a Massachusetts Business Trust.                     Business Trust.
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets as of          $16.9 million                                          $184.4 million
December 31, 2001
- -----------------------------------------------------------------------------------------------------------------------------------
Investment adviser,       Investment Adviser:                                    Investment Adviser:
subadviser and            John Hancock Advisers, LLC                             John Hancock Advisers, LLC
portfolio managers
                          Subadviser:                                            Portfolio Managers:

                          Independence Investment LLC                            John F. Snyder, III
                          -A subsidiary of John Hancock Financial                -Executive Vice President of adviser
                             Services, Inc.                                      -Joined fund team in 1994
                          -Founded in 1982                                       -Joined adviser in 1991
                          -Supervised by the adviser                             -Began business career in 1971

                          Portfolio Managers:                                    Barry H. Evans, CFA
                          Team responsible for day-to-day investment             -Senior Vice President of adviser
                          management                                             -Joined fund team in 1996
                                                                                 -Joined adviser in 1986
                                                                                 -Began business career in 1986

                                                                                 Peter M. Schofield, CFA
                                                                                 -Vice President of adviser
                                                                                 -Joined fund team in 1996
                                                                                 -Joined adviser in 1996
                                                                                 -Portfolio manager at Geewax, Terker & Co.
                                                                                   (1984-1996)
                                                                                 Began business career in 1984
- -----------------------------------------------------------------------------------------------------------------------------------
Investment objective      The fund seeks above-average total return through      The fund seeks current income, long-term growth of
                          capital appreciation and income.  This objective       capital and income and preservation of capital.
                          can be changed without shareholder approval.           This objective can be changed without shareholder
                                                                                 approval.
- -----------------------------------------------------------------------------------------------------------------------------------



                                       14



                                                                           
- -----------------------------------------------------------------------------------------------------------------------------------
Primary Investments       The fund invests in a diversified portfolio of         The fund allocates its investments among a
                          investment-grade bonds and primarily                   diversified mix of debt and equity securities.
                          large-capitalization stocks. The bond                  The fund normally invests at least 25% of assets
                          portfolio's risk profile is substantially similar      in equity securities and at least 25% of assets
                          to that of the Lehman Brothers Aggregate Bond          in senior debt securities.
                          Index and the stock portfolio's risk profile is
                          substantially similar to that of the Standard &        At least 80% of the fund's common stock investments
                          Poor's 500 Index.                                      are "dividend performers."  These are companies
                                                                                 that have typically increased their dividend
                          The fund invests at least 25% of assets in senior      payments over time, or which the managers believe
                          debt securities and, in normal market conditions,      demonstrate the potential for above-average
                          at least 25% of assets in stocks.  The managers        stability of growth of earnings and dividends.
                          adjust the fund's asset mix according to changing      Historically, these companies have tended to have
                          market and economic conditions.  In normal market      large or medium market capitalizations.
                          conditions, the fund is almost entirely invested
                          in stocks and bonds.
                                                                                 The fund's investments in bonds
                                                                                 of any maturity are primarily investment grade
                                                                                 (rated BBB/Baa or above and their unrated
                                                                                 equivalents).

- -----------------------------------------------------------------------------------------------------------------------------------
Junk bonds                The fund does not invest in junk bonds (bonds          The fund may invest up to 20% of assets in junk
                          rated as low as C and their unrated equivalents).      bonds rated below BBB/Baa and their unrated
                                                                                 equivalents.
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign Securities        The fund may invest in U.S. dollar-denominated         The fund may invest up to 35% of assets in U.S.
                          foreign securities.                                    dollar and foreign currency denominated securities
                                                                                 of foreign issuers.
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed and       Each fund may invest in mortgage-backed and asset-backed securities.
asset-backed
securities
- -----------------------------------------------------------------------------------------------------------------------------------
Diversification           Each fund is diversified and, with respect to 75% of total assets, cannot invest more than 5% of total
                          assets in securities of a single issuer.
- -----------------------------------------------------------------------------------------------------------------------------------
Derivatives               The fund does not normally use derivatives.            The fund may make limited use of certain
                                                                                 derivatives (investments whose value is based on
                                                                                 indexes, securities or currencies).
- -----------------------------------------------------------------------------------------------------------------------------------
Temporary defensive       In abnormal market conditions, the fund may            In abnormal market conditions, the fund may
positions                 temporarily invest more than 75% of assets in          temporarily invest extensively in investment-grade
                          investment-grade short-term securities.  In these      short-term securities.  In these and other cases,
                          and other cases, the fund might not achieve its        the fund might not achieve its goal.
                          goal.
- -----------------------------------------------------------------------------------------------------------------------------------


- -----------------------------------------------------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------------------------------------------------
                                     Independence Balanced Fund                             Balanced Fund - Class I
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                           
Sales charge              Shares are offered with no sales charge.
- -----------------------------------------------------------------------------------------------------------------------------------
Distribution and          Shares are not subject to a 12b-1 distribution fee.
Service (12b-1) fee
- -----------------------------------------------------------------------------------------------------------------------------------



                                       15


- --------------------------------------------------------------------------------
BUYING, SELLING AND EXCHANGING SHARES
- --------------------------------------------------------------------------------
                     Both Independence Balanced Fund and Balanced Fund - Class I
- --------------------------------------------------------------------------------
Buying shares        Investors may buy shares at their public offering price
                     through a financial representative or the funds' transfer
                     agent, John Hancock Signature Services, Inc. After March
                     15, 2002, investors will not be allowed to open new
                     accounts in Independence Balanced Fund but can add to
                     existing accounts.
- --------------------------------------------------------------------------------
Minimum initial      $10,000.  No minimum investment for retirement plans with
investment           at least 350 eligible employees.
- --------------------------------------------------------------------------------
Exchanging shares    Shareholders may exchange their shares for Class I shares
                     of other John Hancock funds, or for shares of any John
                     Hancock Institutional Fund.
- --------------------------------------------------------------------------------
Selling shares       Shareholders may sell their shares by submitting a proper
                     written or telephone request to John Hancock Signature
                     Services, Inc.
- --------------------------------------------------------------------------------
Net asset value      All purchases, exchanges and sales are made at a price
                     based on the next determined net asset value per share
                     (NAV) of the fund. Both funds' NAVs are determined at the
                     close of regular trading on the New York Stock Exchange,
                     which is normally 4:00 p.m. Eastern Time.
- --------------------------------------------------------------------------------

The Funds' Expenses

Shareholders of both funds pay various expenses, either directly or indirectly.
The expense table appearing below shows the expenses for the twelve-month period
ended December 31, 2001, adjusted to reflect any changes. Balanced Fund's Class
I shares have no operational history. As a result, expenses were projected based
on expenses incurred by other classes of the Fund. Future expenses may be
greater or less. The examples contained in the expense table show what you would
pay if you invested $10,000 over the various time periods indicated. Each
example assumes that you reinvested all dividends and that the average annual
return was 5%. The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.

Pro Forma Expenses

The following expense table shows the pro forma expenses of Balanced Fund for
the year ended December 31, 2001 assuming that a reorganization with
Independence Balanced Fund had occurred January 1, 2001. The expenses shown in
the table are based on fees and expenses incurred during the twelve months ended
December 31, 2001, adjusted to reflect any changes. Balanced Fund's Class I
shares have no operational history. As a result, expenses were projected based
on expenses incurred by other classes of the Fund. Balanced Fund's actual
expenses after the reorganization may be greater or less than those shown.

The example contained in the pro forma expense table shows what you would have
paid on a $10,000 investment if the reorganization had occurred on January 1,
2001. The example assumes that you had reinvested all dividends and that the
average annual return was 5%. The pro forma example is for comparison purposes
only and is not a representation of Balanced Fund's actual expenses or returns,
either past or future.


                                       16




                                                                                                              Balanced Fund
                                                                                                                 Class I
                                                                                                                (PRO FORMA
                                                                                                               for the year
                                                                                                             ended 12/31/01)
                                                                                                                (Assuming
                                                                                                              reorganization
                                                                                                                   with
                                                                             Independence      Balanced        Independence
                                                                             Balanced Fund    Fund Class I    Balanced Fund)
Shareholder
transaction expenses
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                         
Maximum sales charge (load) imposed on purchases (as a % of purchase              none            none             none
   price)
Maximum sales charge imposed on reinvested dividends                              none            none             none
Maximum deferred sales charge (load) as a % of purchase or sale price,            none            none             none
   whichever is less
Redemption fee                                                                    none            none             none
Exchange fee                                                                      none            none             none

Annual fund operating expenses
(as a % of average net assets)
- -------------------------------------------------------------------------------------------------------------------------------
Management fee                                                                    0.70%           0.60%            0.60%
Distribution and service (12b-1) fee                                              none            none             none
Other expenses                                                                    0.39%           0.15%            0.15%
Total fund operating expenses                                                     1.09%           0.75%            0.75%
Expense reduction(1)                                                              0.19%           none             none
Net fund operating expenses                                                       0.90%           0.75%            0.75%

Expenses
- -------------------------------------------------------------------------------------------------------------------------------
Year 1                                                                          $  102           $  77            $  77
Year 3                                                                          $  338           $ 240            $ 240
Year 5                                                                          $  592           $ 417            $ 417
Year 10                                                                         $1,321           $ 930            $ 930


(1) The Adviser has agreed to limit Independence Balanced Fund's total operating
expenses to 0.90% of the fund's average daily net assets at least until June 30,
2002.

The Reorganization

o     The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
      June 7, 2002, but may occur on any later date before December 31, 2002.
      Independence Balanced Fund will transfer all of its assets to Balanced
      Fund. Balanced Fund will assume Independence Balanced Fund's liabilities.
      The net asset value of both funds will be computed as of 5:00 p.m.,
      Eastern Time, on the reorganization date.

o     Balanced Fund will issue to Independence Balanced Fund Class I shares in
      an amount equal to the net assets attributable to Independence Balanced
      Fund's shares. These shares will immediately be distributed to
      Independence Balanced Fund's shareholders in proportion to their holdings
      on the reorganization date. As a result, shareholders of Independence
      Balanced Fund will end up as Class I shareholders of Balanced Fund.

o     After the shares are issued, Independence Balanced Fund will be
      terminated.

o     The reorganization will be tax-free and will not take place unless both
      funds receive a satisfactory opinion concerning the tax consequences of
      the reorganization from Hale and Dorr LLP, counsel to the funds.


                                       17


The following diagram shows how the reorganization would be carried out.

         ----------------                            -------------------
         Independence                                Balanced Fund
         Balanced Fund           Independence        receives assets &
         transfers assets        Balanced Fund       assumes liabilities
         & liabilities to        assets and          of Independence
         Balanced Fund           liabilities         Balanced Fund
         ----------------                            -------------------

          -------------                                -------------
          Independence                                 Issue
          Balanced Fund                                Class I
          shareholders                                 Shares
          -------------                                -------------

                 Independence Balanced Fund receives Balanced
                      Fund Class I shares and distributes
                      them to Independence Balanced Fund
                                 shareholders

Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets:


- -----------------------------------------------------------------
Fund Asset Breakpoints             Independence Balanced Fund
- -----------------------------------------------------------------
First $500 Million                            0.70%
- -----------------------------------------------------------------
Amount over $500 Million                      0.65%
- -----------------------------------------------------------------

- -----------------------------------------------------------------
                                           Balanced Fund
- -----------------------------------------------------------------
Fund Assets                                   0.60%
- -----------------------------------------------------------------

Independence Investment, LLC ("Independence"), a wholly-owned subsidiary of John
Hancock Financial Services, Inc., serves as subadviser to Independence Balanced
Fund. In this capacity, Independence has primary responsibility for making
investment decisions for Independence Balanced Fund's investment portfolio and
placing orders with brokers and dealers to implement those decisions.
Independence receives its compensation from the Adviser, and Independence
Balanced Fund pays no subadvisory fees over and above the management fee it pays
to the Adviser. Independence receives subadvisory fees from the Adviser at the
following rate: 60% of the advisory fee received by the Adviser.

Balanced Fund's management fee rate of 0.60% and its pro forma management fee
rate of 0.60% are lower than Independence Balanced Fund's management fee rate of
0.70%. Balanced Fund's other expenses of 0.15% and its pro forma other expenses
of 0.15% are lower than Independence Balanced Fund's other expenses of 0.39%.
Balanced Fund's current annual expense ratio (equal to 0.75% of average net
assets) and its pro forma expense ratio (equal to 0.75% of average net assets)
are both lower than Independence Balanced Fund's expense ratio (equal to 0.90%
of average net assets) after the expense reduction. Independence Balanced Fund's
expense ratio before the expense reduction is 1.09% and there is no guarantee
that the expense limitation will be extended beyond June 30, 2002.


                                       18


INVESTMENT RISKS

The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table compares the risks
affecting each fund.



- -----------------------------------------------------------------------------------------------------------------------------------
                                  Independence Balanced Fund                                   Balanced Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                          
Stock market risk      The value of securities in the fund may go down in response to overall stock market movements. Markets
                       tend to move in cycles, with periods of rising prices and periods of falling prices. Stocks tend to go up
                       and down in value more than bonds. If the fund concentrates in certain sectors, its performance could be
                       worse than that of the overall stock market.
- -----------------------------------------------------------------------------------------------------------------------------------
Manager risk           The manager and its strategy may fail to produce the intended results. The fund could underperform its
                       peers or lose money if the manager's investment strategy does not perform as expected.
- -----------------------------------------------------------------------------------------------------------------------------------
Investment             The large capitalization stocks in which the fund        The large and medium capitalization stocks in which
category risk          primarily invests could fall out of favor with the       the fund primarily invests could fall out of favor
                       market, causing the fund to underperform funds that      with the market, causing the fund to underperform
                       focus on small or medium capitalization stocks.          funds that focus on small capitalization stocks.
- -----------------------------------------------------------------------------------------------------------------------------------
Medium                 Not applicable because the fund's stock investments      The fund's investments in medium capitalization
capitalization         are primarily large capitalization companies.            companies may be subject to larger and  more
company risk                                                                    erratic price movements than investments in large
                                                                                capitalization companies.
- -----------------------------------------------------------------------------------------------------------------------------------
Interest               When interest rates rise, bond prices usually fall. Generally, an increase in the fund's average maturity
rate risk              will make it more sensitive to interest rate risk.
- -----------------------------------------------------------------------------------------------------------------------------------
Prepayment (call)      If interest rate movements cause the fund's mortgage-related and callable securities to be paid off earlier
and extension          or later than expected, the fund's share price or yield could be hurt.
risks
- -----------------------------------------------------------------------------------------------------------------------------------
Credit risk            The fund could lose money if the credit rating of        The fund could lose money if the credit rating
                       any bond in its portfolio is downgraded or if the        of any bond in its portfolio is downgraded or if
                       issuer of the bond defaults on its obligations.          the issuer of the bond defaults on its
                                                                                obligations. In general, lower-rated bonds
                                                                                involve more credit risk. The prices of
                                                                                lower-rated bonds may also be more volatile and
                                                                                more sensitive to adverse economic developments.
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign                Foreign investments involve additional risks, including potentially inadequate or inaccurate financial
securities risk        information and social or political instability.
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign                Not applicable because the fund invests only in          Unfavorable foreign currency exchange rates could
currency risk          U.S. dollar-denominated securities.                      reduce the value of securities denominated in
                                                                                foreign currencies.
- -----------------------------------------------------------------------------------------------------------------------------------
Derivatives risk       Not applicable because the fund does not use             Certain derivative instruments can produce
                       derivatives.                                             disproportionate gains or losses and are riskier
                                                                                than direct investments. Also, in a down market
                                                                                derivatives could become harder to value or sell
                                                                                at a fair price.
- -----------------------------------------------------------------------------------------------------------------------------------
Turnover risk          In general, the greater the volume of buying and selling by a fund (and the higher its "turnover rate"),
                       the greater the impact that transaction costs will have on the fund's performance. The fund's turnover
                       rate may exceed 100%, which is considered relatively high.
- -----------------------------------------------------------------------------------------------------------------------------------


PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION

Description of Reorganization

You are being asked to approve an Agreement and Plan of Reorganization, a form
of which is attached as Exhibit A. The Agreement provides for a reorganization
on the following terms:


                                       19


o     The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
      June 7, 2002 but may occur on any later date before December 31, 2002.
      Independence Balanced Fund will transfer all of its assets to Balanced
      Fund and Balanced Fund will assume all of Independence Balanced Fund's
      liabilities. This will result in the addition of Independence Balanced
      Fund's assets to Balanced Fund's portfolio. The net asset value of both
      funds will be computed as of 5:00 p.m., Eastern Time, on the
      reorganization date.

o     Balanced Fund will issue to Independence Balanced Fund Class I shares in
      an amount equal to the net assets attributable to Independence Balanced
      Fund's shares. As part of the liquidation of Independence Balanced Fund,
      these shares will immediately be distributed to shareholders of record of
      Independence Balanced Fund in proportion to their holdings on the
      reorganization date. As a result, shareholders of Independence Balanced
      Fund will end up as Class I shareholders of Balanced Fund.

o     After the shares are issued, the existence of Independence Balanced Fund
      will be terminated.

Reasons for the Proposed Reorganization

The board of trustees of Independence Balanced Fund believes that the proposed
reorganization will be advantageous to the shareholders of Independence Balanced
Fund for several reasons. The board of trustees considered the following
matters, among others, in approving the proposal.

First, that Independence Balanced Fund does not have sufficient assets to
justify maintaining this fund as a separate investment portfolio (i.e. the fund
had $16.9 million in assets as of December 31, 2001). Independence Balanced
Fund, which as been in existence for approximately six years, has not grown in
asset size and in light of the history of the fund, there is no foreseeable
potential for future growth. The investment adviser has subsidized Independence
Balanced Fund by absorbing expenses since the inception of the fund. Without
these subsidies, Independence Balanced Fund would have had a higher expense
ratio and lower performance.

Second, that Balanced Fund's total expenses are lower than Independence Balanced
Fund's total expenses. As a result of the reorganization, shareholders of
Independence Balanced Fund will experience a reduction in the total amount of
fees, as a percentage of average net assets, that they indirectly pay.

Third, that the reorganization would permit Independence Balanced Fund's
shareholders to pursue similar investment goals in a larger fund. A larger fund
should give the investment adviser greater flexibility and the ability to select
a larger number of portfolio securities, resulting in increased diversification.

Fourth, that a combined fund offers economies of scale that may lead to lower
per share expenses. Both funds incur costs for accounting, legal, transfer
agency services, insurance, and custodial and administrative services. Many of
these expenses are duplicative and there may be an opportunity to reduce
Balanced Fund's expense ratio over time because of economies of scale if the
funds are combined.

The board of trustees of Balanced Fund considered that the reorganization
presents an excellent opportunity for Balanced Fund to acquire investment assets
without the obligation to pay commissions or other transaction costs that a fund
normally incurs when purchasing securities. This opportunity provides an
economic benefit to Balanced Fund and its shareholders.

The boards of both funds also considered that the adviser and the funds'
distributor will benefit from the reorganization. For example, the adviser might
realize time savings from a consolidated portfolio management effort and from
the need to prepare fewer reports and regulatory filings as well as prospectus
disclosure for one fund instead of two. The boards believe, however, that these
savings will not amount to a significant economic benefit to the adviser or
distributor.

Comparative Fees and Expense Ratios. As discussed above, the advisory fee rates
paid by your fund are higher than the rates paid by Balanced Fund.

Balanced Fund's management fee rate of 0.60% and pro forma management fee rate
of 0.60%, are lower than Independence Balanced Fund's management fee rate of
0.70%. Balanced Fund's other expenses of 0.15% and its pro forma other expenses
of 0.15% are lower than Independence Balanced Fund's other expenses of 0.39%.
Balanced Fund's current annual expense ratio (0.75% of average net assets) and
pro forma expense ratio (0.75% of average net assets) are both lower than
Independence Balanced Fund's current expense ratio (0.90% of average net assets)
after the expense reduction. Independence Balanced Fund's expense ratio before
the expense reduction is 1.09% and there is no guarantee that the expense
limitation will be extended beyond June 30, 2002.


                                       20


Comparative Performance. The trustees also took into consideration the relative
performance of Independence Balanced Fund and Balanced Fund as of December 31,
2001.

PROPOSAL 3
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN INTERNATIONAL EQUITY
FUND AND INTERNATIONAL FUND

A proposal to approve an Agreement and Plan of Reorganization between
International Equity Fund and International Fund. Under this Agreement,
International Equity Fund would transfer all of its assets to International Fund
in exchange for Class I shares of International Fund. These shares would be
distributed proportionately to the shareholders of International Equity Fund.
International Fund would also assume International Equity Fund's liabilities.
International Equity Fund's Board of Trustees recommends that shareholders vote
FOR this proposal.

SUMMARY

Comparison of International Equity Fund to International Fund



- ------------------------------------------------------------------------------------------------------------------------------------
                                   International Equity Fund                                  International Fund
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                      
Business             A diversified series of John Institutional Series      A diversified series of John Hancock Investment Trust
                     Trust.  The trust is an open-end investment company    III.  The trust is an open-end investment company
                     organized as a Massachusetts business trust.           organized as a Massachusetts business trust.
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets as of     $1.8 million                                           $15.4 million
December 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Investment adviser   Investment Adviser:                                    Investment Adviser:
and subadviser       John Hancock Advisers, LLC                             John Hancock Advisers, LLC

                     Subadviser:                                            Subadviser:

                     Nicholas-Applegate Capital Management                  Nicholas-Applegate Capital Management
                     -U.S. based team responsible for day-to-day            -U.S. based team responsible for day-to-day
                        investment management                                  investment management
                     -Managed fund since December 2000                      -Managed fund since December 2000
                     -Founded in 1984                                       -Founded in 1984
                     -Supervised by the adviser                             -Supervised by the adviser
- ------------------------------------------------------------------------------------------------------------------------------------
Investment           The fund seeks long-term growth of capital. This       The fund seeks long-term growth of capital. This
objective            objective can be changed without shareholder           objective can be changed without shareholder approval.
                     approval.
- ------------------------------------------------------------------------------------------------------------------------------------
Primary investments  The fund invests at least 80% of assets in stocks of   The fund invests at least 80% of assets in stocks of
                     foreign companies. The fund does not maintain a        foreign companies. The fund does not maintain a fixed
                     fixed allocation of assets, either with respect to     allocation of assets, either with respect to
                     securities type or geography. The managers allocate    securities type or geography. The managers allocate
                     the fund's assets among securities of countries that   the fund's assets among securities of countries that
                     are expected to provide the best opportunities for     are expected to provide the best opportunities for
                     meeting the fund's investment objective.               meeting the fund's investment objective.
- ------------------------------------------------------------------------------------------------------------------------------------
Other investments    Each fund may invest in American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
                     Global Depositary Receipts ("GDRs").
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging market      Each fund may invest up to 30% of assets in emerging markets.
securities
- ------------------------------------------------------------------------------------------------------------------------------------
Diversification      Each fund is diversified and, with respect to 75% of total assets, cannot invest more than 5% of total
                     assets in securities of a single issuer. In addition, each fund cannot invest more than 5% of total assets
                     in any one security.
- ------------------------------------------------------------------------------------------------------------------------------------
Derivatives          Each fund may use of certain derivatives (investments whose value is based on indexes, securities, or
                     currencies).
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary            In abnormal market conditions, each fund may temporarily invest more than 20% of assets in investment-grade
defensive positions  short-term securities. In these and other cases, the fund might not achieve its goal.
- ------------------------------------------------------------------------------------------------------------------------------------



                                       21




- ------------------------------------------------------------------------------------------------------------------------------------
SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
                     International Equity Fund                               International Fund -- Class I
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                       
Sales charge         Shares are offered with no sales charge.
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution and     Shares are not subject to a 12b-1 distribution fee.
Service (12b-1) fee
- ------------------------------------------------------------------------------------------------------------------------------------




- -----------------------------------------------------------------------------------------------------------------------------------
BUYING, SELLING AND EXCHANGING SHARES
- -----------------------------------------------------------------------------------------------------------------------------------
                                 Both International Equity Fund and International Fund -- Class I
- -----------------------------------------------------------------------------------------------------------------------------------
                  
Buying shares        Investors may buy shares at their public offering price through a financial representative or the funds'
                     transfer agent, John Hancock Signature Services, Inc.  After March 15, 2002, investors will not be allowed
                     to open new accounts in International Equity Fund but can add to existing accounts.
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum initial      $10,000.  No minimum investment for retirement plans with at least 350 eligible employees.
investment
- -----------------------------------------------------------------------------------------------------------------------------------
Exchanging shares    Shareholders may exchange their shares for Class I shares of other John Hancock funds, or for shares of any
                     John Hancock Institutional Fund.
- -----------------------------------------------------------------------------------------------------------------------------------
Selling shares       Shareholders may sell their shares by submitting a proper written or telephone request to John Hancock
                     Signature Services, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value      All purchases, exchanges and sales are made at a price based on the next determined net asset value per
                     share (NAV) of the fund. Both funds' NAVs are determined at the close of regular trading on the New York
                     Stock Exchange, which is normally 4:00 p.m. Eastern Time.
- -----------------------------------------------------------------------------------------------------------------------------------


The Funds' Expenses

Shareholders of both funds pay various expenses, either directly or indirectly.
The expense table appearing below shows the expenses for the twelve-month period
ended October 31, 2001, adjusted to reflect any changes. International Fund's
Class I shares have no operational history. As a result, expenses were projected
based on expenses incurred by other classes of the Fund. Future expenses may be
greater or less. The examples contained in the expense table show what you would
pay if you invested $10,000 over the various time periods indicated. Each
example assumes that you reinvested all dividends and that the average annual
return was 5%. The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.

Pro Forma Expenses

The following expense table shows the pro forma expenses of International Fund
for the year ended October 31, 2001 assuming that a reorganization with
International Equity Fund had occurred November 1, 2000. The expenses shown in
the table are based on fees and expenses incurred during the twelve months ended
October 31, 2001, adjusted to reflect any changes. International Fund's Class I
shares have no operational history. As a result, expenses were projected based
on expenses incurred by other classes of the Fund. International Fund's actual
expenses after the reorganization may be greater or less than those shown.

The example contained in the pro forma expense table shows what you would have
paid on a $10,000 investment if the reorganization had occurred on November 1,
2000. The example assumes that you had reinvested all dividends and that the
average annual return was 5%. The pro forma example is for comparison purposes
only and is not a representation of International Fund's actual expenses or
returns, either past or future.


                                       22




                                                                                                               International
                                                                                                                   Fund
                                                                                                                  Class I
                                                                                                                (PRO FORMA
                                                                                                               for the year
                                                                                                              ended 10/31/01)
                                                                                                                 (Assuming
                                                                                                              reorganization
                                                                                                                   with
                                                                           International    International      International
                                                                            Equity Fund      Fund Class I      Equity Fund)
Shareholder
transaction expenses
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                        
Maximum sales charge (load) imposed on purchases (as a % of purchase            none             none              none
   price)
Maximum sales charge imposed on reinvested dividends                            none             none              none
Maximum deferred sales charge (load) as a % of purchase or sale                 none             none              none
   price, whichever is less
Redemption fee                                                                  none             none              none
Exchange fee                                                                    none             none              none

Annual fund operating expenses
(as a % of average net assets)
- -------------------------------------------------------------------------------------------------------------------------------
Management fee                                                                  0.90%            1.00%             1.00%
Distribution and service (12b-1) fee                                            none             none              none
Other expenses                                                                  3.28%            1.55%             1.42%
Total fund operating expenses                                                   4.18%            2.55%             2.42%
Expense reduction                                                               3.18%(1)         1.60%(2)          1.47%(2)
Net fund operating expenses                                                     1.00%            0.95%             0.95%

Expenses
- -------------------------------------------------------------------------------------------------------------------------------
Year 1                                                                         $  102          $   97            $   97
Year 3                                                                         $  979          $  641            $  614
Year 5                                                                         $1,870          $1,211            $1,157
Year 10                                                                        $4,162          $2,765            $2,644


(1) The Adviser has agreed to limit International Equity Fund's
operating expenses to 1.00% of the fund's average daily net assets at least
until June 30, 2002.
(2) The adviser has agreed to limit International Fund's operating
expenses, excluding 12b-1 and transfer agent fees, to 0.90% of the fund's
average daily net assets at least until February 28, 2003.

The Reorganization

o     The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
      June 7, 2002, but may occur on any later date before December 31, 2002.
      International Equity Fund will transfer all of its assets to International
      Fund. International Fund will assume International Equity Fund's
      liabilities. The net asset value of both funds will be computed as of 5:00
      p.m., Eastern Time, on the reorganization date.

o     International Fund will issue to International Equity Fund Class I shares
      in an amount equal to the net assets attributable to International Equity
      Fund's shares. These shares will immediately be distributed to
      International Equity Fund's shareholders in proportion to their holdings
      on the reorganization date. As a result, shareholders of International
      Equity Fund will end up as Class I shareholders of International Fund.

o     After the shares are issued, International Equity Fund will be terminated.

o     The reorganization will be tax-free and will not take place unless both
      funds receive a satisfactory opinion concerning the tax consequences of
      the reorganization from Hale and Dorr LLP, counsel to the funds.


                                       23


    The following diagram shows how the reorganization would be carried out.

         --------------------                       -------------------
         International Equity                       International Fund
         Fund transfers           International     receives assets &
         assets & liabilities     Equity Fund       assumes liabilities
         to International         assets and        of International
         Fund                     liabilities       Equity Fund
         --------------------                       -------------------

            -------------                             --------------
            International                             Issues
            Equity Fund                               Class I
            shareholders                              Shares
            -------------                             --------------

                 International Equity Fund receives Inernational
                       Fund Class I shares and distributes
                        them to International Equity Fund
                                  shareholders

Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets:

- -------------------------------------------------------------------------
Fund Asset Breakpoints                  International Equity Fund
- -------------------------------------------------------------------------
First $500 Million                               0.900%
- -------------------------------------------------------------------------
Amount over $500 Million                         0.650%
- -------------------------------------------------------------------------

- -------------------------------------------------------------------------
Fund Asset Breakpoints                     International Fund
- -------------------------------------------------------------------------
First $250 Million                               1.000%
- -------------------------------------------------------------------------
Next $250 Million                                0.800%
- -------------------------------------------------------------------------
Next $250 Million                                0.750%
- -------------------------------------------------------------------------
Amount over $750 Million                         0.625%
- -------------------------------------------------------------------------

Nicholas-Applegate Capital Management ("Nicholas-Applegate") serves as
subadviser to both the Acquired Fund and the Acquiring Fund. In this capacity,
Nicholas-Applegate has primary responsibility for making investment decisions
for each Fund's investment portfolio and placing orders with brokers and dealers
to implement those decisions. Nicholas-Applegate receives its compensation from
the Adviser, and the Funds pay no subadvisory fees over and above the management
fee they pay to the Adviser. Nicholas-Applegate receives subadvisory fees from
the Adviser at the same rate for the Acquired Fund and the Acquiring Fund: (i)
0.50% of the first $500 Million of the average daily net asset value of the
Fund; and (ii) 0.45% of the average daily net asset value of the Fund in excess
of $500 Million.

International Fund's management fee rate of 1.00% and its pro forma management
fee rate of 1.00% are higher than International Equity Fund's management fee
rate of 0.90%. International Fund's other expenses of 1.55% and its pro forma
other expenses of 1.42% are lower than International Equity Fund's other
expenses of 3.28%. International Fund's current annual expense ratio (equal to
0.95% of average net assets) and its pro forma expense ratio (equal to 0.95% of
average net assets) are both lower than International Equity Fund's expense
ratio (equal to 1.00% of average net assets) after the expense reduction. Your
fund's expense ratio before the expense reduction is 4.18%. International Fund's
expense ratio before the expense reduction is 2.55%.


                                       24


INVESTMENT RISKS

The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table compares the risks
affecting each fund.



- -----------------------------------------------------------------------------------------------------------------------------------
                                    International Equity Fund                                   International Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                    
Stock                  The value of securities in the fund may go down in response to overall stock market movements. Markets
market risk            tend to move in cycles, with periods of rising prices and periods of falling prices. Stocks tend to go up
                       and down in value more than bonds. If the fund concentrates in certain sectors or geographic regions, its
                       performance could be worse than that of the overall stock market.
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign                Foreign investments are riskier than investments in U.S. companies. The special risks of foreign
investment risk        investments include:
                       o     Economic, political and social instability
                       o     Lack of reliable, publicly available information
                       o     Limited or excessive government regulation
                       o     Adverse governmental actions ranging from tax law changes to the collapse of governments
                       o     Lack of liquidity
                       o     Foreign currency exchange rate fluctuations
                       o     Restrictions on currency transfers
                       o     Foreign ownership limits
                       These risks are more severe in emerging market countries.
- -----------------------------------------------------------------------------------------------------------------------------------
Manager risk           The manager and its strategy may fail to produce the intended results. The fund could underperform its
                       peers or lose money if the manager's investment strategy does not perform as expected.
- -----------------------------------------------------------------------------------------------------------------------------------
Derivatives risk       Certain derivative instruments can produce disproportionate gains or losses and are riskier than direct
                       investments. Also, in a down market derivatives could become harder to value or sell at a fair price.
- -----------------------------------------------------------------------------------------------------------------------------------
Liquidity and          In a down or unstable market, the fund's investments could become harder to value accurately or to sell at
valuation risks        a fair price.
- -----------------------------------------------------------------------------------------------------------------------------------
Turnover risk          In general, the greater the volume of buying and selling by a fund (and the higher its "turnover rate"),
                       the greater the impact that transaction costs will have on the fund's performance. The fund's turnover
                       rate may exceed 100%, which is considered relatively high.
- -----------------------------------------------------------------------------------------------------------------------------------


PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION

Description of Reorganization

You are being asked to approve an Agreement and Plan of Reorganization, a form
of which is attached as Exhibit A. The Agreement provides for a reorganization
on the following terms:

o     The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
      June 7, 2002 but may occur on any later date before December 31, 2002.
      International Equity Fund will transfer all of its assets to International
      Fund and International Fund will assume all of International Equity Fund's
      liabilities. This will result in the addition of International Equity
      Fund's assets to International Fund's portfolio. The net asset value of
      both funds will be computed as of 5:00 p.m., Eastern Time, on the
      reorganization date.

o     International Fund will issue to International Equity Fund Class I shares
      in an amount equal to the net assets attributable to International Equity
      Fund's shares. As part of the liquidation of International Equity Fund,
      these shares will immediately be distributed to shareholders of record of
      International Equity Fund in proportion to their holdings on the
      reorganization date. As a result, shareholders of International Equity
      Fund will end up as shareholders of International Fund.

o     After the shares are issued, the existence of International Equity Fund
      will be terminated.

Reasons for the Proposed Reorganization

The board of trustees of International Equity Fund believes that the proposed
reorganization will be advantageous to the shareholders of International Equity
Fund for several reasons. The board of trustees considered the following
matters, among others, in approving the proposal.


                                       25


First, that International Equity Fund does not have sufficient assets to justify
maintaining this fund as a separate investment portfolio (i.e. the fund had $1.8
million in assets as of December 31, 2001). International Equity Fund, which as
been in existence for approximately seven years, has not grown in asset size and
in light of the history of the fund, there is no foreseeable potential for
future growth. The investment adviser has subsidized International Equity Fund
by absorbing expenses since the inception of the fund. Without these subsidies,
International Equity Fund would have had a substantially higher expense ratio
and lower performance.

Second, that International Fund's total expenses are lower than International
Equity Fund's total expenses. As a result of the reorganization, shareholders of
International Equity Fund will experience a reduction in the total amount of
fees, as a percentage of average net assets, that they indirectly pay.

Third, that the reorganization would permit International Equity Fund's
shareholders to pursue substantially similar investment goals in a larger fund.
A larger fund should give the investment adviser greater flexibility and the
ability to select a larger number of portfolio securities, resulting in
increased diversification.

The board of trustees of International Fund considered that the reorganization
presents an excellent opportunity for International Fund to acquire substantial
investment assets without the obligation to pay commissions or other transaction
costs that a fund normally incurs when purchasing securities. This opportunity
provides an economic benefit to International Fund and its shareholders.

The boards of both funds also considered that the adviser and the funds'
distributor will benefit from the reorganization. For example, the adviser might
realize time savings from a consolidated portfolio management effort and from
the need to prepare fewer reports and regulatory filings as well as prospectus
disclosure for one fund instead of two. The boards believe, however, that these
savings will not amount to a significant economic benefit to the adviser or
distributor.

Comparative Fees and Expense Ratios. As discussed above, the advisory fee rates
paid by International Equity Fund are higher than the rates paid by
International Fund.

International Fund's management fee rate of 1.00% and pro forma management fee
rate of 1.00% are higher than your fund's management fee rate of 0.90%.
International Fund's other expenses of 1.55% and its pro forma other expenses of
1.42% are lower than your fund's other expenses of 3.28%. International Fund's
current annual expense ratio (0.95% of average net assets) and pro forma expense
ratio (0.95% of average net assets) are both lower than your fund's current
expense ratio (1.00% of average net assets) after the expense reductions. Your
fund's expense ratio before the expense reduction is 4.18%. International Fund's
expense ratio before the expense reduction is 2.55%.

Comparative Performance. The trustees also took into consideration the relative
performance of International Equity Fund and International Fund as of December
31, 2001.

PROPOSAL 4
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN MEDIUM CAPITALIZATION
GROWTH FUND AND MID CAP GROWTH FUND

A proposal to approve an Agreement and Plan of Reorganization between Medium
Capitalization Growth Fund and Mid Cap Growth Fund. Under this Agreement, Medium
Capitalization Growth Fund would transfer all of its assets to Mid Cap Growth
Fund in exchange for Class I shares of Mid Cap Growth Fund. These shares would
be distributed proportionately to the shareholders of Medium Capitalization
Growth Fund. Mid Cap Growth Fund would also assume Medium Capitalization Growth
Fund's liabilities. Medium Capitalization Growth Fund's Board of Trustees
recommends that shareholders vote FOR this proposal.


                                       26


SUMMARY



Comparison of Medium Capitalization Growth Fund to Mid Cap Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                               Medium Capitalization Growth Fund                             Mid Cap Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                      
Business              A diversified series of John Hancock Institutional    A diversified series of John Hancock Investment Trust
                      Series Trust. The trust is an open-end investment     III. The trust is an open-end investment company
                      company organized as a Massachusetts business trust.  organized as a Massachusetts business trust.
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets as of      $5.6 million                                          $208.2 million
December 31, 2001
- -----------------------------------------------------------------------------------------------------------------------------------
Investment adviser    Investment adviser:                                   Investment adviser:
and portfolio         John Hancock Advisers, LLC                            John Hancock Advisers, LLC
managers
                      Portfolio Managers:                                   Portfolio Managers:

                      Paul J. Berlinguet                                    Paul J. Berlinguet
                      -Vice president of adviser                            -Vice president of adviser
                      -Joined fund team in 2001                             -Joined fund team in 2001
                      -Joined adviser in 2001                               -Joined adviser in 2001
                      -U.S. equity investment manager                       -U.S. equity investment manager
                         at Baring America Asset                               at Baring America Asset
                         Management (1989-2001)                                Management (1989-2001)
                      -Began business career in 1986                        -Began business career in 1986

                      Robert J. Uek, CFA                                    Robert J. Uek, CFA
                      -Vice president of adviser                            -Vice president of adviser
                      -Joined fund team in 2001                             -Joined fund team in 2001
                      -Joined adviser in 1997                               -Joined adviser in 1997
                      -Corporate finance manager                            -Corporate finance manager
                        at Ernst & Young (1994-1997)                          at Ernst & Young (1994-1997)
                      -Began business career in 1990                        -Began business career in 1990

                      Timothy N. Manning                                    Timothy N. Manning
                      -Joined fund team in 2000                             -Joined fund team in 2000
                      -Joined adviser in 2000                               -Joined adviser in 2000
                      -Analyst at State Street Research                     -Analyst at State Street Research
                         (1999-2000)                                           (1999-2000)
                      -Equity research associate at                         -Equity research associate at
                         State Street Research (1996-1999)                     State Street Research (1996-1999)
                      -Began business career in 1993                        -Began business career in 1993
- -----------------------------------------------------------------------------------------------------------------------------------
Investment objective  The fund seeks long-term capital appreciation. This   The fund seeks long-term capital appreciation. This
                      objective can be changed without shareholder          objective can be changed without shareholder
                      approval.                                             approval.
- -----------------------------------------------------------------------------------------------------------------------------------
Primary investments   The fund invests at least 80% of assets in stocks     The fund invests at least 80% of assets in stocks of
                      of medium-capitalization companies (companies in      medium-capitalization companies (companies in the
                      the capitalization range of the Russell Midcap        capitalization range of the Russell Midcap Growth
                      Growth Index, which was $_____ million to $_____      Index, which was $_____ million to $_____ billion on
                      billion on February 28, 2002).  In managing the       February 28, 2002).  In managing the portfolio, the
                      portfolio, the managers use quantitative screens to   managers seek to identify companies with
                      identify companies with at least 15% annual           above-average earnings growth.
                      earnings growth, expanding profit margins, and
                      projected price/earnings ratios below their
                      earnings growth rate.
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign securities    Each fund may invest up to 10% of assets in foreign securities.
- -----------------------------------------------------------------------------------------------------------------------------------



                                       27



                    
- -----------------------------------------------------------------------------------------------------------------------------------
Diversification        Each fund is diversified and, with respect to 75% of total assets, cannot invest more than 5% of total
                       assets in securities of a single issuer. In addition, each fund cannot invest more than 5% of total assets
                       in any one security.
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash          Each fund normally has less than 10% of assets in cash and cash equivalents.
equivalents
- -----------------------------------------------------------------------------------------------------------------------------------
Derivatives            Each fund may make limited use of certain derivatives (investments whose value is based on indexes or
                       currencies).
- -----------------------------------------------------------------------------------------------------------------------------------
Temporary              In abnormal market conditions, each fund may temporarily invest in U.S. government securities with
defensive              maturities of up to three years, and may also invest more than 10% of assets in cash and/or cash
positions              equivalents. In these and other cases, a fund might not achieve its goal.
- -----------------------------------------------------------------------------------------------------------------------------------


- -----------------------------------------------------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------------------------------------------------
                       Medium Capitalization Growth Fund                       Mid Cap Growth Fund -- Class I
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                         
Sales charge           Shares are offered with no sales charge.
- -----------------------------------------------------------------------------------------------------------------------------------
Distribution and       Shares are not subject to a 12b-1 distribution fee.
Service (12b-1)
fee
- -----------------------------------------------------------------------------------------------------------------------------------


- -----------------------------------------------------------------------------------------------------------------------------------
BUYING, SELLING AND EXCHANGING SHARES
- -----------------------------------------------------------------------------------------------------------------------------------
                       Both Medium Capitalization Growth Fund and Mid Cap Growth Fund - Class I
- -----------------------------------------------------------------------------------------------------------------------------------
                    
Buying shares          Investors may buy shares at their public offering price through a financial representative or the funds'
                       transfer agent, John Hancock Signature Services, Inc. After March 15, 2002, investors will not be allowed
                       to open new accounts in Medium Capitalization Growth Fund but can add to existing accounts.
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum initial        $10,000.  No minimum investment for retirement plans with at least 350 eligible employees.
investment
- -----------------------------------------------------------------------------------------------------------------------------------
Exchanging             Shareholders may exchange their shares for Class I shares of other John Hancock funds, or for shares of
shares                 any shares John Hancock Institutional Fund.
- -----------------------------------------------------------------------------------------------------------------------------------
Selling shares         Shareholders may sell their shares by submitting a proper written or telephone request to John Hancock
                       Signature Services, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value        All purchases, exchanges and sales are made at a price based on the next determined net asset value per
                       share (NAV) of the fund. Both funds' NAVs are determined at the close of regular trading on the New York
                       Stock Exchange, which is normally 4:00 p.m. Eastern Time.
- -----------------------------------------------------------------------------------------------------------------------------------


The Funds' Expenses

Shareholders of both funds pay various expenses, either directly or indirectly.
The expense table appearing below shows the expenses for the twelve-month period
ended October 31, 2001, adjusted to reflect any changes. Mid Cap Growth Fund's
Class I shares have no operational history. As a result, expenses were projected
based on expenses incurred by other classes of the Fund. Future expenses may be
greater or less. The examples contained in the expense table show what you would
pay if you invested $10,000 over the various time periods indicated. Each
example assumes that you reinvested all dividends and that the average annual
return was 5%. The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.

Pro Forma Expenses

The following expense table shows the pro forma expenses of Mid Cap Growth Fund
for the year ended October 31, 2001 assuming that a reorganization with Medium
Capitalization Growth Fund had occurred November 1, 2000. The expenses shown in
the table are based on fees and expenses incurred during the twelve months ended
October 31, 2001, adjusted to reflect any changes. Mid Cap Growth Fund's Class I
shares have no operational history. As a result, expenses were projected based
on expenses incurred by other classes of the Fund. Mid Cap Growth Fund's actual
expenses after the reorganization may be greater or less than those shown.

The example contained in the pro forma expense table shows what you would have
paid on a $10,000 investment if the reorganization had occurred on November 1,
2000. The example assumes that you had reinvested all dividends and that the
average annual return was 5%. The pro forma example is for comparison purposes
only and is not a representation of Mid Cap Growth Fund's actual expenses or
returns, either past or future.


                                       28




                                                                                                              Mid Cap Growth
                                                                                                                   Fund
                                                                                                                 Class I
                                                                                                                (PRO FORMA
                                                                                                               for the year
                                                                                                             ended 10/31/01)
                                                                                                                (Assuming
                                                                                                              reorganization
                                                                                                                   with
                                                                                 Medium         Mid Cap           Medium
                                                                             Capitalization   Growth Fund     Capitalization
                                                                              Growth Fund       Class I        Growth Fund)
Shareholder
transaction expenses
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                        
Maximum sales charge (load) imposed on purchases (as a % of purchase              none            none             none
   price)
Maximum sales charge imposed on reinvested dividends                              none            none             none
Maximum deferred sales charge (load) as a % of purchase or sale price,            none            none             none
   whichever is less
Redemption fee                                                                    none            none             none
Exchange fee                                                                      none            none             none

Annual fund operating expenses
(as a % of average net assets)
- -------------------------------------------------------------------------------------------------------------------------------
Management fee                                                                    0.80%           0.80%            0.80%
Distribution and service (12b-1) fee                                              none            none             none
Other expenses                                                                    0.93%           0.14%            0.14%
Total fund operating expenses                                                     1.73%           0.94%            0.94%
Expense reduction(1)                                                              0.83%           none             none
Net fund operating expenses                                                       0.90%           0.94%            0.94%

Expenses
- -------------------------------------------------------------------------------------------------------------------------------
Year 1                                                                          $  119          $   96           $   96
Year 3                                                                          $  490          $  300           $  300
Year 5                                                                          $  886          $  520           $  520
Year 10                                                                         $1,994          $1,155           $1,155


(1) The Adviser has agreed to limit Medium Capitalization Growth Fund's expenses
to 0.90% of the fund's average daily net assets at least until June 30, 2002.

The Reorganization

o     The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
      June 7, 2002, but may occur on any later date before December 31, 2002.
      Medium Capitalization Growth Fund will transfer all of its assets to Mid
      Cap Growth Fund. Mid Cap Growth Fund will assume Medium Capitalization
      Growth Fund's liabilities. The net asset value of both funds will be
      computed as of 5:00 p.m., Eastern Time, on the reorganization date.

o     Mid Cap Growth Fund will issue to Medium Capitalization Growth Fund Class
      I shares in an amount equal to the net assets attributable to Medium
      Capitalization Growth Fund's shares. These shares will immediately be
      distributed to Medium Capitalization Growth Fund's shareholders in
      proportion to their holdings on the reorganization date. As a result,
      shareholders of Medium Capitalization Growth Fund will end up as Class I
      shareholders of Mid Cap Growth Fund.

o     After the shares are issued, Medium Capitalization Growth Fund will be
      terminated.

o     The reorganization will be tax-free and will not take place unless both
      funds receive a satisfactory opinion concerning the tax consequences of
      the reorganization from Hale and Dorr LLP, counsel to the funds.


                                       29


    The following diagram shows how the reorganization would be carried out.

       ---------------------                          ----------------------
       Medium Capitalization       Medium             Mid Cap Growth Fund
       Growth Fund transfers       Capitalization     receives assets &
       assets & liabilities        Growth Fund        assumes liabilities of
       to Mid Cap Growth Fund      assets and         Medium Capitalization
                                   liabilities        Growth Fund
       ----------------------                         ----------------------

          --------------                                 --------------
          Medium                                         Issues
          Capitalization                                 Class I
          Growth Fund                                    Shares
          shareholders
          --------------                                 --------------

            Medium Capitalization Growth Fund receives Mid Cap Growth
                       Fund Class I shares and distributes
                    them to Medium Capitalization Growth Fund
                                  shareholders

Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets:

- ------------------------------------------------------------------------------
Fund Asset Breakpoints                     Medium Capitalization Growth Fund
- ------------------------------------------------------------------------------
First $500 Million                                      0.80%
- ------------------------------------------------------------------------------
Amount over $500 Million                                0.75%
- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
Fund Asset Breakpoints                           Mid Cap Growth Fund
- ------------------------------------------------------------------------------
First $500 Million                                      0.80%
- ------------------------------------------------------------------------------
Next $500 Million                                       0.75%
- ------------------------------------------------------------------------------
Amount over $1 Billion                                  0.70%
- ------------------------------------------------------------------------------

Mid Cap Growth Fund's management fee rate of 0.80% and its pro forma management
fee rate of 0.80% are the same as Medium Capitalization Growth Fund's management
fee rate of 0.80%. Mid Cap Growth Fund's other expenses of 0.14% and its pro
forma other expenses of 0.14% are lower than Medium Capitalization Growth Fund's
other expenses of 0.93%. Mid Cap Growth Fund's current annual expense ratio
(equal to 0.94% of average net assets) and its pro forma expense ratio (equal to
0.94% of average net assets) are both slightly higher than Medium Capitalization
Growth Fund's expense ratio (equal to 0.90% of average net assets) after the
expense reduction. Medium Capitalization Growth Fund's expense ratio before the
expense reduction is 1.73% and there is no guarantee that the expense reduction
will be extended beyond June 30, 2002.


                                       30


INVESTMENT RISKS

The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table compares the risks
affecting each fund.



- -----------------------------------------------------------------------------------------------------------------------------------
                                Medium Capitalization Growth Fund                            Mid Cap Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                    
Stock market risk      The value of securities in the fund may go down in response to overall stock market movements. Markets
                       tend to move in cycles, with periods of rising prices and periods of falling prices. Stocks tend to go up
                       and down in value more than bonds. If the fund concentrates in certain sectors, its performance could be
                       worse than that of the overall stock market.
- -----------------------------------------------------------------------------------------------------------------------------------
Manager risk           The manager and its strategy may fail to produce the intended results. The fund could underperform its
                       peers or lose money if the manager's investment strategy does not perform as expected.
- -----------------------------------------------------------------------------------------------------------------------------------
Investment             The medium capitalization growth stocks in which the fund primarily invests could fall out of favor with
category risk          the market. This could cause the fund to underperform funds that focus on large or small capitalization
                       stocks or on value stocks.
- -----------------------------------------------------------------------------------------------------------------------------------
Medium                 The fund's investments in small or medium capitalization companies may be subject to larger and more
capitalization         erratic price movements than investments in large capitalization companies.
company risk
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign                Foreign investments involve additional risks, including potentially unfavorable currency exchange rates,
securities risk        inadequate or inaccurate financial information and social or political instability.
- -----------------------------------------------------------------------------------------------------------------------------------
Derivatives risk       Certain derivative instruments can produce disproportionate gains or losses and are riskier than direct
                       investments. Also, in a down market derivatives could become harder to value or sell at a fair price.
- -----------------------------------------------------------------------------------------------------------------------------------
Liquidity and          In a down or unstable market, the fund's investments could become harder to value accurately or to sell at
valuation risks        a fair price.
- -----------------------------------------------------------------------------------------------------------------------------------
Turnover risk          In general, the greater the volume of buying and selling by a fund (and the higher its "turnover rate"),
                       the greater the impact that transaction costs will have on the fund's performance. The fund's turnover
                       rate may exceed 100%, which is considered relatively high.
- -----------------------------------------------------------------------------------------------------------------------------------


PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION

Description of Reorganization

You are being asked to approve an Agreement and Plan of Reorganization, a form
of which is attached as Exhibit A. The Agreement provides for a reorganization
on the following terms:

o     The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
      June 7, 2002 but may occur on any later date before December 31, 2002.
      Medium Capitalization Growth Fund will transfer all of its assets to Mid
      Cap Growth Fund and Mid Cap Growth Fund will assume all of Medium
      Capitalization Growth Fund's liabilities. This will result in the addition
      of Medium Capitalization Growth Fund's assets to Mid Cap Growth Fund's
      portfolio. The net asset value of both funds will be computed as of 5:00
      p.m., Eastern Time, on the reorganization date.

o     Mid Cap Growth Fund will issue to Medium Capitalization Growth Fund Class
      I shares in an amount equal to the net assets attributable to Medium
      Capitalization Growth Fund's shares. As part of the liquidation of Medium
      Capitalization Growth Fund, these shares will immediately be distributed
      to shareholders of record of Medium Capitalization Growth Fund in
      proportion to their holdings on the reorganization date. As a result,
      shareholders of Medium Capitalization Growth Fund will end up as
      shareholders of Mid Cap Growth Fund.

o     After the shares are issued, the existence of Medium Capitalization Growth
      Fund will be terminated.

Reasons for the Proposed Reorganization

The board of trustees of Medium Capitalization Growth Fund believes that the
proposed reorganization will be advantageous to the shareholders of Medium
Capitalization Growth Fund for several reasons. The board of trustees considered
the following matters, among others, in approving the proposal.


                                       31


First, that Medium Capitalization Growth Fund does not have sufficient assets to
justify maintaining this fund as a separate investment portfolio (i.e. the fund
had $5.6 million in assets as of December 31, 2001). Medium Capitalization
Growth Fund, which as been in existence for approximately seven years, has not
grown to an acceptable asset size and in light of the history of the fund, there
is no foreseeable potential for future growth. The investment adviser has
subsidized Medium Capitalization Growth Fund by absorbing expenses since the
inception of the fund. Without these subsidies, Medium Capitalization Growth
Fund would have had a substantially higher expense ratio and lower performance.

Second, that Mid Cap Growth Fund's total expenses are lower than Medium
Capitalization Growth Fund's total expenses before taking into account the
Adviser's agreement to limit Medium Capitalization Growth Fund's expenses. As a
result of the reorganization, shareholders of Medium Capitalization Growth Fund
will experience a reduction in the total amount of fees, as a percentage of
average net assets, that they indirectly pay if the expense reduction is not
extended beyond June 30, 2002.

Third, that the reorganization would permit Medium Capitalization Growth Fund's
shareholders to pursue substantially similar investment goals in a larger fund.
A larger fund should give the investment adviser greater flexibility and the
ability to select a larger number of portfolio securities, resulting in
increased diversification.

Fourth, that a combined fund offers economies of scale that may lead to lower
per share expenses. Both funds incur costs for accounting, legal, transfer
agency services, insurance, and custodial and administrative services. Many of
these expenses are duplicative and there may be an opportunity to reduce Mid Cap
Growth Fund's expense ratio over time because of economies of scale if the funds
are combined.

The board of trustees of Mid Cap Growth Fund considered that the reorganization
presents an excellent opportunity for Mid Cap Growth Fund to acquire investment
assets without the obligation to pay commissions or other transaction costs that
a fund normally incurs when purchasing securities. This opportunity provides an
economic benefit to Mid Cap Growth Fund and its shareholders.

The boards of both funds also considered that the adviser and the funds'
distributor will benefit from the reorganization. For example, the adviser might
realize time savings from a consolidated portfolio management effort and from
the need to prepare fewer reports and regulatory filings as well as prospectus
disclosure for one fund instead of two. The boards believe, however, that these
savings will not amount to a significant economic benefit to the adviser or
distributor.

Comparative Fees and Expense Ratios. As discussed above, the advisory fee rates
paid by Medium Capitalization Growth Fund are the same as the rates paid by Mid
Cap Growth Fund.

Mid Cap Growth Fund's management fee rate of 0.80%% and pro forma management fee
rate of 0.80%, are the same as Medium Capitalization Growth Fund's management
fee rate of 0.80%. Mid Cap Growth Fund's other expenses of 0.14% and its pro
forma other expenses of 0.14% are lower than Medium Capitalization Growth Fund's
other expenses of 0.93%. Mid Cap Growth Fund's current annual expense ratio
(0.94% of average net assets) and pro forma expense ratio (0.94% of average net
assets) are both slightly higher than Medium Capitalization Growth Fund's
current expense ratio (0.90% of average net assets) after the expense reduction.
Medium Capitalization Growth Fund's expense ratio before the expense reduction
is 1.73% and there is no guarantee that the expense reduction will be extended
beyond June 30, 2002.

Comparative Performance. The trustees also took into consideration the relative
performance of Medium Capitalization Growth Fund and Mid Cap Growth Fund as of
December 31, 2001.

PROPOSAL 5
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN SMALL CAP EQUITY FUND Y
AND SMALL CAP EQUITY FUND

A proposal to approve an Agreement and Plan of Reorganization between Small Cap
Equity Fund Y and Small Cap Equity Fund. Under this Agreement, Small Cap Equity
Fund Y would transfer all of its assets to Small Cap Equity Fund in exchange for
Class I shares of Small Cap Equity Fund. These shares would be distributed
proportionately to the shareholders of Small Cap Equity Fund Y. Small Cap Equity
Fund would also assume Small Cap Equity Fund Y's liabilities. Small Cap Equity
Fund Y's Board of Trustees recommends that shareholders vote FOR this proposal.


                                       32


SUMMARY

Comparison of Small Cap Equity Fund Y to Small Cap Equity Fund



- -----------------------------------------------------------------------------------------------------------------------------------
                                       Small Cap Equity Fund Y                                Small Cap Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                        
Business                  A diversified series of John Hancock                A diversified series of John Hancock Investment
                          Institutional Series Trust.  The Trust is an        Trust II.  The Trust is an open-end investment
                          open-end investment management company organized    management company organized as a Massachusetts
                          as a Massachusetts Business Trust.                  Business Trust.
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets as of          $35.1 million                                       $980.7 million
December 31, 2001
- -----------------------------------------------------------------------------------------------------------------------------------
Investment adviser and    Investment Adviser:                                 Investment Adviser:
portfolio managers        John Hancock Advisers, LLC                          John Hancock Advisers, LLC

                          Portfolio Managers:                                 Portfolio Managers:

                          James S. Yu, CFA                                    James S. Yu, CFA
                          -Vice President of adviser                          -Vice President of adviser
                          -Joined fund team in 2000                           -Joined fund team in 2000
                          -Joined adviser in 2000                             -Joined adviser in 2000
                          -Analyst at Merrill Lynch Asset Management          -Analyst at Merrill Lynch Asset Management
                             (1998-2000)                                         (1998-2000)
                          -Analyst at Gabelli & Company (1995-1998)           -Analyst at Gabelli & Company (1995-1998)
                          -Began business career in 1990                      -Began business career in 1990

                          Roger C. Hamilton                                   Roger C. Hamilton
                          -Vice President of adviser                          -Vice President of adviser
                          -Joined fund team in 1999                           -Joined fund team in 1999
                          -Joined adviser in 1994                             -Joined adviser in 1994
                          -Began business career in 1980                      -Began business career in 1980
- -----------------------------------------------------------------------------------------------------------------------------------
Investment objective      The fund seeks capital appreciation.  This          The fund seeks capital appreciation.
                          objective can be changed without shareholder
                          approval.
- -----------------------------------------------------------------------------------------------------------------------------------
Primary Investments       The fund normally invests at least 80% of assets    The fund normally invests at least 80% of assets in
                          in stocks of small-capitalization companies         stocks of small-capitalization companies (companies
                          (companies in the capitalization range of the       in the capitalization range of the Russell 2000
                          Russell 2000 Index, which was $___ million to       Index, which was $___ million to $___ billion as of
                          $___ billion as of February 28, 2002).              February 28, 2002).

                          In managing the portfolio, the managers emphasize   In managing the portfolio, the managers emphasize a
                          a value-oriented approach to individual stock       value-oriented approach to individual stock
                          selection.  With the aid of proprietary financial   selection.  With the aid of proprietary financial
                          models, the management team looks for companies     models, the management team looks for U.S. and
                          that are selling at what appear to be substantial   foreign companies that are selling at what appear
                          discounts to their long-term value.  These          to be substantial discounts to their long-term
                          companies often have identifiable catalysts for     value.  These companies often have identifiable
                          growth, such as new products, business              catalysts for growth, such as new products,
                          reorganizations, or mergers.                        business reorganizations, or mergers.
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign Securities        Each fund invests primarily in stocks of U.S. companies, but may invest up to 15% of assets in a basket
and bonds                 of foreign securities and bonds rated as low as CC/Ca and their unrated equivalents.  (Bonds rated
                          below BBB/Baa are considered junk bonds.)
- -----------------------------------------------------------------------------------------------------------------------------------
Diversification           Each fund is diversified and, with respect to 75% of total assets, cannot invest more than 5% of total
                          assets in securities of a single issuer. In addition, each fund cannot invest more than 5% of total
                          assets in any one security.
- -----------------------------------------------------------------------------------------------------------------------------------



                                       33



                       
- -----------------------------------------------------------------------------------------------------------------------------------
Derivatives               Each fund may make limited use of certain derivatives (investments whose value is based on indexes or
                          currencies).
- -----------------------------------------------------------------------------------------------------------------------------------
Temporary defensive       In abnormal market conditions, each fund may temporarily invest extensively in investment-grade
positions                 short-term securities.  In these and other cases, a fund might not achieve its goal.
- -----------------------------------------------------------------------------------------------------------------------------------


- -----------------------------------------------------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------------------------------------------------
                                       Small Cap Equity Fund Y                          Small Cap Equity Fund - Class I
- -----------------------------------------------------------------------------------------------------------------------------------
                       
Sales charge              Shares are offered with no sales charge.
- -----------------------------------------------------------------------------------------------------------------------------------
Distribution and          Shares are not subject to a 12b-1 distribution fee.
Service (12b-1) fee
- -----------------------------------------------------------------------------------------------------------------------------------


- -----------------------------------------------------------------------------------------------------------------------------------
BUYING, SELLING AND EXCHANGING SHARES
- -----------------------------------------------------------------------------------------------------------------------------------
                                      Small Cap Equity Fund Y                          Small Cap Equity Fund - Class I
- -----------------------------------------------------------------------------------------------------------------------------------
                       
Buying shares             Investors may buy shares at their public offering price through a financial representative or the funds'
                          transfer agent, John Hancock Signature Services, Inc. After March 15, 2002, investors will not be allowed
                          to open new accounts in Small Cap Equity Fund Y but can add to existing accounts.
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum initial           $10,000.  No minimum investment for retirement plans with at least 350 eligible employees.
investment
- -----------------------------------------------------------------------------------------------------------------------------------
Exchanging shares         Shareholders may exchange their shares for Class I shares of other John Hancock funds, or for shares of
                          any John Hancock Institutional Fund.
- -----------------------------------------------------------------------------------------------------------------------------------
Selling shares            Shareholders may sell their shares by submitting a proper written or telephone request to John Hancock
                          Signature Services, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value           All purchases, exchanges and sales are made at a price based on the next determined net asset value per
                          share (NAV) of the fund. Both funds' NAVs are determined at the close of regular trading on the New York
                          Stock Exchange, which is normally 4:00 p.m. Eastern Time.
- -----------------------------------------------------------------------------------------------------------------------------------


The Funds' Expenses

Shareholders of both funds pay various expenses, either directly or indirectly.
The expense table appearing below shows the expenses for the twelve-month period
ended October 31, 2001, adjusted to reflect any changes. Small Cap Equity Fund's
Class I shares began operations on August 15, 2001. As a result, expenses were
projected as if Class I had been in existence for the entire year. Future
expenses may be greater or less. The examples contained in the expense table
show what you would pay if you invested $10,000 over the various time periods
indicated. Each example assumes that you reinvested all dividends and that the
average annual return was 5%. The examples are for comparison purposes only and
are not a representation of either fund's actual expenses or returns, either
past or future.

Pro Forma Expenses

The following expense table shows the pro forma expenses of Small Cap Equity
Fund for the year ended October 31, 2001 assuming that a reorganization with
Small Cap Equity Fund Y had occurred November 1, 2000. The expenses shown in the
table are based on fees and expenses incurred during the twelve months ended
October 31, 2001, adjusted to reflect any changes. Small Cap Equity Fund's Class
I shares began operations on August 15, 2001. As a result, expenses were
projected as if Class I had been in existence for the entire year. Small Cap
Equity Fund's actual expenses after the reorganization may be greater or less
than those shown.

The example contained in the pro forma expense table shows what you would have
paid on a $10,000 investment if the reorganization had occurred on November 1,
2000. The example assumes that you had reinvested all dividends and that the
average annual return was 5%. The pro forma example is for comparison purposes
only and is not a representation of Small Cap Equity Fund's actual expenses or
returns, either past or future.


                                       34




                                                                                                            Small Cap Equity
                                                                                                               Fund Class I
                                                                                                                (PRO FORMA
                                                                                                               for the year
                                                                                                             ended 10/31/01)
                                                                                                                (Assuming
                                                                                                              reorganization
                                                                                              Small Cap            with
                                                                              Small Cap      Equity Fund     Small Cap Equity
                                                                            Equity Fund Y      Class I           Fund Y)
Shareholder
transaction expenses
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                        
Maximum sales charge (load) imposed on purchases (as a % of purchase             none            none              none
   price)
Maximum sales charge imposed on reinvested dividends                             none            none              none
Maximum deferred sales charge (load) as a % of purchase or sale price,           none            none              none
   whichever is less
Redemption fee                                                                   none            none              none
Exchange fee                                                                     none            none              none

Annual fund operating expenses
(as a % of average net assets)
- -------------------------------------------------------------------------------------------------------------------------------
Management fee                                                                   0.70%           0.70%             0.70%
Distribution and service (12b-1) fee                                             none            none              none
Other expenses                                                                   0.34%           0.13%             0.13%
Total fund operating expenses                                                    1.04%           0.83%             0.83%
Expense reduction(1)                                                             0.24%           none              none
Net fund operating expenses                                                      0.80%           0.83%             0.83%

Expenses
- -------------------------------------------------------------------------------------------------------------------------------
Year 1                                                                         $   90          $   85            $   85
Year 3                                                                         $  315          $  265            $  265
Year 5                                                                         $  558          $  460            $  460
Year 10                                                                        $1,257          $1,025            $1,025


(1) The Adviser has agreed to limit Small Cap Equity Fund Y's operating expenses
to 0.80% of the fund's average daily net assets at least until June 30, 2002.

The Reorganization

o     The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
      June 7, 2002, but may occur on any later date before December 31, 2002.
      Small Cap Equity Fund Y will transfer all of its assets to Small Cap
      Equity Fund. Small Cap Equity Fund will assume Small Cap Equity Fund Y's
      liabilities. The net asset value of both funds will be computed as of 5:00
      p.m., Eastern Time, on the reorganization date.

o     Small Cap Equity Fund will issue to Small Cap Equity Fund Y Class I shares
      in an amount equal to the net assets attributable to Small Cap Equity Fund
      Y's shares. These shares will immediately be distributed to Small Cap
      Equity Fund Y's shareholders in proportion to their holdings on the
      reorganization date. As a result, shareholders of Small Cap Equity Fund Y
      will end up as Class I shareholders of Small Cap Equity Fund.

o     After the shares are issued, Small Cap Equity Fund Y will be terminated.

o     The reorganization will be tax-free and will not take place unless both
      funds receive a satisfactory opinion concerning the tax consequences of
      the reorganization from Hale and Dorr LLP, counsel to the funds.


                                       35


    The following diagram shows how the reorganization would be carried out.

        --------------------                        --------------------
        Small Cap Equity                            Small Cap Equiaty
        Fund Y transfers          Small Cap         Fund receives
        assets & liabilities      Equity Fund Y     assets & assumes
        to Small Cap Equity       assets and        liabilities of Small
        Fund                      liabilities       Cap Equity Fund Y
        --------------------                        --------------------

          --------------                               --------------
          Small Cap                                    Issues
          Equiaty Fund Y                               Class I
          shareholders                                 Shares
          --------------                               --------------

                Small Cap Equity Fund Y receives Small Cap Equity
                       Fund Class I shares and distributes
                         them to Small Cap Equity Fund Y
                                  shareholders

Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets:

- --------------------------------------------------------------------------------
Fund Asset Breakpoints                        Small Cap Equity Fund Y
- --------------------------------------------------------------------------------
First $500 Million                                     0.70%
- --------------------------------------------------------------------------------
Amount over $500 Million                               0.65%
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
                                               Small Cap Equity Fund
- --------------------------------------------------------------------------------
Fund Assets                                            0.70%
- --------------------------------------------------------------------------------

Small Cap Equity Fund's management fee rate of 0.70% and its pro forma
management fee rate of 0.70% are the same as your fund's management fee rate of
0.70%. Small Cap Equity Fund's other expenses of 0.13% and its pro forma other
expenses of 0.13% are lower than your fund's other expenses of 0.34%. Small Cap
Equity Fund's current annual expense ratio (equal to 0.83% of average net
assets) and its pro forma expense ratio (equal to 0.83% of average net assets)
are both slightly higher than your fund's expense ratio (equal to 0.80% of
average net assets) after the expense reduction. Your fund's expense ratio
before the expense reduction is 1.04% and there is no guarantee that the expense
reduction will be extended beyond June 30, 2002.


                                       36


INVESTMENT RISKS

The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table compares the risks
affecting each fund.



- -----------------------------------------------------------------------------------------------------------------------------------
                                        Small Cap Equity Fund Y                               Small Cap Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                       
Stock market risk         The value of securities in the fund may go down in response to overall stock market movements.  Markets
                          tend to move in cycles, with periods of rising prices and periods of falling prices.  Stocks tend to go
                          up and down in value more than bonds.  If the fund concentrates in certain sectors, its performance
                          could be worse than that of the overall stock market.
- -----------------------------------------------------------------------------------------------------------------------------------
Manager risk              The manager and its strategy may fail to produce the intended results.  The fund could underperform its
                          peers or lose money if the manager's investment strategy does not perform as expected.
- -----------------------------------------------------------------------------------------------------------------------------------
Investment category risk  The small capitalization value stocks in which the fund primarily invests could fall out of favor with
                          the market.  This could cause the fund to underperform funds that focus on large or medium
                          capitalization stocks or on growth stocks.
- -----------------------------------------------------------------------------------------------------------------------------------
Small and medium          The fund's investments in small or medium capitalization companies may be subject to larger and more
capitalization company    erratic price movements than investments in established large capitalization companies.  Many smaller
risk                      companies have short track records, narrow product lines or niche markets, making them highly
                          vulnerable to isolated business setbacks.
- -----------------------------------------------------------------------------------------------------------------------------------
Initial public offering   A significant part of the fund's return may at times be attributable to investments in IPOs.  Many IPO
(IPO) risk                stocks are issued by, and involve the risks associated with, small and medium capitalization companies.
- -----------------------------------------------------------------------------------------------------------------------------------
Bond Risk                 The credit rating of any bond in the fund's portfolio could be downgraded or the issuer of a bond could
                          default on its obligations.  Bond prices generally fall when interest rates rise.  This risk is greater
                          for longer maturity bonds.  Junk bond prices can fall on bad news about the economy, an industry or a
                          company.
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign securities risk   Foreign investments involve additional risks, including potentially unfavorable currency exchange
                          rates, inadequate or inaccurate financial information and social or political instability.
- -----------------------------------------------------------------------------------------------------------------------------------
Derivatives risk          Certain derivative instruments can produce disproportionate gains or losses and are riskier than direct
                          investments.  Also, in a down market derivatives could become harder to value or sell at a fair price.
- -----------------------------------------------------------------------------------------------------------------------------------
Liquidity and valuation   In a down or unstable market, the fund's investments could become harder to value accurately or to sell
risks                     at a fair price.
- -----------------------------------------------------------------------------------------------------------------------------------
Turnover risk             In general, the greater the volume of buying and selling by a fund (and the higher its "turnover
                          rate"), the greater the impact that transaction costs will have on the fund's performance.  The fund's
                          turnover rate may exceed 100%, which is considered relatively high.
- -----------------------------------------------------------------------------------------------------------------------------------


PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION

Description of Reorganization

You are being asked to approve an Agreement and Plan of Reorganization, a copy
of which is attached as Exhibit A. The Agreement provides for a reorganization
on the following terms:

o     The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
      June 7, 2002 but may occur on any later date before December 31, 2002.
      Small Cap Equity Fund Y will transfer all of its assets to Small Cap
      Equity Fund and Small Cap Equity Fund will assume all of Small Cap Equity
      Fund Y's liabilities. This will result in the addition of Small Cap Equity
      Fund Y's assets to Small Cap Equity Fund's portfolio. The net asset value
      of both funds will be computed as of 5:00 p.m., Eastern Time, on the
      reorganization date.

o     Small Cap Equity Fund will issue to Small Cap Equity Fund Y Class I shares
      in an amount equal to the net assets attributable to Small Cap Equity Fund
      Y's shares. As part of the liquidation of Small Cap Equity Fund Y, these
      shares will immediately be distributed to shareholders of record of Small
      Cap Equity Fund Y in proportion to their holdings on the reorganization
      date. As a result, shareholders of Small Cap Equity Fund Y will end up as
      shareholders of Small Cap Equity Fund.

o     After the shares are issued, the existence of Small Cap Equity Fund Y will
      be terminated.


                                       37


Reasons for the Proposed Reorganization

The board of trustees of Small Cap Equity Fund Y believes that the proposed
reorganization will be advantageous to the shareholders of Small Cap Equity Fund
Y for several reasons. The board of trustees considered the following matters,
among others, in approving the proposal.

First, that Small Cap Equity Fund Y does not have sufficient assets to justify
maintaining this fund as a separate investment portfolio (i.e. the fund had
$35.1 million in assets as of December 31, 2001). Small Cap Equity Fund Y, which
as been in existence for approximately seven years, has not grown in asset size
and in light of the history of the fund, there is no foreseeable potential for
future growth. The investment adviser has subsidized Small Cap Equity Fund Y by
absorbing expenses since the inception of the fund. Without these subsidies,
Small Cap Equity Fund Y would have had a substantially higher expense ratio and
lower performance.

Second, that Small Cap Equity Fund's total expenses are lower than Small Cap
Equity Fund Y's total expenses before taking into account the Adviser's
agreement to limit Small Cap Equity Fund Y's expenses. As a result of the
reorganization, shareholders of Small Cap Equity Fund Y will experience a
reduction in the total amount of fees, as a percentage of average net assets,
that they indirectly pay if the expense reduction is not extended beyond June
30, 2002.

Third, that the reorganization would permit Small Cap Equity Fund Y's
shareholders to pursue substantially similar investment goals in a larger fund.
A larger fund should give the investment adviser greater flexibility and the
ability to select a larger number of portfolio securities, resulting in
increased diversification.

Fourth, that a combined fund offers economies of scale that may lead to lower
per share expenses. Both funds incur costs for accounting, legal, transfer
agency services, insurance, and custodial and administrative services. Many of
these expenses are duplicative and there may be an opportunity to reduce Small
Cap Equity Fund's expense ratio over time because of economies of scale if the
funds are combined.

The board of trustees of Small Cap Equity Fund considered that the
reorganization presents an excellent opportunity for Small Cap Equity Fund to
acquire investment assets without the obligation to pay commissions or other
transaction costs that a fund normally incurs when purchasing securities. This
opportunity provides an economic benefit to Small Cap Equity Fund and its
shareholders.

The boards of both funds also considered that the adviser and the funds'
distributor will benefit from the reorganization. For example, the adviser might
realize time savings from a consolidated portfolio management effort and from
the need to prepare fewer reports and regulatory filings as well as prospectus
disclosure for one fund instead of two. The boards believe, however, that these
savings will not amount to a significant economic benefit to the adviser or
distributor.

Comparative Fees and Expense Ratios. As discussed above, the advisory fee rates
paid by your fund are the same as the rates paid by Small Cap Equity Fund.

Small Cap Equity Fund's management fee rate of 0.70% and pro forma management
fee rate of 0.70% are the same as your fund's management fee rate of 0.70%.
Small Cap Equity Fund's other expenses of 0.13% and its pro forma other expenses
of 0.13% are lower than your fund's other expenses of 0.34%. Small Cap Equity
Fund's current annual expense ratio (0.83% of average net assets) and pro forma
expense ratio (0.83% of average net assets) are both slightly higher than your
fund's current expense ratio (0.80% of average net assets) after the expense
reduction. Your fund's expense ratio before the expense reduction is 1.04% and
there is no guarantee that the expense reduction will be extended beyond June
30, 2002.

Comparative Performance. The trustees also took into consideration the relative
performance of your fund and Small Cap Equity Fund as of December 31, 2001.


                                       38


FURTHER INFORMATION ON EACH REORGANIZATION

Tax Status of the Reorganization

Each reorganization will not result in income, gain or loss for federal income
tax purposes and will not take place unless both funds in each respective
reorganization receive a satisfactory opinion from Hale and Dorr LLP, counsel to
the Acquired Funds, substantially to the effect that the reorganization
described above will be a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986 (the "Code").

As a result, for federal income tax purposes:

o     No gain or loss will be recognized by each Acquired Fund upon (1) the
      transfer of all of its assets to the respective Acquiring Fund as
      described above or (2) the distribution by each Acquired Fund of Acquiring
      Fund shares to Acquired Fund shareholders;

o     No gain or loss will be recognized by each Acquiring Fund upon the receipt
      of each respective Acquired Fund's assets solely in exchange for the
      issuance of Acquiring Fund shares and the assumption of all of Acquired
      Fund liabilities by each respective Acquiring Fund;

o     The basis of the assets of each Acquired Fund acquired by each respective
      Acquiring Fund will be the same as the basis of those assets in the hands
      of each respective Acquired Fund immediately before the transfer;

o     The tax holding period of the assets of each Acquired Fund in the hands of
      each respective Acquiring Fund will include the Acquired Fund's tax
      holding period for those assets;

o     The shareholders of each Acquired Fund will not recognize gain or loss
      upon the exchange of all their shares of the Acquired Funds solely for
      Acquiring Fund shares as part of the reorganization;

o     The basis of Acquiring Fund shares received by Acquired Fund shareholders
      in the reorganization will be the same as the basis of the shares of each
      Acquired Fund surrendered in exchange; and

o     The tax holding period of the Acquiring Fund shares that Acquired Fund
      shareholders receive will include the tax holding period of the shares of
      the Acquired Fund surrendered in the exchange, provided that the shares of
      the Acquired Fund were held as capital assets on the reorganization date.

You should consult your tax adviser for the particular tax consequences to you
of the transaction, including the applicability of any state, local or foreign
tax laws.

Additional Terms of each Agreement and Plan of Reorganization

Surrender of Share Certificates. If your shares are represented by one or more
share certificates before the reorganization date, you must either surrender the
certificates to your fund(s) or deliver to your fund(s) a lost certificate
affidavit, in the form and accompanied by the surety bonds that your fund(s) may
require (collectively, an "Affidavit"). On the reorganization date, all
certificates that have not been surrendered will be canceled, will no longer
evidence ownership of your fund's shares and will evidence ownership of shares
of the respective Acquiring Fund. Shareholders may not redeem or transfer
Acquiring Fund shares received in the reorganization until they have surrendered
their Acquired Fund share certificates or delivered an Affidavit. The Acquiring
Funds will not issue share certificates in the reorganization.

Conditions to Closing each Reorganization. The obligation of each Acquired Fund
to consummate the reorganization is subject to the satisfaction of certain
conditions, including the performance by the corresponding Acquiring Fund of all
its obligations under the Agreement and the receipt of all consents, orders and
permits necessary to consummate the reorganization (see Agreement, paragraph 6).

The obligation of each Acquiring Fund to consummate the reorganization is
subject to the satisfaction of certain conditions, including each corresponding
Acquired Fund's performance of all of its obligations under the Agreement, the
receipt of certain documents and financial statements from each respective
Acquired Fund and the receipt of all consents, orders and permits necessary to
consummate the reorganization (see Agreement, paragraph 7).

The obligations of each respective Acquired and Acquiring Fund are subject to
approval of the Agreement by the necessary vote of the outstanding shares of the
Acquired Fund, in accordance with the provisions of the Acquired Funds'
declaration of trust and


                                       39


by-laws. The funds' obligations are also subject to the receipt of a favorable
opinion of Hale and Dorr LLP as to the federal income tax consequences of the
reorganization (see Agreement, paragraph 8).

Termination of Agreement. The board of trustees of each respective Acquired Fund
or Acquiring Fund may terminate the Agreement (even if the shareholders of an
Acquired Fund have already approved it) at any time before the reorganization
date, if that board believes that proceeding with the reorganization would no
longer be advisable.

Expenses of the Reorganization. John Hancock Advisers, LLC will pay each
Acquired Fund's merger costs and International Fund's merger costs, and each
other Acquiring Fund will pay its own costs incurred in connection with entering
into and carrying out the provisions of the Agreements, whether or not a
reorganization occurs. With respect to each proposal, the expenses for each fund
are estimated to be approximately $14,600 for Active Bond Fund and $12,200 for
Bond Fund; $14,000 for Independence Balanced Fund and $12,000 for Balanced Fund;
$14,000 for International Equity Fund and $12,000 for International Fund;
$14,000 for Medium Capitalization Growth Fund and $12,000 for Mid Cap Growth
Fund; and $14,200 for Small Cap Equity Fund Y and $12,000 for Small Cap Equity
Fund.

CAPITALIZATION

With respect to each Proposal, the following tables set forth the capitalization
of each fund as of the date specified for each proposal, and the pro forma
combined capitalization of both funds as if each reorganization had occurred on
that date. If a reorganization is consummated, the actual exchange ratios on the
reorganization date may vary from the exchange ratios indicated. This is due to
changes in the market value of the portfolio securities of both funds between
the date specified and the reorganization date, changes in the amount of
undistributed net investment income and net realized capital gains of both funds
during that period resulting from income and distributions, and changes in the
accrued liabilities of both funds during the same period.

It is impossible to predict how many shares of each Acquiring Fund will actually
be received and distributed by each corresponding Acquired Fund on the
reorganization date. The tables should not be relied upon to determine the
amount of Acquiring Fund shares that will actually be received and distributed.

Net assets for each fund are disclosed on the fund level.  The Net Asset Value
per share and shares outstanding are referenced for each Fund's institutional
class.  With respect to Balanced Fund, Inernational Fund and Mid Cap Growth
Fund, the Net Asset Value per share is referenced for Class A shares, as Class I
shares were not operational as of the dates specified in the tables.

- --------------------------------------------------------------------------------
Proposal 1*                  Active Bond Fund     Bond Fund            Pro Forma
- --------------------------------------------------------------------------------
Net Assets (millions)              $9.2            $1,452.2            $1,461.4
- --------------------------------------------------------------------------------
Net Asset Value Per Share         $8.73             $14.95              $14.95
- --------------------------------------------------------------------------------
Shares Outstanding                1,055,248        668                  616,933
- --------------------------------------------------------------------------------
*If the reorganization had taken place on November 30, 2001.

The table reflects pro forma exchange ratios of approximately 0.584 Class I
shares of Bond Fund being issued for each share of Active Bond Fund

- --------------------------------------------------------------------------------
Proposal 2*                    Independence       Balanced Fund       Pro Forma
                              Balanced Fund
- --------------------------------------------------------------------------------
Net Assets (millions)             $16.9                $184.4          $201.3
- --------------------------------------------------------------------------------
Net Asset Value Per Share         $9.25                $12.02          $12.02
- --------------------------------------------------------------------------------
Shares Outstanding                1,828,918            --              1,406,438
- --------------------------------------------------------------------------------
*If the reorganization had taken place on December 31, 2001.

The table reflects pro forma exchange ratios of approximately 0.769 Class I
shares of Balanced Fund being issued for each share of Independence Balanced
Fund

- --------------------------------------------------------------------------------
Proposal 3*                   International     International Fund     Pro Forma
                               Equity Fund
- --------------------------------------------------------------------------------
Net Assets (millions)              $4.1               $15.0              $19.1
- --------------------------------------------------------------------------------
Net Asset Value Per Share         $6.42               $6.18              $6.18
- --------------------------------------------------------------------------------
Shares Outstanding                641,104             --                 666,715
- --------------------------------------------------------------------------------
*If the reorganization had taken place on October 31, 2001.


                                       40


The table reflects pro forma exchange ratios of approximately 1.039 Class I
shares of International Fund being issued for each share of International Equity
Fund

- --------------------------------------------------------------------------------
Proposal 4*                     Medium          Mid Cap Growth Fund    Pro Forma
                            Capitalization
                             Growth Fund
- --------------------------------------------------------------------------------
Net Assets (millions)            $5.2                  $189.3            $194.5
- --------------------------------------------------------------------------------
Net Asset Value Per Share       $7.23                  $7.66             $7.66
- --------------------------------------------------------------------------------
Shares Outstanding              712,450                --                672,553
- --------------------------------------------------------------------------------
*If the reorganization had taken place on October 31, 2001.

The table reflects pro forma exchange ratios of approximately 0.944 Class I
shares of Mid Cap Growth Fund shares being issued for each share of Medium
Capitalization Growth Fund


- --------------------------------------------------------------------------------
Proposal 5*                  Small Cap Equity   Small Cap Equity Fund  Pro Forma
                                  Fund Y
- --------------------------------------------------------------------------------
Net Assets (millions)             $27.1                 $732.8          $764.9
- --------------------------------------------------------------------------------
Net Asset Value Per Share         $10.39                $16.61          $16.61
- --------------------------------------------------------------------------------
Shares Outstanding                2,609,663             489            1,631,528
- --------------------------------------------------------------------------------
*If the reorganization had taken place on October 31, 2001.

The table reflects pro forma exchange ratios of approximately 0.625 Class I
shares of Small Cap Equity Fund being issued for each share of Small Cap Equity
Fund Y.

ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES

The following table shows where in each fund's prospectus you can find
additional information about the business of each fund.

- --------------------------------------------------------------------------------
Type of Information           Headings in Each Prospectus
- --------------------------------------------------------------------------------
Investment objective and      Goal and Strategy / Main Risks
policies
- --------------------------------------------------------------------------------
Portfolio management          Portfolio Management
- --------------------------------------------------------------------------------
Expenses                      Your Expenses
- --------------------------------------------------------------------------------
Eligible Investors            Who Can Buy Shares
- --------------------------------------------------------------------------------
Purchase of shares            Your Account: Opening an Account, Buying Shares,
                              Transaction Policies
- --------------------------------------------------------------------------------
Redemption or sale of         Your Account: Selling shares, Transaction Policies
shares
- --------------------------------------------------------------------------------
Custodian                     Business Structure
- --------------------------------------------------------------------------------
Dividends, distributions      Dividends and Account Policies
and  taxes
- --------------------------------------------------------------------------------


                                       41


BOARDS' EVALUATION AND RECOMMENDATION

For the reasons described above, the board of trustees of each Acquired Fund,
including the trustees who are not "interested persons" of either fund in each
proposed reorganization or the adviser ("independent trustees"), approved the
reorganizations. In particular, the trustees determined that each reorganization
is in the best interests of the Acquired Funds and that the interests of
Acquired Fund shareholders would not be diluted as a result of the
reorganization. Similarly, the board of trustees of each Acquiring Fund,
including the independent trustees, approved the reorganizations. They also
determined that each reorganization is in the best interests of the Acquiring
Funds and that the interests of Acquiring Fund shareholders would not be diluted
as a result of the reorganization.

                The trustees of each Acquired Fund recommend that
           shareholders of each Acquired Fund vote for the proposal to
          approve the appropriate Agreement and Plan of Reorganization.

VOTING RIGHTS AND REQUIRED VOTE

Each Acquired Fund share is entitled to one vote. Approval of each proposal
described above requires the affirmative vote of a majority of the shares of
each Acquired Fund outstanding and entitled to vote on each respective proposal.
For this purpose, a majority of the outstanding shares of your fund means the
vote of the lesser of :

(1) 67% or more of the shares present at the meeting, if the holders of more
than 50% of the shares of the fund are present or represented by proxy, or

(2) more than 50% of the outstanding shares of the fund.



- -----------------------------------------------------------------------------------------------------------------------------------
Shares                        Quorum                        Voting
- -----------------------------------------------------------------------------------------------------------------------------------
                                                      
In General                    All shares "present" in       Shares "present" in person will be voted in person at the meeting.
                              person or by proxy are        Shares present by proxy will be voted in accordance with
                              counted towards a quorum.     instructions.
- -----------------------------------------------------------------------------------------------------------------------------------
Proxy with No Voting          Considered "present" at       Voted "for" a proposal.
Instruction (other than       meeting.
Broker Non-Vote)
- -----------------------------------------------------------------------------------------------------------------------------------
Broker Non-Vote               Considered "present" at       Not voted. Same effect as a vote "against" a proposal.
                              meeting.
- -----------------------------------------------------------------------------------------------------------------------------------
Vote to Abstain               Considered "present" at       Not voted. Same effect as a vote "against" a proposal.
                              meeting.
- -----------------------------------------------------------------------------------------------------------------------------------


If the required approval of shareholders is not obtained with respect to a
proposal, the Acquired Fund subject to the proposal will continue to engage in
business as a separate mutual fund and the board of trustees will consider what
further action may be appropriate. This action could include, among other
things, terminating a fund's expense limitation or closing the fund.

INFORMATION CONCERNING THE MEETING

Solicitation of Proxies

In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, by e-mail, by fax or in person by the trustees, officers and
employees of your fund; by personnel of your fund's investment adviser, John
Hancock Advisers, LLC and its transfer agent, John Hancock Signature Services,
Inc.; or by broker-dealer firms. Signature Services, together with a third party
solicitation firm, has agreed to provide proxy solicitation services to each
Acquired Fund at a cost of approximately $____ per fund.

Revoking Proxies

Each Acquired Fund shareholder signing and returning a proxy has the power to
revoke it at any time before it is exercised:

o     By filing a written notice of revocation with the Acquired Funds' transfer
      agent, John Hancock Signature Services, Inc., 1 John Hancock Way, Suite
      1000, Boston, Massachusetts 02217-1001, or

o     By returning a duly executed proxy with a later date before the time of
      the meeting, or


                                       42


o     If a shareholder has executed a proxy but is present at the meeting and
      wishes to vote in person, by notifying the secretary of your fund (without
      complying with any formalities) at any time before it is voted.

Being present at the meeting alone does not revoke a previously executed and
returned proxy.

Outstanding Shares and Quorum

As of March 15, 2002 (the "record date"), the number of shares of beneficial
interest of each Acquired Fund outstanding were as follows:

        ------------------------------------------------------------
         FUND                                    SHARES OUTSTANDING
        ------------------------------------------------------------
         Active Bond Fund
        ------------------------------------------------------------
         Independence Balanced Fund
        ------------------------------------------------------------
         International Equity Fund
        ------------------------------------------------------------
         Medium Capitalization Growth Fund
        ------------------------------------------------------------
         Small Cap Equity Fund Y
        ------------------------------------------------------------

Only shareholders of record on the record date are entitled to notice of and to
vote at the meeting. A majority of the outstanding shares of each Acquired Fund
that are entitled to vote will be considered a quorum for the transaction of
business.

Other Business

Each Acquired Fund's board of trustees knows of no business to be presented for
consideration at the meeting other than the proposals. If other business is
properly brought before the meeting, proxies will be voted according to the best
judgment of the persons named as proxies.

Adjournments

If a quorum is not present in person or by proxy at the time any session of the
meeting is called to order, the persons named as proxies may vote those proxies
that have been received to adjourn the meeting to a later date. If a quorum is
present but there are not sufficient votes in favor of a proposal, the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies concerning the proposal. Any adjournment will
require the affirmative vote of a majority of an Acquired Fund's shares at the
session of the meeting to be adjourned. If an adjournment of the meeting is
proposed because there are not sufficient votes in favor of a proposal, the
persons named as proxies will vote those proxies favoring the proposal in favor
of adjournment, and will vote those proxies against the reorganization against
adjournment.

Telephone Voting

In addition to soliciting proxies by mail, by fax or in person, your fund(s) may
also arrange to have votes recorded by telephone by officers and employees of
your fund(s) or by personnel of the adviser or transfer agent or a third party
solicitation firm. The telephone voting procedure is designed to verify a
shareholder's identity, to allow a shareholder to authorize the voting of shares
in accordance with the shareholder's instructions and to confirm that the voting
instructions have been properly recorded. If these procedures were subject to a
successful legal challenge, these telephone votes would not be counted at the
meeting. Your fund has not obtained an opinion of counsel about telephone
voting, but is currently not aware of any challenge.

o     A shareholder will be called on a recorded line at the telephone number in
      a fund's account records and will be asked to provide the shareholder's
      social security number or other identifying information.

o     The shareholder will then be given an opportunity to authorize proxies to
      vote his or her shares at the meeting in accordance with the shareholder's
      instructions.

o     To ensure that the shareholder's instructions have been recorded
      correctly, the shareholder will also receive a confirmation of the voting
      instructions by mail.

o     A toll-free number will be available in case the voting information
      contained in the confirmation is incorrect.

o     If the shareholder decides after voting by telephone to attend the
      meeting, the shareholder can revoke the proxy at that time and vote the
      shares at the meeting.


                                       43


Internet Voting

You will also have the opportunity to submit your voting instructions via the
internet by utilizing a program provided through a vendor. Voting via the
internet will not affect your right to vote in person if you decide to attend
the meting. Do not mail the proxy card if you are voting via the internet. To
vote via the internet , you will need the "control number" that appears on your
proxy card. These Internet voting procedures are designed to authenticate
shareholder identities, to allow shareholders give their voting instructions,
and to confirm that shareholders instructions have been recorded properly. If
you are voting via the internet you should understand that there may be costs
associated with electronic access, such as usage charges from internet access
providers and telephone companies, that must be borne to you.

o     Read the proxy statement and have your proxy card(s) at hand.

o     Go to the Web site www.jhfunds.com.

o     Select the shareholder entryway.

o     Select the proxy-voting link for your Fund(s).

o     Enter the "control number" found on your proxy card.

o     Follow the instructions on the Web site. Please call us at 1-800-225-5291
      if you have any problems.

o     To insure that your instructions have been recorded correctly, you will
      receive a confirmation of your voting instructions immediately after your
      submission and also by email if chosen.

Shareholders' Proposals

The Funds are not required, and do not intend, to hold meetings of shareholders
each year. Instead, meetings will be held only when and if required. Any
shareholders desiring to present a proposal for consideration at the next
meeting for shareholders of their respective Funds must submit the proposal in
writing, so that it is received by the appropriate Fund at 101 Huntington
Avenue, Boston, Massachusetts 02199 within a reasonable time before any meeting.

OWNERSHIP OF SHARES OF THE FUNDS

To the knowledge of each fund, as of March 15, 2002, the following persons owned
of record or beneficially 5% or more of the outstanding shares of each fund,
respectively:



- -----------------------------------------------------------------------------------------------------------------------------------
                  Names and Addresses of Owners of More Than 5% of Shares

- -----------------------------------------------------------------------------------------------------------------------------------
Proposal 1                                                                                         Active Bond Fund
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Bond Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
                                                                                    Class A      Class B     Class C     Class I
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

Proposal 2                                                                                    Independence Balanced Fund
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Balanced Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
                                                                                    Class A      Class B     Class C     Class I
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------



                                       44




- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
Proposal 3                                                                                    International Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                  International Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
                                                                                    Class A      Class B     Class C     Class I
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

Proposal 4                                                                                Medium Capitalization Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Mid Cap Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
                                                                                    Class A      Class B     Class C     Class I
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

Proposal 5                                                                                     Small Cap Equity Fund Y
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                Small Cap Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
                                                                                    Class A      Class B     Class C     Class I
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------


As of March 15, 2002, the trustees and officers of each fund owned in the
aggregate less than 1% of the outstanding shares of their respective funds.

EXPERTS

The financial statements and the financial highlights of the Acquiring Funds for
the period ended October 31, 2001 for International Fund, Mid Cap Growth Fund
and Small Cap Equity Fund, November 30, 2001 for Bond Fund, and December 31,
2001 for Balanced Fund and the financial statements and financial highlights for
each Acquired Fund for the period ended August 31, 2001 are incorporated by
reference into this proxy statement and prospectus. The financial statements and
financial highlights for each Acquired Fund have been independently audited by
Deloitte & Touche LLP, for Balanced Fund, Bond Fund, and Small Cap Equity Fund
by Ernst & Young, LLP and for International Fund and Mid Cap Growth Fund, by
PricewaterhouseCoopers, LLP as stated in their reports appearing in the
statement of additional information. These financial statements and financial
highlights have been included in reliance on their reports given on their
authority as experts in accounting and auditing.


                                       45


AVAILABLE INFORMATION

Each fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 and files reports,
proxy statements and other information with the SEC. These reports, proxy
statements and other information filed by the funds can be inspected and copied
(for a duplication fee) at the public reference facilities of the SEC at 450
Fifth Street, N.W., Washington, D.C., and at the Midwest Regional Office (500
West Madison Street, Suite 1400, Chicago, Illinois). Copies of these materials
can also be obtained by mail from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
copies of these documents may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov.


                                       46


Exhibit A

                  FORM OF AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this 1st day
of March, 2002, by and between ______________________ (the "Acquiring Fund"), a
series of _________________________, a Massachusetts business trust (the
"Trust"), and _________________________ (the "Acquired Fund"), a series of John
Hancock Institutional Series Trust, a Massachusetts business trust (the "Trust
II"), each with their principal place of business at 101 Huntington Avenue,
Boston, Massachusetts 02199. The Acquiring Fund and the Acquired Fund are
sometimes referred to collectively herein as the "Funds" and individually as a
"Fund."

This Agreement is intended to be and is adopted as a plan of "reorganization,"
as such term is used in Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization will consist of the transfer of all of
the assets of the Acquired Fund to the Acquiring Fund in exchange solely for the
issuance of Class I Shares of beneficial interest of the Acquiring Fund (the
"Acquiring Fund Shares") to the Acquired Fund and the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund, followed by the
distribution by the Acquired Fund, on or promptly after the Closing Date
hereinafter referred to, of the Acquiring Fund Shares to the shareholders of the
Acquired Fund in liquidation and termination of the Acquired Fund as provided
herein, all upon the terms and conditions set forth in this Agreement.

In consideration of the premises of the covenants and agreements hereinafter set
forth, the parties hereto covenant and agree as follows:

1.    TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF
      LIABILITIES AND ISSUANCE OF ACQUIRING FUND SHARES; LIQUIDATION OF THE
      ACQUIRED FUND

1.1   The Acquired Fund will transfer all of its assets (consisting, without
      limitation, of portfolio securities and instruments, dividends and
      interest receivables, cash and other assets), as set forth in the
      statement of assets and liabilities referred to in Paragraph 7.2 hereof
      (the "Statement of Assets and Liabilities"), to the Acquiring Fund free
      and clear of all liens and encumbrances, except as otherwise provided
      herein, in exchange for (i) the assumption by the Acquiring Fund of the
      known and unknown liabilities of the Acquired Fund, including the
      liabilities set forth in the Statement of Assets and Liabilities (the
      "Acquired Fund Liabilities"), which shall be assigned and transferred to
      the Acquiring Fund by the Acquired Fund and assumed by the Acquiring Fund,
      and (ii) delivery by the Acquiring Fund to the Acquired Fund, for
      distribution pro rata by the Acquired Fund to its shareholders in
      proportion to their respective ownership of shares of beneficial interest
      of the Acquired Fund, as of the close of business on June 7, 2002 (the
      "Closing Date"), of a number of the Acquiring Fund Shares having an
      aggregate net asset value equal to the value of the assets, less such
      liabilities (herein referred to as the "net value of the assets") assumed,
      assigned and delivered, all determined as provided in Paragraph 2.1 hereof
      and as of a date and time as specified therein. Such transactions shall
      take place at the closing provided for in Paragraph 3.1 hereof (the
      "Closing"). All computations shall be provided by The Bank of New York
      (the "Custodian"), as custodian and pricing agent for the Acquiring Fund
      and the Acquired Fund.

1.2   The Acquired Fund has provided the Acquiring Fund with a list of the
      current securities holdings of the Acquired Fund as of the date of
      execution of this Agreement. The Acquired Fund reserves the right to sell
      any of these securities (except to the extent sales may be limited by
      representations made in connection with issuance of the tax opinion
      provided for in paragraph 8.6 hereof) but will not, without the prior
      approval of the Acquiring Fund, acquire any additional securities other
      than securities of the type in which the Acquiring Fund is permitted to
      invest.

1.3   The Acquiring Fund and the Acquired Fund shall each bear its own expenses
      in connection with the transactions contemplated by this Agreement.

1.4   On or as soon after the Closing Date as is conveniently practicable (the
      "Liquidation Date"), the Acquired Fund will liquidate and distribute pro
      rata to shareholders of record (the "Acquired Fund shareholders"),
      determined as of the close of regular trading on the New York Stock
      Exchange on the Closing Date, the Acquiring Fund Shares received by the
      Acquired Fund pursuant to Paragraph 1.1 hereof. Such liquidation and
      distribution will be accomplished by the transfer of the Acquiring Fund
      Shares then credited to the account of the Acquired Fund on the books of
      the Acquiring Fund, to open accounts on the share records of the Acquiring
      Fund in the names of the Acquired Fund shareholders and representing the
      respective pro rata number of Acquiring Fund Shares due such shareholders.
      The Acquiring Fund shall not issue certificates representing Acquiring
      Fund Shares in connection with such exchange.

1.5   The Acquired Fund shareholders holding certificates representing their
      ownership of shares of beneficial interest of the Acquired Fund shall
      surrender such certificates or deliver an affidavit with respect to lost
      certificates in such form and accompanied by such surety bonds as the
      Acquired Fund may require (collectively, an "Affidavit"), to John Hancock
      Signature Services, Inc. prior to the Closing Date. Any Acquired Fund
      share certificate which remains outstanding on the


                                       47


      Closing Date shall be deemed to be canceled, shall no longer evidence
      ownership of shares of beneficial interest of the Acquired Fund and shall
      evidence ownership of Acquiring Fund Shares. Unless and until any such
      certificate shall be so surrendered or an Affidavit relating thereto shall
      be delivered, dividends and other distributions payable by the Acquiring
      Fund subsequent to the Liquidation Date with respect to Acquiring Fund
      Shares shall be paid to the holder of such certificate(s), but such
      shareholders may not redeem or transfer Acquiring Fund Shares received in
      the Reorganization. The Acquiring Fund will not issue share certificates
      in the Reorganization.

1.6   Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
      name other than the registered holder of the Acquired Fund Shares on the
      books of the Acquired Fund as of that time shall, as a condition of such
      issuance and transfer, be paid by the person to whom such Acquiring Fund
      Shares are to be issued and transferred.

1.7   The existence of the Acquired Fund shall be terminated as promptly as
      practicable following the Liquidation Date.

1.8   Any reporting responsibility of the Acquired Fund, including, but not
      limited to, the responsibility for filing of regulatory reports, tax
      returns, or other documents with the Securities and Exchange Commission
      (the "Commission"), any state securities commissions, and any federal,
      state or local tax authorities or any other relevant regulatory authority,
      is and shall remain the responsibility of the Acquired Fund.

2.   VALUATION

2.1   The net asset values of the Acquiring Fund Shares and the net values of
      the assets and liabilities of the Acquired Fund to be transferred shall,
      in each case, be determined as of the close of business (4:00 p.m. Boston
      time) on the Closing Date. The net asset values of the Acquiring Fund
      Shares shall be computed by the Custodian in the manner set forth in the
      Acquiring Fund's Declaration of Trust as amended and restated (the
      "Declaration"), or By-Laws and the Acquiring Fund's then-current
      prospectus and statement of additional information and shall be computed
      in each case to not fewer than four decimal places. The net values of the
      assets of the Acquired Fund to be transferred shall be computed by the
      Custodian by calculating the value of the assets transferred by the
      Acquired Fund and by subtracting therefrom the amount of the liabilities
      assigned and transferred to and assumed by the Acquiring Fund on the
      Closing Date, said assets and liabilities to be valued in the manner set
      forth in the Acquired Fund's then current prospectus and statement of
      additional information and shall be computed in each case to not fewer
      than four decimal places.

2.2   The number of Acquiring Fund Shares to be issued (including fractional
      shares, if any) in exchange for the Acquired Fund's assets shall be
      determined by dividing the value of the Acquired Fund's assets less the
      liabilities assumed by the Acquiring Fund, by the Acquiring Fund's net
      asset value per share, all as determined in accordance with Paragraph 2.1
      hereof.

2.3   All computations of value shall be made by the Custodian in accordance
      with its regular practice as pricing agent for the Funds.

3.    CLOSING AND CLOSING DATE

3.1   The Closing Date shall be June 7, 2002 or such other date on or before
      December 31, 2002 as the parties may agree. The Closing shall be held as
      of 5:00 p.m. at the offices of the Trust and the Trust II, 101 Huntington
      Avenue, Boston, Massachusetts 02199, or at such other time and/or place as
      the parties may agree.

3.2   Portfolio securities that are not held in book-entry form in the name of
      the Custodian as record holder for the Acquired Fund shall be presented by
      the Acquired Fund to the Custodian for examination no later than three
      business days preceding the Closing Date. Portfolio securities which are
      not held in book-entry form shall be delivered by the Acquired Fund to the
      Custodian for the account of the Acquiring Fund on the Closing Date, duly
      endorsed in proper form for transfer, in such condition as to constitute
      good delivery thereof in accordance with the custom of brokers, and shall
      be accompanied by all necessary federal and state stock transfer stamps or
      a check for the appropriate purchase price thereof. Portfolio securities
      held of record by the Custodian in book-entry form on behalf of the
      Acquired Fund shall be delivered to the Acquiring Fund by the Custodian by
      recording the transfer of beneficial ownership thereof on its records. The
      cash delivered shall be in the form of currency or by the Custodian
      crediting the Acquiring Fund's account maintained with the Custodian with
      immediately available funds.

3.3   In the event that on the Closing Date (a) the New York Stock Exchange
      shall be closed to trading or trading thereon shall be restricted or (b)
      trading or the reporting of trading on said Exchange or elsewhere shall be
      disrupted so that accurate appraisal of the value of the net assets of the
      Acquiring Fund or the Acquired Fund is impracticable, the Closing Date
      shall be postponed until the first business day after the day when trading
      shall have been fully resumed and reporting shall have been restored;
      provided that if trading shall not be fully resumed and reporting restored
      on or before December 31, 2002,


                                       48


      this Agreement may be terminated by the Acquiring Fund or by the Acquired
      Fund upon the giving of written notice to the other party.

3.4   The Acquired Fund shall deliver at the Closing a list of the names,
      addresses, federal taxpayer identification numbers and backup withholding
      and nonresident alien withholding status of the Acquired Fund shareholders
      and the number of outstanding shares of beneficial interest of the
      Acquired Fund owned by each such shareholder, all as of the close of
      business on the Closing Date, certified by its Treasurer, Secretary or
      other authorized officer (the "Shareholder List"). The Acquiring Fund
      shall issue and deliver to the Acquired Fund a confirmation evidencing the
      Acquiring Fund Shares to be credited on the Closing Date, or provide
      evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares
      have been credited to the Acquired Fund's account on the books of the
      Acquiring Fund. At the Closing, each party shall deliver to the other such
      bills of sale, checks, assignments, stock certificates, receipts or other
      documents as such other party or its counsel may reasonably request.

4.    REPRESENTATIONS AND WARRANTIES

4.1   The Trust II on behalf of the Acquired Fund represents, warrants and
      covenants to the Acquiring Fund as follows:

      (a)   The Trust II is a business trust, duly organized, validly existing
            and in good standing under the laws of the Commonwealth of
            Massachusetts and has the power to own all of its properties and
            assets and, subject to approval by the shareholders of the Acquired
            Fund, to carry out the transactions contemplated by this Agreement.
            Neither the Trust II nor the Acquired Fund is required to qualify to
            do business in any jurisdiction in which it is not so qualified or
            where failure to qualify would subject it to any material liability
            or disability. The Trust II has all necessary federal, state and
            local authorizations to own all of its properties and assets and to
            carry on its business as now being conducted;

      (b)   The Trust II is a registered investment company classified as a
            management company and its registration with the Commission as an
            investment company under the Investment Company Act of 1940, as
            amended (the "1940 Act"), is in full force and effect. The Acquired
            Fund is a diversified series of the Trust II;

      (c)   The Trust II and the Acquired Fund are not, and the execution,
            delivery and performance of their obligations under this Agreement
            will not result, in violation of any provision of the Trust II's
            Declaration of Trust, as amended and restated (the "Trust II's
            Declaration") or By-Laws or of any agreement, indenture, instrument,
            contract, lease or other undertaking to which the Trust II or the
            Acquired Fund is a party or by which it is bound;

      (d)   Except as otherwise disclosed in writing and accepted by the
            Acquiring Fund, no material litigation or administrative proceeding
            or investigation of or before any court or governmental body is
            currently pending or threatened against the Trust II or the Acquired
            Fund or any of the Acquired Fund's properties or assets. The Trust
            II knows of no facts which might form the basis for the institution
            of such proceedings, and neither the Trust II nor the Acquired Fund
            is a party to or subject to the provisions of any order, decree or
            judgment of any court or governmental body which materially and
            adversely affects the Acquired Fund's business or its ability to
            consummate the transactions herein contemplated;

      (e)   The Acquired Fund has no material contracts or other commitments
            (other than this Agreement or agreements for the purchase of
            securities entered into in the ordinary course of business and
            consistent with its obligations under this Agreement) which will not
            be terminated without liability to the Acquired Fund at or prior to
            the Closing Date;

      (f)   The audited statement of assets and liabilities, including the
            schedule of investments, of the Acquired Fund as of
            _________________ and the related statement of operations (copies of
            which have been furnished to the Acquiring Fund) and the unaudited
            statements as of ___________________, present fairly in all material
            respects the financial condition of the Acquired Fund as of
            ________________ and ________________ and the results of its
            operations for the period then ended in accordance with generally
            accepted accounting principles consistently applied, and there were
            no known actual or contingent liabilities of the Acquired Fund as of
            the respective dates thereof not disclosed therein;

      (g)   Since ________________, there has not been any material adverse
            change in the Acquired Fund's financial condition, assets,
            liabilities, or business other than changes occurring in the
            ordinary course of business, or any incurring by the Acquired Fund
            of indebtedness maturing more than one year from the date such
            indebtedness was incurred, except as otherwise disclosed to and
            accepted by the Acquiring Fund;

      (h)   At the date hereof and by the Closing Date, all federal, state and
            other tax returns and reports, including information returns and
            payee statements, of the Acquired Fund required by law to have been
            filed or furnished by such dates shall have been filed or furnished,
            and all federal, state and other taxes, interest and penalties shall
            have been paid so far as due, or provision shall have been made for
            the payment thereof, and to the best of the Acquired Fund's
            knowledge no such return is currently under audit and no assessment
            has been asserted with respect to such returns or reports;


                                       49


      (i)   The Acquired Fund has qualified as a regulated investment company
            for each taxable year of its operation and the Acquired Fund will
            qualify as such as of the Closing Date with respect to its taxable
            year ending on the Closing Date;

      (j)   The authorized capital of the Acquired Fund consists of an unlimited
            number of shares of beneficial interest, no par value. All issued
            and outstanding shares of beneficial interest of the Acquired Fund
            are, and at the Closing Date will be, duly and validly issued and
            outstanding, fully paid and nonassessable by the Trust II. All of
            the issued and outstanding shares of beneficial interest of the
            Acquired Fund will, at the time of Closing, be held by the persons
            and in the amounts set forth in the Shareholder List submitted to
            the Acquiring Fund pursuant to Paragraph 3.4 hereof. The Acquired
            Fund does not have outstanding any options, warrants or other rights
            to subscribe for or purchase any of its shares of beneficial
            interest, nor is there outstanding any security convertible into any
            of its shares of beneficial interest;

      (k)   At the Closing Date, the Acquired Fund will have good and marketable
            title to the assets to be transferred to the Acquiring Fund pursuant
            to Paragraph 1.1 hereof, and full right, power and authority to
            sell, assign, transfer and deliver such assets hereunder, and upon
            delivery and payment for such assets, the Acquiring Fund will
            acquire good and marketable title thereto subject to no restrictions
            on the full transfer thereof, including such restrictions as might
            arise under the Securities Act of 1933, as amended (the "1933 Act");

      (l)   The execution, delivery and performance of this Agreement have been
            duly authorized by all necessary action on the part of the Trust II
            on behalf of the Acquired Fund, and this Agreement constitutes a
            valid and binding obligation of the Acquired Fund enforceable in
            accordance with its terms, subject to the approval of the Acquired
            Fund's shareholders;

      (m)   The information to be furnished by the Acquired Fund to the
            Acquiring Fund for use in applications for orders, registration
            statements, proxy materials and other documents which may be
            necessary in connection with the transactions contemplated hereby
            shall be accurate and complete and shall comply in all material
            respects with federal securities and other laws and regulations
            thereunder applicable thereto;

      (n)   The proxy statement of the Acquired Fund (the "Proxy Statement") to
            be included in the Registration Statement referred to in Paragraph
            5.7 hereof (other than written information furnished by the
            Acquiring Fund for inclusion therein, as covered by the Acquiring
            Fund's warranty in Paragraph 4.2(m) hereof), on the effective date
            of the Registration Statement, on the date of the meeting of the
            Acquired Fund shareholders and on the Closing Date, shall not
            contain any untrue statement of a material fact or omit to state a
            material fact required to be stated therein or necessary to make the
            statements therein, in light of the circumstances under which such
            statements were made, not misleading;

      (o)   No consent, approval, authorization or order of any court or
            governmental authority is required for the consummation by the
            Acquired Fund of the transactions contemplated by this Agreement;

      (p)   All of the issued and outstanding shares of beneficial interest of
            the Acquired Fund have been offered for sale and sold in conformity
            with all applicable federal and state securities laws;

      (q)   The prospectus of the Acquired Fund, dated ______________ (the
            "Acquired Fund Prospectus"), furnished to the Acquiring Fund, does
            not contain any untrue statement of a material fact or omit to state
            a material fact required to be stated therein or necessary to make
            the statements therein, in light of the circumstances in which they
            were made, not misleading; and

      (r)   The Acquired Fund Tax Representation Certificate to be delivered by
            the Acquired Fund to the Acquiring Fund at Closing pursuant to
            Section 7.5 (the "Acquired Fund Tax Representation Certificate")
            will not on the Closing Date contain any untrue statement of a
            material fact or omit to state a material fact necessary to make the
            statements therein not misleading.

4.2   The Trust on behalf of the Acquiring Fund represents, warrants and
      covenants to the Acquired Fund as follows:

      (a)   The Trust is a business trust duly organized, validly existing and
            in good standing under the laws of The Commonwealth of Massachusetts
            and has the power to own all of its properties and assets and to
            carry out the Agreement. Neither the Trust nor the Acquiring Fund is
            required to qualify to do business in any jurisdiction in which it
            is not so qualified or where failure to qualify would subject it to
            any material liability or disability. The Trust has all necessary
            federal, state and local authorizations to own all of its properties
            and assets and to carry on its business as now being conducted;

      (b)   The Trust is a registered investment company classified as a
            management company and its registration with the Commission as an
            investment company under the 1940 Act is in full force and effect.
            The Acquiring Fund is a diversified series of the Trust;

      (c)   The prospectus (the "Acquiring Fund Prospectus") and statement of
            additional information of the Acquiring Fund, each dated
            ______________, and any amendments or supplements thereto on or
            prior to the Closing Date, and the Registration


                                       50


            Statement on Form N-14 filed in connection with this Agreement (the
            "Registration Statement") (other than written information furnished
            by the Acquired Fund for inclusion therein, as covered by the
            Acquired Fund's warranty in Paragraph 4.1(m) hereof) will conform in
            all material respects to the applicable requirements of the 1933 Act
            and the 1940 Act and the rules and regulations of the Commission
            thereunder, the Acquiring Fund Prospectus does not include any
            untrue statement of a material fact or omit to state any material
            fact required to be stated therein or necessary to make the
            statements therein, in light of the circumstances under which they
            were made, not misleading and the Registration Statement will not
            include any untrue statement of material fact or omit to state any
            material fact required to be stated therein or necessary to make the
            statements therein, in light of the circumstances under which they
            were made, not misleading;

      (d)   At the Closing Date, the Trust on behalf of the Acquiring Fund will
            have good and marketable title to the assets of the Acquiring Fund;

      (e)   The Trust and the Acquiring Fund are not, and the execution,
            delivery and performance of their obligations under this Agreement
            will not result in a violation of any provisions of the Trust's
            Declaration, or By-Laws or of any agreement, indenture, instrument,
            contract, lease or other undertaking to which the Trust or the
            Acquiring Fund is a party or by which the Trust or the Acquiring
            Fund is bound;

      (f)   Except as otherwise disclosed in writing and accepted by the
            Acquired Fund, no material litigation or administrative proceeding
            or investigation of or before any court or governmental body is
            currently pending or threatened against the Trust or the Acquiring
            Fund or any of the Acquiring Fund's properties or assets. The Trust
            knows of no facts which might form the basis for the institution of
            such proceedings, and neither the Trust nor the Acquiring Fund is a
            party to or subject to the provisions of any order, decree or
            judgment of any court or governmental body which materially and
            adversely affects the Acquiring Fund's business or its ability to
            consummate the transactions herein contemplated;

      (g)   The audited statement of assets and liabilities, including the
            schedule of investments, of the Acquiring Fund as of ______________
            and the related statement of operations (copies of which have been
            furnished to the Acquired Fund) and the unaudited statements as of
            ________________, present fairly in all material respects the
            financial condition of the Acquiring Fund as of _______________ and
            _______________ and the results of its operations for the period
            then ended in accordance with generally accepted accounting
            principles consistently applied, and there were no known actual or
            contingent liabilities of the Acquiring Fund as of the respective
            dates thereof not disclosed therein;

      (h)   Since _______________, there has not been any material adverse
            change in the Acquiring Fund's financial condition, assets,
            liabilities or business other than changes occurring in the ordinary
            course of business, or any incurrence by the Trust on behalf of the
            Acquiring Fund of indebtedness maturing more than one year from the
            date such indebtedness was incurred, except as disclosed to and
            accepted by the Acquired Fund;

      (i)   Each of the Acquiring Fund and its predecessors has qualified as a
            regulated investment company for each taxable year of its operation
            and the Acquiring Fund will qualify as such as of the Closing Date;

      (j)   The authorized capital of the Trust consists of an unlimited number
            of shares of beneficial interest, no par value per share. All issued
            and outstanding shares of beneficial interest of the Acquiring Fund
            are, and at the Closing Date will be, duly and validly issued and
            outstanding, fully paid and nonassessable by the Trust. The
            Acquiring Fund does not have outstanding any options, warrants or
            other rights to subscribe for or purchase any of its shares of
            beneficial interest, nor is there outstanding any security
            convertible into any of its shares of beneficial interest;

      (k)   The execution, delivery and performance of this Agreement has been
            duly authorized by all necessary action on the part of the Trust on
            behalf of the Acquiring Fund, and this Agreement constitutes a valid
            and binding obligation of the Acquiring Fund enforceable in
            accordance with its terms;

      (l)   The Acquiring Fund Shares to be issued and delivered to the Acquired
            Fund pursuant to the terms of this Agreement, when so issued and
            delivered, will be duly and validly issued shares of beneficial
            interest of the Acquiring Fund and will be fully paid and
            nonassessable by the Trust;

      (m)   The information to be furnished by the Acquiring Fund for use in
            applications for orders, registration statements, proxy materials
            and other documents which may be necessary in connection with the
            transactions contemplated hereby shall be accurate and complete and
            shall comply in all material respects with federal securities and
            other laws and regulations applicable thereto;

      (n)   No consent, approval, authorization or order of any court or
            governmental authority is required for the consummation by the
            Acquiring Fund of the transactions contemplated by the Agreement,
            except for the registration of the Acquiring Fund Shares under the
            1933 Act and the 1940 Act; and


                                       51


      (o)   The Acquiring Fund Tax Representation Certificate to be delivered by
            the Acquiring Fund to the Acquired Fund at Closing pursuant to
            Section 6.3 (the "Acquiring Fund Tax Representation Certificate")
            will not on the Closing Date contain any untrue statement of a
            material fact or omit to state a material fact necessary to make the
            statements therein not misleading.

5.    COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND

5.1   Except as expressly contemplated herein to the contrary, the Trust II on
      behalf of the Acquired Fund and the Trust on behalf of the Acquiring Fund,
      will operate their respective businesses in the ordinary course between
      the date hereof and the Closing Date, it being understood that such
      ordinary course of business will include customary dividends and
      distributions and any other distributions necessary or desirable to avoid
      federal income or excise taxes.

5.2   The Trust II will call a meeting of the Acquired Fund shareholders to
      consider and act upon this Agreement and to take all other action
      necessary to obtain approval of the transactions contemplated herein.

5.3   The Acquired Fund covenants that the Acquiring Fund Shares to be issued
      hereunder are not being acquired by the Acquired Fund for the purpose of
      making any distribution thereof other than in accordance with the terms of
      this Agreement.

5.4   The Trust II on behalf of the Acquired Fund will provide such information
      within its possession or reasonably obtainable as the Trust on behalf of
      the Acquiring Fund requests concerning the beneficial ownership of the
      Acquired Fund's shares of beneficial interest.

5.5   Subject to the provisions of this Agreement, the Acquiring Fund and the
      Acquired Fund each shall take, or cause to be taken, all action, and do or
      cause to be done, all things reasonably necessary, proper or advisable to
      consummate the transactions contemplated by this Agreement.

5.6   The Trust II on behalf of the Acquired Fund shall furnish to the Trust on
      behalf of the Acquiring Fund on the Closing Date the Statement of Assets
      and Liabilities of the Acquired Fund as of the Closing Date, which
      statement shall be prepared in accordance with generally accepted
      accounting principles consistently applied and shall be certified by the
      Acquired Fund's Treasurer or Assistant Treasurer. As promptly as
      practicable but in any case within 60 days after the Closing Date, the
      Acquired Fund shall furnish to the Acquiring Fund, in such form as is
      reasonably satisfactory to the Trust, a statement of the earnings and
      profits of the Acquired Fund for federal income tax purposes and of any
      capital loss carryovers and other items that will be carried over to the
      Acquiring Fund as a result of Section 381 of the Code, and which statement
      will be certified by the President of the Acquired Fund.

5.7   The Trust on behalf of the Acquiring Fund will prepare and file with the
      Commission the Registration Statement in compliance with the 1933 Act and
      the 1940 Act in connection with the issuance of the Acquiring Fund Shares
      as contemplated herein.

5.8   The Trust II on behalf of the Acquired Fund will prepare a Proxy
      Statement, to be included in the Registration Statement in compliance with
      the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
      Act"), and the 1940 Act and the rules and regulations thereunder
      (collectively, the "Acts") in connection with the special meeting of
      shareholders of the Acquired Fund to consider approval of this Agreement.

5.9   Neither the Acquired Fund nor the Acquiring Fund shall take any action
      that is inconsistent with the representations set forth in, with respect
      to the Acquired Fund, the Acquired Fund Tax Representation Certificate,
      and with respect to the Acquiring Fund, the Acquiring Fund Tax
      Representation Certificate, to the extent such action would prevent the
      reorganization from qualifying as a "reorganization" under Section 368(a)
      of the Code.

6.    CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST II ON BEHALF OF THE
      ACQUIRED FUND

The obligations of the Trust II on behalf of the Acquired Fund to complete the
transactions provided for herein shall be, at its election, subject to the
performance by the Trust on behalf of the Acquiring Fund of all the obligations
to be performed by it hereunder on or before the Closing Date, and, in addition
thereto, the following further conditions:

6.1   All representations and warranties of the Trust on behalf of the Acquiring
      Fund contained in this Agreement shall be true and correct in all material
      respects as of the date hereof and, except as they may be affected by the
      transactions contemplated by this Agreement, as of the Closing Date with
      the same force and effect as if made on and as of the Closing Date;


                                       52


6.2   The Trust on behalf of the Acquiring Fund shall have delivered to the
      Trust II on behalf of the Acquired Fund a certificate executed in its name
      by the Trust's President or Vice President and its Treasurer or Assistant
      Treasurer, in form and substance satisfactory to the Trust II on behalf of
      the Acquired Fund and dated as of the Closing Date, to the effect that the
      representations and warranties of the Trust on behalf of the Acquiring
      Fund made in this Agreement are true and correct at and as of the Closing
      Date, except as they may be affected by the transactions contemplated by
      this Agreement, and as to such other matters as the Trust II on behalf of
      the Acquired Fund shall reasonably request; and

6.3   The Acquiring Fund shall have delivered to the Acquired Fund an Acquiring
      Fund Tax Representation Certificate substantially in the form attached to
      this Agreement as Annex A concerning certain tax-related matters with
      respect to the Acquiring Fund.

7.    CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST ON BEHALF OF THE
      ACQUIRING FUND

The obligations of the Trust on behalf of the Acquiring Fund to complete the
transactions provided for herein shall be, at its election, subject to the
performance by the Trust II on behalf of the Acquired Fund of all the
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following conditions:

7.1   All representations and warranties of the Trust II on behalf of the
      Acquired Fund contained in this Agreement shall be true and correct in all
      material respects as of the date hereof and, except as they may be
      affected by the transactions contemplated by this Agreement, as of the
      Closing Date with the same force and effect as if made on and as of the
      Closing Date;

7.2   The Trust II on behalf of the Acquired Fund shall have delivered to the
      Trust on behalf of the Acquiring Fund the Statement of Assets and
      Liabilities of the Acquired Fund, together with a list of its portfolio
      securities showing the federal income tax bases and holding periods of
      such securities, as of the Closing Date, certified by the Treasurer or
      Assistant Treasurer of the Acquired Fund;

7.3   The Trust II on behalf of the Acquired Fund shall have delivered to the
      Trust on behalf of the Acquiring Fund on the Closing Date a certificate
      executed in the name of the Acquired Fund by a President or Vice President
      and a Treasurer or Assistant Treasurer of the Acquired Fund, in form and
      substance satisfactory to the Trust on behalf of the Acquiring Fund and
      dated as of the Closing Date, to the effect that the representations and
      warranties of the Acquired Fund in this Agreement are true and correct at
      and as of the Closing Date, except as they may be affected by the
      transactions contemplated by this Agreement, and as to such other matters
      as the Trust on behalf of the Acquiring Fund shall reasonably request;

7.4   At or prior to the Closing Date, the Acquired Fund's investment adviser,
      or an affiliate thereof, shall have made all payments, or applied all
      credits, to the Acquired Fund required by any applicable contractual
      expense limitation; and

7.5   The Acquired Fund shall have delivered to the Acquiring Fund an Acquired
      Fund Tax Representation Certificate substantially in the form attached to
      this Agreement as Annex B concerning certain tax-related matters with
      respect to the Acquired Fund.

8.    FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST II ON BEHALF OF
      THE ACQUIRED FUND AND THE TRUST ON BEHALF OF THE ACQUIRING FUND

The obligations hereunder of the Trust II on behalf of the Acquired Fund and the
Trust on behalf of the Acquiring Fund are each subject to the further conditions
that on or before the Closing Date:

8.1   The Agreement and the transactions contemplated herein shall have been
      approved by the requisite vote of the holders of the outstanding shares of
      beneficial interest of the Acquired Fund in accordance with the provisions
      of the Trust II's Declaration and By-Laws, and certified copies of the
      resolutions evidencing such approval by the Acquired Fund's shareholders
      shall have been delivered by the Acquired Fund to the Trust on behalf of
      the Acquiring Fund;

8.2   On the Closing Date no action, suit or other proceeding shall be pending
      before any court or governmental agency in which it is sought to restrain
      or prohibit, or obtain changes or other relief in connection with, this
      Agreement or the transactions contemplated herein;

8.3   All consents of other parties and all other consents, orders and permits
      of federal, state and local regulatory authorities (including those of the
      Commission and their "no-action" positions) deemed necessary by the Trust
      II or the Trust to permit consummation, in all material respects, of the
      transactions contemplated hereby shall have been obtained, except where
      failure to obtain any such consent, order or permit would not involve a
      risk of a material adverse effect on the assets or


                                       53


      properties of the Acquiring Fund or the Acquired Fund, provided that
      either party hereto may waive any such conditions for itself;

8.4   The Registration Statement shall have become effective under the 1933 Act
      and the 1940 Act and no stop orders suspending the effectiveness thereof
      shall have been issued and, to the best knowledge of the parties hereto,
      no investigation or proceeding for that purpose shall have been instituted
      or be pending, threatened or contemplated under the 1933 Act or the 1940
      Act;

8.5   The Acquired Fund shall have distributed to its shareholders, in a
      distribution or distributions qualifying for the deduction for dividends
      paid under Section 561 of the Code, all of its investment company taxable
      income (as defined in Section 852(b)(2) of the Code determined without
      regard to Section 852(b)(2)(D) of the Code) for its taxable year ending on
      the Closing Date, all of the excess of (i) its interest income excludable
      from gross income under Section 103(a) of the Code over (ii) its
      deductions disallowed under Sections 265 and 171(a)(2) of the Code for its
      taxable year ending on the Closing Date, and all of its net capital gain
      (as such term is used in Sections 852(b)(3)(A) and (C) of the Code), after
      reduction by any available capital loss carryforward, for its taxable year
      ending on the Closing Date; and

8.6   The parties shall have received an opinion of Hale and Dorr LLP,
      satisfactory to the Trust II on behalf of the Acquired Fund and the Trust
      on behalf of the Acquiring Fund, substantially to the effect that for
      federal income tax purposes the acquisition by the Acquiring Fund of all
      of the assets of the Acquired Fund solely in exchange for the issuance of
      Acquiring Fund Shares to the Acquired Fund and the assumption of all of
      the Acquired Fund Liabilities by the Acquiring Fund, followed by the
      distribution by the Acquired Fund, in liquidation of the Acquired Fund, of
      Acquiring Fund Shares to the shareholders of the Acquired Fund in exchange
      for their shares of beneficial interest of the Acquired Fund and the
      termination of the Acquired Fund, will constitute a "reorganization"
      within the meaning of Section 368(a) of the Code. Notwithstanding anything
      herein to the contrary, neither the Trust II nor the Trust may waive the
      conditions set forth in this Paragraph 8.6.

9.    BROKERAGE FEES AND EXPENSES

9.1   The Trust on behalf of the Acquiring Fund and the Trust II on behalf of
      the Acquired Fund each represent and warrant to the other that there are
      no brokers or finders entitled to receive any payments in connection with
      the transactions provided for herein.

9.2   The Acquiring Fund and the Acquired Fund shall each be liable solely for
      its own expenses incurred in connection with entering into and carrying
      out the provisions of this Agreement whether or not the transactions
      contemplated hereby are consummated.


                                       54


10.   ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES

10.1  The Trust on behalf of the Acquiring Fund and the Trust II on behalf of
      the Acquired Fund agree that neither party has made any representation,
      warranty or covenant not set forth herein or referred to in Paragraph 4
      hereof and that this Agreement constitutes the entire agreement between
      the parties.

10.2  The representations, warranties and covenants contained in this Agreement
      or in any document delivered pursuant hereto or in connection herewith
      shall survive the consummation of the transactions contemplated hereunder.

11.   TERMINATION

11.1  This Agreement may be terminated by the mutual agreement of the Trust on
      behalf of the Acquiring Fund and the Trust II on behalf of the Acquired
      Fund. In addition, either party may at its option terminate this Agreement
      at or prior to the Closing Date:

      (a)   because of a material breach by the other of any representation,
            warranty, covenant or agreement contained herein to be performed at
            or prior to the Closing Date;

      (b)   because of a condition herein expressed to be precedent to the
            obligations of the terminating party which has not been met and
            which reasonably appears will not or cannot be met;

      (c)   by resolution of the Trust's Board of Trustees if circumstances
            should develop that, in the good faith opinion of such Board, make
            proceeding with the Agreement not in the best interests of the
            Acquiring Fund's shareholders; or

      (d)   by resolution of the Trust II's Board of Trustees if circumstances
            should develop that, in the good faith opinion of such Board, make
            proceeding with the Agreement not in the best interests of the
            Acquired Fund's shareholders.

11.2  In the event of any such termination, there shall be no liability for
      damages on the part of the Trust, the Acquiring Fund, the Trust II, or the
      Acquired Fund, or the Trustees or officers of the Trust or the Trust II,
      but each party shall bear the expenses incurred by it incidental to the
      preparation and carrying out of this Agreement.

12.   AMENDMENTS

This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon by the authorized officers of the Trust and the Trust II.
However, following the meeting of shareholders of the Acquired Fund held
pursuant to Paragraph 5.2 of this Agreement, no such amendment may have the
effect of changing the provisions regarding the method for determining the
number of Acquiring Fund Shares to be received by the Acquired Fund shareholders
under this Agreement to the detriment of such shareholders without their further
approval; provided that nothing contained in this Article 12 shall be construed
to prohibit the parties from amending this Agreement to change the Closing Date.

13.   NOTICES

Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquiring Fund or to the Acquired
Fund, each at 101 Huntington Avenue, Boston, Massachusetts 02199, Attention:
President, and, in either case, with copies to Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts 02109, Attention: Pamela J. Wilson, Esq.

14.   HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT

14.1  The article and paragraph headings contained in this Agreement are for
      reference purposes only and shall not affect in any way the meaning or
      interpretation of this Agreement.

14.2  This Agreement may be executed in any number of counterparts, each of
      which shall be deemed an original.

14.3  This Agreement shall be governed by and construed in accordance with the
      laws of The Commonwealth of Massachusetts.

14.4  This Agreement shall bind and inure to the benefit of the parties hereto
      and their respective successors and assigns, but no assignment or transfer
      hereof or of any rights or obligations hereunder shall be made by any
      party without the prior written consent of the other party. Nothing herein
      expressed or implied is intended or shall be construed to confer upon or
      give any person, firm or corporation, other than the parties hereto and
      their respective successors and assigns, any rights or remedies under or
      by reason of this Agreement.


                                       55


14.5  All persons dealing with the Trust or the Trust II must look solely to the
      property of the Trust or the Trust II, respectively, for the enforcement
      of any claims against the Trust or the Trust II as the Trustees, officers,
      agents and shareholders of the Trust or the Trust II assume no personal
      liability for obligations entered into on behalf of the Trust or the Trust
      II, respectively. None of the other series of the Trust or the Trust II
      shall be responsible for any obligations assumed by on or behalf of the
      Acquiring Fund or the Acquired Fund under this Agreement.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first set forth above by its President or Vice President
and has caused its corporate seal to be affixed hereto.


                                                                  on behalf of
                    ----------------------------------------------

                    ----------------------------------------------


                    By:
                    ----------------------------------------------
                                      Maureen R. Ford
                    Chairman, President and Chief Executive Officer


                    JOHN HANCOCK INSTITUTIONAL SERIES TRUST on behalf of


                    ----------------------------------------------


                    By:
                    ----------------------------------------------
                                   Susan S. Newton
                         Senior Vice President and Secretary


                                       56


                                      Thank
                                       You

                                   for mailing
                                 your proxy card
                                    promptly!

                                     [LOGO]


                                       57





                           JOHN HANCOCK
- --------------------------------------------------------------------------------

Prospectus 3.1.02          Mid Cap Growth Fund

                           INSTITUTIONAL CLASS I

    [LOGO](R)              As with all mutual funds, the Securities and Exchange
- ------------------         Commission has not approved or disapproved this fund
JOHN HANCOCK FUNDS         or determined whether the information in this
                           prospectus is adequate and accurate. Anyone who
                           indicates otherwise is committing a federal crime.


Contents

- --------------------------------------------------------------------------------

A summary of the fund's           Mid Cap Growth Fund                          4
goals, strategies, risks,
performance and expenses.

Policies and instructions for     Your account
opening, maintaining and
closing an account.               Who can buy shares                           6
                                  Opening an account                           6
                                  Buying shares                                7
                                  Selling shares                               8
                                  Transaction policies                        10
                                  Dividends and account policies              10


Further information               Fund details
on the fund.
                                  Business structure                          11
                                  Management biographies                      12
                                  Financial highlights                        13


                                  For more information                back cover


Mid Cap Growth Fund

GOAL AND STRATEGY


[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 80% of its assets in stocks of
medium-capitalization companies (companies in the capitalization range of the
Russell Midcap Growth Index, which was $10 million to $15 billion as of January
31, 2002).


In managing the portfolio, the managers conduct fundamental financial analysis
to identify companies with above-average earnings growth.

In choosing individual securities, the managers look for companies with growth
stemming from a combination of gains in market share and increasing operating
efficiency. Before investing, the manager identifies a specific catalyst for
growth, such as a new product, business reorganization or merger.

The management team generally maintains personal contact with the senior
management of the companies the fund invests in.

The managers consider broad economic trends, demographic factors, technological
changes, consolidation trends and legislative initiatives.

The fund may invest up to 10% of assets in foreign securities. The fund may also
make limited use of certain derivatives (investments whose value is based on
indexes or currencies).

In abnormal circumstances, the fund may temporarily invest in U.S. government
securities with maturities of up to three years and more than 10% of assets in
cash or cash equivalents. In these and other cases, the fund might not achieve
its goal.

The fund may not invest more than 5% of assets in any one security.

The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.

================================================================================

PAST PERFORMANCE

[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. Since Class I shares have no operational history, the
year-by-year and average annual figures are for Class A shares, which are
offered in a separate prospectus. Annual returns should be substantially similar
since all classes invest in the same portfolio. Class I shares have no sales
charges and lower expenses than Class A shares. The average annual figures
reflect sales charges; the year-by-year and index figures do not, and would be
lower if they did. All figures assume dividend reinvestment. Past performance
before and after taxes does not indicate future results.


Class A, total returns
Best quarter: Q4 '99, 45.43%
Worst quarter: Q1 '01, -30.04%


After-tax returns
After-tax returns are shown for Class A shares only and would be different for
the other classes. They are calculated using the historical highest individual
federal marginal income-tax rates and do not reflect the impact of state and
local taxes. Actual after-tax returns depend on the investor's tax situation and
may differ from those shown. The after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement accounts.

Indexes (reflect no fees or taxes)
Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
Russell Midcap Growth Index, an unmanaged index containing those stocks from the
Russell Midcap Index with a greater-than-average growth-orientation.


- --------------------------------------------------------------------------------
Class A calendar year total returns (without sales charges)
- --------------------------------------------------------------------------------
               1994     1995    1996     1997    1998     1999    2000     2001

              -8.76%   34.24%  29.05%    2.37%   6.53%   58.17% -13.52%  -33.59%

- --------------------------------------------------------------------------------
Average annual total returns (including sales charge) for periods ending
12-31-01
- --------------------------------------------------------------------------------
                                                                         Life of
                                                     1 year     5 year   Class A
Class A before tax (began 11-1-93)                   -36.90%    -1.20%     4.91%
Class A after tax on distributions                   -36.90%    -2.30%     3.44%
Class A after tax on distributions, with sale        -22.47%    -0.94%     3.72%
Class I before tax (no operational history)               --        --        --
Standard & Poor's 500 Index                          -11.89%    10.70%    13.68%
Russell Midcap Growth Index                          -20.15%     9.02%    11.37%



4


MAIN RISKS

[Clip Art] The value of your investment will fluctuate in response to stock
market movements.


The fund's management strategy has a significant influence on fund performance.
Medium-capitalization stocks tend to be more volatile than stocks of larger
companies, and as a group could fall out of favor with the market, causing the
fund to underperform investments that focus either on small- or on
large-capitalization stocks. Similarly, growth stocks could underperform value
stocks. To the extent that the fund invests in a given industry, its performance
will be hurt if that industry performs poorly. In addition, if the managers'
security selection strategies do not perform as expected, the fund could
underperform its peers or lose money.


To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:

o     Certain derivatives could produce disproportionate losses.

o     In a down market, higher-risk securities and derivatives could become
      harder to value or to sell at a fair price.

o     Foreign investments carry additional risks, including potentially
      unfavorable currency exchange rates, inadequate or inaccurate financial
      information and social or political instability.

Investments in the fund are not bank deposits and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency. You
could lose money by investing in this fund.

================================================================================

YOUR EXPENSES

[Clip Art] Operating expenses are paid from the fund's assets, and therefore are
paid by shareholders indirectly. Because Class I is new, its expenses are based
on Class A expenses, adjusted to reflect any changes.


- --------------------------------------------------------------------------------
Annual operating expenses
- --------------------------------------------------------------------------------
Management fee                                                             0.80%
Other expenses                                                             0.16%
Total fund operating expenses                                              0.96%

The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.

- --------------------------------------------------------------------------------
Expenses                                    Year 1    Year 3    Year 5   Year 10
- --------------------------------------------------------------------------------
Class I                                        $98      $306      $531    $1,178


================================================================================

PORTFOLIO MANAGERS


Paul J. Berlinguet
Joined fund team in 2001

Timothy N. Manning
Joined fund team in 2001

Robert J. Uek, CFA
Joined fund team in 2001


See page 12 for the management biographies.

FUND CODES


Class I     Ticker          --
            CUSIP           409906740
            Newspaper       --
            SEC number      811-4630
            JH fund number  433



                                                                               5


Your account

- --------------------------------------------------------------------------------
WHO CAN BUY SHARES

Class I shares are offered without any sales charge to certain types of
investors, as noted below:

      o     Retirement and other benefit plans and their participants

      o     Rollover assets for participants whose plans are invested in the
            fund

      o     Certain trusts, endowment funds and foundations

      o     Any state, county or city, or its instrumentality, department,
            authority or agency

      o     Insurance companies, trust companies and bank trust departments
            buying shares for their own account

      o     Investment companies not affiliated with the adviser


      o     Clients of service agents and broker-dealers who have entered into
            an agreement with John Hancock Funds.


      o     Investors who participate in fee-based, wrap and other investment
            platform programs

      o     Any entity that is considered a corporation for tax purposes


      o     Fund trustees and other individuals who are affiliated with this
            fund or other John Hancock funds.


- --------------------------------------------------------------------------------
OPENING AN ACCOUNT

1     Read this prospectus carefully.

2     Determine if you are eligible, by referring to "Who can buy shares" on the
      left.

3     Determine how much you want to invest. The minimum initial investment is
      $10,000. There is no minimum investment for retirement plans with at least
      350 eligible employees.

4     Complete the appropriate parts of the account application, carefully
      following the instructions. By applying for privileges now, you can avoid
      the delay and inconvenience of having to file an additional application if
      you want to add privileges later. You must submit additional documentation
      when opening trust, corporate or power of attorney accounts.

5     Make your initial investment using the table on the next page.

6     If you have questions or need more information, please contact your
      financial representative or call Signature Services at 1-888-972-8696.

John Hancock Funds may pay significant compensation out of its own resources to
your financial representative.

Your broker or agent may charge you a fee to effect transactions in fund shares.


6 YOUR ACCOUNT


- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
            Opening an account                Adding to an account

By check

[Clip Art]  o Make out a check for the        o Make out a check for the
              investment amount, payable to     investment amount payable to
              "John Hancock Signature           "John Hancock Signature
              Services, Inc."                   Services, Inc."

            o Deliver the check and your      o Fill out the detachable
              completed application to your     investment slip from an
              financial representative, or      account statement. If no slip
              mail them to Signature            is available, include a note
              Services (address below).         specifying the fund name(s),
                                                your share class, your
                                                account number and the
                                                name(s) in which the account
                                                is registered.

                                              o Deliver the check and
                                                investment slip or note to
                                                your financial
                                                representative, or mail them
                                                to Signature Services
                                                (address below).

By exchange

[Clip Art]  o Call your financial             o Call your financial
              representative or Signature       representative or Signature
              Services to request an            Services to request an
              exchange.                         exchange.

            o You may only exchange for       o You may only exchange for
              shares of other institutional     shares of other institutional
              funds or Class I shares.          funds or Class I shares.

By wire

[Clip Art]  o Deliver your completed          o Instruct your bank to wire
              application to your financial     the amount of your investment
              representative or mail it to      to:
              Signature Services.                First Signature Bank & Trust
                                                 Account # 900022260
            o Obtain your account number by      Routing # 211475000
              calling your financial
              representative or Signature     Specify the fund name(s), your
              Services.                       share class, your account
                                              number and the name(s) in which
            o Instruct your bank to wire      the account is registered. Your
              the amount of your investment   bank may charge a fee to wire
              to:                             funds.
               First Signature Bank & Trust
               Account # 900022260
               Routing # 211475000

            Specify the fund name(s), the
            share class, the new account
            number and the name(s) in which
            the account is registered. Your
            bank may charge a fee to wire
            funds.

By phone

[Clip Art]  See "By exchange" and "By         o Verify that your bank or
            wire."                              credit union is a member of
                                                the Automated Clearing House
                                                (ACH) system.

                                              o Complete the "To Purchase,
                                                Exchange or Redeem Shares via
                                                Telephone" and "Bank
                                                Information" sections on your
                                                account application.

                                              o Call Signature Services to
                                                verify that these features
                                                are in place on your account.

                                              o Call your financial
                                                representative or Signature
                                                Services with the fund
                                                name(s), your share class,
                                                your account number, the
                                                name(s) in which the account
                                                is registered and the amount
                                                of your investment.

- ----------------------------------------------
Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1001
Boston, MA 02217-1001

Phone Number: 1-888-972-8696

Or contact your financial representative for
instructions and assistance.
- ----------------------------------------------


                                                                  YOUR ACCOUNT 7


- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
            Designed for                      To sell some or all of your shares

By letter

[Clip Art]  o Sales of any amount; however,   o Write a letter of instruction
              sales of $5 million or more       indicating the fund name,
              must be made by letter.           your account number, your
                                                share class, the name(s) in
            o Certain requests will require     which the account is
              a Medallion signature             registered and the dollar
              guarantee. Please refer to        value or number of shares you
              "Selling shares in writing."      wish to sell.

                                              o Include all signatures and
                                                any additional documents that
                                                may be required (see next
                                                page).

                                              o Mail the materials to
                                                Signature Services.

                                              o A check or wire will be sent
                                                according to your letter of
                                                instruction.

By phone

[Clip Art]  o Sales of up to $5 million.      o To place your request with a
                                                representative at John
                                                Hancock Funds, call Signature
                                                Services between 8 A.M. and 4
                                                P.M. Eastern Time on most
                                                business days.

                                              o Redemption proceeds of up to
                                                $100,000 may be sent by wire
                                                or by check. A check will be
                                                mailed to the exact name(s)
                                                and address on the account.
                                                Redemption proceeds exceeding
                                                $100,000 must be wired to
                                                your designated bank account.

By wire or electronic funds transfer (EFT)

[Clip Art]  o Requests by letter to sell      o To verify that the telephone
              any amount.                       redemption privilege is in
                                                place on an account, or to
            o Requests by phone to sell up      request the forms to add it
              to $5 million (accounts with      to an existing account, call
              telephone redemption              Signature Services.
              privileges).
                                              o Amounts of $5 million or more
                                                will be wired on the next
                                                business day.

                                              o Amounts up to $100,000 may be
                                                sent by EFT or by check.
                                                Funds from EFT transactions
                                                are generally available by
                                                the second business day. Your
                                                bank may charge a fee for
                                                this service.

By exchange

[Clip Art]  o Sales of any amount.            o Obtain a current prospectus
                                                for the fund into which you
                                                are exchanging by calling
                                                your financial representative
                                                or Signature Services.

                                              o You may only exchange for
                                                shares of other institutional
                                                funds or Class I shares.

                                              o Call your financial
                                                representative or Signature
                                                Services to request an
                                                exchange.


8 YOUR ACCOUNT


Selling shares in writing In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below, unless they were previously provided
to Signature Services and are still accurate. You may also need to include a
Medallion signature guarantee, which protects you against fraudulent orders. You
will need a signature guarantee if:

o     your address of record has changed within the past 30 days

o     you are selling more than $100,000 worth of shares and are requesting
      payment by check

o     you are selling more than $5 million worth of shares

You will need to obtain your Medallion signature guarantee from a member of the
Signature Guarantee Medallion Program. Most brokers and securities dealers are
members of this program. A notary public CANNOT provide a signature guarantee.

- --------------------------------------------------------------------------------
Seller                                  Requirements for written requests
- --------------------------------------------------------------------------------
                                                                      [Clip Art]

Owners of individual, joint or          o Letter of instruction.
UGMA/UTMA accounts (custodial
accounts for minors).                   o On the letter, the signatures of
                                          all persons authorized to sign for
                                          the account, exactly as the account
                                          is registered.

                                        o Medallion signature guarantee if
                                          applicable (see above).

Owners of corporate, sole               o Letter of instruction.
proprietorship, general partner or
association accounts.                   o Corporate business/organization
                                          resolution, certified within the
                                          past 12 months, or a John Hancock
                                          Funds business/organization
                                          certification form.

                                        o On the letter and the resolution,
                                          the signature of the person(s)
                                          authorized to sign for the account.

                                        o Medallion signature guarantee if
                                          applicable (see above).

Owners or trustees of retirement        o Letter of instruction.
plan, pension trust and trust
accounts.                               o On the letter, the signature(s) of
                                          the trustee(s).

                                        o Copy of the trust document
                                          certified within the past 12 months
                                          or a John Hancock Funds trust
                                          certification form.

                                        o Medallion signature guarantee if
                                          applicable (see above).

Joint tenancy shareholders with         o Letter of instruction signed by
rights of survivorship whose              surviving tenant.
co-tenants are deceased.
                                        o Copy of death certificate.

                                        o Medallion signature guarantee if
                                          applicable (see above).

Executors of shareholder estates.       o Letter of instruction signed by
                                          executor.

                                        o Copy of order appointing executor,
                                          certified within the past 12
                                          months.

                                        o Medallion signature guarantee if
                                          applicable (see above).

Administrators, conservators,           o Call 1-888-972-8696 for
guardians and other sellers or            instructions.
account types not listed above.

- ----------------------------------------------
Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1001
Boston, MA 02217-1001

Phone Number: 1-888-972-8696

Or contact your financial representative for
instructions and assistance.
- ----------------------------------------------


                                                                  YOUR ACCOUNT 9


- --------------------------------------------------------------------------------
TRANSACTION POLICIES

Valuation of shares The net asset value (NAV) per share for the fund is
determined each business day at the close of regular trading on the New York
Stock Exchange (typically 4 P.M. Eastern Time). The fund uses market prices in
valuing portfolio securities, but may use fair-value estimates if reliable
market prices are unavailable. The fund may also value securities at fair value
if the value of these securities has been materially affected by events
occurring after the close of a foreign market. The fund may trade foreign stock
or other portfolio securities on U.S. holidays and weekends, even though the
fund's shares will not be priced on those days. This may change a fund's NAV on
days when you cannot buy or sell shares.

Buy and sell prices When you buy shares, you pay the NAV. When you sell shares,
you receive the NAV.

Execution of requests The fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated after Signature Services receives your
request in good order.

At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing.

In unusual circumstances, the fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.

Telephone transactions For your protection, telephone requests may be recorded
in order to verify their accuracy. Also for your protection, telephone
transactions are not permitted on accounts whose names or addresses have changed
within the past 30 days. Proceeds from telephone transactions can only be mailed
to the address of record.


Exchanges You may exchange Class I shares for shares of any institutional fund
or Class I shares. The registration for both accounts involved must be
identical.


To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties who, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. The fund reserves the right to require that
previously exchanged shares and reinvested dividends be in the fund for 90 days
before a shareholder is permitted a new exchange. The fund may also refuse any
exchange order. A fund may change or cancel its exchange policies at any time,
upon 60 days' notice to its shareholders.

Certificated shares The fund no longer issues share certificates. Shares are
electronically recorded. Any existing certificated shares can only be sold by
returning the certificated shares to Signature Services, along with a letter of
instruction or a stock power and a signature guarantee.

Sales in advance of purchase payments When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten business days after
the purchase.

- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES

Account statements In general, you will receive account statements as follows:

o     after every transaction (except a dividend reinvestment) that affects your
      account balance

o     after any changes of name or address of the registered owner(s)

o     in all other circumstances, at least quarterly

Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.

Dividends The fund generally distributes most or all of its net earnings in the
form of dividends. Any capital gains are distributed annually. The fund declares
and pays any income dividends annually.

Dividend reinvestments Dividends will be reinvested automatically in additional
shares of the same fund on the dividend record date. Alternatively, you can
choose to have your dividends and capital gains sent directly to your bank
account or a check will be sent in the amount of more than $10. However, if the
check is not deliverable or the combined dividend and capital gains amount is
$10 or less, your proceeds will be reinvested. If five or more of your dividend
or capital gains checks remain uncashed after 180 days, all subsequent dividends
and capital gains will be reinvested.


10 YOUR ACCOUNT


Taxability of dividends For investors who are not exempt from federal income
taxes, dividends you receive from a fund, whether reinvested or taken as cash,
are generally considered taxable. Dividends from a fund's short-term capital
gains are taxable as ordinary income. Dividends from a fund's long-term capital
gains are taxable at a lower rate. Whether gains are short-term or long-term
depends on the fund's holding period. Some dividends paid in January may be
taxable as if they had been paid the previous December.

The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.

Taxability of transactions Any time you sell or exchange shares, it is
considered a taxable event for you if you are not exempt from federal income
taxes. Depending on the purchase price and the sale price of the shares you sell
or exchange, you may have a gain or a loss on the transaction. You are
responsible for any tax liabilities generated by your transactions.

- --------------------------------------------------------------------------------
BUSINESS STRUCTURE

The fund's board of trustees oversees the fund's business activities and retains
the services of the various firms that carry out the fund's operations. The
trustees have the power to change the fund's investment goal without shareholder
approval.


The trustees of the fund have the power to change the focus of the fund's 80%
investment policy without shareholder approval. The fund will provide written
notice to shareholders at least 60 days prior to a change in its 80% investment
policy.

The investment adviser The fund is managed by John Hancock Advisers, LLC, 101
Huntington Avenue, Boston, MA 02199-7603. Founded in 1968, John Hancock Advisers
is a wholly owned subsidiary of John Hancock Financial Services, Inc. and
manages approximately $30 billion in assets.

Management fees For the period ended October 31, 2001, the fund paid the
investment adviser management fees at a rate of 0.80% of average net assets.



                                                                 YOUR ACCOUNT 11


- --------------------------------------------------------------------------------
MANAGEMENT BIOGRAPHIES

Below is an alphabetical list of the portfolio managers for the John Hancock Mid
Cap Growth Fund. It is a brief summary of their business careers over the past
five years.


Paul J. Berlinguet
- ---------------------------------------------
Vice president
Joined John Hancock Advisers in 2001
U.S. equity investment manager at
 Baring America Asset management
 (1989-2001)
Began business career in 1986

Timothy N. Manning
- ---------------------------------------------
Joined John Hancock Advisers in 2000
Analyst at State Street Research
 (1999-2000)
Equity research associate at State Street
 Research (1996-1999)
Began business career in 1993

Robert J. Uek, CFA
- ---------------------------------------------
Vice president
Joined John Hancock Advisers in 2001
Corporate finance manager at Ernst &
 Young (1994-1997)
Began business career in 1990



12 FUND DETAILS


- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

Since Class I shares have no operational history, financial highlights are
provided for the fund's Class A shares, which are offered in a separate
prospectus. This table details the performance of the fund's Class A shares,
including total return information showing how much an investment in the fund
has increased or decreased each year.

Mid Cap Growth Fund

Figures audited by PricewaterhouseCoopers LLP.




CLASS A SHARES    PERIOD ENDED:                          10-31-97    10-31-98    10-31-99    10-31-00    10-31-01
                                                                                            
- --------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                       $10.92      $11.40       $9.11      $12.85      $16.03
Net investment loss(1)                                      (0.06)      (0.09)      (0.12)      (0.17)      (0.12)
Net realized and unrealized gain (loss) on investments       1.00       (0.89)       3.86        4.23       (7.48)
Total from investment operations                             0.94       (0.98)       3.74        4.06       (7.60)
Less distributions
From net realized gain                                      (0.46)      (1.31)         --       (0.88)      (0.77)
Net asset value, end of period                             $11.40       $9.11      $12.85      $16.03       $7.66
Total return(2) (%)                                          8.79       (9.40)      41.05       33.26      (49.87)
- --------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions)                      $142        $101        $112        $176         $85
Ratio of expenses to average net assets (%)                  1.59        1.59        1.60        1.46        1.63
Ratio of net investment loss to average net assets (%)      (0.57)      (0.86)      (1.14)      (1.08)      (1.13)
Portfolio turnover (%)                                        317         168         153         146         211


(1)   Based on the average of the shares outstanding at the end of each month.
(2)   Assumes dividend reinvestment and does not reflect the effect of sales
      charges.



                                                                 YOUR ACCOUNT 13


For more information

Two documents are available that offer further information on the John Hancock
Mid Cap Growth Fund:

Annual/Semiannual Report to Shareholders

Includes financial statements, a discussion of the market conditions and
investment strategies that significantly affected performance, as well as the
auditors' report (in annual report only).

Statement of Additional Information (SAI)

The SAI contains more detailed information on all aspects of the fund. The
current annual report is included in the SAI.

A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into (is legally a part of) this prospectus.

To request a free copy of the current annual/semiannual report or the SAI,
please contact John Hancock:

By mail:

John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1001
Boston, MA 02217-1001

By phone: 1-888-972-8696

By EASI-Line: 1-800-597-1897

By TDD: 1-800-462-0825

On the Internet: www.jhfunds.com

Or you may view or obtain these documents from the SEC:

In person: at the SEC's Public Reference Room in Washington, DC. For access to
the Reference Room call 1-202-942-8090

By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)

By electronic request: publicinfo@sec.gov
(duplicating fee required)

On the Internet: www.sec.gov

[LOGO](R)
[OLYMPIC LOGO]
WORLDWIDE SPONSOR


John Hancock Funds, LLC
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603

www.jhfunds.com

Mutual Funds
Institutional Services
Private Managed Accounts
Retirement Plans


                                                 (C)2002 JOHN HANCOCK FUNDS, LLC
                                                                      39IPN 3/02



                           JOHN HANCOCK
- --------------------------------------------------------------------------------

Prospectus 3.1.02          International Fund

                           INSTITUTIONAL CLASS I

    [LOGO](R)              As with all mutual funds, the Securities and Exchange
- ------------------         Commission has not approved or disapproved this fund
JOHN HANCOCK FUNDS         or determined whether the information in this
                           prospectus is adequate and accurate. Anyone who
                           indicates otherwise is committing a federal crime.


Contents

- --------------------------------------------------------------------------------

A summary of the fund's           International Fund                           4
goals, strategies, risks,
performance and expenses.


Policies and instructions for     Your account
opening, maintaining and
closing an account.               Who can buy shares                           6
                                  Opening an account                           6
                                  Buying shares                                7
                                  Selling shares                               8
                                  Transaction policies                        10
                                  Dividends and account policies              10


Further information on the        Fund details
fund.
                                  Business structure                          11
                                  Financial highlights                        12


                                  For more information                back cover


International Fund

GOAL AND STRATEGY

[Clip Art] The fund seeks long-term growth of capital. To pursue this goal, the
fund normally invests at least 80% of its assets in stocks of foreign companies.
The fund may invest up to 30% of assets in emerging markets as classified by
Morgan Stanley Capital International (MSCI). The fund does not maintain a fixed
allocation of assets, either with respect to securities type or geography.

In managing the portfolio, the managers focus on a "bottom-up" analysis on the
financial conditions and competitiveness of individual foreign companies. In
analyzing specific companies for possible investment, the managers ordinarily
look for several of the following characteristics that will enable the companies
to compete successfully in their respective markets:

o     above-average per share earnings growth

o     high return on invested capital

o     a healthy balance sheet

o     sound financial and accounting policies and overall financial strength

o     strong competitive advantages

o     effective research, product development and marketing.

The managers consider whether to sell a particular security when any of those
factors materially changes. The managers allocate the fund's assets among
securities of countries that are expected to provide the best opportunities for
meeting the fund's investment objective.

To manage risk, the fund does not invest more than 5% of assets in any one
security.

The fund may use certain derivatives (investments whose value is based on
indexes, securities or currencies).

In abnormal conditions, the fund may temporarily invest more than 20% of assets
in investment-grade short-term securities. In these and other cases, the fund
might not achieve its goal.

================================================================================

PAST PERFORMANCE

[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. Since Class I shares have no operational history, the
year-by-year and average annual figures are for Class A shares, which are
offered in a separate prospectus. Annual returns should be substantially similar
since all classes invest in the same portfolio. Class I shares have no sales
charges and lower expenses than Class A shares. The average annual figures
reflect sales charges; the year-by-year and index figures do not, and would be
lower if they did. All figures assume dividend reinvestment. Past performance
before and after taxes does not indicate future results.


Class A, total returns
Best quarter: Q4 '99, 25.37%
Worst quarter: Q1 '01, -19.47%


After-tax returns
After-tax returns are shown for Class A shares only and would be different for
the other classes. They are calculated using the historical highest individual
federal marginal income-tax rates and do not reflect the impact of state and
local taxes. Actual after-tax returns depend on the investor's tax situation and
may differ from those shown. The after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement accounts.

Index (reflects no fees or taxes)
MSCI All Country World Ex-U.S. Free Index, an unmanaged index of freely traded
stocks of foreign companies.


- --------------------------------------------------------------------------------
Class A calendar year total returns (without sales charges)
- --------------------------------------------------------------------------------
               1994     1995    1996     1997    1998     1999    2000     2001

              -6.61%    5.34%  11.36%   -7.73%  17.67%   31.19% -27.68%  -29.76%

- --------------------------------------------------------------------------------
Average annual total returns (including sales charge) for periods ending
12-31-01
- --------------------------------------------------------------------------------
                                                                         Life of
                                                       1 year    5 year  Class A
Class A before tax (began 1-3-94)                     -33.30%    -7.21%   -3.49%
Class A after tax on distributions                    -33.30%    -7.39%   -3.66%
Class A after tax on distributions, with sale         -20.28%    -5.50%   -2.68%
Class I before tax (no operational history)                --        --       --
MSCI All Country World Ex-U.S. Free Index             -20.98%    -0.85%    1.56%



4


MAIN RISKS

[Clip Art] The value of your investment will fluctuate in response to stock
market movements.

Foreign investments are more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social instability
and political actions ranging from tax code changes to governmental collapse.
These risks are more significant in emerging markets.

The fund's management strategy has a significant influence on fund performance.
If the fund invests in countries or regions that experience economic downturns,
performance could suffer. In addition, if certain investments or industries do
not perform as expected, or if the managers' security selection strategies do
not perform as expected, the fund could underperform its peers or lose money.

To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:

o     In a down market, emerging market securities, other higher-risk securities
      and derivatives could become harder to value or to sell at a fair price.

o     Certain derivatives could produce disproportionate losses.

The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.

Investments in the fund are not bank deposits and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency. You
could lose money by investing in this fund.

================================================================================


YOUR EXPENSES

[Clip Art] Operating expenses are paid from the fund's assets, and therefore are
paid by shareholders indirectly. Because Class I is new, its expenses are based
on Class A expenses, adjusted to reflect any changes.

- --------------------------------------------------------------------------------
Annual operating expenses
- --------------------------------------------------------------------------------
Management fee                                                             1.00%
Other expenses                                                             1.57%
Total fund operating expenses                                              2.57%
Expense reimbursement (at least until 2-28-03)                             1.60%
Annual operating expenses                                                  0.97%

The hypothetical example below shows what your expenses would be after the
expense reimbursement (first year only) if you invested $10,000 over the time
frames indicated, assuming you reinvested all distributions and that the average
annual return was 5%. The example is for comparison only, and does not represent
the fund's actual expenses and returns, either past or future.

- --------------------------------------------------------------------------------
Expenses                                    Year 1    Year 3    Year 5   Year 10
- --------------------------------------------------------------------------------
Class I                                        $99      $647    $1,221    $2,785


================================================================================

SUBADVISER

Nicholas-Applegate Capital Management

U.S.-based team responsible for day-to-day
investment management since December 2000

Founded in 1984

Supervised by the adviser


FUND CODES

Class I     Ticker          --
            CUSIP           409906732
            Newspaper       --
            SEC number      811-4630
            JH fund number  440



                                                                               5


Your account

- --------------------------------------------------------------------------------
WHO CAN BUY SHARES

Class I shares are offered without any sales charge to certain types of
investors, as noted below:

      o     Retirement and other benefit plans and their participants

      o     Rollover assets for participants whose plans are invested in the
            fund

      o     Certain trusts, endowment funds and foundations

      o     Any state, county or city, or its instrumentality, department,
            authority or agency

      o     Insurance companies, trust companies and bank trust departments
            buying shares for their own account

      o     Investment companies not affiliated with the adviser


      o     Clients of service agents and broker-dealers who have entered into
            an agreement with John Hancock Funds


      o     Investors who participate in fee-based, wrap and other investment
            platform programs

      o     Any entity that is considered a corporation for tax purposes


      o     Fund trustees and other individuals who are affiliated with this
            fund or other John Hancock funds


- --------------------------------------------------------------------------------
OPENING AN ACCOUNT

1     Read this prospectus carefully.

2     Determine if you are eligible, by referring to "Who can buy shares" on the
      left.

3     Determine how much you want to invest. The minimum initial investment is
      $10,000. There is no minimum investment for retirement plans with at least
      350 eligible employees.

4     Complete the appropriate parts of the account application, carefully
      following the instructions. By applying for privileges now, you can avoid
      the delay and inconvenience of having to file an additional application if
      you want to add privileges later. You must submit additional documentation
      when opening trust, corporate or power of attorney accounts.

5     Make your initial investment using the table on the next page.

6     If you have questions or need more information, please contact your
      financial representative or call Signature Services at 1-888-972-8696.

John Hancock Funds may pay significant compensation out of its own resources to
your financial representative.

Your broker or agent may charge you a fee to effect transactions in fund shares.


6 YOUR ACCOUNT


- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
            Opening an account                Adding to an account

By check

[Clip Art]  o Make out a check for the        o Make out a check for the
              investment amount, payable to     investment amount payable to
              "John Hancock Signature           "John Hancock Signature
              Services, Inc."                   Services, Inc."

            o Deliver the check and your      o Fill out the detachable
              completed application to your     investment slip from an
              financial representative, or      account statement. If no slip
              mail them to Signature            is available, include a note
              Services (address below).         specifying the fund name(s),
                                                your share class, your
                                                account number and the
                                                name(s) in which the account
                                                is registered.

                                              o Deliver the check and
                                                investment slip or note to
                                                your financial
                                                representative, or mail them
                                                to Signature Services
                                                (address below).

By exchange

[Clip Art]  o Call your financial             o Call your financial
              representative or Signature       representative or Signature
              Services to request an            Services to request an
              exchange.                         exchange.

            o You may only exchange for       o You may only exchange for
              shares of other institutional     shares of other institutional
              funds or Class I shares.          funds or Class I shares.

By wire

[Clip Art]  o Deliver your completed          o Instruct your bank to wire
              application to your financial     the amount of your investment
              representative or mail it to      to:
              Signature Services.                First Signature Bank & Trust
                                                 Account # 900022260
            o Obtain your account number by      Routing # 211475000
              calling your financial
              representative or Signature     Specify the fund name(s), your
              Services.                       share class, your account
                                              number and the name(s) in which
            o Instruct your bank to wire      the account is registered. Your
              the amount of your investment   bank may charge a fee to wire
              to:                             funds.
               First Signature Bank & Trust
               Account # 900022260
               Routing # 211475000

            Specify the fund name(s), the
            share class, the new account
            number and the name(s) in which
            the account is registered. Your
            bank may charge a fee to wire
            funds.

By phone

[Clip Art]  See "By exchange" and "By         o Verify that your bank or
            wire."                              credit union is a member of
                                                the Automated Clearing House
                                                (ACH) system.

                                              o Complete the "To Purchase,
                                                Exchange or Redeem Shares via
                                                Telephone" and "Bank
                                                Information" sections on your
                                                account application.

                                              o Call Signature Services to
                                                verify that these features
                                                are in place on your account.

                                              o Call your financial
                                                representative or Signature
                                                Services with the fund
                                                name(s), your share class,
                                                your account number, the
                                                name(s) in which the account
                                                is registered and the amount
                                                of your investment.

- ----------------------------------------------
Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1001
Boston, MA 02217-1001

Phone Number: 1-888-972-8696

Or contact your financial representative for
instructions and assistance.
- ----------------------------------------------


                                                                  YOUR ACCOUNT 7


- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
            Designed for                      To sell some or all of your shares

By letter

[Clip Art]  o Sales of any amount; however,   o Write a letter of instruction
              sales of $5 million or more       indicating the fund name,
              must be made by letter.           your account number, your
                                                share class, the name(s) in
            o Certain requests will require     which the account is
              a Medallion signature             registered and the dollar
              guarantee. Please refer to        value or number of shares you
              "Selling shares in writing."      wish to sell.

                                              o Include all signatures and
                                                any additional documents that
                                                may be required (see next
                                                page).

                                              o Mail the materials to
                                                Signature Services.

                                              o A check or wire will be sent
                                                according to your letter of
                                                instruction.

By phone

[Clip Art]  o Sales of up to $5 million.      o To place your request with a
                                                representative at John
                                                Hancock Funds, call Signature
                                                Services between 8 A.M. and 4
                                                P.M. Eastern Time on most
                                                business days.

                                              o Redemption proceeds of up to
                                                $100,000 may be sent by wire
                                                or by check. A check will be
                                                mailed to the exact name(s)
                                                and address on the account.
                                                Redemption proceeds exceeding
                                                $100,000 must be wired to
                                                your designated bank account.

By wire or electronic funds transfer (EFT)

[Clip Art]  o Requests by letter to sell      o To verify that the telephone
              any amount.                       redemption privilege is in
                                                place on an account, or to
            o Requests by phone to sell up      request the forms to add it
              to $5 million (accounts with      to an existing account, call
              telephone redemption              Signature Services.
              privileges).
                                              o Amounts of $5 million or more
                                                will be wired on the next
                                                business day.

                                              o Amounts up to $100,000 may be
                                                sent by EFT or by check.
                                                Funds from EFT transactions
                                                are generally available by
                                                the second business day. Your
                                                bank may charge a fee for
                                                this service.

By exchange

[Clip Art]  o Sales of any amount.            o Obtain a current prospectus
                                                for the fund into which you
                                                are exchanging by calling
                                                your financial representative
                                                or Signature Services.

                                              o You may only exchange for
                                                shares of other institutional
                                                funds or Class I shares.

                                              o Call your financial
                                                representative or Signature
                                                Services to request an
                                                exchange.


8 YOUR ACCOUNT


Selling shares in writing In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below, unless they were previously provided
to Signature Services and are still accurate. You may also need to include a
Medallion signature guarantee, which protects you against fraudulent orders. You
will need a signature guarantee if:

o     your address of record has changed within the past 30 days

o     you are selling more than $100,000 worth of shares and are requesting
      payment by check

o     you are selling more than $5 million worth of shares

You will need to obtain your Medallion signature guarantee from a member of the
Signature Guarantee Medallion Program. Most brokers and securities dealers are
members of this program. A notary public CANNOT provide a signature guarantee.

- --------------------------------------------------------------------------------
Seller                                  Requirements for written requests
- --------------------------------------------------------------------------------
                                                                      [Clip Art]

Owners of individual, joint or          o Letter of instruction.
UGMA/UTMA accounts (custodial
accounts for minors).                   o On the letter, the signatures of
                                          all persons authorized to sign for
                                          the account, exactly as the account
                                          is registered.

                                        o Medallion signature guarantee if
                                          applicable (see above).

Owners of corporate, sole               o Letter of instruction.
proprietorship, general partner or
association accounts.                   o Corporate business/organization
                                          resolution, certified within the
                                          past 12 months, or a John Hancock
                                          Funds business/organization
                                          certification form.

                                        o On the letter and the resolution,
                                          the signature of the person(s)
                                          authorized to sign for the account.

                                        o Medallion signature guarantee if
                                          applicable (see above).

Owners or trustees of retirement        o Letter of instruction.
plan, pension trust and trust
accounts.                               o On the letter, the signature(s) of
                                          the trustee(s).

                                        o Copy of the trust document
                                          certified within the past 12 months
                                          or a John Hancock Funds trust
                                          certification form.

                                        o Medallion signature guarantee if
                                          applicable (see above).

Joint tenancy shareholders with         o Letter of instruction signed by
rights of survivorship whose              surviving tenant.
co-tenants are deceased.
                                        o Copy of death certificate.

                                        o Medallion signature guarantee if
                                          applicable (see above).

Executors of shareholder estates.       o Letter of instruction signed by
                                          executor.

                                        o Copy of order appointing executor,
                                          certified within the past 12
                                          months.

                                        o Medallion signature guarantee if
                                          applicable (see above).

Administrators, conservators,           o Call 1-888-972-8696 for
guardians and other sellers or            instructions.
account types not listed above.

- ---------------------------------------------
Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1001
Boston, MA 02217-1001

Phone Number: 1-888-972-8696

Or contact your financial representative for
instructions and assistance.
- ---------------------------------------------


                                                                  YOUR ACCOUNT 9


- --------------------------------------------------------------------------------
TRANSACTION POLICIES

Valuation of shares The net asset value (NAV) per share for the fund is
determined each business day at the close of regular trading on the New York
Stock Exchange (typically 4 P.M. Eastern Time). The fund uses market prices in
valuing portfolio securities, but may use fair-value estimates if reliable
market prices are unavailable. The fund may also value securities at fair value
if the value of these securities has been materially affected by events
occurring after the close of a foreign market. The fund may trade foreign stock
or other portfolio securities on U.S. holidays and weekends, even though the
fund's shares will not be priced on those days. This may change a fund's NAV on
days when you cannot buy or sell shares.

Buy and sell prices When you buy shares, you pay the NAV. When you sell shares,
you receive the NAV.

Execution of requests The fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated after Signature Services receives your
request in good order.

At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing.

In unusual circumstances, the fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.

Telephone transactions For your protection, telephone requests may be recorded
in order to verify their accuracy. Also for your protection, telephone
transactions are not permitted on accounts whose names or addresses have changed
within the past 30 days. Proceeds from telephone transactions can only be mailed
to the address of record.


Exchanges You may exchange Class I shares for shares of any institutional fund
or Class I shares. The registration for both accounts involved must be
identical.


To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties who, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. The fund reserves the right to require that
previously exchanged shares and reinvested dividends be in the fund for 90 days
before a shareholder is permitted a new exchange. The fund may also refuse any
exchange order. A fund may change or cancel its exchange policies at any time,
upon 60 days' notice to its shareholders.

Certificated shares The fund no longer issues share certificates. Shares are
electronically recorded. Any existing certificated shares can only be sold by
returning the certificated shares to Signature Services, along with a letter of
instruction or a stock power and a signature guarantee.

Sales in advance of purchase payments When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten business days after
the purchase.

- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES

Account statements In general, you will receive account statements as follows:

o     after every transaction (except a dividend reinvestment) that affects your
      account balance

o     after any changes of name or address of the registered owner(s)

o     in all other circumstances, at least quarterly

Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.

Dividends The fund generally distributes most or all of its net earnings in the
form of dividends. The fund declares and pays any income dividends annually.
Capital gains, if any, are typically distributed annually.

Dividend reinvestments Dividends will be reinvested automatically in additional
shares of the same fund on the dividend record date. Alternatively, you can
choose to have your dividends and capital gains sent directly to your bank
account or a check will be sent in the amount of more than $10. However, if the
check is not deliverable or the combined dividend and capital gains amount is
$10 or less, your proceeds will be reinvested. If five or more of your dividend
or capital gains checks remain uncashed after 180 days, all subsequent dividends
and capital gains will be reinvested.


10 YOUR ACCOUNT


Taxability of dividends For investors who are not exempt from federal income
taxes, dividends you receive from a fund, whether reinvested or taken as cash,
are generally considered taxable. Dividends from a fund's short-term capital
gains are taxable as ordinary income. Dividends from a fund's long-term capital
gains are taxable at a lower rate. Whether gains are short-term or long-term
depends on the fund's holding period. Some dividends paid in January may be
taxable as if they had been paid the previous December.

The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.

Taxability of transactions Any time you sell or exchange shares, it is
considered a taxable event for you if you are not exempt from federal income
taxes. Depending on the purchase price and the sale price of the shares you sell
or exchange, you may have a gain or a loss on the transaction. You are
responsible for any tax liabilities generated by your transactions.

- --------------------------------------------------------------------------------
BUSINESS STRUCTURE

The fund's board of trustees oversees the fund's business activities and retains
the services of the various firms that carry out the fund's operations. The
trustees have the power to change the fund's investment goal without shareholder
approval.


The investment adviser The fund is managed by John Hancock Advisers, LLC, 101
Huntington Avenue, Boston, MA 02199-7603. Founded in 1968, John Hancock Advisers
is a wholly owned subsidiary of John Hancock Financial Services, Inc. and
manages approximately $30 billion in assets.


The subadviser Nicholas-Applegate Capital Management, 600 West Broadway, Suite
2900, San Diego, California 92101.


Management fees For the period ended October 31, 2001, the fund paid the
investment adviser no management fees.



                                                                 YOUR ACCOUNT 11


- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

Since Class I shares have no operational history, financial highlights are
provided for the fund's Class A shares, which are offered in a separate
prospectus. This table details the performance of the fund's Class A shares,
including total return information showing how much an investment in the fund
has increased or decreased each year.

International Fund

Figures audited by PricewaterhouseCoopers LLP.




CLASS A SHARES    PERIOD ENDED:                                   10-31-97    10-31-98    10-31-99    10-31-00    10-31-01
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                     
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                                 $8.70       $8.41       $8.81      $10.95       $9.45
Net investment income (loss)(1)                                      (0.02)         --(2)    (0.02)      (0.04)      (0.05)
Net realized and unrealized gain (loss) on investments               (0.26)       0.47        2.16       (1.01)      (3.22)
Total from investment operations                                     (0.28)       0.47        2.14       (1.05)      (3.27)
Less distributions
From net investment income                                           (0.01)         --          --          --          --
From net realized gain                                                  --       (0.07)         --       (0.45)         --
Net asset value, end of period                                       $8.41       $8.81      $10.95       $9.45       $6.18
Total return(3,4) (%)                                                (3.22)       5.61       24.29      (10.15)     (34.60)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions)                                 $5          $6          $7         $15          $8
Ratio of expenses to average net assets (%)                           1.73        1.79        1.96        1.88        2.23
Ratio of adjusted expenses to average net assets(5) (%)               3.03        3.65        3.81        3.44        3.83
Ratio of net investment income (loss) to average net assets (%)      (0.16)       0.04       (0.20)      (0.43)      (0.65)
Portfolio turnover (%)                                                 169         129         113         163         278


(1)   Based on the average of the shares outstanding at the end of each month.
(2)   Less than $0.01 per share.
(3)   Assumes dividend reinvestment and does not reflect the effect of sales
      charges.
(4)   Total returns would have been lower had certain expenses not been reduced
      during the periods shown.
(5)   Does not take into consideration expense reductions during the periods
      shown.

================================================================================
The following return is not audited and is not part of the audited financial
highlights presented above:
Without the expense reductions, returns for the years ended October 31, 1997,
1998, 1999, 2000 and 2001 would have been (4.52%), 3.75%, 22.44%, (11.71%) and
(36.20%), respectively.



12 FUND DETAILS


For more information

Two documents are available that offer further information on the John Hancock
International Fund:

Annual/Semiannual Report to Shareholders

Includes financial statements, a discussion of the market conditions and
investment strategies that significantly affected performance, as well as the
auditors' report (in annual report only).

Statement of Additional Information (SAI)

The SAI contains more detailed information on all aspects of the fund. The
current annual report is included in the SAI.

A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into (is legally a part of) this prospectus.

To request a free copy of the current annual/semiannual report or the SAI,
please contact John Hancock:

By mail:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1001
Boston, MA 02217-1001

By phone: 1-888-972-8696

By EASI-Line: 1-800-597-1897

By TDD: 1-800-462-0825

On the Internet: www.jhfunds.com

Or you may view or obtain these documents from the SEC:

In person: at the SEC's Public Reference Room in Washington, DC. For access to
the Reference Room call 1-202-942-8090

By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)

By electronic request: publicinfo@sec.gov
(duplicating fee required)

On the Internet: www.sec.gov

[LOGO](R)
[OLYMPIC LOGO]
WORLDWIDE SPONSOR


John Hancock Funds, LLC
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603

www.jhfunds.com

Mutual Funds
Institutional Services
Private Managed Accounts
Retirement Plans

                                                 (C)2002 JOHN HANCOCK FUNDS, LLC
                                                                      40IPN 3/02




John Hancock
Mid Cap
Growth
Fund

ANNUAL
REPORT

10.31.01

Sign up for electronic delivery at
www.jhancock.com/funds/edelivery

[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]



[A photo of Maureen R. Ford, Chairman and Chief Executive Officer, flush
left next to first paragraph.]

WELCOME

Table of contents

Your fund at a glance
page 1

Managers' report
page 2

A look at performance
page 6

Growth of $10,000
page 7

Fund's investments
page 8

Financial statements
page 12

For your information
page 25


Dear Fellow Shareholders,

The U.S. stock market has had a very difficult time in 2001, as the
economy has slowed to a standstill and the parade of corporate earnings
disappointments has continued. The Federal Reserve aggressively began to
attack the economic slowdown, cutting short-term interest rates
throughout the year. However, the moves had little effect and the market
remained in turmoil as investors tried to get a clearer timetable for
economic and corporate recovery.

Then on September 11, 2001, a terrorist attack of unspeakable magnitude
was launched on the United States, shocking the world, sending markets
worldwide into a short-term free fall and pushing the already fragile
U.S. economy into recession. As a result, the Standard & Poor's 500
Index, a leading benchmark of large-cap stocks, lost 18.80% year-to-date
through October. Bonds have outperformed stocks overall, producing
mostly positive results, as they were the beneficiaries of the rate cuts
and investors' search for safety.

Apart from the immediate impact of devastating human loss, the tragic
events of September 11 have understandably raised concerns about the
broader repercussions on our country's economy and financial markets. We
have great confidence in the United States economy, its financial
systems and, above all, its people. Throughout history, they have
withstood a range of challenges -- from the Great Depression, to wars,
natural disasters and global financial turmoil -- and have emerged
stronger thereafter. We encourage shareholders to keep this longer-term
perspective, difficult as it may seem, when making investment decisions
in the coming days.

Today, we are seeing the full resources of industry and the U.S.
government working to bolster and sustain our systems. Although we
expect market volatility in the near term, what remains certain is that
the U.S. economic and financial systems are working and resilient. "The
American economy is open for business," said Deputy Treasury Secretary
Ken Dam the day after the attack. We never had any doubts.

Sincerely,

/S/ MAUREEN R. FORD

Maureen R. Ford,
Chairman and Chief Executive Officer



YOUR FUND
AT A GLANCE

The Fund seeks
long-term capital
appreciation by
investing primarily
in stocks of
medium capitaliza
tion companies (in
the capitalization
range of the
Russell Midcap
Growth Index) with
above-average
earnings growth.

Over the last twelve months

* Investment backdrop worsened as period progressed.

* Fund's heavy stake in technology and telecommunication names detracted
  from performance.

* Stage set for some positive stimulus for the months ahead.

[Bar chart with heading "John Hancock Mid Cap Growth Fund." Under the
heading is a note that reads "Fund performance for the year ended October
31, 2001." The chart is scaled in increments of 20% with -60% at the bottom
and 0% at the top. The first bar represents the -49.87% total return for
Class A. The second bar represents the -50.24% total return for Class B.
The third bar represents the -50.21% total return for Class C. A note below
the chart reads "Total returns for the Fund are at net asset value with all
distributions reinvested."]

Top 10 holdings

 3.0%   Affiliated Computer Services
 2.9%   Danaher
 2.8%   USA Education
 2.6%   Cabot Microelectronics
 2.4%   IDEC Pharmaceuticals
 2.4%   Waters
 2.4%   Legg Mason
 2.4%   National Semiconductor
 2.2%   Concord EFS
 2.1%   Electronic Arts

As a percentage of net assets on October 31, 2001.



BY PAUL J. BERLINGUET AND TIMOTHY N. MANNING FOR THE PORTFOLIO MANAGEMENT TEAM

John Hancock
Mid Cap Growth Fund

MANAGERS'
REPORT

Harsh investment conditions pushed stocks well into bear market
territory during the past 12 months. Over the fiscal year, we witnessed
a confluence of factors that in a very short time evolved into a
formidable force against the stock market. These included the steady
deterioration of corporate earnings and profit growth, a persistent
pullback in economic activity, large-scale restraint in capital
spending, the evaporation of funding for mergers and acquisitions as
well as initial public offerings, and the final bursting of the dot.com
bubble. Despite brief price upturns in late spring and midsummer, the
steady drumbeat of bad news heightened the market's unease, serving to
erode investor confidence well before the tragic events of September 11.

The terrorist attacks, however, did serve to drive an economy already
teetering on recession on its way to realizing it in full. After
shutting its doors for four days, the New York Stock Exchange opened on
September 17 and the world watched as the Dow Jones Industrial Average
experienced its greatest one-week decline since the Great Depression.
Despite this significant setback, the U.S. stock market had begun to
demonstrate its hallmark resiliency by the time the Fund's fiscal year
ended. Several key benchmark indexes were able to regain lost ground. In
fact, growth stocks, which had been out of favor for most of the fiscal
year, performed quite well in October.

"Harsh investment
 conditions pushed
 stocks well into bear
 market territory during
 the past 12 months."

FUND PERFORMANCE

In the difficult environment, John Hancock Mid Cap Growth Fund produced
negative returns, as did most growth stock funds. For the 12 months
ended October 31, 2001, the Fund's Class A, Class B and Class C shares
produced total returns of -49.87, -50.24%, and -50.21%, respectively,
at net asset value. This compares with the -42.78% return of the Fund's
benchmark Russell Midcap Growth Index and the -43.31% return of the
average multi-cap growth fund, according to Lipper, Inc.1 Keep in mind
that your net asset value return will be different from the Fund's if
you were not invested in the Fund for the entire period and did not
reinvest all distributions. Longer-term performance information can be
found on pages six and seven.

TECHNOLOGY PLUNGE JUMPING-OFF POINT FOR BROADENING PORTFOLIO

The broad-based downturn experienced by many industries began with a
sharp correction in the technology/telecommunication sector late last
year. The Fund owned many telecommunication equipment companies,
fiber-optics and networking firms, as well as competitive local exchange
carriers that suffered considerably during the sector's rout in the
period's first half. At the time, we believed many of these companies
had the wherewithal to support steady earnings visibility and long-term
contracts. Unfortunately, that was not the case and the Fund
underperformed its peers largely as a result. Without the certainty of
revenue acceleration going forward, we chose to sell many of these
holdings, fortunately before their demise was complete. Holdings we sold
included Comverse Technology, ONI Systems and Sonus Networks to name a
few.

"We then broadened the
 Fund's portfolio to partici-
 pate in companies that
 had diversified business
 models and demonstrated
 predictability of
 earnings growth."

We then broadened the Fund's portfolio to participate in companies that
had diversified business models and demonstrated predictability of
earnings growth. We also enhanced our already solid investment process
to involve even more disciplined buy and sell decisions based on target
upward and downward price thresholds.

[Table at top left-hand side of page entitled "Top five sectors." The first
listing is Medical 24%, the second is Computers 16%, the third Electronics
11%, the fourth Finance 8%, and the fifth Oil & gas 7%.]

BIOTECH AND FINANCIALS INCREASED

Biotechnology was to the 1980s what the dot.coms were to the 1990s.
After biotech's fall, the companies that survived were the ones with
sound business fundamentals, solid partnerships with large
pharmaceutical companies and viable products. As we diversified, we
increased the Fund's exposure to health care, adding to biotechnology
firms as well as health-care services. We have recently pared our
health-care stake in order to realize some profits. Noteworthy holdings
included Invitrogen, ICOS and Waters, which we sold.

[Pie chart at bottom of page with heading "Portfolio diversification As a
percentage of net assets on Oct. 31, 2001." The chart is divided into two
sections (from top to left): Common stocks 95% and Short-term investments &
other 5%.]

Declining interest rates, attractive valuations and fairly solid
consumer creditworthiness created opportunities to purchase
well-diversified consumer finance stocks. We added to or newly purchased
such firms as Commerce Bancorp, Concord EFS, a debit card processor, and
Affiliated Managers Group, a holding company for asset managers, and
student loan marketer USA Education, formerly Sallie Mae.

[Table at top of page entitled "SCORECARD." The header for the left column
is "INVESTMENT" and the header for the right column is "RECENT
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is Brocade
Communications Systems followed by a down arrow with the phrase "Slowdown
in storage spending." The second listing is USA Education followed by an up
arrow with the phrase "Efficiencies from acquisition, low interest rates."
The third listing is McLeodUSA followed by a down arrow with the phrase
"Nonviable business model."]

ENERGY REDUCED

We trimmed the Fund's exposure to energy-related stocks, particularly
those in oil-field services. Upon entering what is called the "shoulder
period" for the industry -- during which time companies decide how much
natural gas to put into storage for the winter -- we began to question
the sustainability of the commodity's price in a weakening economy. Our
move proved timely as the holdings we sold fell considerably in price
soon thereafter. Holdings we pared or sold include BJ Services, Santa Fe
International, Cooper Cameron Corp. and Weatherford International.

"We are well aware the
 market may remain volatile
 in the months ahead."

OUTLOOK

We are well aware the market may remain volatile in the months ahead.
Yet, we also look forward to the economy regaining its footing sometime
not too far in the future. While we shall remain cautious, we are
encouraged not only by the economic and financial stimulus packages
being introduced in Washington but also by the Federal Reserve Board's
resolve to jump-start economic growth through continued aggressive
monetary easing. With such initiatives, growth opportunities will likely
emerge.

This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. Of
course, the team's views are subject to change as market and other
conditions warrant.

1 Figures from Lipper, Inc. include reinvested dividends and do not take
  into account sales charges. Actual load-adjusted performance is lower.



A LOOK AT
PERFORMANCE

For the period ended
October 31, 2001

The index used for
comparison is the
Standard & Poor's 500
Index, Index 1, an
unmanaged index that
includes 500 widely
traded common
stocks. Also shown on
page 7 is the Russell
Midcap Growth Index,
Index 2, an unman-
aged index that
contains those securi-
ties from the Russell
Midcap Index with a
greater-than-average
growth orientation.

It is not possible to
invest in an index.

                              Class A      Class B      Class C      Index 1
Inception date                11-1-93      11-1-93       6-1-98           --

Average annual returns with maximum sales charge (POP)
One year                       -52.36%      -52.61%      -51.17%      -24.89%
Five years                      -2.46%       -2.47%          --        10.04%
Since Inception                  3.50%        3.44%       -6.42%          --

Cumulative total returns with maximum sales charge (POP)
One year                       -52.36%      -52.61%      -51.17%      -24.89%
Five years                     -11.73%      -11.77%          --        61.38%
Since Inception                 31.68%       31.05%      -20.27%          --

Performance figures assume all distributions are reinvested. Returns
with maximum sales charge reflect a sales charge on Class A shares of 5%
and Class C shares of 1%, and the applicable contingent deferred sales
charge (CDSC) on Class B and Class C shares. The Class B shares' CDSC
declines annually between years 1-6 according to the following
schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the
sixth year. Class C shares held for one year or less are subject to a 1%
CDSC. The return and principal value of an investment in the Fund will
fluctuate, so that shares, when redeemed, may be worth more or less than
the original cost. Index figures do not reflect sales charges and would
be lower if they did.

The returns reflect past results and should not be considered indicative
of future performance. The performance table above and the chart on the
next page do not reflect the deduction of taxes that a shareholder would
pay on fund distributions or the redemption of fund shares.



GROWTH OF
$10,000

This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown the
same investment in the two indexes described on page 6.

Line chart with the heading "GROWTH OF $10,000." Within the chart are four
lines. The first line represents the Index 1 and is equal to $26,288 as of
October 31, 2001. The second line represents the Index 2 and is equal to
$20,951 as of October 31, 2001. The third line represents the value of the
hypothetical $10,000 investment made in the John Hancock Mid Cap Growth
Fund, before sales charge, and is equal to $13,866 as of October 31, 2001.
The fourth line represents the value of the same hypothetical investment
made in the John Hancock Mid Cap Growth Fund, after sales charge, and is
equal to $13,168 as of October 31, 2001.

                                    Class B 1    Class C 1
Inception date                      11-1-93       6-1-98
Without sales charge                $13,105       $8,052
With maximum sales charge                --       $7,972
Index 1                             $26,288      $10,147
Index 2                             $20,951      $10,046

Assuming all distributions were reinvested for the period indicated, the
chart above shows the value of a $10,000 investment in the Fund's Class
B and Class C shares, respectively, as of October 31, 2001. Performance
of the classes will vary based on the difference in sales charges paid
by shareholders investing in the different classes and the fee structure
of those classes.

1 No contingency deferred sales charge applicable.



FINANCIAL STATEMENTS

FUND'S
INVESTMENTS

Securities owned
by the Fund on
October 31, 2001

This schedule is divided into two main categories: common stocks and
short-term investments. Common stocks are further broken down by
industry group. Short-term investments, which represent the Fund's cash
position, are listed last.




SHARES           ISSUER                                                                                 VALUE
- -------------------------------------------------------------------------------------------------------------
                                                                                           
COMMON STOCKS 94.78%                                                                             $179,394,277
(Cost $177,204,022)

Advertising 1.44%                                                                                  $2,721,752
 86,680   Lamar Advertising Co.*                                                                    2,721,752

Banks -- United States 2.67%                                                                        5,047,436
 34,832   Commerce Bancorp, Inc.                                                                    2,542,736
 55,000   State Street Corp.                                                                        2,504,700

Beverages 0.97%                                                                                     1,835,000
100,000   Coca-Cola Enterprises, Inc.                                                               1,835,000

Broker Services 2.40%                                                                               4,552,470
108,109   Legg Mason, Inc.                                                                          4,552,470

Business Services -- Misc. 1.49%                                                                    2,830,782
 92,600   Corporate Executive Board Co. (The)*                                                      2,830,782

Chemicals 2.61%                                                                                     4,934,546
 74,450   Cabot Microelectronics Corp.*                                                             4,934,546

Computers 16.03%                                                                                   30,339,575
 63,830   Affiliated Computer Services, Inc.*                                                       5,620,231
205,400   BEA Systems, Inc.*                                                                        2,493,556
124,500   Check Point Software Technologies Ltd.* (Israel)                                          3,675,240
 99,400   Citrix Systems, Inc.*                                                                     2,325,960
 98,800   EarthLink, Inc.*                                                                          1,447,420
 77,350   Electronic Arts, Inc.*                                                                    3,980,431
 91,200   Emulex Corp.*                                                                             2,159,616
140,000   Juniper Networks, Inc.*                                                                   3,120,600
526,650   Parametric Technology Corp.*                                                              3,691,816
 49,450   Pixar, Inc.*                                                                              1,824,705

Electronics 11.36%                                                                                 21,496,582
 98,000   Alpha Industries, Inc.*                                                                   2,281,440
109,750   Cree, Inc.*                                                                               1,970,013
 64,636   International Rectifier Corp.*                                                            2,269,370
102,250   Lam Research Corp.*                                                                       1,938,660
 75,000   Linear Technology Corp.                                                                   2,910,000
103,700   Micrel, Inc.*                                                                             2,608,055
174,917   National Semiconductor Corp.*                                                             4,544,344
 78,800   Semtech Corp.*                                                                            2,974,700

Finance 7.89%                                                                                      14,942,584
 44,602   Affiliated Managers Group, Inc.*                                                          2,751,943
153,000   Concord EFS, Inc.*                                                                        4,187,610
 86,850   SEI Investments Co.                                                                       2,670,638
 65,380   USA Education, Inc.                                                                       5,332,393

Household  0.68%                                                                                    1,287,403
 29,801   Mohawk Industries, Inc.*                                                                  1,287,403

Instruments -- Scientific 2.41%                                                                     4,553,899
128,315   Waters Corp.*                                                                             4,553,899

Insurance  2.92%                                                                                    5,532,923
 43,083   Everest Re Group Ltd. (Bermuda)                                                           2,880,099
113,904   Willis Group Holdings Ltd.*                                                               2,652,824

Manufacturing 2.85%                                                                                 5,395,966
 96,806   Danaher Corp.                                                                             5,395,966

Media 2.15%                                                                                         4,065,709
 37,689   Univision Communications, Inc. (Class A)*                                                   942,225
131,294   Westwood One, Inc.*                                                                       3,123,484

Medical 24.03%                                                                                     45,474,842
 35,863   Allergan, Inc.                                                                            2,574,605
 57,213   AmerisourceBergen Corp.                                                                   3,636,458
 10,550   Anthem, Inc.*                                                                               441,834
 88,600   Cytyc Corp.*                                                                              2,323,092
 32,878   Forest Laboratories, Inc.*                                                                2,445,466
 51,000   Genzyme Corp.*                                                                            2,751,450
113,362   Health Management Associates, Inc. (Class A)*                                             2,209,425
 54,950   ICOS Corp.*                                                                               3,173,363
 76,550   IDEC Pharmaceuticals Corp.*                                                               4,591,469
 47,600   ImClone Systems, Inc.*                                                                    2,912,644
 41,250   Invitrogen Corp.*                                                                         2,530,275
 41,582   Laboratory Corp. of America Holdings*                                                     3,584,368
 82,900   MedImmune, Inc.*                                                                          3,252,996
 62,004   Shire Pharmaceuticals Group Plc*, American
          Depositary Receipts (ADR) (United Kingdom)                                                2,771,579
  4,850   Smith & Nephew Plc (United Kingdom)                                                          27,279
 53,708   Teva Pharmaceutical Industries Ltd. (ADR) (Israel)                                        3,319,154
 43,657   Varian Medical Systems, Inc.*                                                             2,929,385

Oil & Gas 6.89%                                                                                    13,041,687
 38,519   Anadarko Petroleum Corp.                                                                  2,197,509
 89,620   BJ Services Co.*                                                                          2,293,376
 77,204   ENSCO International, Inc.                                                                 1,528,639
 82,818   Halliburton Co.                                                                           2,044,776
 96,619   Santa Fe International Corp.                                                              2,351,706
 76,707   Weatherford International, Inc.*                                                          2,625,681

Retail 3.17%                                                                                        5,995,704
 48,371   BJ's Wholesale Club, Inc.*                                                                2,455,796
104,731   TJX Cos., Inc. (The)                                                                      3,539,908

Utilities  1.83%                                                                                    3,474,100
 70,000   Kinder Morgan, Inc.                                                                       3,474,100

Waste Disposal Service & Equip. 0.99%                                                               1,871,317
114,244   Republic Services, Inc.*                                                                  1,871,317


                                                                     INTEREST        PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE                                       RATE    (000s omitted)         VALUE
- -------------------------------------------------------------------------------------------------------------
                                                                                       
SHORT-TERM INVESTMENTS 5.60%                                                                      $10,599,000
(Cost $10,599,000)

Joint Repurchase Agreement 5.60%
Investment in a joint repurchase agreement transaction with
  Barclays Capital, Inc. -- Dated 10-31-01, due 11-01-01
  (Secured by U.S. Treasury Bond, 6.375% due 08-15-27
  and U.S. Treasury Note, 3.625% due 01-15-08)                           2.58%        $10,599      10,599,000

TOTAL INVESTMENTS 100.38%                                                                        $189,993,277

OTHER ASSETS AND LIABILITIES, NET (0.38%)                                                           ($722,485)

TOTAL NET ASSETS 100.00%                                                                         $189,270,792



* Non-income producing security.

Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer.

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

See notes to
financial statements.



PORTFOLIO
CONCENTRATION

October 31, 2001
(unaudited)

This table shows
the percentages
of the Fund's
investments
aggregated
by various
countries.

                                      VALUE AS A PERCENTAGE
COUNTRY DIVERSIFICATION                       OF NET ASSETS
- -----------------------------------------------------------
Bermuda                                               1.52%
Israel                                                3.70
United Kingdom                                        1.48
United States                                        93.68

Total investments                                   100.38%

See notes to
financial statements.



ASSETS AND
LIABILITIES

October 31, 2001

This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the net
asset value and
the maximum
offering price
per share.

ASSETS
Investments at value (cost $187,803,022)                         $189,993,277
Cash                                                                      108
Receivable for investments sold                                     5,177,724
Receivable for shares sold                                              5,981
Dividends and interest receivable                                       6,967
Other assets                                                           29,436

Total assets                                                      195,213,493

LIABILITIES
Payable for investments purchased                                   5,499,217
Payable for shares repurchased                                         52,410
Payable to affiliates                                                 268,871
Other payables and accrued expenses                                   122,203

Total liabilities                                                   5,942,701

NET ASSETS
Capital paid-in                                                   287,207,006
Accumulated net realized loss on investments                     (100,108,262)
Net unrealized appreciation of investments                          2,190,255
Accumulated net investment loss                                       (18,207)

Net assets                                                       $189,270,792

NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($84,913,803 [DIV] 11,090,107 shares)                           $7.66
Class B ($101,205,800 [DIV] 14,191,300 shares)                          $7.13
Class C ($3,151,189 [DIV] 442,206 shares)                               $7.13

MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($7.66 [DIV] 95%)                                             $8.06
Class C ($7.13 [DIV] 99%)                                               $7.20

1 On single retail sales of less than $50,000. On sales of $50,000 or
  more and on group sales, the offering price is reduced.

See notes to
financial statements.



OPERATIONS

For the year ended
October 31, 2001

This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in oper-
ating the Fund.
It also shows net
gains (losses) for
the period stated.

INVESTMENT INCOME
Interest                                                             $480,406
Dividends (net of foreign withholding taxes of $1,119)                467,036
Securities lending income                                             452,234

Total investment income                                             1,399,676

EXPENSES
Investment management fee                                           2,247,369
Class A distribution and service fee                                  366,277
Class B distribution and service fee                                1,546,873
Class C distribution and service fee                                   41,415
Transfer agent fee                                                  1,234,229
Custodian fee                                                          74,625
Accounting and legal services fee                                      56,109
Auditing fee                                                           28,200
Printing                                                               24,885
Registration and filing fee                                            23,367
Trustees' fee                                                          19,328
Miscellaneous                                                          11,143
Legal fee                                                               2,129
Interest expense                                                          943

Total expenses                                                      5,676,892

Net investment loss                                                (4,277,216)

REALIZED AND UNREALIZED GAIN (LOSS)

Net realized loss on investments                                  (99,532,206)
Net realized loss on foreign currency transactions                       (101)
Change in net unrealized appreciation (depreciation)
  on investments                                                 (105,617,067)

Net realized and unrealized loss                                 (205,149,374)

Decrease in net assets from operations                          ($209,426,590)

See notes to
financial statements.



CHANGES IN
NET ASSETS

This Statement
of Changes in
Net Assets
shows how the
value of the
Fund's net assets
has changed
since the end of
the previous
period. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses, distri-
butions paid to
shareholders, if
any, and any
increase or
decrease in
money share
holders invested
in the Fund.

                                                      YEAR             YEAR
                                                     ENDED            ENDED
                                                  10-31-00         10-31-01

INCREASE (DECREASE) IN NET ASSETS
From operations

Net investment loss                            ($5,859,670)     ($4,277,216)

Net realized gain (loss)                        38,277,590      (99,532,307)
Change in net unrealized
  appreciation (depreciation)                   46,416,551     (105,617,067)
Increase (decrease) in net assets
  resulting from operations                     78,834,471     (209,426,590)

Distributions to shareholders
From net realized gain
Class A                                         (7,725,298)      (8,459,283)
Class B                                        (10,531,936)     (12,235,558)
Class C                                            (30,130)        (268,824)
                                               (18,287,364)     (20,963,665)

From fund share transactions                   103,602,298       (2,662,700)

NET ASSETS
Beginning of period                            258,174,342      422,323,747

End of period 1                               $422,323,747     $189,270,792

1 Includes accumulated net investment loss of $17,614 and $18,207, respectively.

See notes to
financial statements.





FINANCIAL
HIGHLIGHTS

CLASS A SHARES

The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.

PERIOD ENDED                                          10-31-97    10-31-98    10-31-99    10-31-00    10-31-01
                                                                                       
PER SHARE OPERATING PERFORMANCE
Net asset value,
  beginning of period                                   $10.92      $11.40       $9.11      $12.85      $16.03
Net investment loss 1                                    (0.06)      (0.09)      (0.12)      (0.17)      (0.12)
Net realized and unrealized
  gain (loss) on investments                              1.00       (0.89)       3.86        4.23       (7.48)
Total from investment
  operations                                              0.94       (0.98)       3.74        4.06       (7.60)
Less distributions
From net realized gain                                   (0.46)      (1.31)         --       (0.88)      (0.77)
Net asset value,
  end of period                                         $11.40       $9.11      $12.85      $16.03       $7.66
Total return 2 (%)                                        8.79       (9.40)      41.05       33.26      (49.87)

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
  (in millions)                                           $142        $101        $112        $176         $85
Ratio of expenses to
  average net assets (%)                                  1.59        1.59        1.60        1.46        1.63
Ratio of net investment loss
  to average net assets (%)                              (0.57)      (0.86)      (1.14)      (1.08)      (1.13)
Portfolio turnover (%)                                     317         168         153         146         211


See notes to
financial statements.





FINANCIAL
HIGHLIGHTS

CLASS B SHARES

PERIOD ENDED                                          10-31-97    10-31-98    10-31-99    10-31-00    10-31-01
                                                                                       
PER SHARE OPERATING PERFORMANCE
Net asset value,
  beginning of period                                   $10.67      $11.03       $8.72      $12.22      $15.08
Net investment loss 1                                    (0.13)      (0.15)      (0.18)      (0.27)      (0.18)
Net realized and unrealized
  gain (loss) on investments                              0.95       (0.85)       3.68        4.01       (7.00)
Total from investment
  operations                                              0.82       (1.00)       3.50        3.74       (7.18)
Less distributions
From net realized gain                                   (0.46)      (1.31)         --       (0.88)      (0.77)
Net asset value,
  end of period                                         $11.03       $8.72      $12.22      $15.08       $7.13
Total return 2 (%)                                        7.84       (9.97)      40.14       32.30      (50.24)

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
  (in millions)                                           $205        $134        $146        $241        $101
Ratio of expenses to
  average net assets (%)                                  2.28        2.27        2.23        2.16        2.33
Ratio of net investment loss
  to average net assets (%)                              (1.25)      (1.54)      (1.77)      (1.78)      (1.83)
Portfolio turnover (%)                                     317         168         153         146         211


See notes to
financial statements.





FINANCIAL
HIGHLIGHTS

CLASS C SHARES

PERIOD ENDED                                          10-31-98 3  10-31-99    10-31-00    10-31-01
                                                                              
PER SHARE OPERATING PERFORMANCE
Net asset value,
  beginning of period                                    $9.99       $8.72      $12.21      $15.07
Net investment loss 1                                    (0.06)      (0.19)      (0.27)      (0.18)
Net realized and unrealized
  gain (loss) on investments                             (1.21)       3.68        4.01       (6.99)
Total from investment
  operations                                             (1.27)       3.49        3.74       (7.17)
Less distributions
From net realized gain                                      --          --       (0.88)      (0.77)
Net asset value,
  end of period                                          $8.72      $12.21      $15.07       $7.13
Total return 2 (%)                                       12.71 4     40.02       32.32      (50.21)

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
  (in millions)                                             -- 5        -- 5        $5          $3
Ratio of expenses to
  average net assets (%)                                  2.29 6      2.30        2.16        2.33
Ratio of net investment loss
  to average net assets (%)                              (1.66) 6    (1.82)      (1.80)      (1.83)
Portfolio turnover (%)                                     168         153         146         211


1 Based on the average of the shares outstanding at the end of each month.

2 Assumes dividend reinvestment and does not reflect the effect of sales
  charges.

3 Class C shares began operations on 6-1-98.

4 Not annualized.

5 Less than $500,000.

6 Annualized.

See notes to
financial statements.



NOTES TO
STATEMENTS

NOTE A
Accounting policies

John Hancock Mid Cap Growth Fund (the "Fund") is a diversified series of
John Hancock Investment Trust III, an open-end investment management
company registered under the Investment Company Act of 1940. The
investment objective of the Fund is to achieve long-term capital
appreciation.

The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B and Class C shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class which bears distribution and service expenses under terms of a
distribution plan have exclusive voting rights to that distribution
plan.

Significant accounting policies of the Fund are as follows:

Valuation of investments

Securities in the Fund's portfolio 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,
Inc., may participate in a joint repurchase agreement transaction.
Aggregate cash balances are invested in one or more large 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.

Class allocations

Income, common expenses and realized and unrealized gains (losses) are
determined at the fund level and allocated daily to each class of shares
based on the appropriate net assets of the respective classes.
Distribution and service fees, if any, are calculated daily at the class
level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.

Expenses

The majority of the expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund will
be 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 funds.

Bank borrowings

The Fund is permitted to have bank borrowings for temporary or emergency
purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. The Fund has
entered into a syndicated line of credit agreement with various banks.
This agreement enables the Fund to participate with other funds managed
by the Adviser in an unsecured line of credit with banks, which permit
borrowings up to $500 million, collectively. Interest is charged to each
fund, based on its borrowing. In addition, a commitment fee is charged
to each fund based on the average daily unused portion of the line of
credit and is allocated among the participating funds. The Fund had no
borrowing activity under the line of credit during the year ended
October 31, 2001.

Securities lending

The Fund may lend securities to certain qualified brokers who pay the Fund
negotiated lender fees. The loans are collateralized at all times with cash
or securities with a market value at least equal to the market value of the
securities on loan. As with other extensions of credit, the Fund may bear
the risk of delay of the loaned securities in recovery or even loss of
rights in the collateral, should the borrower of the securities fail
financially. At October 31, 2001, the Fund loaned securities having a market
value of $16,689,962 collateralized by securities in the amount of
$17,024,006.

Federal income taxes

The Fund qualifies as a "regulated investment company" by complying with
the applicable provisions of the Internal Revenue Code and will not be
subject to federal income tax on taxable income which is distributed to
shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has $103,577,194 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 Fund, no capital gain distributions will be
made. The Fund's carryforward expires as follows: $3,983,227 on October
31, 2002 and $99,593,967 on October 31, 2009. Availability of a certain
amount of the loss carryforward, which were acquired on September 6,
1996 and December 16, 1994 in mergers, may be limited in a given year.

Dividends, interest and distributions

Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. Foreign income may be subject
to foreign withholding taxes, which are accrued as applicable.

The Fund records distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, which may
differ from accounting principles generally accepted in the United
States of America. Distributions paid by the Fund with respect to each
class of shares will be calculated in the same manner, at the same time
and will be in the same amount, except for the effect of expenses that
may be applied differently to each class.

Use of estimates

The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of
America, incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues and expenses of the
Fund. Actual results could differ from these estimates.

NOTE B
Management fee and transactions with affiliates and others

The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.80% of the first $500,000,000 of the Fund's average daily net asset
value, (b) 0.75% of the next $500,000,000 and (c) 0.70% of the Fund's
average daily net asset value in excess of 1,000,000,000.

The Fund has Distribution Plans with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. The Fund has adopted
Distribution Plans with respect to Class A, Class B and Class C pursuant
to Rule 12b-1 under the Investment Company Act of 1940 to reimburse JH
Funds for the services it provides as distributor of shares of the Fund.
Accordingly, the Fund makes payments to JH Funds at an annual rate not
to exceed 0.30% of Class A average daily net assets and 1.00% of Class B
and Class C average daily net assets. A maximum of 0.25% of such
payments may be service fees as defined by the Conduct Rules of the
National Association of Securities Dealers. Under the Conduct Rules,
curtailment of a portion of the Fund's 12b-1 payments could occur under
certain circumstances.

Class A and Class C shares are assessed up-front sales charges. During
the year ended October 31, 2001, JH Funds received net up-front sales
charges of $354,212 with regard to sales of Class A shares. Of this
amount, $43,008 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $221,657 was paid as
sales commissions to unrelated broker-dealers and $89,547 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect
parent, John Hancock Life Insurance Company ("JHLICo"), is the indirect
sole shareholder of Signator Investors. During the year ended October
31, 2001, JH Funds received net up-front sales charges of $18,115 with
regard to sales of Class C shares. Of this amount, $15,519 was paid as
sales commissions to unrelated broker-dealers and $2,596 was paid as
sales commissions to sales personnel of Signator Investors.

Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates, beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Class C shares which are redeemed within one year of purchase
are subject to a CDSC at a rate of 1.00% of the lesser of the current
market value at the time of redemption or the original purchase cost of
the shares being redeemed. Proceeds from the CDSCs are paid to JH Funds
and are used in whole or in part to defray its expenses for providing
distribution related services to the Fund in connection with the sale of
Class B and Class C shares. For the year ended October 31, 2001, CDSCs
received by JH Funds amounted to $204,422 for Class B shares and $16,399
for Class C shares.

The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc., an indirect subsidiary of JHLICo. The Fund pays monthly
transfer agent fee based on the number of shareholder accounts plus
certain out-of-pocket expenses.

The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
year was at an annual rate of 0.02% of the average net assets of the
Fund.

Ms. Maureen R. Ford and Mr. John M. DeCiccio 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 the
Fund. 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. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.

NOTE C
Fund share transactions

This listing illustrates the number of shares sold, reinvested and
repurchased during the last two periods, along with the corresponding
dollar value. The Fund has an unlimited number of shares authorized with
no par value.





                                   YEAR ENDED 10-31-00              YEAR ENDED 10-31-01
                              SHARES            AMOUNT          SHARES           AMOUNT
                                                               
CLASS A SHARES
Sold                        7,007,167     $113,792,310       6,463,198      $69,108,267
Distributions reinvested      559,925        7,234,539         516,305        8,044,046
Repurchased                (5,290,216)     (84,452,496)     (6,892,015)     (69,795,005)
Net increase                2,276,876      $36,574,353          87,488       $7,357,308

CLASS B SHARES
Sold                        6,140,752      $96,363,708       1,755,115      $18,796,689
Distributions reinvested      792,521        9,700,479         734,126       10,732,049
Repurchased                (2,907,340)     (44,027,463)     (4,260,517)     (40,747,341)
Net increase (decrease)     4,025,933      $62,036,724      (1,771,276)    ($11,218,603)

CLASS C SHARES
Sold                          345,301       $5,336,113         232,471       $2,387,369
Distributions reinvested        1,965           24,049          15,197          222,024
Repurchased                   (24,310)        (368,941)       (151,021)      (1,410,798)
Net increase                  322,956       $4,991,221          96,647       $1,198,595

NET INCREASE (DECREASE)     6,625,765     $103,602,298      (1,587,141)     ($2,662,700)




NOTE D
Investment transactions

Purchases and proceeds from sales of securities, other than short-term
securities and obligations of the U.S. government, during the year ended
October 31, 2001, aggregated $571,197,711 and $602,224,919,
respectively.

The cost of investments owned at October 31, 2001, including short-term
investments, for federal income tax purposes was $187,917,437. Gross
unrealized appreciation and depreciation of investments aggregated
$13,423,859 and $11,348,019, respectively, resulting in net unrealized
appreciation of $2,075,840.

NOTE E
Reclassification of capital accounts

During the year ended October 31, 2001, the fund has reclassified
amounts to reflect an increase in accumulated net realized loss on
investments of $20,986, a decrease in accumulated net investment loss of
$4,276,623, and a decrease in capital paid-in of $4,255,637. This
represents the amount necessary to report these balances on a tax basis,
excluding certain temporary differences, as of October 31, 2001.
Additional adjustments may be needed in subsequent reporting periods.
These reclassifications, which have no impact on the net asset value of
the Fund, are primarily attributable to the treatment of net operating
losses and utilized capital loss carryforwards in the computation of
distributable income and capital gains under federal tax rules versus
accounting principles generally accepted in the United States of
America. The calculation of net investment income per share in the
financial highlights excludes these adjustments.



AUDITORS'
REPORT

Report of
Pricewaterhouse-
Coopers LLP,
Independent
Auditors

To the Shareholders and the Board of Trustees of
John Hancock Mid Cap Growth Fund of
John Hancock Investment Trust III

In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of the
John Hancock Mid Cap Growth Fund (a series of the John Hancock
Investment Trust III) (the "Fund") at October 31, 2001, and the results
of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities owned at October
31, 2001 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 2001



TAX
INFORMATION

Unaudited

For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund for its taxable year ended
October 31, 2001.

The Fund has designated distributions to shareholders of $20,963,665 as
capital gain dividend.

With respect to the Fund's ordinary taxable income for the fiscal year
ended October 31, 2001, 0% of the distributions qualify for the
dividends-received deduction available to corporations.

Shareholders will receive a 2001 U.S. Treasury Department Form 1099-DIV
in January 2002. This will reflect the total of all distributions which
are taxable for calendar year 2001.



FOR YOUR
INFORMATION

TRUSTEES
Dennis S. Aronowitz*
Richard P. Chapman, Jr.
William J. Cosgrove*
John M. DeCiccio
Richard A. Farrell*
Maureen R. Ford
Gail D. Fosler
William F. Glavin
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
*Members of the Audit Committee

OFFICERS
Maureen R. Ford
Chairman, President
and Chief Executive Officer

William L. Braman
Executive Vice President
and Chief Investment Officer

Richard A. Brown
Senior Vice President
and Chief Financial Officer

Susan S. Newton
Senior Vice President
and Secretary

William H. King
Vice President and Treasurer

Thomas H. Connors
Vice President and
Compliance Officer

INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286

TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000

LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803

INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110



HOW TO
CONTACT US

On the Internet                      www.jhfunds.com

By regular mail                      John Hancock Signature Services, Inc.
                                     1 John Hancock Way, Suite 1000
                                     Boston, MA 02217-1000

By express mail                      John Hancock Signature Services, Inc.
                                     Attn: Mutual Fund Image Operations
                                     529 Main Street
                                     Charlestown, MA 02129

Customer service representatives     1-800-225-5291

24-hour automated information        1-800-338-8080

TDD line                             1-800-544-6713



[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]

1-800-225-5291
1-800-544-6713 (TDD)
1-800-338-8080 EASI-Line

www.jhfunds.com

Now available: electronic delivery
www.jhancock.com/funds/edelivery

This report is for the information of
the shareholders of the John Hancock
Mid Cap Growth Fund.

3900A  10/01
       12/01






John Hancock
International
Fund

ANNUAL
REPORT

10.31.01

Sign up for electronic delivery at
www.jhancock.com/funds/edelivery

[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]



[A photo of Maureen R. Ford, Chairman and Chief Executive Officer, flush
left next to first paragraph.]
7
WELCOME

Table of contents

Your fund at a glance
page 1

Managers' report
page 2

A look at performance
page 6

Growth of $10,000
page 7

Fund's investments
page 8

Financial statements
page 14

For your information
page 29


Dear Fellow Shareholders,

The U.S. stock market has had a very difficult time in 2001, as the
economy has slowed to a standstill and the parade of corporate earnings
disappointments has continued. The Federal Reserve aggressively began to
attack the economic slowdown, cutting short-term interest rates
throughout the year. However, the moves had little effect and the market
remained in turmoil as investors tried to get a clearer timetable for
economic and corporate recovery.

Then on September 11, 2001, a terrorist attack of unspeakable magnitude
was launched on the United States, shocking the world, sending markets
worldwide into a short-term free fall and pushing the already fragile
U.S. economy into recession. As a result, the Standard & Poor's 500
Index, a leading benchmark of large-cap stocks, lost 18.80% year-to-date
through October. Bonds have outperformed stocks overall, producing
mostly positive results, as they were the beneficiaries of the rate cuts
and investors' search for safety.

Apart from the immediate impact of devastating human loss, the tragic
events of September 11 have understandably raised concerns about the
broader repercussions on our country's economy and financial markets. We
have great confidence in the United States economy, its financial
systems and, above all, its people. Throughout history, they have
withstood a range of challenges - from the Great Depression, to wars,
natural disasters and global financial turmoil - and have emerged
stronger thereafter. We encourage shareholders to keep this longer-term
perspective, difficult as it may seem, when making investment decisions
in the coming days.

Today, we are seeing the full resources of industry and the U.S.
government working to bolster and sustain our systems. Although we
expect market volatility in the near term, what remains certain is that
the U.S. economic and financial systems are working and resilient. "The
American economy is open for business," said Deputy Treasury Secretary
Ken Dam the day after the attack. We never had any doubts.

Sincerely,

/S/ MAUREEN R. FORD

Maureen R. Ford,
Chairman and Chief Executive Officer



YOUR FUND
AT A GLANCE

The Fund seeks
long-term growth
of capital by
investing primarily
in stocks of foreign
companies.

Over the last twelve months

* Economic conditions continued to deteriorate worldwide.

* Terrorist attacks in the U.S. reverberated throughout the global economy.

* International markets rebounded late in the period as political and
  monetary leaders took action to calm investor fears.

[Bar chart with heading "John Hancock International Fund." Under the
heading is a note that reads "Fund performance for the year ended
October 31, 2001." The chart is scaled in increments of 10% with -40% at
the bottom and 0% at the top. The first bar represents the -34.60% total
return for Class A. The second bar represents the -35.18% total return
for Class B. The third bar represents the -35.14% total return for Class
C. A note below the chart reads "Total returns for the Fund are at net
asset value with all distributions reinvested."]

Top 10 holdings

 1.6%   TotalFinaElf
 1.5%   Inditex
 1.3%   E.On
 1.3%   Suncor Energy
 1.3%   BNP Paribas
 1.3%   GlaxoSmithKline
 1.2%   Manulife Financial
 1.2%   Swiss Reinsurance
 1.2%   Nintendo
 1.2%   Royal Bank of Scotland Group

As a percentage of net assets on October 31, 2001.



MANAGERS'
REPORT

BY LORETTA MORRIS AND RANDY KAHN, FOR THE NICHOLAS-APPLEGATE CAPITAL
MANAGEMENT PORTFOLIO MANAGEMENT TEAM

John Hancock
International Fund

Conditions in global equity markets presented challenges for investors
throughout 2001, exacerbated by the tragic events of September 11. Since
the period began, the international equity markets have been bracing for
a tough investment environment in the face of slowing economic and
earnings growth globally. The terrorist attacks on U.S. soil only served
to heighten investor concerns.

Amid a deceleration in U.S. industrial-sector growth following massive
investments in technology in 1999, the U.S. economy entered a period of
slower growth starting in the second half of 2000. Similar to the trend
in the United States, economic expansion has slowed markedly in Europe.
Among the 12-member Eurozone countries, growth slowed to 0.1% in the
second quarter of 2001, down from 0.5% posted in the first quarter.
Despite slowing growth, the Eurozone remained out of recession (loosely
defined as two straight quarters of falling output) during the reporting
period. In Japan, the economy remained mired in difficulty: the
country's GDP shrank by 0.8% in the second quarter, unemployment has
been on the rise and exporters have lowered their earnings expectations
on heightened fears that the United States would fall into a recession.

"Similar to the trend
 in the United States,
 economic expansion
 has slowed markedly
 in Europe."

In an effort to revive flagging growth, central banks worldwide have
moved to reduce interest rates. Through the end of October, central
bankers cut interest rates more than 150 times and, especially after the
September 11 attacks, injected massive amounts of liquidity into the
global economy.

FUND PERFORMANCE

For the 12 months ended October 31, 2001, John Hancock International
Fund's Class A, Class B and Class C shares posted total returns of
- -34.60%, -35.18% and -35.14%, respectively, at net asset value.
During the same period, the benchmark MSCI All Country World Free
ex-U.S. Index returned -24.93% and the average international fund
returned -26.39%, according to Lipper, Inc.1 Keep in mind that your net
asset value return will be different from the Fund's performance if you
were not invested in the Fund for the entire period and did not reinvest
all distributions. Please see pages six and seven for historical
performance information.

GROWTH STOCKS OUT OF FAVOR

Throughout 2001, rough investment conditions globally have negatively
affected the Fund's returns because growth stocks, which are the Fund's
focus, have been out of favor, while value-oriented companies have been
rewarded. In fact, companies with relatively high price-to-earnings
ratios that met or exceeded their earnings expectations were punished
due to concerns over their future growth rates.

"...growth stocks, which
 are the Fund's focus, have
 been out of favor..."

Despite this challenging environment, we continue to find companies
benefiting from positive, sustainable change. For example, two of the
portfolio's larger holdings -- Diageo, the U.K. spirits and food
company, and Nestle, the Swiss food producer -- are restructuring
operations to reduce costs, expand distribution and increase margins.
These positions have performed quite well.

On a country basis, stock selection in Japan, Hong Kong and Mexico were
the primary contributors to the Fund's decline during the period. During
most of the reporting period, the Fund was significantly underweighted
in Japanese stocks. In particular, we have been bearish on the Japanese
financial sector -- in our opinion, most companies in this group are in
dire financial health, exhibit little transparency and are incongruent
with our investment philosophy.

[Table at top left-hand side of page entitled "Top five sectors." The
first listing is Medical 12%, the second is Banks-foreign 12%, the third
Oil & gas 10%, the fourth Telecommunications 10%, and the fifth Retail
7%.]

By sector, the Fund was hardest-hit by declines in the
commercial/industrial, producers/manufacturing and financial services
groups. In what has been a discouraging year for investors and money
managers alike, there were no positive returns among any of the sectors
in the Fund or the index in 2001 through October 31.

OUTLOOK

Despite a difficult environment for global equities in 2001, a number of
factors inspire optimism. The European Central Bank, the Bank of England
and many other central banks worldwide have reduced the level of
short-term interest rates to encourage borrowing by consumers and
businesses, thereby helping stimulate economic growth. After posting
declines in September, global markets bounced back in the first weeks of
October, but this may reflect short-term oversold conditions. In the
wake of the U.S.-led war on terrorism and the first retaliatory attacks
in Afghanistan, international markets posted gains. Longer term, we
believe the case for international investing remains compelling amid the
positive themes of structural changes such as tax and pension reform in
Europe. The trend toward a rising equity culture in Europe and Japan
also bodes well for international equity markets.

[Bar chart at middle of page with heading "Five largest countries As a
percentage of net assets on 10-31-01." The chart is divided into five
sections: United Kingdom 23%, Japan 15%, France 13%, Canada 7% and
Switzerland 6%.]

[Table at top of page entitled "SCORECARD." The header for the left
column is "INVESTMENT" and the header for the right column is "RECENT
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is
Inditex followed by an up arrow with the phrase "Rapid expansion and
strong same-store sales increases." The second listing is Furukawa
Electric followed by a down arrow with the phrase "Global slowdown in
capital equipment spending." The third listing is Nokia followed by an
up arrow with the phrase "Establishing a dominant position in the
wireless space."]

We continue, however, to maintain a reduced exposure to Japanese stocks.
Although we believe that the new government of Prime Minister Jonichiro
Koizumi may eventually institute structural reforms, in the near term
such efforts will likely push Japan further into recession.

"Our goal has always been to
 identify companies with
 increasing earnings growth
 and we have held true to
 our investment discipline."

At Nicholas-Applegate, we remain committed to our proven investment
philosophy and process despite changing market conditions. Our goal has
always been to identify companies with increasing earnings growth and we
have held true to our investment discipline. Over full market cycles,
earnings drive stock prices, and over time, growth has rewarded
investors. We are confident that our consistent focus on buying well-run
companies that have the ability to outpace expectations will continue to
benefit shareholders over time. Finally, we thank you for your patience
and support during what has been a trying year for all of us.

This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. Of
course, the team's views are subject to change as market and other
conditions warrant.

International investing involves special risks such as political,
economic and currency risks and differences in accounting standards and
financial reporting.

1 Figures from Lipper, Inc. include reinvested dividends and do not take
  into account sales charges. Actual load-adjusted performance is lower.



A LOOK AT
PERFORMANCE

For the period ended
October 31, 2001

The index used for
comparison is the
Morgan Stanley
Capital International
(MSCI) All Country
World Free Ex-U.S.
Index, which measures
the performance of a
broad range of
developed and
emerging stock
markets around the
world. The index
represents" free"
securities that are
traded freely on
equity exchanges
around the world.

It is not possible to
invest in an index.
                              Class A     Class B     Class C       Index
Inception date                 1-3-94      1-3-94      6-1-98          --

Average annual returns with maximum sales charge (POP)
One year                      -37.89%     -38.42%     -36.42%     -24.93%
Five years                     -6.65%      -6.70%          --       0.26%
Since inception                -3.90%      -3.95%     -11.94%          --

Cumulative total returns with maximum sales charge (POP)
One year                      -37.89%     -38.42%     -36.42%     -24.93%
Five years                    -29.10%     -29.31%          --       1.30%
Since inception               -26.72%     -27.04%     -35.23%          --

Performance figures assume all distributions are reinvested. Returns
with maximum sales charge reflect a sales charge on Class A shares of 5%
and Class C shares of 1%, and the applicable contingent deferred sales
charge (CDSC) on Class B and Class C shares. The Class B shares' CDSC
declines annually between years 1-6 according to the following
schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the
sixth year. Class C shares held for one year or less are subject to a 1%
CDSC. The return and principal value of an investment in the Fund will
fluctuate, so that shares, when redeemed, may be worth more or less than
the original cost. Index figures do not reflect sales charges and would
be lower if they did.

The returns reflect past results and should not be considered indicative
of future performance. The performance table above and the chart on the
next page do not reflect the deduction of taxes that a shareholder would
pay on fund distributions or the redemption of fund shares.



GROWTH OF
$10,000

This chart shows what happened to a hypothetical $10,000 investment in
Class A shares for the period indicated. For comparison, we've shown the
same investment in the MSCI All Country World Free Ex-U.S. Index.

Line chart with the heading "GROWTH OF $10,000." Within the chart are
three lines. The first line represents the Index and is equal to $12,340
as of October 31, 2001. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock International
Fund, before sales charge, and is equal to $7,703 as of October 31,
2001. The third line represents the value of the same hypothetical
investment made in the John Hancock International Fund, after sales
charge, and is equal to $7,316 as of October 31, 2001.

                                    Class B 1    Class C 1
Inception date                       1-3-94       6-1-98
Without sales charge                 $7,308       $6,539
With maximum sales charge                --       $6,474
Index                               $12,340       $8,603

Assuming all distributions were reinvested for the period indicated, the
chart above shows the value of a $10,000 investment in the Fund's Class
B and Class C shares, respectively, as of October 31, 2001. Performance
of the classes will vary based on the difference in sales charges paid
by shareholders investing in the different classes and the fee structure
of those classes.

1 No contingent deferred sales charge applicable.



FINANCIAL STATEMENTS

FUND'S
INVESTMENTS

Securities owned
by the Fund on
October 31, 2001

This schedule is divided into four main categories: common stocks,
rights, warrants and short-term investments. Common stocks, rights and
warrants are further broken down by country. Short-term investments,
which represent the Fund's cash position, are listed last.



SHARES   ISSUER                                                                                       VALUE
                                                                                          
COMMON STOCK 97.53%                                                                             $14,608,296
(Cost $15,318,845)

Australia  1.09%                                                                                   $163,854
11,300   News Corp., Ltd. (The) (Media)                                                              77,740
15,100   Woolworths, Ltd. (Retail)                                                                   86,114

Belgium  0.36%                                                                                       53,291
 1,400   UCB SA (Medical)                                                                            53,291

Canada  7.30%                                                                                     1,093,550
 4,600   Barrick Gold Corp. (Metal)                                                                  71,714
 2,800   Biovail Corp.* (Medical)                                                                   132,328
11,800   Bombardier, Inc. (Diversified Operations)                                                   76,594
 4,300   Loblaw Co., Ltd. (Retail)                                                                  133,054
 7,500   Manulife Financial Corp. (Insurance)                                                       185,100
 3,100   PanCanadian Energy Corp. (Oil & Gas)                                                        86,350
 7,300   Placer Dome, Inc. (Metal)                                                                   83,293
 6,400   Suncor Energy, Inc. (Oil & Gas)                                                            195,210
 3,700   Talisman Energy, Inc. (Oil & Gas)                                                          129,907

Denmark  1.03%                                                                                      153,985
 3,800   Novo Nordisk A/S (Class B) (Medical)                                                       153,985

Finland  1.15%                                                                                      172,424
14,200   Stora Enso Oyj (Paper & Paper Products)                                                    172,424

France  12.98%                                                                                    1,944,042
 4,600   Alstom (Machinery)                                                                          70,254
 2,100   Aventis SA (Medical)                                                                       154,413
 2,300   BNP Paribas SA (Banks -- Foreign)                                                          191,151
 3,100   Castorama Dubois Investissement SA (Retail)                                                147,501
 1,700   Lafarge SA (Building)                                                                      150,919
 1,100   L'Oreal SA (Cosmetics & Personal Care)                                                      75,887
19,100   Orange SA* (Telecommunications)                                                            154,615
 2,000   PSA Peugeot Citroen SA (Automobile/Trucks)                                                  81,220
 1,700   Sanofi-Synthelabo SA (Medical)                                                             112,004
 4,100   STMicroelectronics NV (Electronics)                                                        115,795
 3,800   Suez SA (Water)                                                                            119,388
 1,700   Total Fina Elf SA (Oil & Gas)                                                              238,534
10,900   Usinor SA (Steel)                                                                          114,707
 3,600   Vivendi Environnement (Utilities)                                                          138,296
 1,700   Vivendi Universal SA (Media)                                                                79,358

Germany  5.11%                                                                                      765,465
 3,300   BASF AG (Chemicals)                                                                        111,604
 2,500   Bayerische Motoren Werke AG (Automobile/Trucks)                                             74,295
 2,400   Deutsche Bank AG (Banks -- Foreign)                                                        133,385
 3,800   E.On AG (Utilities)                                                                        197,897
 1,400   Fresenius Medical Care AG (Medical)                                                         86,723
   612   Muenchener Rueckversicherungs-Gesellschaft AG (Insurance)                                  161,561

Greece  0.66%                                                                                        98,760
 6,100   Hellenic Telecommunications Organization SA
         (Telecommunications)                                                                        98,760

Ireland  1.86%                                                                                      278,804
11,600   Allied Irish Banks Plc (Banks -- Foreign)                                                  112,683
18,700   Bank of Ireland (Banks -- Foreign)                                                         166,121

Israel  0.99%                                                                                       148,320
 2,400   Teva Pharmaceutical Industries, Ltd.
         American Depositary Receipts (ADR) (Medical)                                               148,320

Italy  3.39%                                                                                        507,972
17,700   Autostrade SpA (Transport)                                                                 111,123
10,700   ENI SpA (Oil & Gas)                                                                        133,968
14,800   Riunione Adriatica di Sicurta SpA (Insurance)                                              177,447
15,700   Telecom Italia Mobile SpA (Telecommunications)                                              85,434

Japan  14.62%                                                                                     2,190,065
 7,000   Ajinomoto Co., Inc. (Diversified Operations)                                                75,686
10,000   Bridgestone Corp. (Rubber -- Tires & Misc.)                                                 94,169
   100   Bridgestone Corp. (ADR) (Rubber -- Tires & Misc.)                                            9,700
 7,000   Dai Nippon Printing Co., Ltd. (Printing -- Commercial)                                      74,487
    13   East Japan Railway Co. (Transport)                                                          75,638
 5,000   Eisai Co., Ltd. (Medical)                                                                  127,708
 2,000   Fuji Photo Film Co., Ltd. (Leisure)                                                         65,935
 4,000   Fujisawa Pharmaceutical Co., Ltd. (Medical)                                                 95,965
12,000   Furukawa Electric Co., Ltd. (Wire & Cable Products)                                         69,134
 2,100   Honda Motor Co., Ltd. (Automobile/Trucks)                                                   75,230
 2,000   Ito-Yokado Co., Ltd. (Retail)                                                               88,131
     4   Japan Tobacco, Inc. (Tobacco)                                                               26,113
 6,000   Marui Co., Ltd. (Retail)                                                                    81,129
 7,000   Mitsui Fudosan Co., Ltd. (Real Estate Operations)                                           71,002
 1,500   Murata Manufacturing Co., Ltd. (Electronics)                                                94,006
 1,200   Nintendo Co., Ltd. (Leisure)                                                               184,879
55,000   Nippon Steel Corp. (Steel)                                                                  73,606
 7,000   Nomura Securities Co., Ltd. (Broker Services)                                               91,966
    10   NTT DoCoMo, Inc. (Telecommunications)                                                      135,460
12,000   OJI Paper Co., Ltd. (Paper & Paper Products)                                                58,558
   800   ORIX Corp. (Leasing Companies)                                                              69,917
 2,000   Seven-Eleven Japan Co., Ltd. (Retail)                                                       86,988
 2,500   Shin-Etsu Chemical Co., Ltd. (Chemicals)                                                    82,215
16,000   Sumitomo Mitsui Bank (Banks -- Foreign)                                                     98,837
 2,000   Takeda Chemical Industries, Ltd. (Medical)                                                  96,781
 3,500   Tokyo Electric Power Co., Inc. (Utilities)                                                  86,825

Mexico  0.61%                                                                                        91,500
 6,100   America Movil SA de CV (ADR) (Telecommunications)                                           91,500

Netherlands  5.35%                                                                                  801,411
 6,700   Aegon NV (Insurance)                                                                       168,134
 3,160   Akzo Nobel NV (Chemicals)                                                                  129,465
 4,000   DSM NV (Chemicals)                                                                         130,060
 6,900   Fortis (NL) NV (Insurance)                                                                 163,223
 2,975   Heineken NV (Beverages)                                                                    109,309
 3,600   Koninklijke Ahold NV (Retail)                                                              101,220

Portugal  0.61%                                                                                      91,816
11,600   Portugal Telecom SA (Telecommunications)                                                    91,816

Singapore  0.53%                                                                                     78,764
83,000   Singapore Telecommunications, Ltd. (Telecommunications)                                     78,764

South Korea 2.22%                                                                                   331,981
 5,400   Korea Telecom Corp. (ADR) (Telecommunications)                                             112,536
 1,600   Samsung Electronics Co., Ltd. (Electronics)                                                120,560
   520   SK Telecom Co., Ltd. (Telecommunications)                                                   98,885

Spain  3.93%                                                                                        589,257
 4,000   Banco Popular Espanol SA (Banks -- Foreign)                                                134,198
12,000   Iberdrola SA (Utilities)                                                                   164,815
11,700   Inditex SA* (Retail)                                                                       217,838
 5,000   Repsol YPF, SA (Oil & Gas)                                                                  72,406

Sweden  1.17%                                                                                       174,890
 9,200   Ericsson (L.M.) Telephone Co. (Class B) (ADR)
           (Telecommunications)                                                                      39,284
11,000   Svenska Handelsbanken AB (Banks -- Foreign)                                                135,606

Switzerland  5.96%                                                                                  891,905
   800   Nestle SA (Food)                                                                           165,841
 3,563   Novartis AG (Medical)                                                                      133,234
 1,082   Roche Holdings AG (Medical)                                                                 74,932
 4,800   Serona SA* (ADR) (Medical)                                                                  91,872
 1,800   Swiss Reinsurance Co. (Insurance)                                                          184,920
   300   Swisscom AG* (Telecommunications)                                                           83,196
 3,400   UBS AG* (Banks -- Foreign)                                                                 157,910

Taiwan  0.55%                                                                                        82,624
 6,400   Taiwan Semiconductor Mfg. Co., Ltd.*( ADR) (Electronics)                                    82,624

United Kingdom 22.67%                                                                             3,395,183
 5,200   Abbey National Plc (Banks -- Foreign)                                                       77,278
16,700   Allied Domecq Plc (Beverages)                                                               84,910
15,000   ARM Holdings Plc* (Electronics)                                                             75,831
 5,800   Barclays Plc (Banks -- Foreign)                                                            174,411
35,400   BG Group Plc (Oil & Gas)                                                                   133,835
18,500   BP Plc (Oil & Gas)                                                                         149,156
36,700   BAE Systems Plc (Aerospace)                                                                178,069
20,600   British American Tobacco Plc (Tobacco)                                                     179,554
14,200   British Sky Broadcasting Group Plc* (Media)                                                158,838
31,700   British Telecommunications Plc (Telecommunications)                                        160,256
47,470   Centrica Plc (Utilities)                                                                   151,022
20,100   Compass Group Plc* (Food)                                                                  146,434
15,600   Diageo Plc (Beverages)                                                                     155,576
 7,000   GlaxoSmithKline Plc (Medical)                                                              188,125
15,800   Lloyds TSB Group Plc (Banks -- Foreign)                                                    159,292
16,200   Marks & Spencer Plc (Retail)                                                                67,542
13,800   Powergen Plc (Utilities)                                                                   149,452
11,100   Reckitt Benckiser Plc (Grocery Products)                                                   154,800
31,900   Rentokil Initial Plc (Diversified Operations)                                              114,694
 7,600   Royal Bank of Scotland Group Plc (Banks -- Foreign)                                        181,617
13,800   Scottish Power Plc (Utilities)                                                              79,187
 9,000   Shire Pharmaceuticals Group Plc* (Medical)                                                 130,743
15,600   South African Breweries Plc (Beverages)                                                     96,815
26,200   Tesco Plc (Retail)                                                                          92,297
67,300   Vodafone AirTouch Plc (Telecommunications)                                                 155,449

United States 3.39%                                                                                 508,433
 4,300   Amdocs, Ltd.* (Telecommunications)                                                         112,273
 5,800   Santa Fe International Corp. (Oil & Gas)                                                   141,172
 2,900   Schlumberger, Ltd. (Oil & Gas)                                                             140,418
 3,800   Transocean Sedco Forex, Inc. (Oil & Gas)                                                   114,570

WARRANTS  0.89%                                                                                    $133,903
(Cost $135,087)

Germany   0.00%
      5   Muenchener Rueckversicherungs-Gesellschaft AG* (Insurance)                                    297

United Kingdom 0.89%
 2,200   Infosys Technology, Ltd.* (Computer)                                                       133,606

TOTAL COMMON STOCKS, RIGHTS AND WARRANTS 98.42%                                                 $14,742,199
(Cost $15,453,932)


                                                                    INTEREST        PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE                                      RATE    (000s OMITTED)        VALUE
                                                                                       
SHORT-TERM INVESTMENTS 3.08%                                                                       $461,400
(Cost $461,400)

Joint Repurchase Agreement 1.30%
Investment in a joint repurchase agreement transaction
  with Barclays Capital, Inc. -- Dated 10-31-01,
  due 11-01-01 (Secured by U.S. Treasury Bond,
  6.375% due 08-15-27 and U.S. Treasury Note,
  3.625% due 01-15-08)                                                  2.58%           $195       $195,000

                                                                                      SHARES

Cash Equivalents 1.78%
Navigator Securities Lending Prime Portfolio**                                       266,400        266,400

TOTAL INVESTMENTS 101.50%                                                                       $15,203,599

OTHER ASSETS AND LIABILITIES, NET (1.50%)                                                         ($224,922)

TOTAL NET ASSETS 100.00%                                                                        $14,978,677

 * Non-income producing security.

** Represents investment of security lending collateral.

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

See notes to
financial statements.





PORTFOLIO
CONCENTRATION

October 31, 2001
(unaudited)

This table shows
the percentages
of the Fund's
investments
aggregated
by various
industry groups.

                                      VALUE AS A PERCENTAGE
INVESTMENT DISTRIBUTION                OF FUND'S NET ASSETS

Aerospace                                             1.18%
Automobile/Trucks                                     1.54
Banks -- Foreign                                     11.50
Beverages                                             2.98
Broker Services                                       0.61
Building                                              1.01
Chemicals                                             3.03
Computer                                              0.89
Cosmetics & Personal Care                             0.51
Diversified Operations                                1.78
Electronics                                           3.26
Food                                                  2.09
Grocery Products                                      1.03
Insurance                                             6.95
Leasing Companies                                     0.47
Leisure                                               1.67
Machinery                                             0.47
Media                                                 2.11
Medical                                              11.89
Metal                                                 1.04
Oil & Gas                                            10.25
Paper & Paper Products                                1.54
Printing -- Commercial                                0.50
Real Estate                                           0.47
Retail                                                7.36
Rubber -- Tires & Misc.                               0.69
Steel                                                 1.26
Telecommunications                                   10.00
Tobacco                                               1.37
Transport                                             1.25
Utilities                                             6.46
Water                                                 0.80
Wire & Cable Products                                 0.46
Short-Term Investments                                3.08

Total investments                                   101.50%



FINANCIAL STATEMENTS

ASSETS AND
LIABILITIES

October 31, 2001

This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the
net asset value
and the maxi
mum offering
price per share.

ASSETS
Investments at value (cost $15,915,332)        $15,203,599
Cash                                                39,879
Receivable for investments sold                    412,980
Receivable for shares sold                             252
Receivable for forward currency exchange
contracts                                           50,215
Dividends and interest receivable                   26,292
Other assets                                         1,016

Total assets                                    15,734,233

LIABILITIES
Due to custodian                                     9,573
Payable for investments purchased                  354,528
Payable for shares repurchased                       3,406
Payable for forward currency exchange contracts     14,651
Payable for securities on loan                     266,400
Payable to affiliates                                4,157
Other payables and accrued expenses                102,841

Total liabilities                                  755,556

NET ASSETS
Capital paid-in                                 24,570,450
Accumulated net realized loss on investments
  and foreign currency transactions             (8,878,842)
Net unrealized depreciation of investments and
  translation of assets and liabilities in
  foreign currencies                              (676,990)
Accumulated net investment loss                    (35,941)

Net assets                                     $14,978,677

NET ASSET VALUE PER SHARE
Based on net asset values and shares outstanding
Class A ($7,762,153 [DIV] 1,257,004 shares)          $6.18
Class B ($6,398,633 [DIV] 1,091,742 shares)          $5.86
Class C ($817,891 [DIV] 139,433 shares)              $5.87

MAXIMUM OFFERING PRICE PER SHARE
Class A 1 ($6.18 [DIV] 95%)                          $6.51
Class C ($5.87 [DIV] 99%)                            $5.93

See notes to
financial statements.

1 On single retail sales of less than $50,000. On sales of $50,000 or
  more and on group sales, the offering price is reduced.


OPERATIONS

For the year ended
October 31, 2001

This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in
operating the
Fund. It also
shows net gains
(losses) for the
period stated.

INVESTMENT INCOME
Dividends (net of foreign withholding taxes of
$34,551)                                          $246,350
Interest                                            54,788
Securities lending income                           27,813

Total investment income                            328,951

EXPENSES
Investment management fee                          208,015
Class A distribution and service fee                33,461
Class B distribution and service fee                87,402
Class C distribution and service fee                 9,077
Transfer agent fee                                 213,668
Custodian fee                                      204,842
Registration and filing fee                         48,447
Auditing fee                                        37,900
Printing                                            11,285
Accounting and legal services fee                    4,160
Miscellaneous                                        1,992
Trustee's fee                                        1,383
Legal fee                                            1,912

Total expenses                                     863,544
Less expense reductions                           (332,651)

Net expenses                                       530,893

Net investment loss                               (201,942)

REALIZED AND UNREALIZED GAIN (LOSS)

Net realized loss on
Investments                                     (7,342,282)
Foreign currency transactions                     (310,763)
Change in unrealized appreciation
(depreciation) on Investments                   (1,096,258)
Translation of assets and liabilities in
foreign currencies                                  36,964

Net realized and unrealized loss                (8,712,339)

Decrease in net assets from operations         ($8,914,281)

See notes to
financial statements.



CHANGES IN
NET ASSETS

This Statement
of Changes in
Net Assets
shows how the
value of the
Fund's net assets
has changed
since the end of
the previous
period. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses,
distributions
paid to share-
holders, if any,
and any increase
or decrease in
money share-
holders invested
in the Fund.
                                                      YEAR             YEAR
                                                     ENDED            ENDED
                                                  10-31-00         10-31-01

INCREASE (DECREASE) IN NET ASSETS

From operations

Net investment loss                              ($203,120)       ($201,942)
Net realized loss                               (1,339,941)      (7,653,045)
Change in net unrealized appreciation
  (depreciation)                                (2,415,129)      (1,059,294)

Decrease in net assets resulting
  from operations                               (3,958,190)      (8,914,281)

Distributions to shareholders

From net realized gain
Class A                                           (295,164)              --
Class B                                           (409,639)              --
Class C                                             (7,456)              --
                                                  (712,259)              --

From fund share transactions                    16,270,661       (4,718,426)

NET ASSETS
Beginning of period                             17,011,172       28,611,384

End of period 1                                $28,611,384      $14,978,677

1 Includes accumulated net investment loss of $90,888 and $35,941,
  respectively.

See notes to
financial statements.




FINANCIAL
HIGHLIGHTS

CLASS A SHARES

The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.

PERIOD ENDED                                          10-31-97    10-31-98    10-31-99    10-31-00    10-31-01
                                                                                       
PER SHARE OPERATING PERFORMANCE
Net asset value,
  beginning of period                                    $8.70       $8.41       $8.81      $10.95       $9.45
Net investment loss 1                                    (0.02)         -- 2     (0.02)      (0.04)      (0.05)
Net realized and unrealized
  gain (loss) on investments                             (0.26)       0.47        2.16       (1.01)      (3.22)
Total from investment
  operations                                             (0.28)       0.47        2.14       (1.05)      (3.27)
Less distributions
From net investment income                               (0.01)         --          --          --          --
From net realized gain                                      --       (0.07)         --       (0.45)         --
Net asset value,
  end of period                                          $8.41       $8.81      $10.95       $9.45       $6.18
Total return 3,4 (%)                                     (3.22)       5.61       24.29      (10.15)     (34.60)

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
  (in millions)                                             $5          $6          $7         $15          $8
Ratio of expenses
  to average net assets (%)                               1.73        1.79        1.96        1.88        2.23
Ratio of adjusted expenses
  to average net assets 5 (%)                             3.03        3.65        3.81        3.44        3.83
Ratio of net investment loss
  to average net assets (%)                              (0.16)       0.04       (0.20)      (0.43)      (0.65)
Portfolio turnover (%)                                     169         129         113         163         278

See notes to
financial statements.







FINANCIAL
HIGHLIGHTS

CLASS B SHARES

PERIOD ENDED                                          10-31-97    10-31-98    10-31-99    10-31-00    10-31-01
                                                                                       
PER SHARE OPERATING PERFORMANCE
Net asset value,
  beginning of period                                    $8.55       $8.22       $8.55      $10.55       $9.04
Net investment loss 1                                    (0.08)      (0.06)      (0.09)      (0.12)      (0.10)
Net realized and unrealized
  gain (loss) on investments                             (0.25)       0.46        2.09       (0.94)      (3.08)
Total from investment
  operations                                             (0.33)       0.40        2.00       (1.06)      (3.18)
Less distributions
From net realized gain                                      --       (0.07)         --       (0.45)         --
Net asset value,
  end of period                                          $8.22       $8.55      $10.55       $9.04       $5.86
Total return 3,4 (%)                                     (3.86)       4.88       23.39      (10.65)     (35.18)

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
  (in millions)                                             $9         $10          $9         $12          $6
Ratio of expenses
  to average net assets (%)                               2.43        2.49        2.63        2.57        2.93
Ratio of adjusted expenses
  to average net assets 5 (%)                             3.73        4.35        4.48        4.13        4.53
Ratio of net investment loss
  to average net assets (%)                              (0.88)      (0.66)      (0.91)      (1.13)      (1.34)
Portfolio turnover (%)                                     169         129         113         163         278

See notes to
financial statements.







FINANCIAL
HIGHLIGHTS

CLASS C SHARES

PERIOD ENDED                                          10-31-98 6  10-31-99    10-31-00    10-31-01
                                                                              
PER SHARE OPERATING PERFORMANCE
Net asset value,
  beginning of period                                    $9.36       $8.55      $10.57       $9.05
Net investment loss 1                                    (0.03)      (0.10)      (0.11)      (0.10)
Net realized and unrealized
  gain (loss) on investments                             (0.78)       2.12       (0.96)      (3.08)
Total from investment
  operations                                             (0.81)       2.02       (1.07)      (3.18)
Less distributions
From net realized gain                                      --          --       (0.45)         --
Net asset value,
  end of period                                          $8.55      $10.57       $9.05       $5.87
Total return 3,4 (%)                                     (8.65) 7    23.63      (10.72)     (35.14)

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
  (in millions)                                             -- 8        -- 8        $1          $1
Ratio of expenses
  to average net assets (%)                               2.29 9      2.66        2.57        2.93
Ratio of adjusted expenses
  to average net assets 5 (%)                             4.15 9      4.51        4.13        4.53
Ratio of net investment loss
  to average net assets (%)                              (1.27) 9    (1.04)      (1.07)      (1.35)
Portfolio turnover (%)                                     129         113         163         278

1  Based on the average of the shares outstanding at the end of each month.

2  Less than $0.01 per share.

3  Assumes dividend reinvestment and does not reflect the effect of sales charges.

4  Total return would have been lower had certain expenses not been reduced during the periods shown.

5  Does not take into consideration expense reductions during the period shown.

6  Class C shares began operations on 6-1-98.

7  Not annualized.

8  Less than $500,000.

9  Annualized.

See notes to
financial statements.




NOTES TO
STATEMENTS

NOTE A
Accounting policies

John Hancock International Fund (the "Fund") is a diversified series of
John Hancock Investment Trust III, an open-end investment management
company registered under the Investment Company Act of 1940. The
investment objective of the Fund is to achieve long-term growth of
capital through investment primarily in stocks of foreign companies.

The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B and Class C shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and the Internal Revenue Service. Shareholders of a
class which bears distribution and service expenses under terms of a
distribution plan have exclusive voting rights to that distribution
plan.

Significant accounting policies of the Fund are as follows:

Valuation of investments

Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or, if
quotations are not readily available, or the value has been materially
affected by events occurring after the closing of a foreign market, 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. All
portfolio transactions initially expressed in terms of foreign
currencies have been translated into U.S. dollars as described in
"Foreign currency translation" below.

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,
Inc., may participate in a joint repurchase agreement transaction.
Aggregate cash balances are invested in one or more large 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.

Foreign currency translation

All assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars based on London currency
exchange quotations as of 5:00 P.M., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain (loss) on
investments are translated at the rates prevailing at the dates of the
transactions.

The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the trade
and settlement dates on securities transactions and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in the value of assets and liabilities,
other than investments in securities, resulting from changes in the
exchange rate.

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. Capital gains realized on some
foreign securities are subject to foreign taxes, which are accrued as
applicable.

Class allocations

Income, common expenses and realized and unrealized gains (losses) are
determined at the fund level and allocated daily to each class of shares
based on the appropriate net assets of the respective classes.
Distribution and service fees, if any, are calculated daily at the class
level based on the appropriate net assets of each class and the specific
expense rate(s) applicable to each class.

Expenses

The majority of the expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund will
be 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 funds.

Bank borrowings

The Fund is permitted to have bank borrowings for temporary or emergency
purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. The Fund has
entered into a syndicated line of credit agreement with various banks.
This agreement enables the Fund to participate with other funds managed
by the Adviser in an unsecured line of credit with banks, which permit
borrowings up to $500 million, collectively. Interest is charged to each
fund, based on its borrowing. In addition, a commitment fee is charged
to each fund based on the average daily unused portion of the line of
credit and is allocated among the participating funds. The Fund had no
borrowing activity under the line of credit during the year ended
October 31, 2001.

Securities lending

The Fund may lend securities to certain qualified brokers who pay the
Fund negotiated lender fees. The loans are collateralized at all times
with cash or securities with a market value at least equal to the market
value of the securities on loan. As with other extensions of credit, the
Fund may bear the risk of delay of the loaned securities in recovery or
even loss of rights in the collateral, should the borrower of the
securities fail financially. At October 31, 2001, the Fund loaned
securities having a market value of $254,236 collateralized by cash in
the amount of $266,400. The cash collateral was invested in a short-term
instrument.

Forward foreign currency exchange contracts

The Fund may enter into forward foreign currency exchange contracts as a
hedge against the effect of fluctuations in currency exchange rates. A
forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date at a set price.
The aggregate principal amounts of the contracts are marked to market
daily at the applicable foreign currency exchange rates. Any resulting
unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Fund records realized gains and losses at
the time the forward foreign currency exchange contract is closed out or
offset by a matching contract. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the
terms of the contract and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.

These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the Fund's statement of assets and
liabilities. The Fund may also purchase and sell forward contracts to
facilitate the settlement of foreign currency denominated portfolio
transactions, under which it intends to take delivery of the foreign
currency. Such contracts normally involve no market risk if they are
offset by the currency amount of the underlying transaction.

The Fund had the following open forward foreign currency exchange
contracts at October 31, 2001:

                                                     UNREALIZED
                PRINCIPAL AMOUNT     EXPIRATION    APPRECIATION
CURRENCY        COVERED BY CONTRACT  MONTH        (DEPRECIATION)

BUYS
Euro            14,356               NOV 01                ($68)
Japanese Yen    83,142,282           NOV 01             (14,558)

                                                       ($14,626)
SELLS
Euro            5,686                NOV 01                 $27
Japanese Yen    134,427,711          NOV 01              50,001
Pound Sterling  36,384               NOV 01                 (25)
Swiss Franc     79,267               NOV 01                 187

                                                        $50,190


Federal income taxes

The Fund qualifies as a "regulated investment company" by complying with
the applicable provisions of the Internal Revenue Code and will not be
subject to federal income tax on taxable income which is distributed to
share holders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has $8,736,081 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 Fund, no capital gain distributions will be
made. The loss carryforward expires as follows: October 31, 2008 --
$1,040,558 and October 31, 2009 -- $7,695,523.

Dividends, interest and distributions

Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. Foreign income may be
subject to foreign withholding taxes, capital gains and repatriation
taxes imposed by certain countries in which the Fund invests, which are
accrued as applicable.

The Fund records distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, which may
differ from accounting principles generally accepted in the United
States of America. Distributions paid by the Fund with respect to each
class of shares will be calculated in the same manner, at the same time
and will be in the same amount, except for the effect of expenses that
may be applied differently to each class.

Use of estimates

The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of
America, incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues and expenses of the
Fund. Actual results could differ from these estimates.

NOTE B
Management fee and transactions with affiliates and others

The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a monthly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
1.00% of the first $250,000,000 of the Fund's average daily net asset
value, (b) 0.80% of the next $250,000,000, (c) 0.75% of the next
$250,000,000 and (d) 0.625% of the Fund's average daily net asset value
in excess of $750,000,000. The Adviser has a subadvisory agreement with
Nicholas-Applegate Capital Management LP. The Fund is not responsible
for the payment of the subadviser's fees.

The Adviser has agreed to limit the Fund's expenses, excluding
distribution and service fees and transfer agent fees, to 0.90% of the
Fund's average daily net assets, at least until February 28, 2002.
Accordingly, the expense reduction amounted to $332,651 for the year
ended October 31, 2001. The Adviser reserves the right to terminate this
limitation in the future.

The Fund has Distribution Plans with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. The Fund has adopted
Distribution Plans with respect to Class A, Class B and Class C pursuant
to Rule 12b-1 under the Investment Company Act of 1940 to reimburse JH
Funds for the services it provides as distributor of shares of the Fund.
Accordingly, the Fund makes payments to JH Funds at an annual rate not
to exceed 0.30% of Class A average daily net assets and 1.00% of Class B
and Class C average daily net assets. A maximum of 0.25% of such
payments may be service fees as defined by the Conduct Rules of the
National Association of Securities Dealers. Under the Conduct Rules,
curtailment of a portion of the Fund's 12b-1 payments could occur under
certain circumstances.

Class A and Class C shares are assessed up-front sales charges. During
the year ended October 31, 2001, JH Funds received net up-front sales
charges of $45,866 with regard to sales of Class A shares. Of this
amount, $5,706 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $36,127 was paid as
sales commissions to unrelated broker-dealers and $4,033 was paid as
sales commissions to sales personnel of Signator Investors, Inc.
("Signator Investors"), a related broker-dealer. The Adviser's indirect
parent, John Hancock Life Insurance Company ("JHLICo"), is the indirect
sole shareholder of Signator Investors. During the year ended October
31, 2001 JH Funds received net up-front sales charges of $4,901 with
regard to sales of Class C shares. Of this amount, $4,151 was paid as
sales commissions to unrelated broker-dealers and $750 was paid as sales
commissions to sales personnel of Signator Investors.

Class B shares which are redeemed within six years of purchase are
subject to a contingent deferred sales charge ("CDSC") at declining
rates, beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Class C shares which are redeemed within one year of purchase
are subject to a CDSC at a rate of 1.00% of the lesser of the current
market value at the time of redemption or the original purchase cost of
the shares being redeemed. Proceeds from the CDSCs are paid to JH Funds
and are used in whole or in part to defray its expenses for providing
distribution related services to the Fund in connection with the sale of
Class B and Class C shares. For the year ended October 31, 2001, CDSCs
received by JH Funds amounted to $29,466 for Class B shares and $1,085
for Class C shares.

The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc., an indirect subsidiary of JHLICo. The Fund pays monthly
transfer agent fee based on the number of shareholder accounts plus
certain out-of-pocket expenses.

The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
year was at an annual rate of 0.02% of the average net assets of the
Fund.

Ms. Maureen R. Ford and Mr. John M. DeCiccio 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 the
Fund. 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. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.

NOTE C
Fund share transactions

This listing illustrates the number of shares sold, reinvested and
repurchased during the last two periods, along with the corresponding
dollar value. The Fund has an unlimited number of shares authorized with
no par value.

                               YEAR ENDED 10-31-00        YEAR ENDED 10-31-01
                              SHARES        AMOUNT       SHARES        AMOUNT
CLASS A SHARES
Sold                       5,688,563   $61,833,499    3,334,883   $26,461,859
Distributions reinvested      24,777       272,550           --            --
Repurchased               (4,748,871)  (51,907,424)  (3,716,888)  (29,457,682)
Net increase (decrease)      964,469   $10,198,625     (382,005)  ($2,995,823)

CLASS B SHARES
Sold                         963,130   $10,656,322      460,496    $3,277,285
Distributions reinvested      30,269       320,249           --            --
Repurchased                 (569,523)   (6,051,775)    (686,822)   (4,979,294)
Net increase (decrease)      423,876    $4,924,796     (226,326)  ($1,702,009)

CLASS C SHARES
Sold                         784,403    $7,784,613      612,584    $4,971,952
Distributions reinvested         704         7,456           --            --
Repurchased                 (669,480)   (6,644,829)    (606,501)   (4,992,546)
Net increase (decrease)      115,627    $1,147,240        6,083      ($20,594)

NET INCREASE (DECREASE)    1,503,972   $16,270,661     (602,248)  ($4,718,426)


NOTE D
Investment transactions

Purchases and proceeds from sales of securities, other than short-term
securities and obligations of the U.S. government, during the year ended
October 31, 2001, aggregated $54,582,027 and $59,062,273, respectively.

The cost of investments owned at October 31, 2001, including short-term
investments, for federal income tax purposes was $16,058,092. Gross
unrealized appreciation and depreciation of investments aggregated
$503,803 and $1,358,296, respectively, resulting in net unrealized
depreciation of $854,493.


NOTE E
Reclassification of accounts

During the year ended October 31, 2001, the Fund has reclassified
amounts to reflect a decrease in accumulated net realized loss on
investments of $200,684, a decrease in accumulated net investment loss
of $256,889 and a decrease in capital paid-in of $457,573. This
represents the amount necessary to report these balances on a tax basis,
excluding certain temporary difference, as of October 31, 2001.
Additional adjustments may be needed in subsequent reporting periods.
These reclassifications, which have no impact on the net asset value of
the Fund, are primarily attributable to the treatment of net operating
losses, passive foreign investment companies, and net realized gain/loss
on foreign currency transactions in computation of distributable income
and capital gains under federal tax rules versus accounting principles
generally accepted in the United States of America. The calculation of
net investment income (loss) per share in the financial highlights
excludes these adjustments.



AUDITORS'
REPORT

Report of
Pricewaterhouse-
Coopers LLP,
Independent
Auditors

To the Board of Trustees and Shareholders
of John Hancock International Fund
of the John Hancock Investment Trust III

In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of the
John Hancock International Fund (a series of John Hancock Investment
Trust III) (the "Fund") at October 31, 2001, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities owned at October
31, 2001 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 2001



TAX
INFORMATION

Unaudited

For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund for its fiscal year ended
October 31, 2001.

The Fund designated no distributions to shareholders as capital gain
dividends. No distributions qualify for the dividends-received deduction
available to corporations.



Shareholder meeting (unaudited)

On April 25, 2001, a special meeting of shareholders of the Fund was
held. The shareholders approved Proposal 1 (vote in parentheses):

To approve a new sub-investment management contract between the Fund,
John Hancock Advisers, Inc. and Nicholas-Applegate Capital Management LP
(1,458,428 FOR, 41,265 AGAINST and 76,071 ABSTAINING).

Since no quorum was present with regard to Proposal 2, the meeting was
adjourned to May 25, 2001.

On May 25, 2001, the shareholders approved Proposals 2(a) and 2(b)
(votes in parentheses):

To amend certain investment restrictions of the Fund (1,528,325 FOR,
64,844 AGAINST and 76,701 ABSTAINING).

To amend the Fund's investment restriction on investing in commodities
(1,517,096 FOR, 68,650 AGAINST and 84,124 ABSTAINING).



FOR YOUR
INFORMATION

TRUSTEES
Dennis S. Aronowitz*
Richard P. Chapman, Jr.
William J. Cosgrove*
John M. DeCiccio
Richard A. Farrell*
Maureen R. Ford
Gail D. Fosler
William F. Glavin
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
*Members of the Audit Committee

OFFICERS

Maureen R. Ford
Chairman, President
and Chief Executive Officer

William L. Braman
Executive Vice President
and Chief Investment Officer

Richard A. Brown
Senior Vice President
and Chief Financial Officer

Susan S. Newton
Senior Vice President
and Secretary

William H. King
Vice President and Treasurer

Thomas H. Connors
Vice President and
Compliance Officer

INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

SUBADVISER
Nicholas-Applegate Capital Management
600 West Broadway
San Diego, California 92101

PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286

TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000

LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803

INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110



HOW TO
CONTACT US

On the Internet                      www.jhfunds.com

By regular mail                      John Hancock Signature Services, Inc.
                                     1 John Hancock Way, Suite 1000
                                     Boston, MA 02217-1000

By express mail                      John Hancock Signature Services, Inc.
                                     Attn: Mutual Fund Image Operations
                                     529 Main Street
                                     Charlestown, MA 02129

Customer service representatives     1-800-225-5291

24-hour automated information        1-800-338-8080

TDD line                             1-800-544-6713



[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]

1-800-225-5291
1-800-544-6713 (TDD)
1-800-338-8080 EASI-Line

www.jhfunds.com

Now available: electronic delivery
www.jhancock.com/funds/edelivery

This report is for the information of
the shareholders of the John Hancock
International Fund.

4000A  10/01
       12/01



                                                     VOTE THIS PROXY CARD TODAY!
                                        YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
                                              THE EXPENSE OF ADDITIONAL MAILINGS


JOHN HANCOCK INTERNATIONAL EQUITY FUND
SPECIAL MEETING OF SHAREHOLDERS - MAY 29, 2002
PROXY SOLICITATION BY THE BOARD OF TRUSTEES

         The undersigned, revoking previous proxies, hereby appoint(s) Maureen
R. Ford, Susan S. Newton and William H. King, with full power of substitution in
each, to vote all the shares of beneficial interest of John Hancock
International Equity Fund ("International Equity Fund") which the undersigned is
(are) entitled to vote at the Special Meeting of Shareholders (the "Meeting") of
International Equity Fund to be held at 101 Huntington Avenue, Boston,
Massachusetts, on May 29, 2002 at 9:00 a.m., Boston time, and at any
adjournment(s) of the Meeting. All powers may be exercised by a majority of all
proxy holders or substitutes voting or acting, or, if only one votes and acts,
then by that one. Receipt of the Proxy Statement dated April 15, 2002 is hereby
acknowledged. If not revoked, this proxy shall be voted for the proposal.

                                Date                               , 2002

                                PLEASE SIGN, DATE AND RETURN
                                PROMPTLY IN THE ENCLOSED ENVELOPE


                                ------------------------------------------------

                                ------------------------------------------------
                                                 Signature(s)
                                NOTE: Signature(s) should
                                agree with the name(s)
                                printed herein. When
                                signing as attorney,
                                executor, administrator,
                                trustee or guardian, please
                                give your full name as
                                such. If a corporation,
                                please sign in full
                                corporate name by president
                                or other authorized
                                officer. If a partnership,
                                please sign in partnership
                                name by authorized person.









                                                     VOTE THIS PROXY CARD TODAY!
                                        YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
                                              THE EXPENSE OF ADDITIONAL MAILINGS


THIS PROXY WILL BE VOTED IN FAVOR OF (FOR) PROPOSAL 1 IF NO SPECIFICATION IS
MADE BELOW. AS TO ANY OTHER MATTER, THE PROXY OR PROXIES WILL VOTE IN ACCORDANCE
WITH THEIR BEST JUDGEMENT.

               PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW

(1)      To approve an Agreement and Plan of Reorganization between John Hancock
         International Equity Fund ("International Equity") and John Hancock
         International Fund ("International Fund"). Under this Agreement,
         International Equity Fund would transfer all of its assets to
         International Fund in exchange for Class I shares of International
         Fund. These shares will be distributed proportionately to you and the
         other shareholders of International Equity Fund. International Fund
         will also assume International Equity Fund's liabilities.

         FOR      |_|               AGAINST  |_|               ABSTAIN  |_|

           PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.






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John Hancock Institutional Series Trust Proxy                    PROXY DIRECT TM
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                                  John Hancock
                               ------------------
                               JOHN HANCOCK FUNDS

i  Below is the list of your holdings.  Text next to each holding's name
   indicates whether you wish to vote as the Board recommends or to submit your
   individual instructions.  To change between board recommended and individual
   instructions, click on the name of the holding; then follow the additional
   instructions.  Unless you click on the name of the holding and the vote of
   your choice, your vote will automatically be recorded on the proposal as
   recommended by the Board.

            YOU MUST CLICK VOTE NOW! BUTTON TO COMPLETE YOUR SESSION

- --------------------------------------------------------------------------------
List of Your Holdings                               Voting instructions
- --------------------------------------------------------------------------------
John Hancock Active Bond Fund                        as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Core Growth Fund                        as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Core Value Fund                         as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Dividend Performers Fund                as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Independence Balanced Fund              as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock International Equity Fund               as recommended by the Board
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John Hancock Medium Capitalization Growth Fund       as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Small Cap Equity Fund Y                 as recommended by the Board
- --------------------------------------------------------------------------------
Click on arrow to modify voting instructions
- --------------------------------------------

Help me...                       Cancel                        Vote Now!
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If you need help navigating      You can quit Internet         Once you have
the site or experience problems  voting at any time. However,  completed
during your online session,      your voting instructions set  selection of your
this page may provide you with   up during this session will   voting
answers                          be disregarded                instructions and
                                                               are ready to
                                                               submit them for
                                                               processing, click
                                                               the Vote Now!
                                                               button

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John Hancock Institutional Series Trust Proxy                    PROXY DIRECT TM
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Shareholder:     John P. Sample
                 ALAMO Direct Mail Services,
                 Inc.
                 23-10 Square Circle Lane
                 Someoldtown, TS 12345-
                 6789

Acount:          ALAMO-TST01 / 271-XXXX-             John Hancock
                 XXXX-123                         ------------------
                                                  JOHN HANCOCK FUNDS
Previous vote:   None-Testing APPS/TR
                 Setup


                     John Hancock International Equity Fund

- --------------------------------------------------------------------------------
Applicable Campaign Proposals              Mark All   For      Against     Board
- --------------------------------------------------------------------------------
 1 A proposal to approve an agreement and         ( ) For  ( ) Against ( ) Board
   Plan of Reorganization between John Hancock
   International Equity Fund ("International Equity Fund") and
   John Hancock International Fund ("International Fund").
   Under this Agreement, your fund would transfer all
   of its assets to International Fund in exchange for
   Class I shares of International Fund. These shares
   would be distributed proportionately to you
   and the other shareholders of International Equity
   Fund. International Fund would also assume International
   Equity Fund's liabilities.
- --------------------------------------------------------------------------------
   Any other business that may properly come before the meeting.
- --------------------------------------------------------------------------------
                                                             Voting Instructions
                                                             -------------------

i Answers have been marked according to the Board's
  recommendations. Please change responses as appropriate
  before submission.
                                                     [ ] Cancel     [ ] Continue

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John Hancock Institutional Series Trust Proxy                    PROXY DIRECT TM
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                                  John Hancock
                               ------------------
                               JOHN HANCOCK FUNDS

Thank you. Your voting instructions have been submitted for processing.

If necessary, you can revisit Internet Voting site any time before the Meeting
Date on Wednesday, May 29, 2002 at 9:00 AM [ET] to submit new voting
instructions.

This is the summary of your voting instructions delivered to John Hancock Funds.
It is not a receipt or vote confirmation. You may print this page for your
records.

Instructions submitted on _________, 2002
Transaction Code: __________________


                     John Hancock International Equity Fund
- --------------------------------------------------------------------------------
1 Approve an Agreement and Plan of Reorganization                 Voted For



If you wish to vote another card, please click here.

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                                                     VOTE THIS PROXY CARD TODAY!
                                        YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
                                              THE EXPENSE OF ADDITIONAL MAILINGS


JOHN HANCOCK MEDIUM CAPITALIZATION GROWTH FUND
SPECIAL MEETING OF SHAREHOLDERS - MAY 29, 2002
PROXY SOLICITATION BY THE BOARD OF TRUSTEES

         The undersigned, revoking previous proxies, hereby appoint(s) Maureen
R. Ford, Susan S. Newton and William H. King, with full power of substitution in
each, to vote all the shares of beneficial interest of John Hancock Medium
Capitalization Growth Fund ("Medium Capitalization Growth Fund") which the
undersigned is (are) entitled to vote at the Special Meeting of Shareholders
(the "Meeting") of Medium Capitalization Growth Fund to be held at 101
Huntington Avenue, Boston, Massachusetts, on May 29, 2002 at 9:00 a.m., Boston
time, and at any adjournment(s) of the Meeting. All powers may be exercised by a
majority of all proxy holders or substitutes voting or acting, or, if only one
votes and acts, then by that one. Receipt of the Proxy Statement dated April 15,
2002 is hereby acknowledged. If not revoked, this proxy shall be voted for the
proposal.

                                   Date                               , 2002

                                   PLEASE SIGN, DATE AND RETURN
                                   PROMPTLY IN THE ENCLOSED ENVELOPE


                                   ---------------------------------------------

                                   ---------------------------------------------
                                                Signature(s)
                                   NOTE: Signature(s) should
                                   agree with the name(s)
                                   printed herein. When
                                   signing as attorney,
                                   executor, administrator,
                                   trustee or guardian, please
                                   give your full name as
                                   such. If a corporation,
                                   please sign in full
                                   corporate name by president
                                   or other authorized
                                   officer. If a partnership,
                                   please sign in partnership
                                   name by authorized person.









                                                     VOTE THIS PROXY CARD TODAY!
                                        YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
                                              THE EXPENSE OF ADDITIONAL MAILINGS


THIS PROXY WILL BE VOTED IN FAVOR OF (FOR) PROPOSAL 1 IF NO SPECIFICATION IS
MADE BELOW. AS TO ANY OTHER MATTER, THE PROXY OR PROXIES WILL VOTE IN ACCORDANCE
WITH THEIR BEST JUDGEMENT.

               PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW


(1)      To approve an Agreement and Plan of Reorganization between John Hancock
         Medium Capitalization Growth Fund ("Medium Capitalization Growth Fund")
         and John Hancock Mid Cap Growth Fund ("Mid Cap Growth Fund"). Under
         this Agreement, Medium Capitalization Growth Fund would transfer all of
         its assets to Mid Cap Growth Fund in exchange for Class I shares of Mid
         Cap Growth Fund. These shares will be distributed proportionately to
         you and the other shareholders of Medium Capitalization Growth Fund.
         Mid Cap Growth Fund will also assume Medium Capitalization Growth
         Fund's liabilities.

         FOR      |_|               AGAINST  |_|               ABSTAIN  |_|

           PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.






                                                                 ---------------
Shareholder Login                                                PROXY DIRECT TM
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You can now submit your voting instructions online.  To do so, please enter your
Proxy Control Number in the area below.  Your Internet Voting Control Number is
located on your voting instruction card and is identified as Control Number or
Internet Control Number.  If you have received multiple voting instruction
cards, each card has its own control number; you will need to login and provide
your voting instructions separately for each such distinct Control Number.

- --------------------------------------------------------------------------------
Enter Control Number here: [   ] [   ] [   ] [   ] Continue
- --------------------------------------------------------------------------------

Your browser must support JavaScript 1.1 or higher and be able to accept cookies
in order to continue.  Click on HELP button at the top for more information and
navigation tips.  If you are unable to vote yor proxy using this service
because of technical difficulties, you should refer to your Proxy Package for
other voting options.


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                                     Secure
                                      Site
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C 2001 PROXY DIRECT TM - Service of ALAMO Direct Mail Svcs, Inc. All rights
reserved.



John Hancock Institutional Series Trust Proxy                    PROXY DIRECT TM
- --------------------------------------------------------------------------------
Back to Home     Contact Us     Security                                     ?
- --------------------------------------------------------------------------------

                                  John Hancock
                               ------------------
                               JOHN HANCOCK FUNDS

i  Below is the list of your holdings.  Text next to each holding's name
   indicates whether you wish to vote as the Board recommends or to submit your
   individual instructions.  To change between board recommended and individual
   instructions, click on the name of the holding; then follow the additional
   instructions.  Unless you click on the name of the holding and the vote of
   your choice, your vote will automatically be recorded on the proposal as
   recommended by the Board.

            YOU MUST CLICK VOTE NOW! BUTTON TO COMPLETE YOUR SESSION

- --------------------------------------------------------------------------------
List of Your Holdings                               Voting instructions
- --------------------------------------------------------------------------------
John Hancock Active Bond Fund                        as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Core Growth Fund                        as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Core Value Fund                         as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Dividend Performers Fund                as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Independence Balanced Fund              as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock International Equity Fund               as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Medium Capitalization Growth Fund       as recommended by the Board
- --------------------------------------------------------------------------------
John Hancock Small Cap Equity Fund Y                 as recommended by the Board
- --------------------------------------------------------------------------------
Click on arrow to modify voting instructions
- --------------------------------------------

Help me...                       Cancel                        Vote Now!
- ----------                       ------                        ---------
If you need help navigating      You can quit Internet         Once you have
the site or experience problems  voting at any time. However,  completed
during your online session,      your voting instructions set  selection of your
this page may provide you with   up during this session will   voting
answers                          be disregarded                instructions and
                                                               are ready to
                                                               submit them for
                                                               processing, click
                                                               the Vote Now!
                                                               button

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Back to Home     Contact Us     Security                  C 2000 PROXY DIRECT TM
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John Hancock Institutional Series Trust Proxy                    PROXY DIRECT TM
- --------------------------------------------------------------------------------
Back to Home     Contact Us     Security                                     ?
- --------------------------------------------------------------------------------

Shareholder:     John P. Sample
                 ALAMO Direct Mail Services,
                 Inc.
                 23-10 Square Circle Lane
                 Someoldtown, TS 12345-
                 6789

Acount:          ALAMO-TST01 / 271-XXXX-             John Hancock
                 XXXX-123                         ------------------
                                                  JOHN HANCOCK FUNDS
Previous vote:   None-Testing APPS/TR
                 Setup


                 John Hancock Medium Capitalization Growth Fund

- --------------------------------------------------------------------------------
Applicable Campaign Proposals              Mark All   For      Against     Board
- --------------------------------------------------------------------------------
 1 A proposal to approve an agreement and         ( ) For  ( ) Against ( ) Board
   Plan of Reorganization between John Hancock
   Medium Capitalization Growth Fund ("Medium
   Capitalization Growth Fund") and
   John Hancock Mid Cap Growth Fund ("Mid Cap
   Growth Fund"). Under this Agreement, your fund
   would transfer all of its assets to Mid Cap Growth
   Fund in exchange for Class I shares of Mid Cap Growth
   Fund. These shares would be distributed proportionately
   to you and the other shareholders of Medium Capitalization
   Growth Fund. Mid Cap Growth Fund would also assume Medium
   Capitalization Growth Fund's liabilities.
- --------------------------------------------------------------------------------
   Any other business that may properly come before the meeting.
- --------------------------------------------------------------------------------
                                                             Voting Instructions
                                                             -------------------

i Answers have been marked according to the Board's
  recommendations. Please change responses as appropriate
  before submission.
                                                     [ ] Cancel     [ ] Continue

- --------------------------------------------------------------------------------
Back to Home     Contact Us     Security                  C 2000 PROXY DIRECT TM
- --------------------------------------------------------------------------------



John Hancock Institutional Series Trust Proxy                    PROXY DIRECT TM
- --------------------------------------------------------------------------------
Back to Home     Contact Us     Security                                     ?
- --------------------------------------------------------------------------------

                                  John Hancock
                               ------------------
                               JOHN HANCOCK FUNDS

Thank you. Your voting instructions have been submitted for processing.

If necessary, you can revisit Internet Voting site any time before the Meeting
Date on Wednesday, May 29, 2002 at 9:00 AM [ET] to submit new voting
instructions.

This is the summary of your voting instructions delivered to John Hancock Funds.
It is not a receipt or vote confirmation. You may print this page for your
records.

Instructions submitted on _________, 2002
Transaction Code: __________________


                 John Hancock Medium Capitalization Growth Fund
- --------------------------------------------------------------------------------
1 Approve an Agreement and Plan of Reorganization                 Voted For



If you wish to vote another card, please click here.

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Back to Home     Contact Us     Security                  C 2000 PROXY DIRECT TM
- --------------------------------------------------------------------------------




                                     Part B

                       Statement of Additional Information

                         JOHN HANCOCK INTERNATIONAL FUND
                        JOHN HANCOCK MID CAP GROWTH FUND
          (Each an "Acquiring Fund" and each a series of John Hancock
                             Investment Trust III)

                     JOHN HANCOCK INTERNATIONAL EQUITY FUND
                 JOHN HANCOCK MEDIUM CAPITALIZATION GROWTH FUND
          (Each an "Acquired Fund", and each a series of John Hancock
                             Institutional Series)

                              101 Huntington Avenue
                                Boston, MA 02199
                                 1-800-225-5291

                                 April 15, 2002

This Statement of Additional Information provides additional information and is
not a prospectus. It should be read in conjunction with the related proxy
statement and prospectus that is also dated April 15, 2002. This Statement of
Additional Information provides additional information about John Hancock
International Fund and John Hancock Mid Cap Growth Fund and the Funds that each
is acquiring, John Hancock International Equity Fund and John Hancock Medium
Capitalization Growth Fund, respectively. Please retain this Statement of
Additional Information for future reference. A copy of the proxy statement and
prospectus can be obtained free of charge by calling John Hancock Signature
Services, Inc., at 1-800-225-5291.


                                Table Of Contents

                                                                          Page
Introduction                                                               3
Note Regarding Pro Forma Financial Information                             3
Additional Information about the Acquiring Funds                           3
General Information and History                                            3
Investment Objective and Policies                                          3
Management of the Acquiring Funds                                          3
Control Persons and Principal Holders of Shares                            3
Investment Advisory and Other Services                                     3
Brokerage Allocation                                                       3
Capital Stock and Other Securities                                         3
Purchase, Redemption and Pricing of Acquiring Fund Shares                  3
Tax Status                                                                 4
Underwriters                                                               4
Calculation of Performance Data                                            4
Financial Statements                                                       4
                                                                           4
Additional Information about the Acquired Funds
General Information and History                                            4
Investment Objective and Policies                                          4
Management of the Acquired Funds                                           4
Investment Advisory and Other Services                                     4
Brokerage Allocation                                                       4
Capital Stock and Other Securities                                         4
Purchase, Redemption and Pricing of Acquired Fund Shares                   5
Tax Status                                                                 5
Underwriters                                                               5
Calculation of Performance Data                                            5
Financial Statements                                                       5

Exhibits

A -   Statements of Additional Information, dated March 1, 2002, of the
      Acquiring Funds including audited financial statements as of October 31,
      2001.

B -   Statement of Additional Information, dated July 1, 2001, of the Acquired
      Funds including unaudited financial statements as of August 30, 2001 and
      audited financial statements as of February 28, 2001.

C -   Pro forma financial statements as of October 31, 2001, assuming the
      reorganization of John Hancock International Equity Fund into John Hancock
      International Fund occurred on that date.


                                       2


                                  INTRODUCTION

This Statement of Additional Information ("SAI") is intended to supplement the
information provided in a proxy statement and prospectus dated April 15, 2002 .
The proxy statement and prospectus has been sent to the shareholders of the
Acquired Funds in connection with the solicitation by the Trustees of the
Acquired Funds of proxies to be voted at the Special Meeting of Shareholders of
the Acquired Funds to be held on May 29, 2002. This Statement of Additional
Information incorporates by reference the Statements of Additional Information
of the Acquiring Funds, dated March 1, 2002, and the Statement of Additional
Information of the Acquired Funds, dated July 1, 2001. The SAIs for the
Acquiring Funds and the SAIs for the Acquired Funds are included with this
Statement of Additional Information.

                 NOTE REGARDING PRO FORMA FINANCIAL INFORMATION

In accordance with Item 14(a)(2) of Form N-14, pro forma financial statements
were not prepared for the proposed reorganization of John Hancock Medium
Capitalization Growth Fund into John Hancock Mid Cap Growth Fund, since the net
asset value of Medium Capitalization Growth Fund did not exceed ten percent of
the net asset value of John Hancock Mid Cap Growth Fund on February 12, 2002.
Pro forma financial statements for the proposed combination of John Hancock
International Equity Fund into John Hancock International Fund are attached as
Exhibit C.

                Additional Information About the Acquiring Funds

General Information and History

For additional information about the Acquiring Funds generally and their
history, see "Organization of the Fund" in each Acquiring Fund's SAI attached
hereto as Exhibit A.

Investment Objective and Policies

For additional information about each Acquiring Fund's investment objective,
policies and restrictions, see "Investment Objective and Policies" and
"Investment Restrictions" in each Acquiring Fund's SAIs attached hereto as
Exhibit A.

Management of the Acquiring Funds

For additional information about each Acquiring Fund's Board of Trustees,
officers and management personnel, see "Those Responsible for Management" in the
Acquiring Fund SAIs attached hereto as Exhibit A.

Control Persons and Principal Holders of Shares

For additional information about control persons of each Acquiring Fund and
principal holders of shares of Acquiring Fund, see "Those Responsible for
Management" in the Acquiring Fund SAIs attached hereto as Exhibit A.

Investment Advisory and Other Services

For additional information about each Acquiring Fund's investment adviser,
subadviser, custodian, transfer agent and independent accounts, see "Investment
Advisory and Other Services", "Distribution Contracts", "Transfer Agent
Services", "Custody of Portfolio", and "Independent Auditors" in the Acquiring
Fund SAIs attached hereto as Exhibit A.

Brokerage Allocation and Other Practices

For additional information about each Acquiring Fund's brokerage allocation
practices, see "Brokerage Allocation" in the Acquiring Fund SAIs attached hereto
as Exhibit A.

Capital Stock and Other Securities


For additional information about the voting rights and other characteristics of
each Acquiring Fund's shares of beneficial interest, see "Description of the
Fund's Shares" in the Acquiring Fund SAIs attached hereto as Exhibit A.

Purchase, Redemption and Pricing of Acquiring Fund Shares

For additional information about the purchase, redemption and pricing of each
Acquiring Fund's shares, see "Net Asset Value", "Sales Compensation", "Special
Redemptions", "Additional Services and Programs", and "Purchase and Redemptions
through Third Parties" in the Acquiring Fund SAIs attached hereto as Exhibit A.

Tax Status

For additional information about the tax status of each Acquiring Fund, see "Tax
Status" in the Acquiring Fund SAIs, attached hereto as Exhibit A.

Underwriters

For additional information about each Acquiring Fund's principal underwriter and
the distribution contract between the principal underwriter and the Acquiring
Funds, see "Distribution Contracts" in the Acquiring Fund SAIs attached hereto
as Exhibit A.

Calculation of Performance Data

For additional information about the investment performance of each Acquiring
Fund, see "Calculation of Performance" in the Acquiring Fund SAIs attached
hereto as Exhibit A.

Financial Statements

Audited annual financial statements of each Acquiring Fund at October 31, 2001
are attached to each Acquiring Fund's SAI, which are attached hereto as Exhibit
A.

                 Additional Information About the Acquired Funds

General Information and History

For additional information about the Acquired Funds generally and their history,
see "Organization of the Funds" in the Acquired Funds' SAI attached hereto as
Exhibit B.

Investment Objective and Policies

For additional information about the Acquired Funds' investment objectives,
policies and restrictions, see "Investment Objective and Policies" and
"Investment Restrictions" in the Acquired Funds' SAI attached hereto as Exhibit
B.

Management of Acquired Funds

For additional information about the Acquired Funds' Board of Trustees, officers
and management personnel, see "Those Responsible for Management" in the Acquired
Funds' SAI attached hereto as Exhibit B.

Investment Advisory and Other Services

For additional information about each Acquired Funds' investment adviser,
subadviser, custodian, transfer agent and independent accountants, see
"Investment Advisory and Other Services", "Distribution Contracts", "Transfer
Agent Services", "Custody of Portfolio" and "Independent Auditors" in the
Acquired Funds' SAI attached hereto as Exhibit B.

Brokerage Allocation and Other Practices

For additional information about each Acquired Funds' brokerage allocation
practices, see "Brokerage Allocation" in the Acquired Funds' SAI attached hereto
as Exhibit B.

Capital Stock and Other Securities


                                       2


For additional information about the voting rights and other characteristics of
each Acquired Funds' shares of beneficial interest, see "Description of the
Fund's Shares" in the Acquired Funds' SAI attached hereto as Exhibit B.

Purchase, Redemption and Pricing of Acquired Fund Shares

For additional information about the purchase, redemption and pricing of each
Acquired Funds' shares, see "Net Asset Value", "Sales Compensation", "Additional
Services and Programs", "Special Redemptions" and "Purchases and Redemptions
Through Third Parties" in the Acquired Funds' SAI attached hereto as Exhibit B.

Tax Status

For additional information about the tax status of the Acquired Funds, see "Tax
Status" in each Acquired Funds' SAI attached hereto as Exhibit B.

Underwriters

For additional information about each Acquired Funds' principal underwriter and
the distribution contract between the principal underwriter and the Acquired
Funds, see "Distribution Contracts" in the Acquired Funds' SAI attached hereto
as Exhibit B.

Calculation of Performance Data

For additional information about the investment performance of the Acquired
Funds, see "Calculation of Performance" in the Acquired Funds' SAI attached
hereto as Exhibit B.

Financial Statements

Audited annual financial statements of the Acquired Funds at February 28, 2001
and unaudited semi-annual financial statements as of August 31, 2001 are
attached to the Acquired Funds' SAI, which is attached hereto as Exhibit B.


                                       3







                         JOHN HANCOCK INTERNATIONAL FUND

                                 Class I Shares
                       Statement of Additional Information

                                  March 1, 2002

This Statement of Additional Information provides information about John Hancock
International Fund (the "Fund"), in addition to the information that is
contained in the combined International Funds' current Prospectus (the
"Prospectus"). The Fund is a diversified series of John Hancock Investment Trust
III (the "Trust").

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which may be obtained free of
charge by writing or telephoning:

                      John Hancock Signature Services, Inc.
                         1 John Hancock Way, Suite 1001
                              Boston MA 02217-1001
                                 1-888-972-8696

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----


Organization of the Fund ..................................................    2
Investment Objective and Policies .........................................    2
Investment Restrictions ...................................................   13
Those Responsible for Management ..........................................   15
Investment Advisory and Other Services ....................................   22
Distribution Contracts ....................................................   25
Sales Compensation ........................................................   26
Net Asset Value ...........................................................   26
Special Redemptions .......................................................   27
Additional Services and Programs ..........................................   27
Purchases and Redemptions through Third Parties ...........................   27
Description of the Fund's Shares ..........................................   28
Tax Status ................................................................   29
Calculation of Performance ................................................   34
Brokerage Allocation ......................................................   36
Transfer Agent Services ...................................................   38
Custody of Portfolio ......................................................   38
Independent Auditors ......................................................   38
Appendix A- Description of Investment Risk ................................  A-1
Appendix B-Description of Bond Ratings ....................................  B-1
Financial Statements ......................................................  F-1



                                       1


ORGANIZATION OF THE FUND

The Fund is a series of the Trust, an open-end investment management company
organized as a Massachusetts business trust under the laws of The Commonwealth
of Massachusetts.


John Hancock Advisers, LLC (prior to February 1, 2002, John Hancock Advisers,
Inc.) (the "Adviser") is the Fund's investment adviser. The Adviser is an
indirect, wholly-owned subsidiary of John Hancock Life Insurance Company
(formerly John Hancock Mutual Life Insurance Company)(the "Life Company"), a
Massachusetts life insurance company chartered in 1862, with national
headquarters at John Hancock Place, Boston, Massachusetts. The Life Company is
wholly owned by John Hancock Financial Services, Inc., a Delaware corporation
organized in February, 2000.


The Fund's Sub-Adviser is Nicholas-Applegate Capital Management
("Nicholas-Applegate"), (the "Sub-Adviser"). Nicholas-Applegate is responsible
for providing investment advice to the Fund, subject to the review of the
Trustees and overall supervision of the Adviser.

INVESTMENT OBJECTIVE AND POLICIES

The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. Appendix A contains further
information describing investment risks. The investment objective of the Fund is
non-fundamental. There is no assurance that the Fund will achieve its investment
objective.

The Fund's investment objective is long-term growth of capital. The Fund seeks
to achieve its investment objective by investing primarily in foreign equity
securities. The Fund's investments will be subject to the market fluctuations
and risks inherent in all securities.

Under normal circumstances, at least 80% of the Fund's total assets will be
invested in equity securities of issuers located in various countries around the
world. Generally, the Fund's portfolio will contain securities of issuers from
at least three countries other than the United States. The Fund normally will
invest substantially all of its assets in equity securities, such as common
stock, preferred stock, and securities convertible into common and preferred
stock. However, if deemed advisable by the Adviser, the Fund may invest in any
other type of security including warrants, bonds, notes and other debt
securities (including Eurodollar securities) or obligations of domestic or
foreign governments and their political subdivisions, or domestic or foreign
corporations.

The Fund will maintain a flexible investment policy and will invest in a
diversified portfolio of securities of companies and governments located
throughout the world. In making the allocation of assets among various countries
and geographic regions, the Adviser and the Sub-Adviser ordinarily consider such
factors as prospects for relative economic growth between foreign countries;
expected levels of inflation and interest rates; government policies influencing
business conditions; and other pertinent financial, tax, social, political,
currency and national factors - all in relation to the prevailing prices of the
securities in each country or region.

In abnormal conditions, the Fund may hold cash or invest all or a portion of its
assets in short-term domestic as well as foreign instruments, including:
short-term U.S. Government securities and repurchase agreements in connection
with such instruments; bank certificates of deposit, bankers' acceptances, time
deposits and letters of credit; and commercial paper (including so called
Section 4(2) paper rated at least A-1 or A-2 by Standard & Poor's Ratings Group
("S&P") or P-1 or P-2 by Moody's Investors Service, Inc. ("Moody's") or if
unrated considered by the Adviser to be of comparable value. The Fund's
temporary defensive investments may also


                                       2


include: short-term debt obligations of U.S. companies, rated at least BBB or
Baa by S&P or Moody's, respectively, or, if unrated, of comparable quality in
the opinion of the Adviser; commercial paper and short-term corporate debt
obligations not satisfying the above credit standards if they are (a) subject to
demand features or puts or (b) guaranteed as to principal and interest by a
domestic or foreign bank having total assets in excess of $1 billion, by a
corporation whose commercial paper may be purchased by the Fund, or by a foreign
government having an existing debt security rated at least BBB or Baa by S&P or
Moody's, respectively; and other short-term investments which the Trustees of
the Fund determine present minimal credit risks and which are of "high quality"
as determined by any major rating service or, in the case of an instrument that
is not rated, of comparable quality as determined by the Adviser.

Government Securities. Certain U.S. Government securities, including U.S.
Treasury bills, notes and bonds, and GNMA certificates ("Ginnie Maes"), are
supported by the full faith and credit of the United States. Certain other U.S.
Government securities, issued or guaranteed by Federal agencies or government
sponsored enterprises, are not supported by the full faith and credit of the
United States, but may be supported by the right of the issuer to borrow from
the U.S. Treasury. These securities include obligations of the Federal Home Loan
Mortgage Corporation ("Freddie Macs"), and obligations supported by the credit
of the instrumentality, such as Federal National Mortgage Association Bonds
("Fannie Maes"). No assurance can be given that the U.S. Government will provide
financial support to such Federal agencies, authorities, instrumentalities and
government sponsored enterprises in the future.

Ginnie Maes, Freddie Macs and Fannie Maes are mortgage-backed securities which
provide monthly payments which are, in effect, a "pass-through" of the monthly
interest and principal payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans. Collateralized mortgage
obligations ("CMOs") in which the Fund may invest are securities issued by a
U.S. Government instrumentality that are collateralized by a portfolio of
mortgages or mortgage-backed securities. Mortgage-backed securities may be less
effective than traditional debt obligations of similar maturity at maintaining
yields during periods of declining interest rates.

Structured or Hybrid Notes. The Fund may invest in "structured" or "hybrid"
notes. The distinguishing feature of a structured or hybrid note is that the
amount of interest and/or principal payable on the note is based on the
performance of a benchmark asset or market other than fixed income securities or
interest rates. Examples of these benchmark include stock prices, currency
exchange rates and physical commodity prices. Investing in a structured note
allows the Fund to gain exposure to the benchmark market while fixing the
maximum loss that the Fund may experience in the event that market does not
perform as expected. Depending on the terms of the note, the Fund may forego all
or part of the interest and principal that would be payable on a comparable
conventional note; the Fund's loss cannot exceed this foregone interest and/or
principal. An investment in structured or hybrid notes involves risks similar to
those associated with a direct investment in the benchmark asset.

Ratings as Investment Criteria. In general the ratings of Moody's and S&P
represent the opinions of these agencies as to the quality of the securities
which they rate. It should be emphasized, however, that these ratings are
relative and subjective and are not absolute standards of quality. These ratings
will be used by the Fund as initial criteria for the selection of debt
securities. Among the factors which will be considered are the ability of the
issuer to pay principal and interest and general economic trends. Appendix B
contains further information concerning the ratings of Moody's and S&P and their
significance. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. Neither of these events will require the sale of the
securities by the Fund.


                                       3


Investments in Foreign Securities. The Fund may invest directly in the
securities of foreign issuers as well as securities in the form of sponsored or
unsponsored American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs") or other securities convertible into securities of foreign issuers.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a similar ownership arrangement. Generally, ADRs, in
registered form, are designed for use in U.S. securities markets and EDRs, in
bearer form, are designed for use in European securities markets. Issuers of the
shares underlying unsponsored ADRs are not contractually obligated to disclose
material information in the United States. Foreign issuers may be assigned to
reasonable industry classifications that differ from the industry
classifications ordinarily assigned to U.S. issuers.

Foreign Currency Transactions. The Fund's foreign currency transactions may be
conducted on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market.

The Fund may also enter into forward foreign currency exchange contracts to
enhance return, to hedge against fluctuations in currency exchange rates
affecting a particular transaction or portfolio position, or as a substitute for
the purchase or sale of a currency or assets denominated in that currency.
Forward contracts are agreements to purchase or sell a specified currency at a
specified future date and price set at the time of the contract. Transaction
hedging is the purchase or sale of forward foreign currency contracts with
respect to specific receivables or payables of the Fund accruing in connection
with the purchase and sale of its portfolio securities quoted or denominated in
the same or related foreign currencies. Portfolio hedging is the use of forward
foreign currency contracts to offset portfolio security positions denominated or
quoted in the same or related foreign currencies. The Fund may elect to hedge
less than all of its foreign portfolio positions as deemed appropriate by the
Adviser and Sub-Adviser.

If the Fund purchases a forward contract or sells a forward contract for
non-hedging purposes, the Fund will segregate cash or liquid securities in a
separate account of the Fund in an amount equal to the value of the Fund's total
assets committed to the consummation of such forward contract. The assets in the
segregated account will be valued at market daily and if the value of the
securities in the separate account declines, additional cash or securities will
be placed in the account so that the value of the account will be equal the
amount of the Fund's commitment with respect to such contracts.

Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it may
not be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates.

Risks of Foreign Securities. Investments in foreign securities may involve a
greater degree of risk than those in domestic securities. There is generally
less publicly available information about foreign companies in the form of
reports and ratings similar to those that are published about issuers in the
United States. Also, foreign issuers are generally not subject to uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to United States issuers.


                                       4


Because foreign securities may be denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will affect the Fund's net
asset value, the value of dividends and interest earned, gains and losses
realized on the sale of securities, and any net investment income and gains that
the Fund distributes to shareholders. Securities transactions undertaken in some
foreign markets may not be settled promptly so that the Fund's investments on
foreign exchanges may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement.

Foreign securities will be purchased in the best available market, whether
through over-the-counter markets or exchanges located in the countries where
principal offices of the issuers are located. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.

With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States' economy in terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.

The dividends, in some cases capital gains and interest payable on certain of
the Fund's foreign portfolio securities, may be subject to foreign withholding
or other foreign taxes, thus reducing the net amount of income or gains
available for distribution to the Fund's shareholders.

The Fund normally invests at least 80% of total assets in a diversified
portfolio of foreign stocks from both developed and emerging countries. The Fund
may invest up to 30% of total assets in emerging markets as classified by the
Morgan Stanley (MCI). Foreign equities include but are not limited to common
stocks, convertible preferred stocks, preferred stocks, warrants, ADRs, GDRs and
EDRs. The risks of foreign investing may be intensified in the case of
investments in emerging markets or countries with limited or developing capital
markets. These countries are located in the Asia-Pacific region, Eastern Europe,
Latin and South America and Africa. Security prices in these markets can be
significantly more volatile than in more developed countries, reflecting the
greater uncertainties of investing in less established markets and economies.
Political, legal and economic structures in many of these emerging market
countries may be undergoing significant evolution and rapid development, and
they may lack the social, political, legal and economic stability characteristic
of more developed countries. Emerging market countries may have failed in the
past to recognize private property rights. They may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions on
foreign ownership, or prohibitions on repatriation of assets, and may have less
protection of property rights than more developed countries. Their economies may
be predominantly based on only a few industries, may be highly vulnerable to
changes in local or global trade conditions, and may suffer from extreme and
volatile debt burdens or inflation rates. Local securities markets may trade a
small number of securities and may be unable to respond effectively to increases
in trading volume, potentially making prompt liquidation of substantial holdings
difficult or impossible at times. The Fund may be required to establish special
custodial or other arrangements before making certain investments in those
countries. Securities of issuers located


                                       5


in these countries may have limited marketability and may be subject to more
abrupt or erratic price movements.

The U.S. Government has from time to time in the past imposed restrictions,
through taxation and otherwise, on foreign investments by U.S. investors such as
the Fund. If such restrictions should be reinstituted, it might become necessary
for the Fund to invest all or substantially all of its assets in U.S.
securities. In such event, the Fund would review its investment objective and
investment policies to determine whether changes are appropriate.

Repurchase Agreements. In a repurchase agreement the Fund buys a security for a
relatively short period (usually not more than 7 days) subject to the obligation
to sell it back to the issuer at a fixed time and price plus accrued interest.
The Fund will enter into repurchase agreements only with member banks of the
Federal Reserve System and with "primary dealers" in U.S. Government securities.
The Adviser will continuously monitor the creditworthiness of the parties with
whom it enters into repurchase agreements.

The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period in which the Fund seeks
to enforce its rights thereto, possible subnormal levels of income, decline in
value of the underlying securities or lack of access to income during this
period as well as the expense of enforcing its rights.

Reverse Repurchase Agreements. The Fund may also enter into reverse repurchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. The Fund will
also continue to be subject to the risk of a decline in the market value of the
securities sold under the agreements because it will reacquire those securities
upon effecting their repurchase. To minimize various risks associated with
reverse repurchase agreements, the Fund will establish and maintain a separate
account consisting of liquid securities, of any type or maturity, in an amount
at least equal to the repurchase prices of the securities (plus accrued interest
thereon) under such agreements. In addition, the Fund will not borrow money or
enter into reverse repurchase agreements except from banks as a temporary
measure for extraordinary emergency purposes in amounts not to exceed 33 1/3% of
the Fund's total assets (including the amount borrowed) taken at market value.
The Fund will enter into reverse repurchase agreements only with federally
insured banks which are approved in advance as being creditworthy by the
Trustees. Under procedures established by the Trustees, the Adviser will monitor
the creditworthiness of the banks involved.

Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 15% of its net
assets in illiquid investments. If the Trustees determine, based upon a
continuing review of the trading markets for specific Section 4(2) paper or Rule
144A securities that they are liquid, they will not be subject to the 15% limit
on illiquid investments. The Trustees have adopted guidelines and delegated to
the Advisers the daily function of determining and monitoring the liquidity of
restricted securities. The Trustees, however, will retain sufficient oversight
and be


                                       6


ultimately responsible for the determinations. The Trustees will carefully
monitor the Fund's investments in these securities, focusing on such important
factors, among others, as valuation, liquidity and availability of information.
This investment practice could have the effect of increasing the level of
illiquidity in the Fund if qualified institutional buyers become for a time
uninterested in purchasing these restricted securities.

Options on Securities, Securities Indices and Currency. The Fund may purchase
and write (sell) call and put options on any securities in which it may invest,
on any securities index based on securities in which it may invest or on any
currency in which Fund investments may be denominated. These options may be
listed on national domestic securities exchanges or foreign securities exchanges
or traded in the over-the-counter market. The Fund may write covered put and
call options and purchase put and call options as a substitute for the purchase
or sale of securities or currency or to protect against declines in the value of
portfolio securities and against increases in the cost of securities to be
acquired.

Writing Covered Options. A call option on securities or currency written by the
Fund obligates the Fund to sell specified securities or currency to the holder
of the option at a specified price if the option is exercised at any time before
the expiration date. A put option on securities or currency written by the Fund
obligates the Fund to purchase specified securities or currency from the option
holder at a specified price if the option is exercised at any time before the
expiration date. Options on securities indices are similar to options on
securities, except that the exercise of securities index options requires cash
settlement payments and does not involve the actual purchase or sale of
securities. In addition, securities index options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. Writing covered call options may
deprive the Fund of the opportunity to profit from an increase in the market
price of the securities or foreign currency assets in its portfolio. Writing
covered put options may deprive the Fund of the opportunity to profit from a
decrease in the market price of the securities or foreign currency assets to be
acquired for its portfolio.

All call and put options written by the Fund are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities,
either of which may be quoted or denominated in any currency, in a segregated
account with a value at least equal to the Fund's obligation under the option,
(ii) entering into an offsetting forward commitment and/or (iii) purchasing an
offsetting option or any other option which, by virtue of its exercise price or
otherwise, reduces the Fund's net exposure on its written option position. A
written call option on securities is typically covered by maintaining the
securities that are subject to the option in a segregated account. The Fund may
cover call options on a securities index by owning securities whose price
changes are expected to be similar to those of the underlying index.

The Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."

Purchasing Options. The Fund would normally purchase call options in
anticipation of an increase, or put options in anticipation of a decrease
("protective puts"), in the market value of securities or currencies of the type
in which it may invest. The Fund may also sell call and put options to close out
its purchased options.

The purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities or currency at a specified price during
the option period. The Fund would ordinarily realize a gain on the purchase of a
call option if, during the option period, the value of such securities or
currency exceeded the sum of the exercise price, the premium paid and


                                       7


transaction costs; otherwise the Fund would realize either no gain or a loss on
the purchase of the call option.

The purchase of a put option would entitle the Fund, in exchange for the premium
paid, to sell specified securities or currency at a specified price during the
option period. The purchase of protective puts is designed to offset or hedge
against a decline in the market value of the Fund's portfolio securities or the
currencies in which they are denominated. Put options may also be purchased by
the Fund for the purpose of affirmatively benefiting from a decline in the price
of securities or currencies which it does not own. The Fund would ordinarily
realize a gain if, during the option period, the value of the underlying
securities or currency decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Fund would realize either no
gain or a loss on the purchase of the put option. Gains and losses on the
purchase of put options may be offset by countervailing changes in the value of
the Fund's portfolio securities.

The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.

Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
currencies or dispose of assets held in a segregated account until the options
expire or are exercised. Similarly, if the Fund is unable to effect a closing
sale transaction with respect to options it has purchased, it would have to
exercise the options in order to realize any profit and will incur transaction
costs upon the purchase or sale of underlying securities or currencies.

Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.

The Fund's ability to terminate over-the-counter options is more limited than
with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.


                                       8


The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities or currency markets.

Futures Contracts and Options on Futures Contracts. The Fund may purchase and
sell futures contracts based on various securities (such as U.S. Government
securities) and securities indices, foreign currencies and any other financial
instruments and indices and purchase and write call and put options on these
futures contracts. The Fund may purchase and sell futures and options on futures
for hedging or other non-speculative purposes. The Fund may also enter into
closing purchase and sale transactions with respect to any of these contracts
and options. All futures contracts entered into by the Fund are traded on U.S.
or foreign exchanges or boards of trade that are licensed, regulated or approved
by the Commodity Futures Trading Commission ("CFTC").

Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments or
currencies for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).

Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, the Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
contracts are traded guarantees that, if still open, the sale or purchase will
be performed on the settlement date.

Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire or the
exchange rate of currencies in which the portfolio securities are quoted or
denominated. When securities prices are falling, the Fund can seek to offset a
decline in the value of its current portfolio securities through the sale of
futures contracts. When securities prices are rising, the Fund, through the
purchase of futures contracts, can attempt to secure better rates or prices than
might later be available in the market when it effects anticipated purchases.
The Fund may seek to offset anticipated changes in the value of a currency in
which its portfolio securities, or securities that it intends to purchase, are
quoted or denominated by purchasing and selling futures contracts on such
currencies.

The Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated decline
in market prices or foreign currency rates that would adversely affect the value
of the Fund's portfolio securities. Such futures contracts may include contracts
for the future delivery of securities held by the Fund or securities with
characteristics similar to those of the Fund's portfolio securities. Similarly,
the Fund may sell futures contracts on any currencies in which its portfolio
securities are quoted or denominated or in one currency to hedge against
fluctuations in the value of securities denominated in a different currency if
there is an established historical pattern of correlation between the two
currencies.

If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for the Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in the Fund's portfolio
may be more or less volatile than prices of such futures contracts, the Adviser
will


                                       9


attempt to estimate the extent of this volatility difference based on historical
patterns and compensate for any differential by having the Fund enter into a
greater or lesser number of futures contracts or by attempting to achieve only a
partial hedge against price changes affecting the Fund's portfolio securities.

When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.

On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency rates then available in the applicable market to
be less favorable than prices that are currently available. The Fund may also
purchase futures contracts as a substitute for transactions in securities or
foreign currency, to alter the investment characteristics of or currency
exposure associated with portfolio securities or to gain or increase its
exposure to a particular securities market or currency.

Options on Futures Contracts. The purchase of put and call options on futures
contracts will give the Fund the right (but not the obligation) for a specified
price to sell or to purchase, respectively, the underlying futures contract at
any time during the option period. As the purchaser of an option on a futures
contract, the Fund obtains the benefit of the futures position if prices move in
a favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.

The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium (upon exercise
of the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to purchase. However,
the Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by the Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.

The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.

Other Considerations. The Fund will engage in futures and related options
transactions either for bona fide hedging or for other non-speculative purposes
as permitted by the CFTC. These purposes may include using futures and options
on futures as a substitute for the purchase or sale of securities or currencies
to increase or reduce exposure to particular markets. To the extent that the
Fund is using futures and related options for hedging purposes, futures
contracts will be sold to protect against a decline in the price of securities
(or the currency in which they are quoted or denominated) that the Fund owns or
futures contracts will be purchased to protect the Fund against an increase in
the price of securities or the currency in which they are quoted or denominated)
it intends to purchase. The Fund will determine that the price fluctuations in
the futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Fund or
securities or instruments which it expects to purchase. As evidence of its
hedging intent, the Fund expects that on 75% or more of the occasions on which
it takes a long futures or option position (involving the purchase of futures
contracts), the Fund will have purchased, or will be in the process of
purchasing, equivalent


                                       10


amounts of related securities in the cash market at the time when the futures or
option position is closed out. However, in particular cases, when it is
economically advantageous for the Fund to do so, a long futures position may be
terminated or an option may expire without the corresponding purchase of
securities or other assets.

To the extent that the Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. The Fund will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), for maintaining its qualifications as a
regulated investment company for federal income tax purposes.

Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities or currencies, require the Fund to
establish a segregated account consisting of cash or liquid securities in an
amount equal to the underlying value of such contracts and options.

While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates, securities prices or currency
exchange rates may result in a poorer overall performance for the Fund than if
it had not entered into any futures contracts or options transactions.

Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. In the event of an imperfect correlation between
a futures position and a portfolio position which is intended to be protected,
the desired protection may not be obtained and the Fund may be exposed to risk
of loss. In addition, it is not possible to hedge fully or protect against
currency fluctuations affecting the value of securities denominated in foreign
currencies because the value of such securities is likely to fluctuate as a
result of independent factors not related to currency fluctuations.

Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.

Forward Commitment and When-Issued Securities. The Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time. When the Fund engages in forward commitment and
when-issued transactions, it relies on the seller to consummate the transaction.
The failure of the issuer or seller to consummate the transaction may result in
the Funds losing the opportunity to obtain a price and yield considered to be
advantageous. The purchase of securities on a when-issued and forward commitment
basis also involves a risk of loss if the value of the security to be purchased
declines prior to the settlement date.


                                       11


On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, the Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.

Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities and money market
funds. When the Fund lends portfolio securities, there is a risk that the
borrower may fail to return the securities involved in the transaction. As a
result, the Fund may incur a loss or, in the event of the borrower's bankruptcy,
the Fund may be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Fund not to lend portfolio securities having a total
value exceeding 33 1/3% of its total assets.

Rights and Warrants. The Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price, subject to the Fund's Investment
Restrictions. Generally, warrants and stock purchase rights do not carry with
them the right to receive dividends or exercise voting rights with respect to
the underlying securities, and they do not represent any rights in the assets of
the issuer. As a result, an investment in warrants and rights may be considered
to entail greater investment risk than certain other types of investments. In
addition, the value of warrants and rights does not necessarily change with the
value of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration date. Investment in warrants and
rights increases the potential profit or loss to be realized from the investment
of a given amount of the Fund's assets as compared with investing the same
amount in the underlying stock.

Short-Term Trading and Portfolio Turnover. Short-term trading means the purchase
and subsequent sale of a security after it has been held for a relatively brief
period of time. The Fund may engage in short-term trading in response to stock
market conditions, changes in interest rates or other economic trends and
developments, or to take advantage of yield disparities between various fixed
income securities in order to realize capital gains or improve income.
Short-term trading may have the effect of increasing portfolio turnover rate. A
high rate of portfolio turnover (100% or greater) involves correspondingly
greater brokerage expenses. The Fund's portfolio turnover rate is set forth in
the table under the caption "Financial Highlights" in the Prospectus.


                                       12


INVESTMENT RESTRICTIONS

Fundamental Investment Restrictions. The following investment restrictions will
not be changed without the approval of a majority of the Fund's outstanding
voting securities which, as used in the Prospectus and this Statement of
Additional Information, means the approval by the lesser of (1) the holders of
67% or more of the Fund's shares represented at a meeting if more than 50% of
the Fund's outstanding shares are present in person or by proxy at that meeting
or (2) more than 50% of the outstanding shares.

The Fund may not:

      (1)   Issue senior securities, except as permitted by paragraph (2) below.
            For purposes of this restriction, the issuance of shares of
            beneficial interest in multiple classes or series, the purchase or
            sale of options, futures contracts and options on future contracts,
            forward commitments, forward foreign exchange contracts and
            repurchase agreements entered into in accordance with the Fund's
            investment policy are not deemed to be senior securities.

      (2)   Borrow money, except for the following extraordinary or emergency
            purposes (i) for temporary or short-term purposes or for the
            clearance of transactions in amounts not to exceed 33 1/3% of the
            value of the Fund's total assets (including the amount borrowed)
            taken at market value; (ii) in connection with the redemption of
            Fund shares or to finance failed settlements of portfolio trades
            without immediately liquidating portfolio securities or other
            assets; (iii) in order to fulfill commitments or plans to purchase
            additional securities pending the anticipated sale of other
            portfolio securities or assets; (iv) in connection with entering
            into reverse repurchase agreements and dollar rolls, but only if
            after each such borrowing there is asset coverage of at least 300%
            as defined in the 1940 Act. For purposes of this investment
            restriction, the deferral of trustees' fees and transactions in
            short sales, futures contracts, options on future contracts,
            securities or indices and forward commitment transactions will not
            constitute borrowing.

      (3)   Act as an underwriter, except to the extent that, in connection with
            the disposition of portfolio securities, the Fund may be deemed to
            be an underwriter for purposes of the Securities Act.

      (4)   Purchase or sell real estate or any interest therein, except that
            the Fund may invest in securities of corporate or governmental
            entities secured by real estate or marketable interests therein or
            issued by companies that invest in real estate or interests therein.

      (5)   Make loans, except that the Fund may purchase or hold debt
            instruments in accordance with the Fund's investment policies and
            may make loans of portfolio securities provided that as a result no
            more than 33 1/3% of the Fund's total assets taken at current value
            would be so loaned. The Fund does not, for this purpose, consider
            the purchase of repurchase agreements, bank certificates of deposit,
            bank loan participation agreements, bankers' acceptances, a portion
            of an issue of publicly distributed bonds, debentures or other
            securities, whether or not the purchase is made upon the original
            issuance of the securities, to be the making of a loan.

      (6)   Invest in commodities or commodity futures contracts, other than
            financial derivatives contracts. Financial derivatives include
            forward foreign currency


                                       13


            contracts; financial futures contracts and options on financial
            futures contracts; options and warrants on securities, currencies
            and financial indices; swaps, caps, floors, collars, swapations; and
            repurchase agreements entered into in accordance with the Fund's
            investment policies.

      (7)   Purchase the securities of issuers conducting their principal
            business activity in the same industry if, immediately after such
            purchase, the value of its investments in such industry would exceed
            25% of its total assets taken at market value at the time of each
            investment. This limitation does not apply to investments in
            obligations of the U.S. Government or any of its agencies or
            instrumentalities.

      (8)   For each Fund with respect to 75% of total assets [see
            nonfundamental investment restriction (h)], purchase securities of
            an issuer (other than the U.S. government, its agencies,
            instrumentalities or authorities):

            (a)   such purchase would cause more than 5% of the Fund's total
                  assets taken at market value to be invested in the securities
                  of such issuer; or

            (b)   such purchase would at the time result in more than 10% of the
                  outstanding voting securities of such issuer being held by the
                  Fund.

In connection with the lending of portfolio securities under item (5) above,
such loans must at all times be fully collateralized and the Fund's custodian
must take possession of the collateral either physically or in book entry form.
Securities used as collateral must be marked to market daily.

Non-fundamental Investment Restrictions. The following restrictions, as well as
the Fund's investment objective, are designated as non-fundamental and may be
changed by the Trustees without shareholder approval:

The Fund may not:

            (a)   Make short sales

            (b)   Purchase a security if, as a result, (i) more than 10% of the
                  Fund's total assets would be invested in the securities of
                  other investment companies, (ii) the Fund would hold more than
                  3% of the total outstanding voting securities of any one
                  investment company, or (iii) more than 5% of the Fund's total
                  assets would be invested in the securities of any one
                  investment company. These limitations do not apply to (a) the
                  investment of cash collateral, received by the Fund in
                  connection with lending the Fund's portfolio securities, in
                  the securities of open-end investment companies or (b) the
                  purchase of shares of any investment company in connection
                  with a merger, consolidation, reorganization or purchase of
                  substantially all of the assets of another investment company.
                  Subject to the above percentage limitations, the Fund may, in
                  connection with the John Hancock Group of Funds Deferred
                  Compensation Plan for Independent Trustees/Directors, purchase
                  securities of other investment companies within the John
                  Hancock Group of Funds.

            (c)   Invest for the purpose of exercising control over or
                  management of any company.

            (d)   Invest more than 15% of its net assets in illiquid securities.


                                       14


            (e)   The Fund may not invest more than 5% of its total assets at
                  time of purchase in any one security (other than US Government
                  securities).

            (f)   The Fund normally invests at least 80% of total assets in a
                  diversified portfolio of foreign stocks form both developed
                  and emerging countries. The fund may invest up to 30% of total
                  assets in emerging markets as classified by the Morgan Stanley
                  (MSCI). Foreign equities include but are not limited to common
                  stocks, convertible preferred stocks, preferred stocks,
                  warrants, ADRs, GDRs and EDRs.

If a percentage restriction on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value of the Fund's assets will not be
considered a violation of the restriction.

The Funds will invest only in countries on the Adviser's Approved Country
Listing. The Approved Country Listing is a list maintained by the Adviser's
investment department that outlines all countries, including the United States,
that have been approved for investment by Funds managed by the Adviser.

In addition, no Fund may invest either directly or indirectly in any Russian
equity. Only certain funds can invest in certain types of Russian debt. These
funds are: Active Bond, Income, Investors, High Income, Bond, High Yield Bond,
Strategic Income and VA Strategic Income. Each of these funds may invest only up
to 5% of total assets in: (1) Sovereign Russian Debt and Municipal Fixed Income
Securities; (2) that are NOT ruble- denominated; (3) that are held physically
outside of Russia; and (4) have Euroclear settlement.

THOSE RESPONSIBLE FOR MANAGEMENT


The business of the Fund is managed by its Trustees, who elect officers who are
responsible for the day-to-day operations of the Fund and who execute policies
formulated by the Trustees. Several of the officers and Trustees of the Fund are
also officers or Directors of the Adviser, or officers and Directors of the
Fund's principal distributor, John Hancock Funds, LLC (prior to February 1,
2002, John Hancock Funds, Inc.) ("John Hancock Funds").



                                       15





- ---------------------------------------------------------------------------------------------------------------------
                                                                                                       Number of
                                                                                                       John Hancock
                             Position(s)   Trustee/       Principal Occupation(s) and other            Funds
Name, Address (1)            Held with     Officer        Directorships                                Overseen by
And Age                      Fund          since(2)       During Past 5 Years                          Trustee
- ---------------------------------------------------------------------------------------------------------------------
                                                                                           
Independent Trustees

- ---------------------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz          Trustee       1996           Professor of Law, Emeritus, Boston           30
Born:  1931                                               University School of Law (as of 1996);
                                                          Director, Brookline Bancorp.

- ---------------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr.      Trustee       1996           Chairman, President and Chief Executive      30
Born:  1935                                               Officer, Brookline Bancorp. (lending)
                                                          (since 1972); Trustee, Northeastern
                                                          University (education); Chairman and
                                                          Director, Lumber Insurance Co. (insurance)
                                                          (until 2000); Chairman and Director,
                                                          Northeast Retirement Services, Inc.
                                                          (retirement administration) (since 1998).

- ---------------------------------------------------------------------------------------------------------------------
William J. Cosgrove          Trustee       1996           Vice President, Senior Banker and Senior     30
Born:  1933                                               Credit Officer, Citibank, N.A. (retired
                                                          1991); Executive Vice President, Citadel
                                                          Group Representatives, Inc.;  Director,
                                                          Hudson City Bancorp; Trustee, Scholarship
                                                          Fund for Inner City Children (since 1986).

- ---------------------------------------------------------------------------------------------------------------------
Richard A. Farrell           Trustee       1986           President, Farrell, Healer & Co., Inc.,      30
Born:  1932                                               (venture capital management firm)(since
                                                          1980) and General Partner of the Venture
                                                          Capital Fund of NE (since 1980); Prior to
                                                          1980, headed the venture capital group at
                                                          Bank of Boston Corporation.

- ---------------------------------------------------------------------------------------------------------------------


(1) Business address for independent and interested Trustees and officers is 101
Huntington Avenue, Boston, Massachusetts 02119.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.



                                       16





- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                             Number of
                                                                                                             John Hancock
                             Position(s)   Trustee/       Principal Occupation(s) and other                  Funds
Name, Address (1)            Held with     Officer        Directorships                                      Overseen by
And Age                      Fund          since(2)       During Past 5 Years                                Trustee
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                 
Gail D. Fosler               Trustee       1986           Senior Vice President and Chief Economist, The     30
Born:  1947                                               Conference Board (non-profit economic and
                                                          business research)(since 1989); Director,
                                                          Unisys Corp. (since 1993); Director, H.B.
                                                          Fuller Company (since 1992) and DBS Holdings
                                                          (Singapore) (banking and financial
                                                          services)(since 1999); Director, National
                                                          Bureau of Economic Research (academic)(since
                                                          1989); Director, Baxter International (medical
                                                          health care) (since 2001).

- ---------------------------------------------------------------------------------------------------------------------------
William F. Glavin            Trustee       1992           President Emeritus, Babson College (as of 1998);   30
Born:  1932                                               Vice Chairman, Xerox Corporation (until 1989);
                                                          Director, Reebok, Inc. (since 1994) and Inco Ltd.

- ---------------------------------------------------------------------------------------------------------------------------
John A. Moore                Trustee       1991           President and Chief Executive Officer,             36
Born:  1939                                               Institute for Evaluating Health Risks,
                                                          (nonprofit institution) (until 2001); Senior
                                                          Scientist, Sciences International (health
                                                          research)(since 1998); Principal, Hollyhouse
                                                          (consulting)(since 2000); Director,
                                                          CIIT(nonprofit research) (since 2002).

- ---------------------------------------------------------------------------------------------------------------------------
Patti McGill Peterson        Trustee       1993           Executive Director, Council for International      36
Born:  1943                                               Exchange of Scholars (since 1998); Vice
                                                          President, Institute of International Education
                                                          (since 1998); Senior Fellow, Cornell Institute
                                                          of Public Affairs, Cornell University (until
                                                          1997); President Emerita of Wells College and
                                                          St. Lawrence University; Director, Niagara
                                                          Mohawk Power Corporation (electric utility).

- ---------------------------------------------------------------------------------------------------------------------------
John W. Pratt                Trustee       1986           Professor of Business Administration Emeritus,     30
Born:  1931                                               Harvard University Graduate School of Business
                                                          Administration (as of 1998).
- ---------------------------------------------------------------------------------------------------------------------------


(1) Business address for independent and interested Trustees and officers is 101
Huntington Avenue, Boston, Massachusetts 02119.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.



                                       17





- -------------------------------------------------------------------------------------------------------------------------
                                                                                                           Number of
                                                                                                           John Hancock
                             Position(s)   Trustee/       Principal Occupation(s) and other                Funds
Name, Address (1)            Held with     Officer        Directorships                                    Overseen by
And Age                      Fund          since(2)       During Past 5 Years                              Trustee
- -------------------------------------------------------------------------------------------------------------------------
                                                                                               
Interested Trustees
- -------------------------------------------------------------------------------------------------------------------------
John M. DeCiccio (3)         Trustee       2001           Executive Vice President and Chief Investment    66
Born:  1948                                               Officer, John Hancock Financial Services,
                                                          Inc.; Director, Executive Vice President and
                                                          Chief Investment Officer, John Hancock Life
                                                          Insurance Company; Chairman of the Committee
                                                          of Finance of John Hancock Life Insurance
                                                          Company; Director, John Hancock Subsidiaries,
                                                          LLC, Hancock Natural Resource Group,
                                                          Independence Investment LLC, Independence
                                                          Fixed Income LLC, John Hancock Advisers, LLC
                                                          (the "Adviser") and The Berkeley Financial
                                                          Group, LLC ("The Berkeley Group"), John
                                                          Hancock Funds, LLC ("John Hancock Funds"),
                                                          Massachusetts Business Development
                                                          Corporation; Director, John Hancock Insurance
                                                          Agency, Inc. ("Insurance Agency, Inc.") (until
                                                          1999) and John Hancock Signature Services,
                                                          Inc. ("Signature Services") (until 1997).

- -------------------------------------------------------------------------------------------------------------------------
Maureen R. Ford (3)          Trustee,      2000           Executive Vice President, John Hancock           66
Born:  1955                  Chairman,                    Financial Services, Inc., John Hancock Life
                             President                    Insurance Company; Chairman, Director,
                             and Chief                    President and Chief Executive Officer, the
                             Executive                    Advisers and The Berkeley Group; Chairman,
                             Officer                      Director and Chief Executive Officer, John
                                                          Hancock Funds, Chairman, Director and
                                                          President, Insurance Agency, Inc.; Chairman,
                                                          Director and Chief Executive Officer,
                                                          Sovereign Asset Management Corporation
                                                          ("SAMCorp."); Director, Independence
                                                          Investment LLC, Independence Fixed Income LLC
                                                          and Signature Services; Senior Vice President,
                                                          MassMutual Insurance Co. (until 1999); Senior
                                                          Vice President, Connecticut Mutual Insurance
                                                          Co. (until 1996).
- -------------------------------------------------------------------------------------------------------------------------


(1) Business address for independent and interested Trustees and officers is 101
Huntington Avenue, Boston, Massachusetts 02119.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.



                                       18





- ---------------------------------------------------------------------------------------------------------------------
                                                                                                       Number of
                                                                                                       John Hancock
                            Position(s)    Trustee/       Principal Occupation(s) and other            Funds
Name, Address (1)           Held with      Officer        Directorships                                Overseen by
And Age                     Fund           since(2)       During Past 5 Years                          Trustee
- ---------------------------------------------------------------------------------------------------------------------
                                                                                           
Principal Officers who
are not Trustees
- ---------------------------------------------------------------------------------------------------------------------
William L. Braman           Executive      2000           Executive Vice President and Chief
Born:  1953                 Vice                          Investment Officer, the Adviser and each
                            President                     of the John Hancock funds; Director,
                            and Chief                     SAMCorp., Executive Vice President and
                            Investment                    Chief Investment Officer, Barring Asset
                            Officer                       Management, London U.K. (until 2000).

- ---------------------------------------------------------------------------------------------------------------------
Richard A. Brown            Senior Vice    2000           Senior Vice President, Chief Financial
Born:  1949                 President                     Officer and Treasurer, the Adviser, John
                            and Chief                     Hancock Funds, and The Berkeley Group;
                            Financial                     Second Vice President and Senior Associate
                            Officer                       Controller, Corporate Tax Department, John
                                                          Hancock Financial Services, Inc. (until
                                                          2001).

- ---------------------------------------------------------------------------------------------------------------------
Thomas H. Connors           Vice           1991           Vice President and Compliance Officer, the
Born:  1959                 President                     Adviser and each of the John Hancock
                            and                           funds; Vice President, John Hancock Funds.
                            Compliance
                            Officer

- ---------------------------------------------------------------------------------------------------------------------
William H. King             Vice           2001           Vice President and Assistant Treasurer,
Born:  1952                 President                     the Adviser; Vice President and Treasurer
                            and                           of each of the John Hancock funds;
                            Treasurer                     Assistant Treasurer of each of the John
                                                          Hancock funds (until 2001).

- ---------------------------------------------------------------------------------------------------------------------
Susan S. Newton             Senior Vice    2000           Senior Vice President, Secretary and Chief
Born:  1950                 President,                    Legal Officer, SAMCorp., the Adviser and
                            Secretary                     each of the John Hancock funds, John
                            and Chief                     Hancock Funds and The Berkeley Group; Vice
                            Legal Officer                 President, Signature Services (until
                                                          2000), Director, Senior Vice President and
                                                          Secretary, NM Capital.
- ---------------------------------------------------------------------------------------------------------------------


(1) Business address for independent and interested Trustees and officers is 101
Huntington Avenue, Boston, Massachusetts 02119.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.



                                       19



The Fund's Board of Trustees currently has five standing Committees: the Audit
Committee, the Administration Committee, the Contracts/Operations Committee, the
Investment Performance Committee and the Coordinating Committee. Each Committee
is comprised of Independent Trustees who are not "interested persons". The Audit
Committee members are Messrs. Moore, Farrell and Ms. Fosler. The Audit Committee
recommends to the full board auditors for the Fund, monitors and oversees the
audits of the Fund, communicates with both independent auditors and internal
auditors on a regular basis and provides a forum for the auditors to report and
discuss any matters they deem appropriate at any time. The Audit Committee held
four meetings during the fiscal year ended October 31, 2001.

The Administration Committee's members are all of the Independent Trustees of
the Fund. The Administration Committee reviews the activities of the other four
standing committees and makes the final selection and nomination of candidates
to serve as Independent Trustees. The Administration Committee will consider
nominees recommended by shareholders to serve as Independent Trustees, provided
that shareholders submit recommendations in compliance with all of the pertinent
provisions of Rule 14a-8 under the Securities Exchange Act of 1934. The
Administration Committee also works with all Trustees on the selection and
election of officers of the Fund. The Administration Committee held four
meetings during the fiscal year ended October 31, 2001.

The Contracts/Operations Committee members are Messrs. Chapman, Cosgrove and
Pratt. The Contracts/Operations Committee oversees the initiation, operation,
and renewal of contracts between the Fund and other entities. These contracts
include advisory and subadvisory agreements, custodial and transfer agency
agreements and arrangements with other service providers. The
Contracts/Operations Committee held five meetings during the fiscal year ended
October 31, 2001.

The Investment Performance Committee consists of Messrs. Aronowitz, Glavin and
Ms. Peterson. The Investment Performance Committee monitors and analyzes the
performance of the Fund generally, consults with the adviser as necessary if the
Fund requires special attention, and reviews peer groups and other comparative
standards as necessary. The Investment Performance Committee held four meetings
during the fiscal year ended October 31, 2001.

The Coordinating Committee members are the chairpersons of the other four
standing committees. The Coordinating Committee assures consistency of action
among committees, reviews Trustee compensation, evaluates Trustee performance
and considers committee membership rotations as well as relevant corporate
governance issues.

The following table provides a dollar range indicating each Trustee's ownership
of equity securities of the Fund, as well as aggregate holdings of shares of
equity securities of all John Hancock Funds overseen by the Trustee, as of
December 31, 2001.



                                       20





- -------------------------------------------------------------------------------------------------------------
                                                                       Aggregate Dollar Range of holdings
                                      Dollar Range of Fund Shares      in John Hancock funds overseen by
Name of Trustee                       Owned by Trustee                 Trustee
- -------------------------------------------------------------------------------------------------------------
                                                                 
Independent Trustees
- -------------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz                   $1-$10,000                       $50,001-$100,000
- -------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr.               $1-$10,000                       Over $100,000
- -------------------------------------------------------------------------------------------------------------
William J. Cosgrove                   $1-$10,000                       Over $100,000
- -------------------------------------------------------------------------------------------------------------
Richard A. Farrell                    None                             Over $100,000
- -------------------------------------------------------------------------------------------------------------
Gail D. Fosler                        $1-$10,000                       $10,001-$50,000
- -------------------------------------------------------------------------------------------------------------
William F. Glavin                     None                             $10,001-$50,000
- -------------------------------------------------------------------------------------------------------------
Dr. John A. Moore                     None                             Over $100,000
- -------------------------------------------------------------------------------------------------------------
Patti McGill Peterson                 $1-$10,000                       Over $100,000
- -------------------------------------------------------------------------------------------------------------
John W. Pratt                         $1-$10,000                       Over $100,000

- -------------------------------------------------------------------------------------------------------------
Interested Trustees
- -------------------------------------------------------------------------------------------------------------
John M. DeCiccio                      None                             Over $100,000
- -------------------------------------------------------------------------------------------------------------
Maureen R. Ford                       $1-$10,000                       Over $100,000
- ------------------------------------- -------------------------------- --------------------------------------


The following table provides information regarding the compensation paid by the
Fund and the other investment companies in the John Hancock Fund Complex to the
Independent Trustees for their services. Mr. DeCiccio and Ms. Ford, each a
non-Independent Trustee, and each of the officers of the Fund who are interested
persons of the Adviser, are compensated by the Adviser and/or affiliates and
receive no compensation from the Fund for their services.

                             Aggregate           Total Compensation From the
                             Compensation        Fund and John Hancock Fund
Independent Trustees         From the Fund(1)    Complex to Trustees(2)
- --------------------         ----------------    ---------------------------

Dennis S. Aronowitz              $  146                       $ 75,000
Richard P. Chapman, Jr.*            153                         78,100
William J. Cosgrove*                146                         72,000
Leland O. Erdahl +                   45                         18,000
Richard A. Farrell                  144                         72,000
Gail D. Fosler                      146                         75,000
William F. Glavin*                  142                         72,000
Dr. John A. Moore*                  146                         75,100
Patti McGill Peterson               144                         72,000
John W. Pratt                       142                         72,000
                                 ------                       --------
Total                            $1,354                       $681,200

(1) Compensation is for the current fiscal year ending October 31, 2001.

(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 2001. As of this date, there were sixty-six funds
in the John Hancock Fund Complex, with Mr. Moore and Ms. Peterson serving on
thirty-six funds and each other Independent Trustees servicing on thirty funds.

+ As of February 28, 2001, Mr. Erdahl resigned as Trustees of the Complex.



                                       21



*As of December 31, 2001, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $71,309, Mr. Cosgrove was $207,842, Mr. Glavin was $280,472 and for
Dr. Moore was $238,982 under the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees (the "Plan").

All of the officers listed are officers or employees of the Adviser or
Affiliated Companies. Some of the Trustees and officers may also be officers or
Trustees of one or more of the other funds for which the Adviser serves as
investment adviser.

As of February 4, 2002, the officers and Trustees of the Fund as a group
beneficially owned less than 1% of the outstanding shares of the Fund and no
shareholders of record beneficially owned 5% or more of the outstanding Class I
shares of the Fund.


INVESTMENT ADVISORY AND OTHER SERVICES

The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has approximately $30 billion in assets under
management in its capacity as investment adviser to the Fund and the other funds
in the John Hancock group of funds as well as institutional accounts. The
Adviser is an affiliate of the Life Company, one of the most recognized and
respected financial institutions in the nation. With total assets under
management of more than $100 billion, the Life Company is one of ten largest
life insurance companies in the United States, and carries a high rating from
Standard & Poor's and A.M. Best. Founded in 1862, the Life Company has been
serving clients for over 130 years.

The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser which was approved by the Fund's shareholders.
Pursuant to the Advisory Agreement, the Adviser will: (a) furnish continuously
an investment program for the Fund and determine, subject to the overall
supervision and review of the Trustees, which investments should be purchased,
held, sold or exchanged, and (b) provide supervision over all aspects of the
Fund's operations except those which are delegated to a custodian, transfer
agent or other agent.

The Fund bears all costs of its organization and operation, including but not
limited to expenses of preparing, printing and mailing all shareholders'
reports, notices, prospectuses, proxy statements and reports to regulatory
agencies; expenses relating to the issuance, registration and qualification of
shares; government fees; interest charges; expenses of furnishing to
shareholders their account statements; taxes; expenses of redeeming shares;
brokerage and other expenses connected with the execution of portfolio
securities transactions; expenses pursuant to the Fund's plan of distribution;
fees and expenses of custodians including those for keeping books and accounts,
maintaining a committed line of credit, and calculating the net asset value of
shares; fees and expenses of transfer agents and dividend disbursing agents;
legal, accounting, financial, management, tax and auditing fees and expenses of
the Fund (including an allocable portion of the cost of the Adviser's employees
rendering such services to the Fund; the compensation and expenses of Trustees
who are not otherwise affiliated with the Trust, the Adviser or any of their
affiliates; expenses of Trustees' and shareholders' meetings; trade association
membership; insurance premiums; and any extraordinary expenses.

As compensation for its services under the Advisory Agreement, the Fund pays the
Adviser monthly a fee based on a stated percentage of the average of the daily
net assets of the Fund as follows:


                                       22


      Average Daily Net Assets                         Annual Rate
      ------------------------                         -----------

      First $250 million                                  1.00%
      Next $250 million                                   0.80%
      Next $250 million                                   0.75%
      Amounts over $750 million                           0.625%

From time to time, the Adviser may reduce its fee or make other arrangements to
limit the Fund's expenses to a specified percentage of its average daily net
assets. The Adviser retains the right to reimpose a fee and recover any other
payments to the extent that, at the end of any fiscal year, the Fund's annual
expenses fall below this limit.


For the fiscal years ended October 31, 1999, 2000 and 2001, the Adviser's
management fee was $159,468, $252,090 and $208,015, respectively. After expense
reductions by the Adviser, the Adviser received no management fees for the
fiscal years ended October 31, 1999, 2000 and 2001.

As of December 14, 2000, the Adviser has entered into a sub-investment
management contract (the "sub-advisory agreement") with Nicholas-Applegate under
which, subject to the review of the Trustees and the overall supervision of the
Adviser, Nicholas-Applegate is responsible for providing the Fund with
investment advice. Nicholas-Applegate will also provide the Fund on a continuous
basis with economic, financial and political information, research and
assistance concerning international markets. Until May 11, 2001, as compensation
for its services under the Sub-Advisory Agreement, the Adviser paid
Nicholas-Applegate quarterly, in arrears, a fee at the annual rate of 55% of the
investment advisory fee received by the Adviser. Effective May 11, 2001, the
Adviser pays quarterly a sub-advisory fee to Nicholas-Applegate equal on an
annual basis to (i) 0.50% of the first $500,000,000 of the average daily net
asset value of the Fund; and (ii) 0.45% of the average daily net asset value of
the Fund in excess of $500,000,000. Nicholas-Applegate is a limited liability
company organized under the laws of the State of Delaware with offices at 600
West Broadway, 30th Floor, San Diego, California 92101. Nicholas-Applegate was
organized in August 1984 to manage discretionary accounts investing primarily in
publicly traded equity securities and securities convertible into or exercisable
for publicly traded equity securities, with the goal of capital appreciation.
Nicholas-Applegate is a wholly owned subsidiary of Allianz of America, Inc.
("AZOA"). Allianz AG, the parent of AZOA, is a German Aktiengesellschaft, a
German publicly traded company, which, together with its subsidiaries, comprises
the world's largest insurance group (the "Allianz Group"). Allianz Group
currently has assets under management of approximately $690 billion. Allianz
AG's address is: Koeniginstrasse 28, D-80802, Munich, Germany.


Until December 14, 2000, the Sub-Adviser to the Fund was Indocam International
Investment Services ("IIIS"). IIIS is a French corporation and a subsidiary of
Indocam, the asset management affiliate of Credit Agricole, a French bank group
with a presence in financial centers around the world. IIIS is located at 90
Boulevard Pasteaur, Paris, France 75015. Indocam is an asset management firm
maintaining established relationships with institutional, corporate and
individual investors. Credit Agricole is one of the largest bank groups in the
world. As compensation for its services under the Sub-Advisory Agreement, the
Adviser was paying IIIS quarterly, in arrears, a fee at the annual rate of 55%
of the investment advisory fee received by the Adviser. Until March 1, 2000, the
Fund had another sub-Adviser, John Hancock Advisers International Limited
("JHAI") located at 6th Floor, Duke's Court, 32-36 Duke Street, St. James's,
London, England SW1Y6DF. JHAI was a wholly-owned subsidiary of the Adviser
formed in 1987 to provide international investment research and advisory
services to U.S. institutional clients. As compensation for its services under
the Sub-Advisory Agreement, JHAI received from the Adviser a portion of its
monthly fee equal to 0.70% on an annual basis of the


                                       23


average daily net asset value of the Fund for each calendar month up to $200
million of average daily net assets; and 0.6375% on an annual basis of the
average daily net asset value over $200 million. JHAI agreed to waive all but
0.05% of its fee as of January 1, 2000 and its Sub-Advisory contract was
terminated effective March 1, 2000. The Fund is not responsible for paying any
Sub-Adviser's fee.

The Adviser has agreed to limit the Fund's expenses (excluding 12b-1 and
transfer agent expenses) to 0.90% of the Fund's average daily net assets. The
Adviser reserves the right to terminate this limitation in the future.

Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser, a Sub-Adviser or any of their respective
affiliates provide investment advice. Because of different investment objectives
or other factors, a particular security may be bought for one or more funds or
clients when one or more other Funds or clients are selling the same security.
If opportunities for purchase or sale of securities by the Adviser or a
Sub-Adviser for the Fund or for other funds or clients for which the Adviser or
a Sub-Adviser renders investment advice arise for consideration at or about the
same time, transactions in such securities will be made, insofar as feasible,
for the respective funds or clients in a manner deemed equitable to all of them.
To the extent that transactions on behalf of more than one client of the
Adviser, a Sub Adviser or its affiliates may increase the demand for securities
being purchased or the supply of securities being sold, there may be an adverse
effect on price.

Pursuant to their Advisory Agreements, the Adviser and Sub-Adviser are not
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which the Agreements relate, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser or Sub-Adviser in the performance of their duties or from
reckless disregard by them of their obligations and duties under the applicable
Agreements.

Under the Advisory Agreement, the Fund may use the name "John Hancock" or any
name derived from or similar to it only for so long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the Advisory
Agreement is no longer in effect, the Fund (to the extent that it lawfully can)
will cease to use such a name or any other name indicating that it is advised by
or otherwise connected with the Adviser. In addition, the Adviser or the Life
Company may grant the nonexclusive right to use the name "John Hancock" or any
similar name to any other corporation or entity, including but not limited to
any investment company of which the Life Company or any subsidiary or affiliate
thereof or any successor to the business of any subsidiary or affiliate thereof
shall be the investment adviser.


The Fund's Board of Trustees is responsible for overseeing the performance of
the Fund's investment Adviser and Sub-adviser and determining whether to approve
and renew the Fund's Advisory Agreement and Sub-Advisory Agreement. The Board
has a standing request that the Adviser provide the Board with certain
information the Board has deemed important to evaluating the short- and
long-term performance of the Adviser and Sub-Adviser. This information includes
periodic performance analysis and status reports from the Adviser and quarterly
Portfolio and Investment Performance Reports. The Fund's portfolio managers meet
with the Board from time to time to discuss the management and performance of
the Fund and respond to the Board's questions concerning the performance of the
Adviser. When the Board considers whether to renew an investment advisory
contract, the Board takes into account numerous factors, including: (1) the
nature, extent and quality of the services provided by the Adviser and
Sub-adviser; (2) the investment performance of the Fund; (3) the fair market
value of the services provided by the Adviser and Sub-Adviser; (4) a comparative
analysis of expense ratios of, and advisory fees paid by, similar funds; (5) the
extent to which the Adviser has realized or will realize economies of scale as
the Fund grows; (6) other sources of revenue to the Adviser or its affiliates
from its relationship with the Fund and intangible or "fall-out" benefits



                                       24



that accrue to the adviser and its affiliates, if relevant; and (7) the
Adviser's control of the operating expenses of the fund, such as transaction
costs, including ways in which portfolio transactions for the fund are conducted
and brokers are selected.

The primary factors underlying the Board's decision to renew the Fund's Advisory
Agreement and Sub-Advisory Agreement were as follows:

o     The Board determined that the performance results of the Fund and the
      Adviser and Sub-Adviser's responsive actions were reasonable, as compared
      with relevant performance standards, including the performance results of
      comparable international funds derived from data provided by Lipper Inc.
      and appropriate market indexes.

o     The Board decided that the advisory fee paid by the Fund was reasonable
      based on the average advisory fee for comparable funds. The Board also
      took into account the nature of the fee arrangements which include
      breakpoints that will adjust the fee downward as the size of the Fund's
      portfolio increases.

o     The Board evaluated the Adviser and Sub-Adviser's investment staff and
      portfolio management process, and reviewed the composition and overall
      performance of the Fund's portfolio on both a short-term and long-term
      basis. The Board considered whether the Fund should obtain alternative
      portfolio management services and concluded that, under all the
      circumstances and based on its informed business judgement, the most
      appropriate course of action in the best interest of the Fund's
      shareholders was to renew the agreements with the Adviser and Sub-Adviser.


The continuation of the Advisory Agreement, the Sub-Advisory Agreement and the
Distribution Agreement (discussed below) was approved by all of the Trustees in
June of 1999. On December 12, 2000, the Trustees approved the termination of
IIIS as Sub-Adviser and appointed Nicholas-Applegate as Sub-Adviser effective
December 14, 2000. On April 25, 2001, the shareholders of the Fund approved the
appointment of Nicholas-Applegate as Sub-adviser. The Advisory Agreement, the
Nicholas-Applegate Sub-Advisory Agreement and the Distribution Agreement, will
continue in effect from year to year, provided that its continuance is approved
annually both (i) by the holders of a majority of the outstanding voting
securities of the Trust or by the Trustees, and (ii) by a majority of the
Trustees who are not parties to the Agreement or "interested persons" of any
such parties. Each of these Agreements may be terminated on 60 days written
notice by any party or by vote of a majority of the outstanding voting
securities of the Fund and will terminate automatically if assigned.


Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the fiscal year ended October 31, 1999, 2000, 2001, the
Fund paid the Adviser $2,650, $4,779 and $4,160, respectively, for services
under this Agreement.


Personnel of the Adviser and its affiliates may trade securities for their
personal accounts. The Fund also may hold, or may be buying or selling, the same
securities. To prevent the Fund from being disadvantaged, the adviser(s),
principal underwriter and the Fund have adopted a code of ethics which restricts
the trading activity of those personnel.

DISTRIBUTION CONTRACTS

The Fund has a Distribution Agreement with John Hancock Funds. Under the
Agreement, John Hancock Funds is obligated to use its best efforts to sell
shares of the Fund. Shares of the Fund are also sold by selected broker-dealers
(the "Selling Brokers") which have entered into selling


                                       25


agency agreements with John Hancock Funds. These Selling Brokers are authorized
to designate other intermediaries to receive purchase and redemption orders on
behalf of the Fund. John Hancock Funds accepts orders for the purchase of the
shares of the Fund that are continually offered at net asset value next
determined.

SALES COMPENSATION

As part of its business strategy, John Hancock Funds may pay compensation to
financial services firms that sell the Fund's shares. These firms typically pass
along a portion of this compensation to your financial representative.

John Hancock Funds may make a one-time payment at the time of initial purchase
out of its own resources to a Selling Broker who sells shares of the Fund. This
payment may not exceed 0.15% of the amount invested.


In addition, from time to time, John Hancock Funds, at its expense, may provide
significant additional compensation to financial services firms in connection
with their promotion of the Fund and sale of shares of the Fund. Such
compensation provided by John Hancock Funds may include, for example, financial
assistance to financial services firms in connection with their marketing and
sales development programs for their registered representatives and other
employees, as well as payment for travel expenses, including lodging, incurred
by registered representatives and other employees for such marketing and sales
development programs, as well as assistance for seminars for the public,
advertising and sales campaigns regarding one or more Funds, and other financial
services firms-sponsored events or activities. From time to time, John Hancock
Funds may provide expense reimbursements for special training of a financial
services firm's registered representatives and other employees in group
meetings. Other compensation, such as asset retention fees, finder's fees and
reimbursement for wire transfer fees, may be offered to the extent not
prohibited by law or any self-regulatory agency, such as the NASD.


NET ASSET VALUE

For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.

Debt investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.

Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned categories for which no sales are reported and
other securities traded over-the-counter are generally valued at the mean
between the current closing bid and asked prices.

Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.

Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00


                                       26


p.m., London time (12:00 noon, New York time) on the date of any determination
of the Fund's NAV. If quotations are not readily available, or the value has
been materially affected by events occurring after the closing of a foreign
market, assets are valued by a method that the Trustees believe accurately
reflects fair value.

The NAV for each fund and class is determined each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing a class's net assets by the number of its shares outstanding.
On any day an international market is closed and the New York Stock Exchange is
open, any foreign securities will be valued at the prior day's close with the
current day's exchange rate. Trading of foreign securities may take place on
Saturdays and U.S. business holidays on which the Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.

SPECIAL REDEMPTIONS

Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When a shareholder sells portfolio
securities received in this fashion, the shareholder will incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. The Fund has,
however, elected to be governed by Rule 18f-1 under the Investment Company Act.
Under that rule, the Fund must redeem its shares for cash except to the extent
that the redemption payments to any shareholder during any 90-day period would
exceed the lesser of $250,000 or 1% of the Fund's net asset value at the
beginning of such period.

ADDITIONAL SERVICES AND PROGRAMS

Exchange Privilege. The Fund permits exchanges of shares of any class of a fund
for shares of the same class in any other John Hancock fund offering that class.

The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.

The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.

An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".

PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES

Shares of the Fund may be purchased or redeemed through certain broker-dealers
or Service Agents ("Brokers"). Brokers may charge for their services or place
limitations on the extent to which you may use the services of the Fund. The
Fund will be deemed to have received a purchase or redemption order when an
authorized broker, or if applicable, a broker's authorized designee, receives
the order. If a broker is an agent or designee of the Fund, orders are processed
at the NAV next calculated after the broker receives the order. The broker must
segregate any orders it receives after the close of regular trading on the New
York Stock Exchange and transmit those orders to the Fund for execution at NAV
next determined. Some brokers that maintain nominee accounts with the Fund for
their clients charge an annual fee on the average net assets held in such
accounts for accounting, servicing, and distribution services they provide with


                                       27


respect to the underlying Fund shares. The Adviser, the Fund, and/or John
Hancock Funds, Inc. (the Fund's principal distributor), share in the expense of
these fees.

DESCRIPTION OF THE FUND'S SHARES

The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series and
classes, without further action by shareholders. As of the date of this
Statement of Additional Information, the Trustees have authorized shares of the
Fund and one other series. Additional series may be added in the future. The
Trustees have also authorized the issuance of four classes of shares of the
Fund, designated as Class A, Class B, Class C and Class I. Class A, Class B and
Class C shares are discussed in a separate Statement of Additional Information.

The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of the Fund. Holders of
each class of shares have certain exclusive voting rights on matter relating to
their respective distribution plans. The different classes of the Fund may bear
different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.

Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts that (i) the
distribution and service fees relating to each class of shares will be borne
exclusively by that class, (ii) Class B and Class C shares will pay higher
distribution and service fees than Class A shares and (iii) each class of shares
will bear any class expenses properly allocable to that class of shares, subject
to the conditions the Internal Revenue Service imposes with respect to
multiple-class structures. Similarly, the net asset value per share may vary
depending on which class of shares are purchased. No interest will be paid on
uncashed dividend or redemption checks.

In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, except as set forth below.

Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.

Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Fund's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Furthermore, no fund included in this Fund's prospectus shall
be liable for the liabilities of any other John Hancock fund. Liability is


                                       28


therefore limited to circumstances in which a Fund itself would be unable to
meet its obligations, and the possibility of this occurrence is remote.

The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or the policies of any regulatory authority. John
Hancock Funds does not accept starter, credit card or third party checks. All
checks returned by the post office as undeliverable will be reinvested at net
asset value in the fund or funds from which a redemption was made or dividend
paid. Information provided on the account application may be used by the Fund to
verify the accuracy of the information or for background or financial history
purposes. A joint account will be administered as a joint tenancy with right of
survivorship, unless the joint owners notify Signature Services of a different
intent. A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts. For telephone transactions, the transfer agent will take measures
to verify the identity of the caller, such as asking for name, account number,
Social Security or other taxpayer ID number and other relevant information. If
appropriate measures are taken, the transfer agent is not responsible for any
losses that may occur to any account due to an unauthorized telephone call. Also
for your protection telephone transactions are not permitted on accounts whose
names or addresses have changed within the past 30 days. Proceeds from telephone
transactions can only be mailed to the address of record.

Selling activities for the Fund may not take place outside the U.S. except with
U.S. military bases, APO addresses and U.S. diplomats. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.

TAX STATUS

The Fund is treated as a separate entity for accounting and tax purposes, has
qualified and elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") and
intends to continue to qualify for each taxable year. As such and by complying
with the applicable provisions of the Code regarding the sources of its income,
the timing of its distributions, and the diversification of its assets, the Fund
will not be subject to Federal income tax on its taxable income (including net
realized capital gains) which is distributed to shareholders in accordance with
the timing requirements of the Code.

The Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.

Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than net capital gain, after reduction by
deductible expenses.) Some distributions may be paid in January but may be
taxable to shareholders as if they had been received on December 31 of the
previous year. The tax treatment described above will apply without regard to
whether distributions are received in cash or reinvested in additional shares of
the Fund.

Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic


                                       29


reinvestment of their distributions will have a federal tax basis in each share
received pursuant to such a reinvestment equal to the amount of cash they would
have received had they elected to receive the distribution in cash, divided by
the number of shares received in the reinvestment.

If the Fund invests in stock (including an option to acquire stock such as is
inherent in a convertible bond) of certain foreign corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, certain rents and royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from these
passive foreign investment companies or gain from the sale of stock in such
companies, even if all income or gain actually received by the Fund is timely
distributed to its shareholders. The Fund would not be able to pass through to
its shareholders any credit or deduction for such a tax. An election may be
available to ameliorate these adverse tax consequences, but could require the
Fund to recognize taxable income or gain without the concurrent receipt of cash.
These investments could also result in the treatment of associated capital gains
as ordinary income. The Fund may limit and/or manage its investments in passive
foreign investment companies or make an available election to minimize its tax
liability or maximize its return from these investments.

Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
certain foreign currency options, foreign currency forward contracts, foreign
currencies, or payables or receivables denominated in a foreign currency are
subject to Section 988 of the Code, which generally causes such gains and losses
to be treated as ordinary income and losses and may affect the amount, timing
and character of distributions to shareholders. Transactions in foreign
currencies that are not directly related to the Fund's investment in stock or
securities, including speculative currency positions could under future Treasury
regulations produce income not among the types of "qualifying income" from which
the Fund must derive at least 90% of its gross income for each taxable year. If
the net foreign exchange loss for a year treated as ordinary loss under Section
988 were to exceed the Fund's investment company taxable income computed without
regard to such loss the resulting overall ordinary loss for such year would not
be deductible by the Fund or its shareholders in future years.

The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
Investors may be entitled to claim U.S. foreign tax credits or deductions with
respect to foreign income taxes or certain other foreign taxes ("qualified
foreign taxes") paid by the Fund, subject to certain provisions and limitations
contained in the Code, if the Fund so elects. If more than 50% of the value of
the Fund's total assets at the close of any taxable year consists of stock or
securities of foreign corporations, the Fund may file an election with the
Internal Revenue Service pursuant to which shareholders of the Fund will be
required to (i) include in ordinary gross income (in addition to taxable
dividends and distributions actually received) their pro rata shares of
qualified foreign taxes paid by the Fund even though not actually received by
them, and (ii) treat such respective pro rata portions as foreign taxes paid by
them.

If the Fund makes this election, shareholders may then deduct such pro rata
portions of qualified foreign taxes in computing their taxable income, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of qualified foreign taxes paid by the Fund,
although such shareholders will be required to include their share of such taxes
in gross income. Shareholders who claim a foreign tax credit for such foreign
taxes may be required to treat a portion of dividends received from the Fund as
a separate category of income for purposes of computing the limitations on the
foreign


                                       30


tax credit. Tax-exempt shareholders will ordinarily not benefit from this
election. Each year (if any) that the Fund files the election described above,
its shareholders will be notified of the amount of (i) each shareholder's pro
rata share of qualified foreign taxes paid by the Fund and (ii) the portion of
Fund dividends which represents income from each foreign country. If the Fund
cannot or does not make this election, the Fund will deduct the foreign taxes it
pays in determining the amount it has available for distribution to
shareholders, and shareholders will not include these foreign taxes in their
income, nor will they be entitled to any tax deductions or credits with respect
to such taxes.

The amount of the Fund's net realized capital gains, if any, in any given year
will vary depending upon the Adviser's current investment strategy and whether
the Adviser believes it to be in the best interest of the Fund to dispose of
portfolio securities and/ or engage in options, futures or forward transactions
that will generate capital gains. At the time of an investor's purchase of Fund
shares, a portion of the purchase price is often attributable to realized or
unrealized appreciation in the Fund's portfolio or undistributed taxable income
of the Fund. Consequently, subsequent distributions on those shares from such
appreciation or income may be taxable to such investor even if the net asset
value of the investor's shares is, as a result of the distributions, reduced
below the investor's cost for such shares, and the distributions in reality
represent a return of a portion of the purchase price.

Upon a redemption or other disposition of shares of the Fund (including by
exercise of the exchange privilege) in a transaction that is treated as a sale
for tax purposes, a shareholder will ordinarily realize a taxable gain or loss
depending upon the amount of the proceeds and the investor's basis in his
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands. A sales charge paid in purchasing
shares of the Fund cannot be taken into account for purposes of determining gain
or loss on the redemption or exchange of such shares within 90 days after their
purchase to the extent shares of the Fund or another John Hancock Fund are
subsequently acquired without payment of a sales charge pursuant to the
reinvestment or exchange privilege. This disregarded charge will result in an
increase in the shareholder's tax basis in the shares subsequently acquired.
Also, any loss realized on a redemption or exchange will be disallowed to the
extent the shares disposed of are replaced with other shares of the Fund within
a period of 61 days beginning 30 days before and ending 30 days after the shares
are disposed of, such as pursuant to automatic dividend reinvestments. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.

Any loss realized upon the redemption of shares with a tax holding period of six
months or less will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain with respect to such
shares. Shareholders should consult their own tax advisers regarding their
particular circumstances to determine whether a disposition of Fund shares is
properly treated as a sale for tax purposes, as is assumed in the foregoing
discussion.

Although its present intention is to distribute, at least annually, all net
capital gain, if any, the Fund reserves the right to retain and reinvest all or
any portion of the excess, as computed for Federal income tax purposes, of net
long-term capital gain over net short-term capital loss in any year. The Fund
will not in any event distribute net capital gain realized in any year to the
extent that a capital loss is carried forward from prior years against such
gain. To the extent such excess was retained and not exhausted by the
carryforward of prior years' capital losses, it would be subject to Federal
income tax in the hands of the Fund. Upon proper designation of this amount by
the Fund, each shareholder would be treated for Federal income tax purposes as
if the Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain in his return for his taxable year in which the last day of the
Fund's taxable year falls, (b) be entitled either to a tax credit on his return
for, or to a refund of, his pro rata


                                       31


share of the taxes paid by the Fund, and (c) be entitled to increase the
adjusted tax basis for his shares in the Fund by the difference between his pro
rata share of such excess and his pro rata shares of such taxes.


For Federal income tax purposes, the Fund is permitted to carry forward a net
realized capital loss in any year to offset its net capital gains, if any,
during the eight years following the year of the loss. To the extent subsequent
net capital gains are offset by such losses, they would not result in Federal
income tax liability to the Fund and, as noted above, would not be distributed
as such to shareholders. The Fund has capital loss carryforwards available, to
the extent provided by regulations, to offset future net realized capital gains.
The Fund's carryforwards expire as follows: $1,042,558 expires in October 31,
2008 and $7,695,523 expires October 31, 2009.


The Fund is required to accrue income on any debt securities that have more than
a de minimis amount of original issue discount (or debt securities acquired at a
market discount, if the Fund elects to include market discount in income
currently) prior to the receipt of the corresponding cash payments. The mark to
market or constructive sale rules applicable to certain options, futures,
forward, short sales or other transactions may also require the Fund to
recognize income or gain without a concurrent receipt of cash. Additionally,
some countries restrict repatriation which may make it difficult or impossible
for the Fund to obtain cash corresponding to its earnings or assets in those
countries. However, the Fund must distribute to shareholders for each taxable
year substantially all of its net income and net capital gains, including such
income or gain, to qualify as a regulated investment company and avoid liability
for any federal income or excise tax. Therefore, the Fund may have to dispose of
its portfolio securities under disadvantageous circumstances to generate cash,
or borrow cash, to satisfy these distribution requirements.

A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangible property taxes, the
value of its assets is attributable to) certain U.S. Government obligations,
provided in some states that certain thresholds for holdings of such obligations
and/or reporting requirements are satisfied. The Fund will not seek to satisfy
any threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.

The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax in the case of non-exempt shareholders
who fail to furnish the Fund with their correct taxpayer identification number
and certain certifications required by the IRS or if the IRS or a broker
notifies the Fund that the number furnished by the shareholder is incorrect or
that the shareholder is subject to backup withholding as a result of failure to
report interest or dividend income. The Fund may refuse to accept an application
that does not contain any required taxpayer identification number or
certification that the number provided is correct. If the backup withholding
provisions are applicable, any such distributions and proceeds, whether taken in
cash or reinvested in shares, will be reduced by the amounts required to be
withheld. Any amounts withheld may be credited against a shareholder's U.S.
federal income tax liability. Investors should consult their tax advisors about
the applicability of the backup withholding provisions.

For purposes of the dividends received deduction available to corporations,
dividends received by the Fund, if any, from U.S. domestic corporations in
respect of any share of stock held by the


                                       32


Fund, for U.S. Federal income tax purposes, for at least 46 days (91 days in the
case of certain preferred stock) during a prescribed period extending before and
after each such dividend and distributed and properly designated by the Fund may
be treated as qualifying dividends. Because the Fund is not generally
anticipated to invest a significant portion of its assets in the stock of such
U.S. corporations, it is unlikely that a substantial portion of its
distributions will qualify for the dividends received deduction. Corporate
shareholders must meet the holding period requirements stated above with respect
to their shares of the Fund for each dividend in order to qualify for the
deduction and, if they have any debt that is deemed under the Code directly
attributable to such shares, may be denied a portion of the dividends received
deduction. The entire qualifying dividend, including the otherwise deductible
amount, will be included in determining alternative minimum tax liability, if
any. Additionally, any corporate shareholder should consult its tax adviser
regarding the possibility that its tax basis in its shares may be reduced, for
Federal income tax purposes, by reason of "extraordinary dividends" received
with respect to the shares and to the extent such basis would be reduced below
zero, that current recognition of income would be required.

Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.

Certain options, futures and forward foreign currency contracts undertaken by
the Fund may cause the Fund to recognize gains or losses from marking to market
even though its positions have not been sold or terminated and affect the
character as long-term or short-term (or, in the case of foreign currency
contracts, as ordinary income or loss) and timing of some capital gains and
losses realized by the Fund. Additionally, the Fund may be required to recognize
gain, but not loss, if an option, short sales or other transaction is treated as
a constructive sale of an appreciated financial position in the Fund's
portfolio. Also, certain of the Fund's losses on its transactions involving
options, futures or forward contracts and/or offsetting or successor portfolio
positions may be deferred rather than being taken into account currently in
calculating the Fund's taxable income or gains. Certain of these transactions
may also cause the Fund to dispose of investments sooner than would otherwise
have occurred. These transactions may therefore affect the amount, timing and
character of the Fund's distributions to shareholders. The Fund will take into
account the special tax rules (including consideration of available elections)
applicable to options, futures or forward contracts in order to minimize any
potential adverse tax consequences.

The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain types of
investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. Shareholders should consult their own tax
advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Fund in their particular
circumstances.

Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8, Form W-8BEN or
other authorized withholding certificate is on file and to backup withholding on
certain


                                       33


other payments from the Fund. Non-U.S. investors should consult their tax
advisers regarding such treatment and the application of foreign taxes to an
investment in the Fund.

The Fund is not subject to Massachusetts corporate excise or franchise taxes.
The Fund anticipates that, provided that the Fund qualifies as a regulated
investment company under the Code, it will also not be required to pay any
Massachusetts income tax.

CALCULATION OF PERFORMANCE


Because Class I shares are new, there is no performance to report. Class A
performance is currently disclosed in the Fund's prospectus for Class I shares.

As of October 31, 2001, the average annual total return for Class A shares of
the Fund for the one, five year periods and from the commencement of operations
January 3, 1994 were -37.99%, -6.68% and -3.92%, respectively.


The average annual total return before taxes is computed by finding the average
annual compounded rate of return over the 1 year, 5 year and 10-year periods, or
the period since the commencement of operations, that would equate the initial
amount invested to the ending redeemable value according to the following
formula:

P(1+T)^n = ERV

Where:

      P =         a hypothetical initial payment of $1,000.
      T =         average annual total return.
      n =         number of years.
      ERV =       ending redeemable value of a hypothetical $1,000
                  payment made at the beginning of the 1-year, 5-year
                  and 10-year periods (or fractional portion).

The Fund discloses average annual total returns after taxes for Class A shares
for the one, five and 10 year periods ended December 31, 2001 in the prospectus.
After tax returns are computed using the historical highest individual federal
marginal income-tax rates and do not reflect the impact of state and local
taxes. Actual after-tax returns depend on the investor's tax situation and may
differ from those shown. The after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement accounts.

The average annual total return (after taxes on distributions) is computed by
finding the average annual compounded rate of return over the 1-year, 5-year and
10-year periods, or the period since the commencement of operations, that would
equate the initial amount invested to the ending redeemable value according to
the following formula:

P(1+T)^n = ATV(D)

Where:

      P =         a hypothetical initial payment of $1,000.
      T =         average annual total return (after tax distributions).
      n =         number of years.
      ATV(D) =    ending value of a hypothetical $1,000 payment made at the
                  beginning of the 1-year, 5-year or 10-year periods or (or


                                       34


                  fractional portion) after taxes on fund distributions but not
                  after taxes on redemption.

The average annual total return (after taxes on distributions and redemption) is
computed by finding the average annual compounded rate of return over the
1-year, 5-year, and 10-year periods, or the period since the commencement
operations, that would equate the initial amount invested to the ending
redeemable value according to the following formula:

P(1+T)^n = ATV(DR)

Where:

      P =         a hypothetical initial payment of $1,000.
      T =         average annual total return (after tax distributions and
                  redemption).
      n =         number of years.
      ATV(DR) =   ending value of a hypothetical $1,000 payment made at the
                  beginning of the 1-year, 5-year or 10-year periods or (or
                  fractional portion), after taxes on fund distributions and
                  redemption.

Because each class has its own sales charge and fee structure, the classes have
different performance results. In the case of each class, these calculations
assume the maximum sales charge is included in the initial investment or the
CDSC is applied at the end of the period. These calculations also assume that
all dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. The "distribution rate" is determined by
annualizing the result of dividing the declared dividends of the Fund during the
period stated by the maximum offering price or net asset value at the end of the
period. Excluding the Fund's sales charge from the distribution rate produces a
higher rate.

In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period of time. Cumulative total returns may be quoted as a
percentage or as a dollar amount, and may be calculated for a single investment,
a series of investments, and/or a series of redemptions, over any period of
time. Total returns may be quoted with or without taking the Fund's sales charge
on Class A shares into account. Excluding the Fund's sales charge on Class A
shares from a total return calculation produces a higher total return figure.

From time to time, in reports and promotional literature, the Fund's total
return will be compared to indices of mutual funds such as Lipper Analytical
Services, Inc.'s "Lipper - Mutual Fund Performance Analysis," a monthly
publication which tracks net assets, total return, and yield on equity mutual
funds in the United States. Ibottson and Associates, CDA Weisenberger and F.C.
Towers are also used for comparison purposes, as well as the Russell and
Wilshire Indices.

Performance rankings and ratings reported periodically in, and excerpts from,
national financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK,
THE WALL STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S may
also be utilized. The Fund's promotional and sales literature may make reference
to the Fund's "beta". Beta is a reflection of the market related risk of the
Fund by showing how responsive the Fund is to the market.

The performance of the Fund is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of the Fund for
any period in the future. The performance of the Fund is a function of many
factors, including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of


                                       35


portfolio securities; sales and redemptions of shares of beneficial interest;
and changes in operating expenses are all examples of items that can increase or
decrease the Fund's performance.

BROKERAGE ALLOCATION

Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Sub-Adviser under the
supervision of and under the guidelines established by the Adviser, which
consists of officers and directors of the Adviser and officers and Trustees who
are interested persons of the Fund. Orders for purchases and sales of securities
are placed in a manner which, in the opinion of the officers of the Adviser,
will offer the best price and market for the execution of each such transaction.
Purchases from underwriters of portfolio securities may include a commission or
commissions paid by the issuer and transactions with dealers serving as market
maker reflect a "spread." Debt securities are generally traded on a net basis
through dealers acting for their own account as principals and not as brokers;
no brokerage commissions are payable on these transactions.

In the U.S. Government securities market, securities are generally traded on a
"net" basis with dealers acting as principal for their own account without a
stated commission, although the price of the security usually includes a profit
to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the U.S.

The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Conduct Rules of the National Association of Securities Dealers, Inc. and such
other policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund as a factor in the selection of broker-dealers to execute the
Fund's portfolio transactions.


To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser or Sub-Adviser,
and their value and expected contribution to the performance of the Fund. It is
not possible to place a dollar value on information and services to be received
from brokers and dealers, since it is only supplementary to the research efforts
of the Adviser or Sub-Adviser. The receipt of research information is not
expected to reduce significantly the expenses of the Adviser or Sub-Adviser. The
research information and statistical assistance furnished by brokers and dealers
may benefit the Life Company or other advisory clients of the Adviser or
Sub-Adviser, and, conversely, brokerage commissions and spreads paid by other
advisory clients of the Adviser or Sub-Adviser may result in research
information and statistical assistance beneficial to the Fund. The Fund will
make no commitment to allocate portfolio transactions upon any prescribed basis.
While the Adviser and Sub-Adviser will be primarily responsible for the
allocation of the Fund's brokerage business, their policies and practices in
this regard must be consistent with the foregoing and will at all times be
subject to review by the Trustees. For the years ending October 31, 1999, 2000
and 2001, the Fund paid negotiated brokerage commissions of $101,052, $223,172
and $160,338, respectively.



                                       36


As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay a broker which provides brokerage and research services to the Fund an
amount of disclosed commission in excess of the commission which another broker
would have charged for effecting that transaction. This practice is subject to a
good faith determination by the Trustees that such price is reasonable in light
of the services provided and to such policies as the Trustees may adopt from
time to time. During the fiscal year ended October 31, 2001, the Fund paid
$6,471 to compensate brokers for research services such as industry, economic
and company reviews and evaluations of the securities.

The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of Signator Investors, Inc., a broker-dealer (until January 1, 1999,
John Hancock Distributors, Inc.) ("Signator" or "Affiliated Broker").

Allianz AG, the parent of Nicholas Applegate Capital Management ("NACM"), has
several affiliates engaged in the brokerage business: Bayerische Hypo-und
Vereinsbank AG, HPV, HVB Capital Markets; Credit Lyonnais SA; Dresdner, Dresdner
Kleinwort Benson, Dresdner Kleinwort Wasserstein; Deutsche Bank AG, Deutsche
Bank Alex Brown, Deutsche Morgan Grenfell; Grantchester Securities Inc; IKB
Deutsche Industriebank AG; Munchener Ruckversicherungs-Gesellschaft AG, Munich
Re; National Discount Brokers Group, Inc., NDB Capital Markets; UniCredito
Italiano S.p.A., UniCredit Banco Mobiliare S.p.A.; US Allianz Securities, Inc.;
Williams Capital Group. (all "Affiliated Brokers"). Pursuant to procedures
determined by the Trustees and consistent with the above policy of obtaining
best net results, the Fund may execute portfolio transactions with or through
Affiliated Brokers. For the period from December 14, 2000 through October 31,
2001, the Fund paid $3,616 to Affiliated Brokers of NACM. During the fiscal year
ended October 31, 2001, this amounted to approximately 2.26% of the aggregate
brokerage commissions paid by the Fund for the transactions involving
approximately 1.79% of the aggregate dollar amount of transactions for which
the Fund paid brokerage commissions.

Credit Agricole, The parent of Indocam Investment Services ("IIIS"), the Fund's
subadviser until December 14, 2001, has several affiliates engaged in the
brokerage business in Europe and Asia: Credit Agricole Indosuez Cheuvreux; CPR
Action (ex-Schelcher Prince Cheuvreux de Virieu International Ltd, London;
Cheuvreux de Virieu, Nordic AB, Stockholm, Cheuvreux de Virieu, Espana, Madrid,
Credit Agricole Indosuez Cheuvreux Deutschland GMBH, Frankfourt/ Main; Caboto
Sim in Italy; Carr Securities; Carr Futures SNC. (Paris) and Carr Futures PTE,
Singapore (all "Affiliated Brokers"). Pursuant to procedures determined by the
Trustees and consistent with the above policy of obtaining best net results, the
Fund may execute portfolio transactions with or through Affiliated Brokers. For
the fiscal years ended October 31, 1999, 2000 and for the period from November
1, 2000 through October 12, 2000, the Fund paid $0, $0 and $1,899, respectively,
for portfolio transactions with Affiliated Brokers of IIS. During the fiscal
year ended October 31, 2001, this amounted to approximately xx.xx% of the
aggregate brokerage commissions paid by the Fund for transactions involving
approximately 0.61% of the aggregate dollar amount of transactions for when the
Fund paid brokerage commissions.

Affiliated Brokers may act as broker for the Fund on exchange transactions,
subject, however, to the general policy of the Fund set forth above and the
procedures adopted by the Trustees pursuant to the Investment Company Act.
Commissions paid to an Affiliated Broker must be at least as favorable as those
which the Trustees believe to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold. A transaction would not be placed with an Affiliated Broker
if the Fund would have to pay a commission rate less favorable than the
Affiliated Broker's contemporaneous charges for comparable transactions for its
other most favored, but unaffiliated, customers except for accounts for which
the Affiliated Broker acts as clearing broker for another brokerage firm, and
any customers of the Affiliated Broker not comparable to the Fund as determined
by a majority of the Trustees who are not interested persons (as defined in the
Investment Company Act) of the Fund, the Adviser or the Affiliated Broker.
Because the Adviser, which is affiliated with the Affiliated Broker, has, as an
investment adviser to the Fund, the obligation to provide investment management
services, which includes elements of research and related investment skills such
research and related skills will not be used by the Affiliated Broker as a basis
for negotiating commissions at a rate higher than that determined in accordance
with the above criteria.

Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Fund. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Fund. Because of
this, client accounts in a particular style may sometimes not sell or acquire
securities as quickly or at the same prices as they might if each were managed
and traded individually.

For purchases of equity securities, when a complete order is not filled, a
partial allocation will be made to each account pro rata based on the order
size. For high demand issues (for example, initial public offerings), shares
will be allocated pro rata by account size as well as on the basis of account
objective, account size ( a small account's allocation may be increased to
provide it with a meaningful position), and the account's other holdings. In
addition, an account's allocation may be increased if that account's portfolio
manager was responsible for generating the investment idea or the portfolio
manager intends to buy more shares in the secondary market. For fixed income
accounts, generally securities will be allocated when appropriate among

                                       37


accounts based on account size, except if the accounts have different objectives
or if an account is too small to get a meaningful allocation. For new issues,
when a complete order is not filled, a partial allocation will be made to each
account pro rata based on the order size. However, if a partial allocation is
too small to be meaningful, it may be reallocated based on such factors as
account objectives, duration benchmarks and credit and sector exposure. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser or Sub-Adviser may aggregate
securities to be sold or purchased for the Fund with those to be sold or
purchased for other clients managed by it in order to obtain best execution.

TRANSFER AGENT SERVICES

John Hancock Signature Services, Inc., 1 John Hancock Way, Suite 1001, Boston,
MA 02217-1001, a wholly-owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays Signature
Services a fee of 0.05% of its average daily net assets attributable to Class I
shares plus certain out-of-pocket expenses.

CUSTODY OF PORTFOLIO

Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and The Bank of New York, One Wall Street, New York, New York
10286. Under the custodian agreement The Bank of New York is performing custody,
Foreign Custody Manager and fund accounting services.

INDEPENDENT AUDITORS


The independent auditors of the Fund are PricewaterhouseCoopers LLP, 160 Federal
Street, Boston, Massachusetts 02110. PricewaterhouseCoopers LLP audits and
renders an opinion on the Fund's annual financial statements and reviews the
Fund's annual Federal income tax return.



                                       38


APPENDIX A

MORE ABOUT RISK

A fund's risk profile is largely defined by the fund's primary securities and
investment practices. You may find the most concise description of the fund's
risk profile in the prospectus.

A fund is permitted to utilize -- within limits established by the trustees --
certain other securities and investment practices that have higher risks and
opportunities associated with them. To the extent that the Fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following pages are brief definitions of
certain associated risks with them with examples of related securities and
investment practices included in brackets. See the "Investment Objective and
Policies" and "Investment Restrictions" sections of this Statement of Additional
Information for a description of this Fund's investment policies. The Fund
follows certain policies that may reduce these risks.

As with any mutual fund, there is no guarantee that the Fund will earn income or
show a positive return over any period of time -- days, months or years.

TYPES OF INVESTMENT RISK

Correlation risk The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). (e.g., short sales, currency
contracts, financial futures and options; securities and index options).

Credit risk The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. (e.g., repurchase agreements, securities lending, foreign debt
securities, non-investment-grade debt securities, asset-backed securities,
mortgage-backed securities, participation interests, financial futures and
options; securities and index options, structured securities).

Currency risk The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency denominated investments, and may widen any losses. (e.g., currency
trading, foreign debt securities, currency contracts, financial futures and
options; securities and index options).

Extension risk The risk that an unexpected rise in interest rates will extend
the life of a mortgage-backed security beyond the expected prepayment time,
typically reducing the security's value.(e.g., mortgage-backed securities,
structured securities).

Information risk The risk that key information about a security or market is
inaccurate or unavailable.(e.g., non-investment-grade debt securities).

Interest rate risk The risk of market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.(e.g.,
foreign debt securities, non-investment-grade debt securities, asset-backed
securities, mortgage-backed securities, participation interests, financial
future and options; securities and index options, structured securities).

Leverage risk Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value. (e.g.,
when-issued securities and forward


                                       A-1


commitments, currency contracts, financial futures and options; securities and
index options, structured securities).

o     Hedged When a derivative (a security whose value is based on another
      security or index) is used as a hedge against an opposite position that
      the fund also holds, any loss generated by the derivative should be
      substantially offset by gains on the hedged investment, and vice versa.
      While hedging can reduce or eliminate losses, it can also reduce or
      eliminate gains.

o     Speculative To the extent that a derivative is not used as a hedge, the
      fund is directly exposed to the risks of that derivative. Gains or losses
      from speculative positions in a derivative may be substantially greater
      than the derivative's original cost.

Liquidity risk The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead, or forego an investment
opportunity, any of which could have a negative effect on fund management or
performance. (e.g., short sales, non-investment-grade debt securities,
restricted and illiquid securities, mortgage-backed securities, participation
interests, currency contracts, financial futures and options; securities and
index options, structured securities).

Management risk The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.

Market risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than it was worth at an earlier time. Market risk may affect a
single issuer, industry, sector of the economy or the market as a whole. Common
to all stocks and bonds and the mutual funds that invest in them. (e.g., short
sales, short-term trading, when-issued securities and forward commitments,
foreign debt securities, non-investment-grade debt securities, restricted and
illiquid securities, financial futures and options; securities and index
options, structured securities).

Natural event risk The risk of losses attributable to natural disasters, crop
failures and similar events.

Opportunity risk The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments. (e.g., short sales, when-issued securities and forward commitments,
currency contracts, financial futures and options; securities and index
options).

Political risk The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and war.
(e.g., foreign debt securities).

Prepayment risk The risk that unanticipated prepayments may occur during periods
of falling interest rates, reducing the value of mortgage-backed securities.
(e.g., mortgage-backed securities, structured securities).

Valuation risk The risk that a fund has valued certain of its securities at a
higher price than it can sell them for. (e.g., non-investment-grade debt
securities, restricted and illiquid securities, participation interests,
structured securities)


                                       A-2


APPENDIX B

DESCRIPTION OF BOND RATINGS

Standard & Poor's Bond Ratings

      BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

      AAA Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

      AA Debt rated AA has a very strong capacity to pay interest and repay
principal, and differs from the highest rated issues only in small degree.

      A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

      To provide more detailed indications of credit quality, the ratings AA to
BBB may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.

      A provisional rating, indicated by "p" following a rating, is sometimes
used by Standard & Poor's. It assumes the successful completion of the project
being financed by the issuance of the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion.

Moody's Bond Ratings

      Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Generally speaking, the safety
of obligations of this class is so absolute that with the occasional exception
of oversupply in a few specific instances, characteristically, their market
value is affected solely by money market fluctuations.

      Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
The market value of Aa bonds is virtually immune to all but money market
influences, with the occasional exception of oversupply in a few specific
instances.


                                       B-1


      A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

      Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

      Rating symbols may include numerical modifiers 1, 2 or 3. The numerical
modifier 1 indicates that the security ranks at the high end, 2 in the
mid-range, and 3 nearer the low end, of the generic category. These modifiers of
rating symbols Aa, A and Baa are to give investors a more precise indication of
relative debt quality in each of the historically defined categories.

      Conditional ratings, indicated by "Con," are sometimes given when the
security for the bond depends upon the completion of some act or the fulfillment
of some condition. Such bonds, are given a conditional rating that denotes their
probable credit status upon completion of that act or fulfillment of that
condition.


                                       B-2



FINANCIAL STATEMENTS

The financial statements listed below are included in the Fund's 2001 Annual
Report to Shareholder's for the year ended October 31, 2001 (filed
electronically on December 27, 2001, accession number 0000928816-01-500747 and
are included in and incorporated by reference into Part B of the Registration
Statement for John Hancock International Fund (file no. 811-4630 and 33-4559).

John Hancock Investment Trust III
      John Hancock International Fund

Statement of Assets and Liabilities as of October 31, 2001.
      Statement of Operations for year ended October 31, 2001.
      Statement of Changes in Net Assets for the two years ended October 31,
      2001.
      Financial Highlights.
      Notes to Financial Statements.
      Schedule of Investments as of October 31, 2001.
      Report of Independent Auditors.



                                       F-1







                        JOHN HANCOCK MID CAP GROWTH FUND

                                 Class I Shares
                       Statement of Additional Information

                                  March 1, 2002

This Statement of Additional Information provides information about John Hancock
Mid Cap Growth Fund (the "Fund"), in addition to the information that is
contained in the combined Equity Funds' current Prospectus (the "Prospectus").
The Fund is a diversified series of John Hancock Investment Trust III (the
"Trust).

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which may be obtained free of
charge by writing or telephoning:

                      John Hancock Signature Services, Inc.
                         1 John Hancock Way, Suite 1001
                              Boston MA 02217-1001
                                 1-888-972-8696

                                TABLE OF CONTENTS

                                                                            Page


Organization of the Fund .............................................        2
Investment Objective and Policies ....................................        2
Investment Restrictions ..............................................       11
Those Responsible for Management .....................................       14
Investment Advisory and Other Services ...............................       21
Distribution Contracts ...............................................       23
Sales Compensation ...................................................       24
Net Asset Value ......................................................       24
Special Redemptions ..................................................       25
Additional Services and Programs .....................................       25
Purchases and Redemptions through Third Parties ......................       25
Description of the Fund's Shares .....................................       26
Tax Status ...........................................................       27
Calculation of Performance ...........................................       31
Brokerage Allocation .................................................       33
Transfer Agent  Services .............................................       35
Custody of Portfolio .................................................       35
Independent Auditors .................................................       35
Appendix A- Description of Investment Risk ...........................      A-1
Appendix B-Description of Bond Ratings ...............................      B-1
Financial Statements .................................................      F-1



                                       1


ORGANIZATION OF THE FUND

The Fund is a series of the Trust, an open-end investment management company
organized as a Massachusetts business trust on March 31, 1986 under the laws of
The Commonwealth of Massachusetts. Prior to June 1, 1999, the Fund was called
John Hancock Special Opportunities Fund.


John Hancock Advisers, LLC (prior to February 1, 2002, John Hancock Advisers,
Inc.) (the "Adviser") is the Fund's investment adviser. The Adviser is an
indirect, wholly-owned subsidiary of John Hancock Life Insurance Company
(formerly John Hancock Mutual Life Insurance Company)(the "Life Company"), a
Massachusetts life insurance company chartered in 1862, with national
headquarters at John Hancock Place, Boston, Massachusetts. The Life Company is
wholly owned by John Hancock Financial Services, Inc., a Delaware corporation
organized in February, 2000.


INVESTMENT OBJECTIVE AND POLICIES

The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. Appendix A contains further
information describing investment risks. The investment objective of the Fund is
non-fundamental and may be changed by a vote of the Trustees without shareholder
approval. There is no assurance that the Fund will achieve its investment
objective.

The Fund's investment objective is long-term capital appreciation. To pursue
this goal, the Fund normally invests at least 80% of Net Assets in stocks of
medium-capitalization companies-companies in the capitalization range of the
Russell MidCap Growth Index.

With respect to the Fund's investment policy of investing at least 80% of its
Assets in medium capitalization companies, "Assets" is defined as net assets
plus the amount of any borrowings for investment purposes. In addition, the Fund
will notify shareholders at least 60 days prior to any change in this policy.

In managing the portfolio, the manager seeks to identify promising sectors for
investment. The manager considers broad economic trends, demographic factors,
technological changes, consolidation trends and legislative initiatives.

The manager conducts fundamental financial analysis to identify companies with
above average earnings growth. The manager looks for companies with growth
stemming from a combination of gains in market share and increasing operating
efficiency. Before investing, the manager identifies a specific catalyst for
growth, such as a new product, business reorganization or merger. The management
team generally maintains personal contact with the senior management of the
companies the fund invests in.

The fund may not invest more than 5% of assets in any one security (other than
securities of the U.S. government, its agencies or instrumentalities).

The fund may invest up to 10% of assets in foreign securities. It may also use
certain derivatives (investments whose value is based on indices or currencies).

Under normal circumstances, the fund may not invest more than 10% of total
assets in cash and/or cash equivalents (except cash segregated in relation to
futures, forward and option contracts). Under normal circumstances, the fund
will not invest in any other fixed income securities. However, in abnormal
circumstances, the fund may temporarily invest in U.S.


                                       2


government securities and U.S. government agency securities with maturities of
up to three years, and may also invest more than 10% of total assets in cash
and/or cash equivalents (including U.S. government securities maturing in 90
days or less). The equity securities in which the Fund invests consist primarily
of common stocks but may also include preferred stocks and warrants.

Government Securities. Under normal circumstances the fund will not invest in
any fixed income securities except cash equivalents as noted above. However, in
abnormal circumstances the fund may temporarily invest in US Government
securities and US Government agency securities with maturities of up to three
years, and may also invest more than 10% of total assets in cash and/or cash
equivalents (including US Government securities maturing in 90 days or less).
Certain U.S. Government securities, including U.S. Treasury bills, notes and
bonds, and Government National Mortgage Association certificates ("Ginnie
Maes"), are supported by the full faith and credit of the United States. Certain
other U.S. Government securities, issued or guaranteed by Federal agencies or
government sponsored enterprises, are not supported by the full faith and credit
of the United States, but may be supported by the right of the issuer to borrow
from the U.S. Treasury. These securities include obligations of the Federal Home
Loan Mortgage Corporation ("Freddie Macs"), and obligations supported by the
credit of the instrumentality, such as Federal National Mortgage Association
Bonds ("Fannie Maes"). No assurance can be given that the U.S. Government will
provide financial support to such Federal agencies, authorities,
instrumentalities and government sponsored enterprises in the future.

Ginnie Maes, Freddie Macs and Fannie Maes are mortgage-backed securities which
provide monthly payments which are, in effect, a "pass-through" of the monthly
interest and principal payments (including any prepayments) made the by
individual borrowers on the pooled mortgage loans. Collateralized mortgage
obligations ("CMOs") in which the Fund may invest are securities issued by a
U.S. Government instrumentality that are collateralized by a portfolio of
mortgages or mortgage-backed securities. Mortgage-backed securities may be less
effective than traditional debt obligations of similar maturity at maintaining
yields during periods of declining interest rates.

Ratings as Investment Criteria. In general, the ratings of Moody's and S&P
represent the opinions of these agencies as to the quality of the securities
which they rate. It should be emphasized, however, that ratings are relative and
subjective and are not absolute standards of quality. These ratings will be used
by the Fund as initial criteria for the selection of debt securities. Among the
factors which will be considered are the long-term ability of the issuer to pay
principal and interest and general economic trends. Appendix B contains further
information concerning the ratings of Moody's and S&P and their significance.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither of these events will require the sale of the securities by the
Fund.

Common stocks. Common stocks are shares of a corporation or other entity that
entitle the holder to a pro rata share of the profits of the corporation, if
any, without preference over any other shareholder or class of shareholders,
including holders of such entity's preferred stock and other senior equity.
Ownership of common stock usually carries with it the right to vote and,
frequently, an exclusive right to do so. Common stocks have the potential to
outperform fixed-income securities over the long term. Common stocks provide the
most potential for growth, yet are the more volatile of the two asset classes.

Preferred stocks. Preferred stock generally pays dividends in cash (or
additional shares of preferred stock) at a defined rate but, unlike interest
payments on debt securities, preferred stock dividends are payable only if
declared by the issuer's board of directors. Dividends on preferred stock may be
cumulative, meaning that, in the event the issuer fails to make one or more

                                       3


dividend payments on the preferred stock, no dividends may be paid on the
issuer's common stock until all unpaid preferred stock dividends have been paid.
Preferred stock also may be subject to optional or mandatory redemption
provisions.

Investment in Foreign Securities. The Fund may invest up to 10% of total assets
in the securities of foreign issuers, including securities in the form of
sponsored or unsponsored American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs"), Global Depository Receipts (GDRs), convertible
preferred stocks, preferred stocks and warrants or other securities convertible
into securities of foreign issuers. ADRs are receipts typically issued by a U.S.
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. EDRs are receipts issued in Europe which evidence a
similar ownership arrangement. Issuers of unsponsored ADRs are not contractually
obligated to disclose material information, including financial information, in
the United States. Generally, ADRs are designed for use in the United States
securities markets and EDRs are designed for use in European securities markets.
Issuers of unsponsored ADRs are not contractually obligated to disclose material
information including financial information in the United States.

Foreign Currency Transactions. The Fund's foreign currency transactions may be
conducted on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market.

The Fund may also enter into forward foreign currency exchange contracts to
hedge against fluctuations in currency exchange rates affecting a particular
transaction or portfolio position. Forward contracts are agreements to purchase
or sell a specified currency at a specified future date and price set at the
time of the contract. Transaction hedging is the purchase or sale of forward
foreign currency contracts with respect to specific receivables or payables of
the Fund accruing in connection with the purchase and sale of its portfolio
securities quoted or denominated in the same or related foreign currencies.
Portfolio hedging is the use of forward foreign currency contracts to offset
portfolio security positions denominated or quoted in the same or related
foreign currencies. The Fund may elect to hedge less than all of its foreign
portfolio positions as deemed appropriate by the Adviser.

If the Fund purchases a forward contract, the Fund will segregate cash or liquid
securities in a separate account of the Fund in an amount equal to the value of
the Fund's total assets committed to the consummation of such forward contract.
The assets in the segregated account will be valued at market daily and if the
value of the securities in the separate account declines, additional cash or
securities will be placed in the account so that the value of the account will
be equal the amount of the Fund's commitment with respect to such contracts.

Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it may
not be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates.

Risks of Foreign Securities. Investments in foreign securities may involve a
greater degree of risk than those in domestic securities. There is generally
less publicly available information about foreign companies in the form of
reports and ratings similar to those that are published about issuers in the
United States. Also, foreign issuers are generally not subject to uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to United States issuers.


                                       4


Because foreign securities may be denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will affect the Fund's net
asset value, the value of dividends and interest earned, gains and losses
realized on the sale of securities, and any net investment income and gains that
the Fund distributes to shareholders. Securities transactions undertaken in some
foreign markets may not be settled promptly, so that the Fund's investments on
foreign exchanges may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement.

Foreign securities will be purchased in the best available market, whether
through over-the-counter markets or exchanges located in the countries where
principal offices of the issuers are located. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.

With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States' economy in terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.

The dividends, interest and in some cases, capital gains payable on certain of
the Fund's foreign portfolio securities may be subject to foreign withholding or
other foreign taxes, thus reducing the net amount of income or gains available
for distribution to the Fund's shareholders.

Repurchase Agreements. In a repurchase agreement the Fund buys a security for a
relatively short period (usually not more than 7 days) subject to the obligation
to sell it back to the issuer at a fixed time and price, plus accrued interest.
The Fund will enter into repurchase agreements only with member banks of the
Federal Reserve System and with "primary dealers" in U.S. Government securities.
The Adviser will continuously monitor the creditworthiness of the parties with
whom the Fund enters into repurchase agreements.

The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period in which the Fund seeks
to enforce its rights thereto, possible subnormal levels of income decline in
value of the underlying securities or lack of access to income during this
period as well as the expense of enforcing its rights.

Reverse Repurchase Agreements. The Fund may also enter into reverse repurchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank or securities firm with an agreement that the Fund will buy
back the securities at a fixed future date at a fixed price plus an agreed
amount of "interest" which may be reflected in the repurchase price. Reverse
repurchase agreements are considered to be borrowings by the Fund. The Fund will
use proceeds obtained from the sale of securities pursuant to reverse repurchase
agreements to purchase other investments. The use of borrowed funds to make
investments is a practice known


                                       5


as "leverage," which is considered speculative. Use of reverse repurchase
agreements is an investment technique that is intended to increase income. Thus,
the Fund will enter into a reverse repurchase agreement only when the Adviser
determines that the interest income to be earned from the investment of the
proceeds is greater than the interest expense of the transaction. However, there
is a risk that interest expense will nevertheless exceed the income earned.
Reverse repurchase agreements involve the risk that the market value of
securities purchased by the Fund with proceeds of the transaction may decline
below the repurchase price of the securities sold by the Fund which it is
obligated to repurchase. The Fund will also continue to be subject to the risk
of a decline in the market value of the securities sold under the agreements
because it will reacquire those securities upon effecting their repurchase. To
minimize various risks associated with reverse repurchase agreements, the Fund
will establish and maintain a separate account consisting of liquid securities,
of any type or maturity, in an amount at least equal to the repurchase prices of
the securities (plus any accrued interest thereon) under such agreements. In
addition, the Fund will not borrow money or enter into reverse repurchase
agreements except from banks as a temporary measure for extraordinary or
emergency purposes, except pursuant to reverse repurchase agreements, in amounts
not to exceed 33 1/3% of the Fund's total assets (including the amount borrowed)
taken at market value. The Fund will enter into reverse repurchase agreements
only with selected registered broker/dealers or with federally insured banks
which are approved in advance as being creditworthy by the Trustees. Under
procedures established by the Trustees, the Adviser will monitor the
creditworthiness of the firms involved.

Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 15% of its net
assets in illiquid investments. If the Trustees determine, based upon a
continuing review of the trading markets for specific Section 4(2) paper or Rule
144A securities, that they are liquid, they will not be subject to the 15% limit
on illiquid investments. The Trustees have adopted guidelines and delegated to
the Adviser the daily function of determining and monitoring the liquidity of
restricted securities. The Trustees, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Trustees will
carefully monitor the Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund if qualified institutional buyers become for a
time uninterested in purchasing these restricted securities.

Options on Securities Indices. The Fund may purchase and write (sell) call and
put options on any securities index based on securities in which it may invest.
These options may be listed on national domestic securities exchanges or foreign
securities exchanges or traded in the over-the-counter market. The Fund may
write covered put and call options and purchase put and call options for any
non-speculative purpose. These include using options as a substitute for the
purchase or sale of securities or to protect against declines in the value of
portfolio securities and against increases in the cost of securities to be
acquired.

Writing Covered Options. A call option on a securities index written by the Fund
obligates the Fund to make a cash payment reflecting any increase in the index
above a specified level to the holder of the option if the option is exercised
at any time before the expiration date. A put option on a securities index
written by the Fund obligates the Fund to make a cash payment reflecting any
decrease in the index below a specified level from the option holder if the
option is exercised at any time before the expiration date. Options on
securities indices do not involve the actual purchase or sale of securities. In
addition, securities index options are designed to reflect price fluctuations in
a group of securities or segment of the securities market rather than price
fluctuations in a single security. Writing covered call options may deprive the
Fund of the


                                       6


opportunity to profit from an increase in the market price of the securities in
its portfolio. Writing covered put options may deprive the Fund of the
opportunity to profit from a decrease in the market price of the securities to
be acquired for its portfolio.

All call and put options written by the Fund are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities,
either of which may be quoted or denominated in any currency, in a segregated
account with a value at least equal to the Fund's obligation under the option,
(ii) entering into an offsetting forward commitment and/or (iii) purchasing an
offsetting option or any other option which, by virtue of its exercise price or
otherwise, reduces the Fund's net exposure on its written option position. The
Fund may also cover call options on a securities index by owning securities
whose price changes are expected to be similar to those of the underlying index.

The Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."

Purchasing Options. The Fund would normally purchase index call options in
anticipation of an increase, or index put options in anticipation of a decrease
("protective puts"), in the market value of securities of the type in which it
may invest. The Fund may also sell call and put options to close out its
purchased options.

The purchase of an index call option would entitle the Fund, in return for the
premium paid, to receive a cash payment reflecting any increase in the index
above a specified level upon exercising the option during the option period. The
Fund would ordinarily realize a gain on the purchase of a call option if the
amount of this cash payment exceeded the premium paid and transaction costs;
otherwise the Fund would realize either no gain or a loss on the purchase of the
call option.

The purchase of an index put option would entitle the Fund, in exchange for the
premium paid, to receive a cash payment reflecting any decrease in the index
below a specified level upon exercising the option during the option period. The
purchase of protective puts is designed to offset or hedge against a decline in
the market value of the Fund's portfolio securities. The Fund would ordinarily
realize a gain if, during the option period, the level of the index decreased
below the exercise price sufficiently to cover the premium and transaction
costs; otherwise the Fund would realize either no gain or a loss on the purchase
of the put option. Gains and losses on the purchase of put options may be offset
by countervailing changes in the value of the Fund's portfolio securities.

The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.

Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction


                                       7


with respect to covered options it has written, the Fund will not be able to
dispose of assets held in a segregated account until the options expire or are
exercised. Similarly, if the Fund is unable to effect a closing sale transaction
with respect to options it has purchased, it would have to exercise the options
in order to realize any profit.

Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.

The Fund's ability to terminate over-the-counter options is more limited than
with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.

The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities markets.

Futures Contracts and Options on Futures Contracts. The Fund may purchase and
sell various kinds of futures contracts on securities indices, and purchase and
write call and put options on these futures contracts, for any non-speculative
purpose. The Fund may also enter into closing purchase and sale transactions
with respect to any of these contracts and options. All futures contracts
entered into by the Fund are traded on U.S. or foreign exchanges or boards of
trade that are licensed, regulated or approved by the Commodity Futures Trading
Commission ("CFTC").

Futures Contracts. An index futures contract may generally be described as an
agreement between two parties to deliver a final cash settlement price based on
an increase or decrease in the level of the index above or below a specified
level. Unlike some futures contracts, index futures do not involve the physical
delivery of securities at the end of trading in the contract.

Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. A clearing corporation associated with the exchange on which futures
contracts are traded guarantees that, if still open, the contract will be
performed on the settlement date.

Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire. When
securities prices are falling, the Fund can seek to offset a decline in the
value of its current portfolio securities through the sale of futures contracts.
When securities prices are rising, the Fund, through the purchase of futures
contracts, can attempt to secure better rates or prices than might later be
available in the market when it effects anticipated purchases.


                                       8


The Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated decline
in market prices that would adversely affect the value of the Fund's portfolio
securities. Such futures contracts may be based on indices that include
securities held by the Fund or securities with characteristics similar to those
of the Fund's portfolio securities. Although under some circumstances prices of
securities in the Fund's portfolio may be more or less volatile than prices of
such futures contracts, the Adviser will attempt to estimate the extent of this
volatility difference based on historical patterns and compensate for any
differential by having the Fund enter into a greater or lesser number of futures
contracts or by attempting to achieve only a partial hedge against price changes
affecting the Fund's portfolio securities.

When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.

On other occasions, the Fund may take a "long" position by purchasing index
futures contracts. This would be done, for example, when the Fund anticipates
the subsequent purchase of particular securities when it has the necessary cash,
but expects the prices rates then available in the applicable market to be less
favorable than prices that are currently available. The Fund may also purchase
index futures contracts as a substitute for transactions in securities. For
example, the Fund may engage in these substitution transactions in order to
remain fully invested in the stock market while maintaining a sufficient cash
position to meet the Fund's liquidity needs.

Options on Futures Contracts. The Fund may purchase and write options on index
futures for the same purposes as its transactions in index futures contracts.
The purchase of put and call options on index futures contracts will give the
Fund the right (but not the obligation) for a specified price to sell or to
purchase, respectively, the underlying futures contract at any time during the
option period. As the purchaser of an option on a futures contract, the Fund
obtains the benefit of the futures position if prices move in a favorable
direction but limits its risk of loss in the event of an unfavorable price
movement to the loss of the premium and transaction costs.

The writing of a call option on an index futures contract generates a premium
which may partially offset a decline in the value of the Fund's assets. By
writing a call option, the Fund becomes obligated, in exchange for the premium
(upon exercise of the option) to sell a futures contract if the option is
exercised, which may have a value higher than the exercise price. Conversely,
the writing of a put option on an index futures contract generates a premium
which may partially offset an increase in the price of securities that the Fund
intends to purchase. However, the Fund becomes obligated (upon exercise of the
option) to purchase a futures contract if the option is exercised, which may
have a value lower than the exercise price. The loss incurred by the Fund in
writing options on index futures is potentially unlimited and may exceed the
amount of the premium received.

The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.

Other Considerations. The Fund will engage in index futures and related options
transactions for bona fide hedging or other non-speculative purposes. To the
extent that the Fund is using futures and related options for hedging purposes,
futures contracts will be sold to protect against a decline in the price of
securities that the Fund owns or futures contracts will be purchased to protect
the Fund against an increase in the price of securities it intends to purchase.
The Fund


                                       9


will determine that the price fluctuations in the futures contracts and options
on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or securities or instruments which
it expects to purchase. As evidence of its hedging intent, the Fund expects that
on 75% or more of the occasions on which it takes a long index futures or option
position (involving the purchase of futures contracts), the Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities in the cash market at the time when the futures or option
position is closed out. However, in particular cases, when it is economically
advantageous for the Fund to do so, a long futures position may be terminated or
an option may expire without the corresponding purchase of securities.

To the extent that the Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. The Fund will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), for maintaining its qualifications as a
regulated investment company for federal income tax purposes.

Transactions in index futures contracts and options on index futures involve
brokerage costs, require margin deposits and, in the case of contracts and
options that are economically equivalent to the purchase of securities, require
the Fund to establish a segregated account consisting of cash or liquid
securities in an amount equal to the underlying value of such contracts and
options.

While transactions in index futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in securities prices may result in a poorer
overall performance for the Fund than if it had not entered into any futures
contracts or options transactions.

Perfect correlation between the Fund's index futures positions and portfolio
positions will be impossible to achieve. In the event of an imperfect
correlation between a futures position and a portfolio position which is
intended to be protected, the desired protection may not be obtained and the
Fund may be exposed to risk of loss.

Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.

Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities and money market
funds. When the Fund lends portfolio securities, there is a risk that the
borrower may fail to return the securities involved in the transaction. As a
result, the Fund may incur a loss or, in the event of the borrower's bankruptcy,
the Fund may be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Fund not to lend portfolio securities having a total
value exceeding 33 1/3% of its total assets.

Rights and Warrants. The Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a


                                       10


predetermined price, subject to the Fund's Investment Restrictions. Generally,
warrants and stock purchase rights do not carry with them the right to receive
dividends or exercise voting rights with respect to the underlying securities,
and they do not represent any rights in the assets of the issuer. As a result,
an investment in warrants and rights may be considered to entail greater
investment risk than certain other types of investments. In addition, the value
of warrants and rights does not necessarily change with the value of the
underlying securities, and they cease to have value if they are not exercised on
or prior to their expiration date. Investment in warrants and rights increases
the potential profit or loss to be realized from the investment of a given
amount of the Fund's assets as compared with investing the same amount in the
underlying stock.

Short Sales.  The Fund may not make short sales.

Forward Commitment and When-Issued Securities. The Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.

When the Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.

On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, the Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.

Short-Term Trading and Portfolio Turnover. Short-term trading means the purchase
and subsequent sale of a security after it has been held for a relatively brief
period of time. The Fund may engage in short-term trading in response to stock
market conditions, changes in interest rates or other economic trends and
developments, or to take advantage of yield disparities between various fixed
income securities in order to realize capital gains or improve income.
Short-term trading may have the effect of increasing portfolio turnover rate. A
high rate of portfolio turnover (100% or greater) involves correspondingly
greater brokerage expenses. The Fund's portfolio turnover rate is set forth in
the table under the caption "Financial Highlights" in the Prospectus.

INVESTMENT RESTRICTIONS

Fundamental Investment Restrictions. The following investment restrictions will
not be changed without the approval of a majority of the Fund's outstanding
voting securities which, as used in the Prospectus and this Statement of
Additional Information means the approval by the lesser of (1) the holders of
67% or more of the Fund's shares represented at a meeting if more than 50%


                                       11


of the Fund's outstanding shares are present in person or by proxy at that
meeting, or (2) more than 50% of the Fund's outstanding shares.

The Fund may not:

      (1)   Issue senior securities, except as permitted by paragraph (2) below.
            For purposes of this restriction, the issuance of shares of
            beneficial interest in multiple classes or series, the purchase or
            sale of options, futures contracts and options on futures contracts,
            interest rate or currency swaps, forward commitments, forward
            foreign currency exchange contracts and repurchase agreements
            entered into in accordance with the Fund's investment policies, and
            the pledge, mortgage or hypothecation of the Fund's assets within
            the meaning of paragraph (3) below are not deemed to be senior
            securities.

      (2)   Borrow money, except from banks as a temporary measure for
            extraordinary or emergency purposes, except pursuant to reverse
            repurchase agreements, in amounts not to exceed 33 1/3% of the
            Fund's total assets (including the amount borrowed) taken at market
            value.

      (3)   Pledge, mortgage, or hypothecate its assets, except to secure
            indebtedness permitted by paragraph (2) above and then only if such
            pledging, mortgaging or hypothecating does not exceed 33 1/3% of the
            Fund's total assets taken at market value.

      (4)   Act as an underwriter, except to the extent that, in connection with
            the disposition of portfolio securities, the Fund may be deemed to
            be an underwriter for purposes of the Securities Act of 1933.

      (5)   Purchase or sell real estate or any interest therein, except that
            the Fund may invest in securities secured by real estate or
            marketable interests therein or issued by companies that invest in
            real estate or interests therein and may retain or sell real estate
            acquired due to the ownership of securities.

      (6)   Make loans, except that the Fund may (a) lend portfolio securities
            in an amount that does not exceed 33 1/3% of such Fund's total
            assets; (b) enter into repurchase agreements; and (c) purchase bank
            certificates of deposit, bank loan participation agreements,
            bankers' acceptances or all or a portion of an issue of debt
            securities, whether or not the purchase is made upon the original
            issuance of the securities.

      (7)   Invest in commodities or commodity contracts or in puts, calls, or
            combinations of both, except financial futures contracts, options on
            securities, securities indices, currency and other financial
            instruments, options on futures contracts, forward foreign currency
            exchange contracts, forward commitments, interest rate or currency
            swaps, warrants and repurchase agreements entered into in accordance
            with the Fund's investment policies. See also nonfundamental (h)

      (8)   Purchase the securities of issuers conducting their principal
            business activity in the same industry if, immediately after such
            purchase, the value of the Fund's investments in such industry would
            exceed 25% of its total assets taken at market value at the time of
            each investment. For purposes of this restriction, telephone, water,
            gas and electric public utilities are each regarded as separate
            industries and wholly-owned finance companies are considered to be
            in the industry of their parents if their activities are primarily
            related to financing the activities of their


                                       12


            parent. This limitation does not apply to investments by the Fund in
            obligations of the U.S. Government or any of its agencies or
            instrumentalities.

      (9)   With respect to 75% of its total assets, purchase any security
            (other than securities issued or guaranteed by the U.S. Government,
            its agencies or instrumentalities) if, as a result: (a) more than 5%
            of its total assets would be invested in the securities of any one
            issuer, or (b) the Fund would own more than 10% of the voting
            securities of any one issuer. See also nonfundamental (g)

In connection with the lending of portfolio securities under item (6) above,
such loans must at all times be fully collateralized and the Fund's custodian
must take possession of the collateral either physically or in book entry form.
Securities used as collateral must be marked to market daily.

Non-fundamental Investment Restrictions. The following restrictions are
designated as non-fundamental and may be changed by the Trustees without
shareholder approval.

The Fund may not:

      (a)   Participate on a joint or joint-and-several basis in any securities
            trading account. The "bunching" of orders for the sale or purchase
            of marketable portfolio securities with other accounts under the
            management of the Adviser to save commissions or to average prices
            among them is not deemed to result in a securities trading account.

      (b)   Make short sales of securities.

      (c)   Purchase a security if, as a result, (i) more than 10% of the Fund's
            total assets would be invested in the securities of other investment
            companies, (ii) the Fund would hold more than 3% of the total
            outstanding voting securities of any one investment company, or
            (iii) more than 5% of the Fund's total assets would be invested in
            the securities of any one investment company. These limitations do
            not apply to (a) the investment of cash collateral, received by the
            Fund in connection with lending the Fund's portfolio securities, in
            the securities of open-end investment companies or (b) the purchase
            of shares of any investment company in connection with a merger,
            consolidation, reorganization or purchase of substantially all of
            the assets of another investment company. Subject to the above
            percentage limitations, the Fund may, in connection with the John
            Hancock Group of Funds Deferred Compensation Plan for Independent
            Trustees/Directors, purchase securities of other investment
            companies within the John Hancock Group of Funds.

      (d)   Invest for the purpose of exercising control over or management of
            any company.

      (e)   Invest more than 15% of its net assets in illiquid securities.

      (f)   Purchase securities while outstanding borrowings, other than reverse
            repurchase agreements, exceed 5% of the Fund's total assets.

      (g)   Invest more than 5% of its total assets at time of purchase in any
            one security (other than securities issued or guaranteed by the U.S.
            Government, its agencies or instrumentalities).

      (h)   purchase or sell currency options or currency futures.


                                       13


If a percentage restriction on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value of the Fund's assets will not be
considered a violation of the restriction.

The Funds will invest only in countries on the Adviser's Approved Country
Listing. The Approved Country Listing is a list maintained by the Adviser's
investment department that outlines all countries, including the United States,
that have been approved for investment by Funds managed by the Adviser.

In addition, no Fund may invest either directly or indirectly in any Russian
equity. Only certain funds can invest in certain types of Russian debt. These
funds are: Active Bond, Income, Investors, High Income, Bond, High Yield Bond,
Strategic Income and VA Strategic Income. Each of these funds may invest only up
to 5% of total assets in: (1) Sovereign Russian Debt and Municipal Fixed Income
Securities; (2) that are NOT ruble-denominated; (3) that are held physically
outside of Russia; and (4) have Euroclear settlement.

THOSE RESPONSIBLE FOR MANAGEMENT


The business of the Fund is managed by its Trustees, who elect officers who are
responsible for the day-to-day operations of the Fund and who execute policies
formulated by the Trustees. Several of the officers and Trustees of the Fund are
also officers or Directors of the Adviser, or officers and Directors of the
Fund's principal distributor, John Hancock Funds, LLC (prior to February 1,
2002, John Hancock Funds, Inc.) ("John Hancock Funds").



                                       14





- ---------------------------------------------------------------------------------------------------------------------
                                                                                                       Number of
                                                                                                       John
                                                                                                       Hancock
                             Position(s)   Trustee/       Principal Occupation(s) and other            Funds
Name, Address (1)            Held with     Officer        Directorships                                Overseen by
And Age                      Fund          since(2)       During Past 5 Years                          Trustee
- ---------------------------------------------------------------------------------------------------------------------
                                                                                           
Independent Trustees
- ---------------------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz          Trustee       1996           Professor of Law, Emeritus, Boston           30
Born:  1931                                               University School of Law (as of 1996);
                                                          Director, Brookline Bancorp.

- ---------------------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr.      Trustee       1996           Chairman, President and Chief Executive      30
Born:  1935                                               Officer, Brookline Bancorp. (lending)
                                                          (since 1972); Trustee, Northeastern
                                                          University (education); Chairman and
                                                          Director, Lumber Insurance Co. (insurance)
                                                          (until 2000); Chairman and Director,
                                                          Northeast Retirement Services, Inc.
                                                          (retirement administration) (since 1998).

- ---------------------------------------------------------------------------------------------------------------------
William J. Cosgrove          Trustee       1996           Vice President, Senior Banker and Senior     30
Born:  1933                                               Credit Officer, Citibank, N.A. (retired
                                                          1991); Executive Vice President, Citadel
                                                          Group Representatives, Inc.;  Director,
                                                          Hudson City Bancorp; Trustee, Scholarship
                                                          Fund for Inner City Children (since 1986).

- ---------------------------------------------------------------------------------------------------------------------
Richard A. Farrell           Trustee       1993           President, Farrell, Healer & Co., Inc.,      30
Born:  1932                                               (venture capital management firm)(since
                                                          1980) and General Partner of the Venture
                                                          Capital Fund of NE (since 1980); Prior to
                                                          1980, headed the venture capital group
                                                          at Bank of Boston Corporation.

- ---------------------------------------------------------------------------------------------------------------------


(1) Business address for independent and interested Trustees and officers is 101
Huntington Avenue, Boston, Massachusetts 02119.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.



                                       15





- ---------------------------------------------------------------------------------------------------------------------
                                                                                                       Number of
                                                                                                       John
                                                                                                       Hancock
                             Position(s)   Trustee/       Principal Occupation(s) and other            Funds
Name, Address (1)            Held with     Officer        Directorships                                Overseen by
And Age                      Fund          since(2)       During Past 5 Years                          Trustee
- ---------------------------------------------------------------------------------------------------------------------
                                                                                           
Gail D. Fosler               Trustee       1996           Senior Vice President and Chief Economist,   30
Born:  1947                                               The Conference Board (non-profit economic
                                                          and business research)(since 1989);
                                                          Director, Unisys Corp. (since 1993);
                                                          Director, H.B. Fuller Company (since 1992)
                                                          and DBS Holdings (Singapore) (banking
                                                          and financial services)(since 1999);
                                                          Director, National Bureau of Economic
                                                          Research (academic)(since 1989); Director,
                                                          Baxter International (medical health care)
                                                          (since 2001).

- ---------------------------------------------------------------------------------------------------------------------
William F. Glavin            Trustee       1993           President Emeritus, Babson College (as of    30
Born:  1932                                               1998); Vice Chairman, Xerox Corporation
                                                          (until 1989); Director, Reebok, Inc. (since
                                                          1994) and Inco Ltd.

- ---------------------------------------------------------------------------------------------------------------------
John A. Moore                Trustee       1993           President and Chief Executive Officer,       36
Born:  1939                                               Institute for Evaluating Health Risks,
                                                          (nonprofit institution) (until 2001);
                                                          Senior Scientist, Sciences
                                                          International (health research)(since
                                                          1998); Principal, Hollyhouse (consulting)
                                                          (since 2000); Director, CIIT(nonprofit
                                                          research) (since 2002).

- ---------------------------------------------------------------------------------------------------------------------
Patti McGill Peterson        Trustee       1993           Executive Director, Council for              36
Born:  1943                                               International Exchange of Scholars (since
                                                          1998); Vice President, Institute of I
                                                          nternational Education (since 1998);
                                                          Senior Fellow, Cornell Institute of
                                                          Public Affairs, Cornell University
                                                          (until 1997); President Emerita of
                                                          Wells College and St. Lawrence
                                                          University; Director, Niagara Mohawk
                                                          Power Corporation (electric utility).

- ---------------------------------------------------------------------------------------------------------------------
John W. Pratt                Trustee       1993           Professor of Business Administration         30
Born:  1931                                               Emeritus, Harvard University Graduate
                                                          School of Business Administration (as
                                                          of 1998).

- ---------------------------------------------------------------------------------------------------------------------


(1) Business address for independent and interested Trustees and officers is 101
Huntington Avenue, Boston, Massachusetts 02119.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.



                                       16





- ---------------------------------------------------------------------------------------------------------------------
                                                                                                           Number of
                                                                                                           John
                                                                                                           Hancock
                             Position(s)   Trustee/       Principal Occupation(s) and other                Funds
Name, Address (1)            Held with     Officer        Directorships                                    Overseen by
And Age                      Fund          since(2)       During Past 5 Years                              Trustee
- ---------------------------------------------------------------------------------------------------------------------
                                                                                               
Interested Trustees
- ---------------------------------------------------------------------------------------------------------------------
John M. DeCiccio (3)         Trustee       2001           Executive Vice President and Chief Investment    66
Born:  1948                                               Officer, John Hancock Financial Services,
                                                          Inc.; Director, Executive Vice President and
                                                          Chief Investment Officer, John Hancock Life
                                                          Insurance Company; Chairman of the Committee
                                                          of Finance of John Hancock Life Insurance
                                                          Company; Director, John Hancock Subsidiaries,
                                                          LLC, Hancock Natural Resource Group,
                                                          Independence Investment LLC, Independence
                                                          Fixed Income LLC, John Hancock Advisers, LLC
                                                          (the "Adviser") and The Berkeley Financial
                                                          Group, LLC ("The Berkeley Group"), John
                                                          Hancock Funds, LLC ("John Hancock Funds"),
                                                          Massachusetts Business Development
                                                          Corporation; Director, John Hancock Insurance
                                                          Agency, Inc. ("Insurance Agency, Inc.") (until
                                                          1999) and John Hancock Signature Services,
                                                          Inc. ("Signature Services") (until 1997).

- ---------------------------------------------------------------------------------------------------------------------
Maureen R. Ford (3)          Trustee,      2000           Executive Vice President, John Hancock           66
Born:  1955                  Chairman,                    Financial Services, Inc., John Hancock Life
                             President                    Insurance Company; Chairman, Director,
                             and Chief                    President and Chief Executive Officer, the
                             Executive                    Advisers and The Berkeley Group; Chairman,
                             Officer                      Director and Chief Executive Officer, John
                                                          Hancock Funds, Chairman, Director and
                                                          President, Insurance Agency, Inc.; Chairman,
                                                          Director and Chief Executive Officer,
                                                          Sovereign Asset Management Corporation
                                                          ("SAMCorp."); Director, Independence
                                                          Investment LLC, Independence Fixed Income LLC
                                                          and Signature Services; Senior Vice President,
                                                          MassMutual Insurance Co. (until 1999); Senior
                                                          Vice President, Connecticut Mutual Insurance
                                                          Co. (until 1996).
- ---------------------------------------------------------------------------------------------------------------------


(1) Business address for independent and interested Trustees and officers is 101
Huntington Avenue, Boston, Massachusetts 02119.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.



                                       17





- ---------------------------------------------------------------------------------------------------------------------
                                                                                                       Number of
                                                                                                       John
                                                                                                       Hancock
                             Position(s)   Trustee/       Principal Occupation(s) and other            Funds
Name, Address (1)            Held with     Officer        Directorships                                Overseen by
And Age                      Fund          since(2)       During Past 5 Years                          Trustee
- ---------------------------------------------------------------------------------------------------------------------
                                                 
Principal Officers who
are not Trustees
- ---------------------------------------------------------------------------------------------------------------------
William L. Braman           Executive      2000           Executive Vice President and Chief
Born:  1953                 Vice                          Investment Officer, the Adviser and each
                            President                     of the John Hancock funds; Director,
                            and Chief                     SAMCorp., Executive Vice President and
                            Investment                    Chief Investment Officer, Barring Asset
                            Officer                       Management, London U.K. (until 2000).

- ---------------------------------------------------------------------------------------------------------------------
Richard A. Brown            Senior Vice    2000           Senior Vice President, Chief Financial
Born:  1949                 President                     Officer and Treasurer, the Adviser, John
                            and Chief                     Hancock Funds, and The Berkeley Group;
                            Financial                     Second Vice President and Senior Associate
                            Officer                       Controller, Corporate Tax Department, John
                                                          Hancock Financial Services, Inc. (until
                                                          2001).

- ---------------------------------------------------------------------------------------------------------------------
Thomas H. Connors           Vice           1993           Vice President and Compliance Officer, the
Born:  1959                 President                     Adviser and each of the John Hancock
                            and                           funds; Vice President, John Hancock Funds.
                            Compliance
                            Officer

- ---------------------------------------------------------------------------------------------------------------------
William H. King             Vice           1993           Vice President and Assistant Treasurer,
Born:  1952                 President                     the Adviser; Vice President and
                            and                           Treasurer of each of the John Hancock
                            Treasurer                     funds; Assistant Treasurer of each of
                                                          the John Hancock funds (until 2001).

- ---------------------------------------------------------------------------------------------------------------------
Susan S. Newton             Senior Vice    1993           Senior Vice President, Secretary and Chief
Born:  1950                 President,                    Legal Officer, SAMCorp., the Adviser and
                            Secretary                     each of the John Hancock funds, John
                            and Chief                     Hancock Funds and The Berkeley Group; Vice
                            Legal Officer                 President, Signature Services (until
                                                          2000), Director, Senior Vice President and
                                                          Secretary, NM Capital.
- ---------------------------------------------------------------------------------------------------------------------


(1) Business address for independent and interested Trustees and officers is 101
Huntington Avenue, Boston, Massachusetts 02119.
(2) Each Trustee serves until resignation, retirement age or until her or his
successor is elected.
(3) Interested Trustee: holds positions with the Fund's investment adviser,
underwriter, and or certain other affiliates.



                                       18



The Fund's Board of Trustees currently has five standing Committees: the Audit
Committee, the Administration Committee, the Contracts/Operations Committee, the
Investment Performance Committee and the Coordinating Committee. Each Committee
is comprised of Independent Trustees who are not "interested persons". The Audit
Committee members are Messrs. Moore, Farrell and Ms. Fosler. The Audit Committee
recommends to the full board auditors for the Fund, monitors and oversees the
audits of the Fund, communicates with both independent auditors and internal
auditors on a regular basis and provides a forum for the auditors to report and
discuss any matters they deem appropriate at any time. The Audit Committee held
four meetings during the fiscal year ended October 31, 2001.

The Administration Committee's members are all of the Independent Trustees of
the Fund. The Administration Committee reviews the activities of the other four
standing committees and makes the final selection and nomination of candidates
to serve as Independent Trustees. The Administration Committee will consider
nominees recommended by shareholders to serve as Independent Trustees, provided
that shareholders submit recommendations in compliance with all of the pertinent
provisions of Rule 14a-8 under the Securities Exchange Act of 1934. The
Administration Committee also works with all Trustees on the selection and
election of officers of the Fund. The Administration Committee held four
meetings during the fiscal year ended October 31, 2001.

The Contracts/Operations Committee members are Messrs. Chapman, Cosgrove and
Pratt. The Contracts/Operations Committee oversees the initiation, operation,
and renewal of contracts between the Fund and other entities. These contracts
include advisory and subadvisory agreements, custodial and transfer agency
agreements and arrangements with other service providers. The
Contracts/Operations Committee held five meetings during the fiscal year ended
October 31, 2001.

The Investment Performance Committee consists of Messrs. Aronowitz, Glavin and
Ms. Peterson. The Investment Performance Committee monitors and analyzes the
performance of the Fund generally, consults with the adviser as necessary if the
Fund requires special attention, and reviews peer groups and other comparative
standards as necessary. The Investment Performance Committee held four meetings
during the fiscal year ended October 31, 2001.

The Coordinating Committee members are the chairpersons of the other four
standing committees. The Coordinating Committee assures consistency of action
among committees, reviews Trustee compensation, evaluates Trustee performance
and considers committee membership rotations as well as relevant corporate
governance issues.

The following table provides a dollar range indicating each Trustee's ownership
of equity securities of the Fund, as well as aggregate holdings of shares of
equity securities of all John Hancock Funds overseen by the Trustee, as of
December 31, 2001.



                                       19





- -----------------------------------------------------------------------------------------------------------
                                                                     Aggregate Dollar Range of
                                     Dollar Range of Fund            holdings in John Hancock funds
Name of Trustee                      Shares Owned by Trustee         overseen by Trustee
- -----------------------------------------------------------------------------------------------------------
                                                               
Independent Trustees
- -----------------------------------------------------------------------------------------------------------
Dennis S. Aronowitz                  $1-$10,000                      $50,001-$100,000
- -----------------------------------------------------------------------------------------------------------
Richard P. Chapman, Jr.              $1-$10,000                      Over $100,000
- -----------------------------------------------------------------------------------------------------------
William J. Cosgrove                  $1-$10,000                      Over $100,000
- -----------------------------------------------------------------------------------------------------------
Richard A. Farrell                   $1-$10,000                      Over $100,000
- -----------------------------------------------------------------------------------------------------------
Gail D. Fosler                       $1-$10,000                      $10,001-$50,000
- -----------------------------------------------------------------------------------------------------------
William F. Glavin                    None                            $10,001-$50,000
- -----------------------------------------------------------------------------------------------------------
Dr. John A. Moore                    $1-$10,000                      Over $100,000
- -----------------------------------------------------------------------------------------------------------
Patti McGill Peterson                $1-$10,000                      Over $100,000
- -----------------------------------------------------------------------------------------------------------
John W. Pratt                        $10,001-$50,000                 Over $100,000

- -----------------------------------------------------------------------------------------------------------
Interested Trustees
- -----------------------------------------------------------------------------------------------------------
John M. DeCiccio                     $10,001-$50,000                 Over $100,000
- -----------------------------------------------------------------------------------------------------------
Maureen R. Ford                      $1-$10,000                      Over $100,000
- -----------------------------------------------------------------------------------------------------------


The following table provides information regarding the compensation paid by the
Fund and the other investment companies in the John Hancock Fund Complex to the
Independent Trustees for their services. Mr. DeCiccio and Ms. Ford, each a
non-Independent Trustee, and each of the officers of the Fund who are interested
persons of the Adviser, are compensated by the Adviser and/or affiliates and
receive no compensation from the Fund for their services.


                                                         Total Compensation
                                                         From the Fund and John
                              Aggregate Compensation     Hancock Fund Complex
Independent Trustees          from the Fund (1)          to Trustees (2)
- --------------------          -----------------          ---------------

Dennis J. Aronowitz                     $ 2,066          $ 75,000
Richard P. Chapman*                       2,141            78,100
William J. Cosgrove*                      1,994            72,000
Leland O. Erdahl +                          632            18,000
Richard A. Farrell                        2,017            72,000
Gail D. Fosler                            2,043            75,000
William F. Glavin*                        1,994            72,000
Dr. John A. Moore*                        2,045            75,100
Patti McGill Peterson                     2,017            72,000
John Pratt                                1,994            72,000
                                        -------          --------
Total                                   $18,943          $681,200

(1) Compensation is for the current fiscal year ending October 31, 2001.

(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 2001. As of this date, there were sixty-six funds
in the John Hancock Fund Complex, with Mr. Moore and Ms. Peterson serving on
thirty-six funds and each other Independent Trustees servicing on thirty funds.

+ As of February 28, 2001, Mr. Erdahl resigned as Trustee of the Complex.



                                       20



*As of December 31, 2001, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $71,309, Mr. Cosgrove was $207,842, Mr. Glavin was $280,472 and for
Dr. Moore was $238,982 under the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees (the "Plan").

All of the officers listed are officers or employees of the Adviser or
Affiliated Companies. Some of the Trustees and officers may also be officers or
Trustees of one or more of the other funds for which the Adviser serves as
investment adviser.

As of February 4, 2002, the officers and Trustees of the Fund as a group
beneficially owned less than 1% of the outstanding shares of the Fund. As of
that date, no shareholder beneficially owned 5% or more of outstanding shares of
the Fund.


INVESTMENT ADVISORY AND OTHER SERVICES

The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has approximately $30 billion in assets under
management in its capacity as investment adviser to the Fund and other funds in
the John Hancock group of funds as well as retail and institutional privately
managed accounts. The Adviser is an affiliate of the Life Company, one of the
most recognized and respected financial institutions in the nation. With total
assets under management of more than $100 billion, the Life Company is one of
the ten largest life insurance companies in the United States, and carries a
high rating with Standard & Poor's and A. M. Best. Founded in 1862, the Life
Company has been serving clients for over 130 years.

The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser which was approved by the Fund's shareholders.
Pursuant to the Advisory Agreement, the Adviser will: (a) furnish continuously
an investment program for the Fund and determine, subject to the overall
supervision and review of the Trustees, which investments should be purchased,
held, sold or exchanged, and (b) provide supervision over all aspects of the
Fund's operations except those which are delegated to a custodian, transfer
agent or other agent.

The Fund bears all costs of its organization and operation, including but not
limited to expenses of preparing, printing and mailing all shareholders'
reports, notices, prospectuses, proxy statements and reports to regulatory
agencies; expenses relating to the issuance, registration and qualification of
shares; government fees; interest charges; expenses of furnishing to
shareholders their account statements; taxes; expenses of redeeming shares;
brokerage and other expenses connected with the execution of portfolio
securities transactions; expenses pursuant to the Fund's plan of distribution;
fees and expenses of custodians including those for keeping books and accounts,
maintaining a committed line of credit, and calculating the net asset value of
shares; fees and expenses of transfer agents and dividend disbursing agents;
legal, accounting, financial, management, tax and auditing fees and expenses of
the Fund (including an allocable portion of the cost of the Adviser's employees
rendering such services to the Fund); the compensation and expenses of Trustees
who are not otherwise affiliated with the Trust, the Adviser or any of their
affiliates; expenses of Trustees' and shareholders' meetings; trade association
membership; insurance premiums; and any extraordinary expenses.

As compensation for its services under the Advisory Agreement, the Fund pays the
Adviser monthly a fee based on a stated percentage of the average of the daily
net assets of the Fund as follows:


                                       21


       Average Daily Net Assets                         Annual Rate
       ------------------------                         -----------
       First    $500,000,000                             0.80%
       Next     $500,000,000                             0.75%
       Amount over  $1,000,000,000                       0.70%

From time to time, the Adviser may reduce its fee or make other arrangements to
limit the Fund's expenses to a specified percentage of average daily net assets.
The Adviser retains the right to reimpose a fee and recover any other payments
to the extent that, at the end of any fiscal year, the Fund's annual expenses
fall below this limit.


For the fiscal years ended October 31, 1999, 2000 and 2001, the Fund paid the
Adviser an investment advisory fee of $1,918,860, $3,143,893 and $2,247,369,
respectively.


Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provide investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more funds or clients are selling the same security. If opportunities for
purchase or sale of securities by the Adviser for the Fund or for other funds or
clients for which the Adviser renders investment advice arise for consideration
at or about the same time, transactions in such securities will be made insofar
as feasible, for the respective funds or clients in a manner deemed equitable to
all of them. To the extent that transactions on behalf of more than one client
of the Adviser or its affiliates may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse effect
on price.

Pursuant to the Advisory Agreement, the Adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which the Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Advisory Agreement.

Under the Advisory Agreement, the Fund may use the name "John Hancock" or any
name derived from or similar to it only for so long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the Advisory
Agreement is no longer in effect, the Fund (to the extent that it lawfully can)
will cease to use such a name or any other name indicating that it is advised by
or otherwise connected with the Adviser. In addition, the Adviser or the Life
Company may grant the nonexclusive right to use the name "John Hancock" or any
similar name to any other corporation or entity, including but not limited to
any investment company of which the Life Company or any subsidiary or affiliate
thereof or any successor to the business of any subsidiary or affiliate thereof
shall be the investment adviser.


The Fund's Board of Trustees is responsible for overseeing the performance of
the Fund's investment adviser and determining whether to approve and renew the
Fund's Advisory Agreement. The Board has a standing request that the Adviser
provide the Board with certain information the Board has deemed important to
evaluating the short- and long-term performance of the Adviser. This information
includes periodic performance analysis and status reports from the Adviser and
quarterly Portfolio and Investment Performance Reports. The Fund's portfolio
managers meet with the Board from time to time to discuss the management and
performance of the Fund and respond to the Board's questions concerning the
performance of the Adviser. When the Board considers whether to renew an
investment advisory contract, the Board takes into account numerous factors,
including: (1) the nature, extent and quality of the services provided by the
Adviser; (2) the investment performance of the Fund's assets managed by the
adviser; (3) the fair market value of the services provided by the adviser; (4)
a comparative analysis of expense ratios of, and advisory fees paid by, similar
funds; (5) the extent to which the adviser


                                       22


has realized or will realize economies of scale as the Fund grows; (6) other
sources of revenue to the Adviser or its affiliates from its relationship with
the Fund and intangible or "fall-out" benefits that accrue to the adviser and
its affiliates, if relevant; and (7) the Adviser's control of the operating
expenses of the fund, such as transaction costs, including ways in which
portfolio transactions for the fund are conducted and brokers are selected.

The primary factors underlying the Board's decision to renew the Fund's Advisory
Agreement were as follows:

o     The Board determined that the performance results of the Fund and the
      Adviser's responsive actions were reasonable, as compared with relevant
      performance standards, including the performance results of comparable
      multi-cap growth funds derived from data provided by Lipper Inc. and
      appropriate market indexes.

o     The Board decided that the advisory fee paid by the Fund was reasonable
      based on the average advisory fee for comparable funds. The Board also
      took into account the nature of the fee arrangements which include
      breakpoints that will adjust the fee downward as the size of the Fund's
      portfolio increases.

o     The Board evaluated the Adviser's investment staff and portfolio
      management process, and reviewed the composition and overall performance
      of the Fund's portfolio on both a short-term and long-term basis. The
      Board considered whether the Fund should obtain alternative portfolio
      management services and concluded that, under all the circumstances and
      based on its informed business judgement, the most appropriate course of
      action in the best interest of the Fund's shareholders was to renew the
      agreement with the Adviser.


The continuation of the Advisory Agreement and Distribution Agreement (discussed
below) was approved by all Trustees. The Advisory Agreement and the Distribution
Agreement, will continue in effect from year to year, provided that its
continuance is approved annually both (i) by the holders of a majority of the
outstanding voting securities of the Trust or by the Trustees, and (ii) by a
majority of the Trustees who are not parties to the Agreement or "interested
persons" of any such parties. Both agreements may be terminated on 60 days
written notice by any party or by vote of a majority to the outstanding voting
securities of the Fund and will terminate automatically if assigned.


Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the fiscal years ended October 31, 1999, 2000 and 2001,
the Fund paid the Adviser $39,688, $74,428 and $56,109, respectively, for
services under this Agreement.


Personnel of the Adviser and its affiliates may trade securities for their
personal accounts. The Fund also may hold, or may be buying or selling, the same
securities. To prevent the Fund from being disadvantaged, the adviser(s),
principal underwriter and the Fund have adopted a code of ethics which restricts
the trading activity of those personnel.

DISTRIBUTION CONTRACTS

The Fund has a Distribution Agreement with John Hancock Funds. Under the
agreement, John Hancock Funds is obligated to use its best efforts to sell
shares of the Fund. Shares of the Fund are also sold by selected broker-dealers
(the "Selling Brokers") that have entered into selling agency agreements with
John Hancock Funds. These Selling Brokers are authorized to designate other
intermediaries to receive purchase and redemption orders on behalf of the Fund.
John


                                       23


Hancock Funds accepts orders for the purchase of the shares of the Fund that are
continually offered at net asset value next determined.

SALES COMPENSATION

As part of their business strategy, John Hancock Funds may pay compensation to
financial services firms that sell the Fund's shares. These firms typically pass
along a portion of this compensation to your broker or financial representative.

John Hancock Funds may make a one-time payment at the time of initial purchase
out of its own resources to a Selling Broker who sells shares of the Fund. This
payment may not exceed 0.15% of the amount invested.

In addition, from time to time, John Hancock Funds, at its expense, may provide
significant additional compensation to financial services firms in connection
with the sale of shares of the Fund. Such compensation provided by John Hancock
Funds may include, for example, financial assistance to financial services firms
in connection with their marketing and sales development programs for their
registered representatives and other employees, as well as payment for travel
expenses, including lodging, incurred by registered representatives and other
employees for such marketing and sales development programs, seminars for the
public, advertising and sales campaigns regarding one or more Funds, and/or
other financial services firms-sponsored events or activities. From time to
time, John Hancock Funds may make expense reimbursements for special training of
a financial services firm's registered representatives and other employees in
group meetings. Other compensation, such as asset retention fees, finder's fees
and reimbursement for wire transfer fees, may be offered to the extent not
prohibited by law or any self-regulatory agency, such as the NASD.

NET ASSET VALUE

For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.

Debt investment securities are valued on the basis of valuations furnished by a
principal market- maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.

Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the mean
between the current closing bid and asked prices.

Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.

Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time (12:00 noon,
New York time) on the date of any determination of a Fund's NAV. If quotations
are not readily available or the value has been materially affected by events

                                       24


occurring after the closing of a foreign market, assets are valued by a method
that the Trustees believe accurately reflects fair value.

The NAV for each fund and class is determined each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing a class's net assets by the number of its shares outstanding.
On any day an international market is closed and the New York Stock Exchange is
open, any foreign securities will be valued at the prior day's close with the
current day's exchange rate. Trading of foreign securities may take place on
Saturdays and U.S. business holidays on which a Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.

SPECIAL REDEMPTIONS

Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, the shareholder will incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. The Fund has,
however, elected to be governed by Rule 18f-1 under the Investment Company Act.
Under that rule, the Fund must redeem its shares for cash except to the extent
that the redemption payments to any shareholder during any 90-day period would
exceed the lesser of $250,000 or 1% of the Fund's net asset value at the
beginning of such period.

ADDITIONAL SERVICES AND PROGRAMS

Exchange Privilege. The Fund permits exchanges of shares of any class of a fund
for shares of the same class in any other John Hancock fund offering that class.

The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.

The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.

An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".

PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES

Shares of the Fund may be purchased or redeemed through certain broker-dealers
or Service Agents ("Brokers"). Brokers may charge for their services or place
limitations on the extent to which you may use the services of the Fund. The
Fund will be deemed to have received a purchase or redemption order when an
authorized broker, or if applicable, a broker's authorized designee, receives
the order. If a broker is an agent or designee of the Fund, orders are processed
at the NAV next calculated after the broker receives the order. The broker must
segregate any orders it receives after the close of regular trading on the New
York Stock Exchange and transmit those orders to the Fund for execution at NAV
next determined. Some brokers that maintain nominee accounts with the Fund for
their clients charge an annual fee on the average net assets held in such
accounts for accounting, servicing, and distribution services they provide with
respect to the underlying Fund shares. The Adviser, the Fund and/or John Hancock
Funds, Inc. (the Fund's principal distributor), share in the expense of these
fees.


                                       25


DESCRIPTION OF THE FUND'S SHARES

The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund, without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series and
classes, without further action by shareholders. As of the date of this
Statement of Additional Information, the Trustees have authorized shares of the
Fund and three other series. Additional series may by added in the future. The
Trustees have also authorized the issuance of four classes of shares of the
Fund, designated as Class A, Class B, Class C and Class I. Class A, Class B and
Class C shares are discussed in a separate Statement of Additional Information.

The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of the Fund. Holders of
each class of shares have certain exclusive voting rights on matters relating to
their respective distribution plans. The different classes of the Fund may bear
different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.

Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts that (i) the
distribution and service fees relating to each class of shares will be borne
exclusively by that class (ii) Class B and Class C shares will pay higher
distribution and service fees than Class A shares and (iii) each class of shares
will bear any other class expenses properly allocable to that class of shares,
subject to the conditions imposed by the Internal Revenue Service with respect
to multiple-class structures. Similarly, the net asset value per share may vary
depending on which class of shares are purchased. No interest will be paid on
uncashed dividend or redemption checks.

In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, except as set forth below.

Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.

Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Fund's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Furthermore, no fund included in this Fund's prospectus shall
be liable for the liabilities of any other John Hancock Fund. Liability is
therefore limited to circumstances in which the Fund itself would be unable to
meet its obligations, and the possibility of this occurrence is remote.


                                       26


The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or the policies of any regulatory authority. John
Hancock Funds does not accept starter, credit card or third party checks. All
checks returned by the post office as undeliverable will be reinvested at net
asset value in the fund or funds from which a redemption was made or dividend
paid. Information provided on the account application may be used by the Fund to
verify the accuracy of the information or for background or financial history
purposes. A joint account will be administered as a joint tenancy with right of
survivorship, unless the joint owners notify Signature Services of a different
intent. A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts. For telephone transactions, the transfer agent will take measures
to verify the identity of the caller, such as asking for name, account number,
Social Security or other taxpayer ID number and other relevant information. If
appropriate measures are taken, the transfer agent is not responsible for any
losses that may occur to any account due to an unauthorized telephone call. Also
for your protection telephone transactions are not permitted on accounts whose
names or addresses have changed within the past 30 days. Proceeds from telephone
transactions can only be mailed to the address of record.

Selling activities for the Fund may not take place outside the U.S. except with
U.S. military bases, APO addresses and U.S. diplomats. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.

TAX STATUS

The Fund, is treated as a separate entity for accounting and tax purposes, has
qualified and elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") and
intends to continue to qualify for each taxable year. As such and by complying
with the applicable provisions of the Code regarding the sources of its income,
the timing of its distributions, and the diversification of its assets, the Fund
will not be subject to Federal income tax on its taxable income (including net
realized capital gains) which is distributed to shareholders in accordance with
the timing requirements of the Code.

The Fund will be subject to a 4% non-deductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.

Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than net capital gain, after reduction by
deductible expenses.) Some distributions may be paid in January but may be
taxable to shareholders as if they had been received on December 31 of the
previous year. The tax treatment described above will apply without regard to
whether distributions are received in cash or reinvested in additional shares of
the Fund.

Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to

                                       27


such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.

If the Fund invests in stock (including an option to acquire stock such as is
inherent in a convertible bond) of certain foreign corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, certain rents and royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders.
The Fund would not be able to pass through to its shareholders any credit or
deduction for such a tax. An election may be available to ameliorate these
adverse tax consequences, but could require the Fund to recognize taxable income
or gain without the concurrent receipt of cash. These investments could also
result in the treatment of associated capital gains as ordinary income. The Fund
may limit and/or manage its holdings in passive foreign investment companies or
make an available election to minimize its tax liability or maximize its return
from these investments.

Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
certain foreign currency options, foreign currency forward contracts, foreign
currencies, or payables or receivables denominated in a foreign currency are
subject to Section 988 of the Code, which generally causes such gains and losses
to be treated as ordinary income and losses and may affect the amount, timing
and character of distributions to shareholders. Transactions in foreign
currencies that are not directly related to the Fund's investment in stock or
securities, including speculative currency positions, could under future
Treasury regulations produce income not among the types of "qualifying income"
from which the Fund must derive at least 90% of its gross income for each
taxable year. If the net foreign exchange loss for a year treated as ordinary
loss under Section 988 were to exceed the Fund's investment company taxable
income computed without regard to such loss, the resulting overall ordinary loss
for such year would not be deductible by the Fund or its shareholders in future
years.

The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes. The
Fund does not expect to qualify to pass such taxes through to its shareholders,
who consequently will not take such taxes into account on their own tax returns.
However, the Fund will deduct such taxes in determining the amount it has
available for distribution to shareholders.

The amount of the Fund's net realized capital gains, if any, in any given year
will vary depending upon the Adviser's current investment strategy and whether
the Adviser believes it to be in the best interest of the Fund to dispose of
portfolio securities and/or engage in options, futures or forward transactions
that will generate capital gains. At the time of an investor's purchase of Fund
shares, a portion of the purchase price is often attributable to realized or
unrealized appreciation in the Fund's portfolio or undistributed taxable income
of the Fund. Consequently, subsequent distributions from such appreciation or
income may be taxable to such investor even if the net asset value of the
investor's shares is, as a result of the distributions, reduced below the
investor's cost for such shares, and the distributions in reality represent a
return of a portion of the purchase price.

Upon a redemption or other disposition of shares of the Fund (including by
exercise of the exchange privilege) in a transaction that is treated as a sale
for tax purposes, a shareholder may realize a taxable gain or loss depending
upon the amount of the proceeds and the investor's basis in his shares. Such
gain or loss will be treated as capital gain or loss if the shares are capital


                                       28


assets in the shareholder's hands. A sales charge paid in purchasing shares of
the Fund cannot be taken into account for purposes of determining gain or loss
on the redemption or exchange of such shares within 90 days after their purchase
to the extent shares of the Fund or another John Hancock Fund are subsequently
acquired without payment of a sales charge pursuant to the reinvestment or
exchange privilege. This disregarded charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Also, any loss
realized on a redemption or exchange may be disallowed to the extent the shares
disposed of are replaced with other shares of the Fund within a period of 61
days beginning 30 days before and ending 30 days after the shares are disposed
of, such as pursuant to automatic dividend reinvestments. In such a case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.

Any loss realized upon the redemption of shares with a tax holding period of six
months or less will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain with respect to such
shares. Shareholders should consult their own tax advisers regarding their
particular circumstances to determine whether a disposition of Fund shares is
properly treated as a sale for tax purposes, as is assumed in the foregoing
discussion.

Although its present intention is to distribute, at least annually, all net
capital gain, if any, the Fund reserves the right to retain and reinvest all or
any portion of the excess, as computed for Federal income tax purposes, of net
long-term capital gain over net short-term capital loss in any year. The Fund
will not in any event distribute net capital gain realized in any year to the
extent that a capital loss is carried forward from prior years against such
gain. To the extent such excess was retained and not exhausted by the
carryforward of prior years' capital losses, it would be subject to Federal
income tax in the hands of the Fund. Upon proper designation of this amount by
the Fund, each shareholder would be treated for Federal income tax purposes as
if the Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain in his return for his taxable year in which the last day of the
Fund's taxable year falls, (b) be entitled either to a tax credit on his return
for, or to a refund of, his pro rata share of the taxes paid by the Fund, and
(c) be entitled to increase the adjusted tax basis for his shares in the Fund by
the difference between his pro rata share of such excess and his pro rata are of
such taxes.


For Federal income tax purposes, the Fund is permitted to carry forward a net
realized capital loss in any year to offset its net capital gains, if any,
during the eight years following the year of the loss. To the extent subsequent
net capital gains are offset by such losses, they would not result in Federal
income tax liability to the Fund and, as noted above, would not be distributed
as such to shareholders. The Fund has capital loss carryforwards available, to
the extent provided by regulations, to offset future net realized capital gains.
The Fund's carryforwards expire as follows: $3,983,227 on October 31, 2002 and
$99,593,967 on October 31, 2009. Availability of a certain amount of capital
loss carryforwards which were acquired on September 6, 1996 and December 16,
1994 in mergers, may be limited in a given year.


For purposes of the dividends received deduction available to corporations,
dividends received by the Fund, if any, from U.S. domestic corporations in
respect of the stock of such corporations held by the Fund, for U.S. Federal
income tax purposes, for at least 46 days (91 days in the case of certain
preferred stock) during a prescribed period extending before and after each such
dividend and distributed and properly designated by the Fund may be treated as
qualifying dividends. Corporate shareholders must meet the holding period
requirements stated above with respect to their shares of the Fund for each
dividend in order to qualify for the deduction and, if they have any debt that
is deemed under the Code directly attributable to such shares, may be denied a
portion of the dividends received deduction. The entire qualifying dividend,
including the otherwise deductible amount, will be included in determining the
excess (if any) of a


                                       29


corporate shareholder's adjusted current earnings over its alternative minimum
taxable income, which may increase its alternative minimum tax liability, if
any. Additionally, any corporate shareholder should consult its tax adviser
regarding the possibility that its basis in its shares may be reduced, for
Federal income tax purposes, by reason of "extraordinary dividends" received
with respect to the shares, and to the extent such basis would be reduced below
zero, that current recognition of income would be required.

The Fund is required to accrue income on any debt securities that have more than
a de minimis amount of original issue discount (or debt securities acquired at a
market discount, if the Fund elects to include market discount in income
currently) prior to the receipt of the corresponding cash payments. The mark to
market or constructive sale rules applicable to certain options, futures,
forwards, short sales or other transactions may also require the Fund to
recognize income or gain without a concurrent receipt of cash. Additionally,
some countries restrict repatriation which may make it difficult or impossible
for the Fund to obtain cash corresponding to its earnings or assets in those
countries. However, the Fund must distribute to shareholders for each taxable
year substantially all of its net income and net capital gains, including such
income or gain, to qualify as a regulated investment company and avoid liability
for any federal income or excise tax. Therefore, the Fund may have to dispose of
its portfolio securities under disadvantageous circumstances to generate cash,
or borrow cash, to satisfy these distribution requirements.

A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangible property taxes, the
value of its assets is attributable to) certain U.S. Government obligations,
provided in some states that certain thresholds for holdings of such obligations
and/or reporting requirements are satisfied. The Fund will not seek to satisfy
any threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.

The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax in the case of non-exempt shareholders
who fail to furnish the Fund with their correct taxpayer identification number
and certain certifications required by the IRS or if the IRS or a broker
notifies the Fund that the number furnished by the shareholder is incorrect or
that the shareholder is subject to backup withholding as a result of failure to
report interest or dividend income. The Fund may refuse to accept an application
that does not contain any required taxpayer identification number or
certification that the number provided is correct. If the backup withholding
provisions are applicable, any such distributions and proceeds, whether taken in
cash or reinvested in shares, will be reduced by the amounts required to be
withheld. Any amounts withheld may be credited against a shareholder's U.S.
federal income tax liability. Investors should consult their tax advisers about
the applicability of the backup withholding provisions.

Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.

Certain options, futures and forward foreign currency contracts undertaken by
the Fund may cause the Fund to recognize gains or losses from marking to market
even though its positions


                                       30


have not been sold or terminated and affect the character as long-term or
short-term (or, in the case of foreign currency contracts, as ordinary income or
loss) and timing of some capital gains and losses realized by the Fund.
Additionally, the Fund may be required to recognize gain, but not loss, if an
option, short sales or other transaction is treated as a constructive sale of an
appreciated financial position in the Fund's portfolio. Also, certain of the
Fund's losses on its transactions involving options or forward contracts and/or
offsetting or successor portfolio positions may be deferred rather than being
taken into account currently in calculating the Fund's taxable income or gains.
These transactions may therefore affect the amount, timing and character of the
Fund's distributions to shareholders. Certain of such transactions may also
cause the Fund to dispose of investments sooner than would otherwise have
occurred. The Fund will take into account the special tax rules (including
consideration of available elections) applicable to options and forward
contracts in order to seek to minimize any potential adverse tax consequences.

The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain types of
investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. Shareholders should consult their own tax
advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Fund in their particular
circumstances.

Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8, Form W-8BEN or
other authorized withholding certificate is on file and to backup withholding on
certain other payments from the Fund. Non-U.S. investors should consult their
tax advisers regarding such treatment and the application of foreign taxes to an
investment in the Fund.

The Fund is not subject to Massachusetts corporate excise or franchise taxes.
The Fund anticipates that, provided that the Fund qualifies as a regulated
investment company under the Code, it will also not be required to pay any
Massachusetts income tax.

CALCULATION OF PERFORMANCE


Because Class I shares are new, there is no performance to report. Class A
performance is currently disclosed in the Fund's prospectus for Class I shares.

As of October 31, 2001, the average annual total returns before taxes for Class
A shares of the Fund for the one and five year periods and since commencement of
operations on November 1, 1993 were -52.36%, -2.46% and 3.50%, respectively.


The average annual total return before taxes is computed by finding the average
annual compounded rate of return over the 1-year, 5-year, and 10-year periods,
or the period since the commencement of operations, that would equate the
initial amount invested to the ending redeemable value according to the
following formula:


                                       31


P(1+T)^n = ERV

Where:
       P=    a hypothetical initial payment of $1,000.
       T=    average annual total return
       n=    number of years
     ERV=    ending redeemable value of a hypothetical $1,000 payment made
             at the beginning of the 1-year, 5-year or 10-year periods (or
             fractional portion).

The Fund discloses average annual total returns after taxes for Class A shares
for the one, five and 10 year periods ended December 31, 2001 in the prospectus.
After tax returns are computed using the historical highest individual federal
marginal income-tax rates and do not reflect the impact of state and local
taxes. Actual after-tax returns depend on the investor's tax situation and may
differ from those shown. The after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement accounts.

The average annual total return (after taxes on distributions) is computed by
finding the average annual compounded rate of return over the 1-year, 5-year and
10-year periods, or the period since the commencement of operations, that would
equate the initial amount invested to the ending redeemable value according to
the following formula:

P(1+T)^n = ATV(D)

Where:
       P=    a hypothetical initial payment of $1,000.
       T=    average annual total return (after taxes on distributions)
       n=    number of years
  ATV(D)=    ending value of a hypothetical $1,000 payment made at
             the beginning of the 1-year, 5-year, or 10-year periods
             (or fractional portion) after taxes on fund
             distributions but not after taxes on redemption.

The average annual total return (after taxes on distributions and redemption) is
computed by finding the average annual compounded rate of return over the
1-year, 5-year, and 10-year periods, or the period since the commencement of
operations, that would equate the initial amount invested to the ending
redeemable value according to the following formula:

P(1+T)^n = ATV(DR)

Where:
       P=    a hypothetical initial payment of $1,000.
       T=    average annual total return (after taxes on distributions and
             redemption).
       n=    number of years.
 ATV(DR)=    ending value of a hypothetical $1,000 payment made at
             the beginning of the 1-year, 5-year or 10-year periods
             (or fractional portion), after taxes on fund
             distributions and redemption.

Because each class has its own sales charge and fee structure, the classes have
different performance results. In the case of each class, these calculations
assume the maximum sales charge is included in the initial investment or the
CDSC is applied at the end of the period. These calculations assume that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. The "distribution rate" is determined by
annualizing


                                       32


the result of dividing the declared dividends of the Fund during the period
stated by the maximum offering price or net asset value at the end of the
period. Excluding the Fund's sales charge from the distribution rate produces a
higher rate.

In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments, and/or a series of redemptions, over any time period. Total returns
may be quoted with or without taking the Fund's sales charge on Class A shares
into account. Excluding the Fund's sales charge on Class A shares from a total
return calculation produces a higher total return figure.

From time to time, in reports and promotional literature, the Fund's total
return will be compared to indices of mutual funds such as Lipper Analytical
Services, Inc.'s "Lipper-Mutual Fund Performance Analysis", a monthly
publication which tracks net assets, total return, and yield on mutual funds in
the United States. Ibottson and Associates, CDA Weisenberger and F.C. Towers are
also used for comparison purposes as well as the Russell and Wilshire Indices.

Performance ranking and ratings reported periodically in, and excerpts from,
national financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK,
THE WALL STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S may
also be utilized. The Fund's promotional and sales literature may make reference
to the Fund's "beta". Beta is a reflection of the market related risk of the
Fund by showing how the Fund is to the market.

The performance of the Fund is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of the Fund for
any period in the future. The performance of the Fund is a function of many
factors, including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemption of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performance.

BROKERAGE ALLOCATION

Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Adviser pursuant to
recommendations made by an investment committee, which consists of officers and
directors of the Adviser and its affiliates, and officers and Trustees who are
interested persons of the Trust. Orders for purchases and sales of securities
are placed in a manner which, in the opinion of the Adviser, will offer the best
price and market for the execution of each transaction. Purchases from
underwriters of portfolio securities may include a commission or commissions
paid by the issuer and transactions with dealers serving as market makers
reflect a "spread." Debt securities are generally traded on a net basis through
dealers acting for their own account as principals and not as brokers; no
brokerage commissions are payable on these transactions.

In the U.S. Government securities market, securities are generally traded on a
"net" basis with dealers acting as principal for their own account without a
stated commission, although the price of the security usually includes a profit
to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less


                                       33


government supervision and regulation of foreign stock exchanges and
broker-dealers than in the U.S.

The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Conduct Rules of the National Association of Securities Dealers, Inc. and such
other policies as the Trustees may determine, the Adviser may consider sales of
shares of the Fund a factor in the selection of broker-dealers to execute the
Fund's portfolio transactions.


To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and in the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser of the Fund, and
their value and expected contribution to the performance of the Fund. It is not
possible to place a dollar value on information and services to be received from
brokers and dealers, since it is only supplementary to the research efforts of
the Adviser. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and, conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may result
in research information and statistical assistance beneficial to the Fund. The
Fund will make no commitment to allocate portfolio transactions upon any
prescribed basis. While the Adviser's officers will be primarily responsible for
the allocation of the Fund's brokerage business, the policies and practices of
the Adviser in this regard must be consistent with the foregoing and will at all
times be subject to review by the Trustees. For the years ended October 31,
1999, 2000 and 2001, the Fund paid negotiated brokerage commissions of $776,503,
$675,634 and $850,201, respectively.

As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Trustees that such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. During the year ended October 31, 2001,
the Fund paid commissions of $249,263 to compensate brokers for research
services such as industry and company reviews and evaluations of securities.


The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of Signator Investors, Inc., a broker-dealer (until January 1, 1999,
the John Hancock Distributors, Inc.) ("Signator" or "Affiliated Broker").
Pursuant to procedures determined by the Trustees and consistent with the above
policy of obtaining best net results, the Fund may execute portfolio
transactions with or through the Affiliated Broker. For the fiscal years ended
October 31, 1999, 2000 and 2001, the Fund paid no commissions with the
Affiliated Broker.

Signator may act as broker for the Fund on exchange transactions, subject,
however, to the general policy of the Fund set forth above and the procedures
adopted by the Trustees pursuant to the Investment Company Act. Commissions paid
to an Affiliated Broker must be at least as favorable as those which the
Trustees believe to be contemporaneously charged by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold. A transaction would not be placed with an Affiliated Broker if the Fund
would have to pay a commission rate less favorable than the Affiliated Broker's
contemporaneous charges for comparable transactions for its other most favored,
but unaffiliated, customers except for accounts for which the Affiliated Broker
acts as clearing broker for another brokerage firm and


                                       34


any customers of the Affiliated Broker not comparable to the Fund as determined
by a majority of the Trustees who are not interested persons (as defined in the
Investment Company Act) of the Trust, the Adviser or the Affiliated Broker.
Because the Adviser, which is affiliated with the Affiliated Broker, has, as
investment adviser to the Fund, the obligation to provide investment management
services, which includes elements of research and related investment skills,
such research and related skills will not be used by the Affiliated Broker as a
basis for negotiating commissions at a rate higher than that determined in
accordance with the above criteria.

Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Fund. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Fund. Because of
this, client accounts in a particular style may sometimes not sell or acquire
securities as quickly or at the same prices as they might if each were managed
and traded individually.

For purchases of equity securities, when a complete order is not filled, a
partial allocation will be made to each account pro rata based on the order
size. For high demand issues (for example, initial public offerings), shares
will be allocated pro rata by account size as well as on the basis of account
objective, account size ( a small account's allocation may be increased to
provide it with a meaningful position), and the account's other holdings. In
addition, an account's allocation may be increased if that account's portfolio
manager was responsible for generating the investment idea or the portfolio
manager intends to buy more shares in the secondary market. For fixed income
accounts, generally securities will be allocated when appropriate among accounts
based on account size, except if the accounts have different objectives or if an
account is too small to get a meaningful allocation. For new issues, when a
complete order is not filled, a partial allocation will be made to each account
pro rata based on the order size. However, if a partial allocation is too small
to be meaningful, it may be reallocated based on such factors as account
objectives, strategies, duration benchmarks and credit and sector exposure. For
example, value funds will likely not participate in initial public offerings as
frequently as growth funds. In some instances, this investment procedure may
adversely affect the price paid or received by the Fund or the size of the
position obtainable for it. On the other hand, to the extent permitted by law,
the Adviser may aggregate securities to be sold or purchased for the Fund with
those to be sold or purchased for other clients managed by it in order to obtain
best execution.

TRANSFER AGENT SERVICES

John Hancock Signature Services, Inc., 1 John Hancock Way, Suite 1001, Boston,
MA 02217-1001, a wholly-owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays Signature
Services al fee of 0.05% of its average daily net assets attributable to Class I
shares plus certain out-of-pocket expenses.

CUSTODY OF PORTFOLIO

Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Trust and The Bank of New York, One Wall Street, New York, New York
10286. Under the custodian agreement, The Bank of New York is performing
custody, Foreign Custody Manager and fund accounting services.

INDEPENDENT AUDITORS


The independent auditors of the Fund are PricewaterhouseCoopers LLP, 160 Federal
Street, Boston, Massachusetts 02110. PricewaterhouseCoopers LLP audits and
renders an opinion on the Fund's annual financial statements and reviews the
Fund's annual Federal income tax return.



                                       35


APPENDIX A - MORE ABOUT RISK

A fund's risk profile is largely defined by the fund's primary securities and
investment practices. You may find the most concise description of the fund's
risk profile in the prospectus.

A fund is permitted to utilize -- within limits established by the trustees --
certain other securities and investment practices that have higher risks and
opportunities associated with them. To the extent that the Fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following pages are brief definitions of
certain associated risks with them with examples of related securities and
investment practices included in brackets. See the "Investment Objective and
Policies" and "Investment Restrictions" sections of this Statement of Additional
Information for a description of this Fund's investment policies. The Fund
follows certain policies that may reduce these risks.

As with any mutual fund, there is no guarantee that the Fund will earn income or
show a positive return over any period of time -- days, months or years.

TYPES OF INVESTMENT RISK

Correlation risk The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). Incomplete correlation can result
in unanticipated risks. (e.g., short sales, financial futures and options;
securities and index options, currency contracts).

Credit risk The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. (e.g., borrowing; reverse repurchase agreements, repurchase
agreements, securities lending, non-investment-grade securities, financial
futures and options; securities and index options).

Currency risk The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency denominated investments and may widen any losses. (e.g., foreign
equities, financial futures and options; securities and index options, currency
contracts).

Information risk The risk that key information about a security or market is
inaccurate or unavailable. (e.g., non-investment-grade securities, foreign
equities).

Interest rate risk The risk of market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values. (e.g.,
non-investment-grade securities, financial futures and options; securities and
index options).

Leverage risk Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value. (e.g.,
borrowing; reverse repurchase agreements, when-issued securities and forward
commitments).

o     Hedged When a derivative (a security whose value is based on another
      security or index) is used as a hedge against an opposite position that
      the fund also holds, any loss generated by the derivative should be
      substantially offset by gains on the hedged investment, and vice versa.
      While hedging can


                                       A-1


      reduce or eliminate losses, it can also reduce or eliminate gains. (e.g.,
      short sales, financial futures and options securities and index options;
      currency contracts).

o     Speculative To the extent that a derivative is not used as a hedge, the
      fund is directly exposed to the risks of that derivative. Gains or losses
      from speculative positions in a derivative may be substantially greater
      than the derivative's original cost. (e.g., short sales, financial futures
      and options securities and index options; currency contracts).

o     Liquidity risk The risk that certain securities may be difficult or
      impossible to sell at the time and the price that the seller would like.
      The seller may have to lower the price, sell other securities instead or
      forego an investment opportunity, any of which could have a negative
      effect on fund management or performance. (e.g., non-investment-grand
      securities, short sales, restricted and illiquid securities, financial
      futures and options securities and index options; currency contracts).

Management risk The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.

Market risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than the price originally paid for it, or less than it was worth
at an earlier time. Market risk may affect a single issuer, industry, sector of
the economy or the market as a whole. Common to all stocks and bonds and the
mutual funds that invest in them. (e.g., short sales, short-term trading,
when-issued securities and forward commitments, non-investment-grade securities,
foreign equities, financial futures and options; securities and index options
restricted and illiquid securities).

Natural event risk The risk of losses attributable to natural disasters, crop
failures and similar events. (e.g., foreign equities).

Opportunity risk The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments. (e.g., short sales, when-issued securities and forward commitments;
financial futures and options; securities and index options, currency
contracts).

Political risk The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and
war.(e.g., foreign equities).

Valuation risk The risk that a fund has valued certain of its securities at a
higher price than it can sell them for. (e.g., non-investment-grade securities,
restricted and illiquid securities).


                                       A-2


                                   APPENDIX B

                           DESCRIPTION OF BOND RATINGS

Standard & Poor's Bond Ratings

      AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

      AA-Debt rated AA has a very strong capacity to pay interest and repay
principal, and differs from the highest rated issues only in small degree.

      A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

      BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

      To provide more detailed indications of credit quality, the ratings AA to
BBB may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.

      A provisional rating, indicated by "p" following a rating, is sometimes
used by Standard & Poor's. It assumes the successful completion of the project
being financed by the issuance of the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion.

Moody's Bond Ratings

      Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Generally speaking, the safety
of obligations of this class is so absolute that with the occasional exception
of oversupply in a few specific instances, characteristically, their market
value is affected solely by money market fluctuations.

      Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
The market value of Aa bonds is virtually immune to all but money market
influences, with the occasional exception of oversupply in a few specific
instances.


                                       B-1


      A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

      Baa-Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

      Rating symbols may include numerical modifiers 1, 2 or 3. The numerical
modifier 1 indicates that the security ranks at the high end, 2 in the
mid-range, and 3 nearer the low end, of the generic category. These modifiers of
rating symbols Aa, A and Baa are to give investors a more precise indication of
relative debt quality in each of the historically defined categories.

      Conditional ratings, indicated by "Con", are sometimes given when the
security for the bond depends upon the completion of some act or the fulfillment
of some condition. Such bonds, are given a conditional rating that denotes their
probably credit statute upon completion of that act or fulfillment of that
condition.


                                       B-2


FINANCIAL STATEMENTS


The financial statements listed below are included in the Fund's 2001 Annual
Report to Shareholder's for the year ended October 31, 2001(filed electronically
on December 27, 2001, accession number 0000928816-01-500747 and are included in
and incorporated by reference into Part B of the Registration Statement for John
Hancock Mid Cap Growth Fund (file no. 811-4630 and 33-4559).

John Hancock Investment Trust III
         John Hancock Mid Cap Growth Fund

Statement of Assets and Liabilities as of October 31,2001.
    Statement of Operations for year ended October 31, 2001.
    Statement of Changes in Net Assets for the two years ended October 31, 2001.
    Financial Highlights.
    Notes to Financial Statements.
    Schedule of Investments as of October 31, 2001.
    Report of Independent Auditors



                                       F-1







               Supplements to the John Hancock Institutional Funds
                          Prospectus Dated July 2, 2001

John Hancock Small Cap Equity Fund
- ----------------------------------

On November 20, 2001, the Trustees of the John Hancock Small Cap Equity Fund
voted to change the Fund's name to the John Hancock Small Cap Equity Fund Y,
effective March 1, 2002.

John Hancock Active Bond Fund
- -----------------------------
John Hancock Medium Capitalization Growth Fund
- ----------------------------------------------
John Hancock Small Cap Equity Fund Y
- ------------------------------------
John Hancock International Equity Fund
- --------------------------------------

On February 26, 2002, the Trustees of the John Hancock Institutional Series
Trust (the "Trust") voted to recommend that shareholders of the Series of the
Trust listed below (the "Acquired Funds") approve the following tax-free
reorganizations:

- --------------------------------------------------------------------------------
     Acquired Funds                             Acquiring Funds
- --------------------------------------------------------------------------------
Active Bond Fund                        Bond Fund
- --------------------------------------------------------------------------------
Medium Capitalization Growth Fund       Mid Cap Growth Fund
- --------------------------------------------------------------------------------
Small Cap Equity Fund Y                 Small Cap Equity Fund
- --------------------------------------------------------------------------------
International Equity Fund               International Fund
- --------------------------------------------------------------------------------

Under the terms of each reorganization, subject to shareholder approval at a
shareholder meeting scheduled for May 29, 2002, each Acquired Fund would
transfer all of its assets and liabilities to the corresponding Acquiring Fund
in a tax-free exchange for Class I shares of equal value of the Acquiring Fund.
Further information regarding each proposed reorganization will be contained in
a proxy statement and prospectus scheduled to be mailed to shareholders on or
about April 15, 2002.

Effective March 15, 2002, each Acquired Fund will be closed to all new accounts.

February 27, 2002



John Hancock Medium Capitalization Growth Fund
- ----------------------------------------------

On page 8, the "Portfolio Managers" section for the John Hancock Medium
Capitalization Growth Fund has been changed as follows:

         PORTFOLIO MANAGERS

         Paul J. Berlinguet
         ------------------

         Vice president of adviser
         Joined fund team in 2001
         Joined adviser in 2001
         U.S. equity investment manager
           at Baring America Asset
           Management (1989-2001)
         Began business career in 1986

         Robert J. Uek, CFA
         ------------------

         Vice president of adviser
         Joined fund team in 2001
         Joined adviser in 1997
           Corporate finance manager
           at Ernst & Young (1994-1997)
         Began business career in 1990

         Timothy N. Manning
         ------------------

         Joined fund team in 2000
         Joined adviser in 2000
         Analyst at State Street Research
           (1999-2000)
         Equity research associate at
           State Street Research (1996-1999)
         Began business career in 1993

January 7, 2002




John Hancock Small Cap Equity Fund
- ----------------------------------

On page 10, the "Portfolio Managers" section for the John Hancock Small Cap
Equity Fund has been changed as follows:

         PORTFOLIO MANAGERS

         James S. Yu, CFA
         ----------------

         Vice president of adviser
         Joined fund team in 2000
         Joined adviser in 2000
          Analyst at Merrill Lynch Asset
          Management (1998-2000)
         Analyst at Gabelli & Company
          (1995-1998)
         Began business career in 1991

         Roger C. Hamilton
         -----------------

         Vice president of adviser
         Joined fund team in 1999
         Joined adviser in 1994
         Began business career in 1980

December 10, 2001



                        John Hancock Institutional Funds
      Supplement to the Prospectus and Statement of Additional Information
                               Dated July 2, 2001

John Hancock Small Capitalization Value Fund
- --------------------------------------------

On September 25, 2001, the Trustees of the John Hancock Small Capitalization
Value Fund voted to change the Fund's name to the John Hancock Small Cap Equity
Fund, effective September 30, 2001.

September 25, 2001




                                                                    John Hancock
                                                             Institutional Funds


                                                                      Prospectus


                                                                    July 2, 2001


- --------------------------------------------------------------------------------

                                                                Active Bond Fund

                                                        Dividend Performers Fund

                                               Medium Capitalization Growth Fund

                                                 Small Capitalization Value Fund

                                                   Focused Small Cap Growth Fund
                                     (formerly Small Capitalization Growth Fund)

                                                       International Equity Fund

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these funds or determined whether the information in
this prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a federal crime.

                                                                  [LOGO](R)
                                                            --------------------
                                                             JOHN HANCOCK FUNDS



Contents
- --------------------------------------------------------------------------------
A fund-by-fund summary          Active Bond Fund                               4
of goals, strategies, risks,
performance and expenses.       Dividend Performers Fund                       6

                                Medium Capitalization Growth Fund              8

                                Small Capitalization Value Fund               10

                                Focused Small Cap Growth Fund                 12

                                International Equity Fund                     14

Policies and instructions for   Your account
opening, maintaining and
closing an account in any       Who can buy shares                            16
institutional fund.             Opening an account                            16
                                Buying shares                                 17
                                Selling shares                                18
                                Transaction policies                          20
                                Dividends and account policies                20
                                Business structure                            21

Further information on the      Financial highlights                          22
institutional funds.
                                For more information                  back cover



Overview
- --------------------------------------------------------------------------------

FUND INFORMATION KEY

Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:

[Clip Art] Goal and strategy The fund's particular investment goals and the
strategies it intends to use in pursuing those goals.

[Clip Art] Main risks The major risk factors associated with the fund.

[Clip Art] Past performance The fund's total return, measured year-by-year and
over time.

[Clip Art] Your expenses The overall costs borne by an investor in the fund,
including annual expenses.

JOHN HANCOCK INSTITUTIONAL FUNDS


These funds offer clearly defined investment strategies, each focusing on a
particular market segment and following a disciplined investment process.
Blended together or selected individually, these funds are designed to meet the
needs of investors seeking risk-managed investment strategies from seasoned
professional portfolio managers.


RISKS OF MUTUAL FUNDS

Mutual funds are not bank deposits and are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Because
you could lose money by investing in these funds, be sure to read all risk
disclosure carefully before investing.

THE MANAGEMENT FIRM

All John Hancock institutional funds are managed by John Hancock Advisers, Inc.
Founded in 1968, John Hancock Advisers is a wholly owned subsidiary of John
Hancock Financial Services, Inc. and manages more than $30 billion in assets.


                                                                               3


Active Bond Fund

GOAL AND STRATEGY

[Clip Art] The fund seeks a high rate of total return consistent with prudent
investment risk. To pursue this goal, the fund normally invests 80% of assets in
a diversified portfolio of investment-grade debt securities. These include
corporate bonds and debentures as well as U.S. government and agency securities.
Most of these securities are investment-grade, although the fund may invest up
to 20% of assets in junk bonds rated as low as CC/Ca and their unrated
equivalents. There is no limit on the fund's average maturity.

In managing the fund's portfolio, the managers concentrate on sector allocation,
industry allocation and securities selection: deciding which types of bonds and
industries to emphasize at a given time, and then which individual bonds to buy.
When making sector and industry allocations, the managers try to anticipate
shifts in the business cycle, using top-down analysis to determine which sectors
and industries may benefit over the next 12 months.

In choosing individual securities, the managers use bottom-up research to find
securities that appear comparatively undervalued. The managers look at bonds of
all different quality levels and maturities from many different issuers. These
may include bonds of foreign governments and companies which are usually U.S.
dollar-denominated.

The fund uses a disciplined, risk-controlled approach to fixed income
management. The fund may invest in mortgage-related securities and certain other
derivatives (investments whose value is based on indexes, securities or
currencies). The fund intends to keep its exposure to interest rate movements
generally in line with that of the markets in which it invests.

Under normal conditions, the fund may not invest more than 10% of assets in cash
or cash equivalents.

In abnormal conditions, the fund may temporarily invest in investment-grade
short-term securities. In these and other cases, the fund might not achieve its
goal.

================================================================================

PORTFOLIO MANAGERS

James K. Ho, CFA
- ---------------------------------------
Executive vice president of adviser
Joined team in 1995
Joined adviser in 1985
Began business career in 1977

Benjamin A. Matthews
- ---------------------------------------
Vice president of adviser
Joined team in 1995
Joined adviser in 1995
Began business career in 1970

PAST PERFORMANCE

[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment. Past performance
does not indicate future results.


- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
                                          1996     1997    1998    1999    2000
                                          4.82%   10.38%   8.97%  -0.41%  11.51%

2001 total return as of March 31: 2.91%
Best quarter: Q4 '00, 4.24%  Worst quarter: Q1 '96, -0.93%

- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/00
- --------------------------------------------------------------------------------
                                                            Fund         Index
1 year                                                     11.51%        11.85%
5 year                                                      6.96%         6.24%
Life of fund - began 3/30/95                                7.59%         7.76%


Index: Lehman Brothers Government/Credit Bond Index, an unmanaged index of U.S.
government, U.S. corporate and Yankee bonds.


4


MAIN RISKS

[Clip Art] The major factors that influence this fund's performance are interest
rates and credit risk. When interest rates rise, bond prices generally fall. An
increase in the fund's average maturity will normally increase its sensitivity
to changes in interest rates.

The fund could lose money if the credit ratings of any bonds it owns are
downgraded or the issuers default. In general, lower-rated bonds have higher
credit risks. If certain sectors or investments do not perform as the fund
expects, it could underperform its peers or lose money.

To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:

o     Junk bonds and foreign securities may make the fund more sensitive to
      market or economic shifts in the U.S. and abroad.

o     If interest rate movements cause the fund's mortgage-related and callable
      securities to be paid off substantially earlier or later than expected,
      the fund's share price or yield could be hurt.

o     In a rising interest rate environment, higher-risk securities and
      derivatives could become harder to value or to sell at a fair price.

o     Certain derivatives could produce disproportionate losses.

Any U.S. government guarantees on individual securities in the portfolio do not
apply to these securities' market value or current yield, or to fund shares.


The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.


================================================================================

YOUR EXPENSES

[Clip Art] Operating expenses are paid from the fund's assets, and therefore are
paid by shareholders indirectly.


- --------------------------------------------------------------------------------
Annual operating expenses
- --------------------------------------------------------------------------------
Management fee                                                         0.50%
Other expenses                                                         1.56%
Total fund operating expenses                                          2.06%
Expense reimbursement (at least until 6/30/02)                         1.46%
Net annual operating expenses                                          0.60%

The hypothetical example below shows what your expenses would be after the
expense reimbursement (first year only) if you invested $10,000 over the time
frames indicated, assuming you reinvested all distributions, that the average
annual return was 5% and that your shares were redeemed at the end of the time
frames. The example is for comparison only, and does not represent the fund's
actual expenses and returns, either past or future.

- --------------------------------------------------------------------------------
Expenses                        Year 1       Year 3       Year 5       Year 10
- --------------------------------------------------------------------------------
                                $61          $504         $973         $2,273


FUND CODES

- ---------------------------------------
Ticker            JHABX
CUSIP             410132203
Newspaper         ActiveBd
JH fund number    421


                                                                               5


Dividend Performers Fund

GOAL AND STRATEGY

[Clip Art] The fund seeks long-term growth of capital with income as a secondary
objective. To pursue this goal, the fund normally invests at least 80% of assets
in a diversified portfolio of U.S. stocks with market capitalizations within the
range of the Standard & Poor's 500 Stock Index. On May 31, 2001, that range was
$730 million to $482 billion.


The managers normally invest at least 80% of assets in "dividend performers."
These are companies that have typically increased their dividend payments
over time, or which the managers believe demonstrate the potential for above-
average stability of growth of earnings and dividends.


In managing the portfolio, the managers use fundamental financial analysis to
identify individual companies with high-quality income statements, substantial
cash reserves and identifiable catalysts for growth, which may be new products
or benefits from industry-wide growth. The managers generally visit companies to
evaluate the strength and consistency of their management strategy. Finally, the
managers look for stocks that are reasonably priced relative to their earnings
and industry. Historically, companies that meet these criteria have tended to
have large market capitalizations.

The fund may not invest more than 5% of assets, at time of purchase, in any one
security. The fund typically invests in U.S. companies but may invest in
American Depositary Receipts. It may also make limited use of certain
derivatives (investments whose value is based on indexes).

Under normal conditions, the fund may not invest more than 10% of assets in cash
or cash equivalents.

In abnormal conditions, the fund may temporarily invest in U.S. government
securities with maturities of up to three years and more than 10% of assets in
cash or cash equivalents. In these and other cases, the fund might not achieve
its goal.

================================================================================

PORTFOLIO MANAGERS

John F. Snyder, III
- ---------------------------------------
Executive vice president of adviser
Joined team in 1995
Joined adviser in 1991
Began business career in 1971

Peter M. Schofield, CFA
- ---------------------------------------
Vice president of adviser
Joined fund team in 1996
Joined adviser in 1996
Portfolio manager at Geewax,
  Terker & Co. (1984-1996)
Began business career in 1984

PAST PERFORMANCE

[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment. Past performance
does not indicate future results.


- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
                                          1996     1997    1998    1999    2000
                                         18.56%   34.33%  17.95%  13.38%  -0.62%

2001 total return as of March 31: -12.01%
Best quarter: Q4 '98, 20.75% Worst quarter: Q3 '98, -11.46%

- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/00
- --------------------------------------------------------------------------------
                                                           Fund         Index
1 year                                                     -0.62%       -9.10%
5 year                                                     16.18%       18.33%
Life of fund - began 3/30/95                               17.29%       20.27%

Index: Standard &Poor's 500 Index, an unmanaged index of 500 stocks.



6


MAIN RISKS

[Clip Art] The value of your investment will fluctuate in response to movements
in the stock market.

The fund's investment strategy will influence performance significantly.
Large-capitalization stocks could fall out of favor, causing the fund to
underperform funds that focus on small- or medium-capitalization stocks.
Similarly, if individual securities do not perform as the management team
expects, the fund could underperform its peers or lose money.

To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:

o     Certain derivatives could produce disproportionate losses.

o     Foreign investments carry additional risks, including inadequate or
      inaccurate financial information and social or political instability.

o     In a down market, higher-risk securities and derivatives could become
      harder to value or to sell at a fair price.

================================================================================

YOUR EXPENSES

[Clip Art] Operating expenses are paid from the fund's assets, and therefore are
paid by shareholders indirectly.


- --------------------------------------------------------------------------------
Annual operating expenses
- --------------------------------------------------------------------------------
Management fee                                                         0.60%
Other expenses                                                         0.51%
Total fund operating expenses                                          1.11%
Expense reimbursement (at least until 6/30/02)                         0.41%
Net annual operating expenses                                          0.70%

The hypothetical example below shows what your expenses would be after the
expense reimbursement (first year only) if you invested $10,000 over the time
frames indicated, assuming you reinvested all distributions, that the average
annual return was 5% and that your shares were redeemed at the end of the time
frames. The example is for comparison only, and does not represent the fund's
actual expenses and returns, either past or future.

- --------------------------------------------------------------------------------
Expenses                        Year 1       Year 3       Year 5       Year 10
- --------------------------------------------------------------------------------
                                $72          $312         $572         $1,315


FUND CODES

- ---------------------------------------
Ticker            JHDPX
CUSIP             410132104
Newspaper         DivPerf
JH fund number    442


                                                                               7


Medium Capitalization Growth Fund

GOAL AND STRATEGY

[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 80% of assets in stocks of
medium-capitalization companies -- companies in the capitalization range of the
Russell Midcap Growth Index. On May 31, 2001, that range was $50 million to $21
billion.


In managing the portfolio, the managers seek to identify promising sectors for
investment. The managers consider broad economic trends, demographic factors,
technological changes, consolidation trends and legislative initiatives.


Quantitative screens identify companies with at least 15% annual earnings
growth, expanding profit margins and projected price/earnings ratios below their
earnings growth rate.


The managers conduct fundamental analysis to identify companies with a dominant
market position and a strong management team. Before investing, the managers
look for a specific catalyst for growth, such as a new product or business
reorganization. The management team generally maintains personal contact with
the senior management of the companies in which the fund invests.


The fund may invest up to 10% of assets in foreign securities. It may also use
certain derivatives (investments whose value is based on indexes or currencies).

The fund may not invest more than 5% of assets, at time of purchase, in any one
security.

Under normal conditions, the fund may not invest more than 10% of assets in cash
or cash equivalents.

In abnormal conditions, the fund may temporarily invest in U.S. government
securities with maturities of up to three years and more than 10% of assets in
cash or cash equivalents. In these and other cases, the fund might not achieve
its goal.


The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.


================================================================================

PORTFOLIO MANAGERS


Team responsible for day-to-day
investment management


PAST PERFORMANCE

[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment. Past performance
does not indicate future results.


- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
                                         1996     1997    1998    1999    2000
                                        31.55%    3.61%   7.35%  60.19%  -13.11%

2001 total return as of March 31: -29.64%
Best quarter: Q4 '99, 45.24% Worst quarter: Q3 '98, -20.97%

- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/00
- --------------------------------------------------------------------------------
                                                            Fund       Index
1 year                                                    -13.11%     -11.75%
5 year                                                     15.29%      17.77%
Life of fund - began 4/11/95                               17.03%      19.14%*


Index: Russell Midcap Growth Index, an unmanaged index containing those stocks
from the Russell Midcap Index with a greater-than-average growth orientation.

* Index figure as of 3/31/95.


8


MAIN RISKS

[Clip Art] The value of your investment will fluctuate in response to movements
in the stock market.

Stocks of medium-capitalization companies may be more volatile than those of
larger companies. Similarly, medium-capitalization stocks are generally traded
in lower volumes than large-capitalization stocks.

The fund's investment strategy will influence performance significantly.
Medium-capitalization stocks could fall out of favor, causing the fund to
underperform funds that focus on other types of stocks. Also, growth stocks as a
group could fall out of favor with the market, causing the fund to underperform
funds that focus on value stocks. Similarly, if industries or individual
securities do not perform as the management team expects, the fund could
underperform its peers or lose money.

To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:

o     In a down market, higher-risk securities and derivatives could become
      harder to value or to sell at a fair price.

o     Certain derivatives could produce disproportionate losses.

o     Foreign investments carry additional risks, including potentially
      unfavorable currency exchange rates, inadequate or inaccurate financial
      information and social or political instability.

================================================================================
YOUR EXPENSES

[Clip Art] Operating expenses are paid from the fund's assets, and therefore are
paid by shareholders indirectly.


- --------------------------------------------------------------------------------
Annual operating expenses
- --------------------------------------------------------------------------------
Management fee                                                         0.80%
Other expenses                                                         0.37%
Total fund operating expenses                                          1.17%
Expense reimbursement (at least until 6/30/02)                         0.27%
Net annual operating expenses                                          0.90%

The hypothetical example below shows what your expenses would be after the
expense reimbursement (first year only) if you invested $10,000 over the time
frames indicated, assuming you reinvested all distributions, that the average
annual return was 5% and that your shares were redeemed at the end of the time
frames. The example is for comparison only, and does not represent the fund's
actual expenses and returns, either past or future.

- --------------------------------------------------------------------------------
Expenses                        Year 1       Year 3       Year 5       Year 10
- --------------------------------------------------------------------------------
                                $92          $345         $618         $1,396


FUND CODES

- ---------------------------------------
Ticker            HMSGX
CUSIP             410132401
Newspaper         MdCapGr
JH fund number    439


                                                                               9


Small Capitalization Value Fund

GOAL AND STRATEGY


[Clip Art] The fund seeks capital appreciation. To pursue this goal, the fund
normally invests at least 80% of assets in stocks of small-capitalization
companies -- companies in the capitalization range of the Russell 2000 Index. On
May 31, 2001, that range was $10 million to $4.9 billion.


In managing the portfolio, the managers emphasize a value-oriented approach to
individual stock selection. With the aid of proprietary financial models, the
management team looks for companies that are selling at what appear to be
substantial discounts to their long-term value. These companies often have
identifiable catalysts for growth,
such as new products, business reorganizations or mergers.

The managers use fundamental financial analysis of individual companies to
identify those with substantial cash flows, reliable revenue streams and strong
competitive positions. The strength of companies' management teams is also a key
selection factor. The fund diversifies across industry sectors. The fund may not
invest more than 5% of assets, at time of purchase, in any one security.

The fund invests primarily in stocks of U.S. companies, but may invest up to 15%
of assets in a basket of foreign securities and bonds rated as low as CC/Ca and
their unrated equivalents. (Bonds rated below BBB/Baa are considered junk
bonds.)

The fund may make limited use of certain derivatives (investments whose value is
based on indexes or currencies).

Under normal conditions, the fund may not invest more than 10% of assets in cash
or cash equivalents.

In abnormal conditions, the fund may temporarily invest in investment- grade
short-term securities. In these and other cases, the fund might not achieve its
goal.


The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.


================================================================================
PORTFOLIO MANAGERS

Timothy E. Quinlisk, CFA
- ---------------------------------------
Senior vice president of adviser
Joined fund team in 1998
Joined adviser in 1998
Analyst at Hagler, Mastrouita & Hewitt (1997-1998)
Analyst at State Street Global
 Advisors (1995-1997)
Began business career in 1985

James S. Yu, CFA
- ---------------------------------------
Vice president of adviser
Joined fund team in 2000
Joined adviser in 2000
Analyst at Merrill Lynch Asset
 Management (1998-2000)
Analyst at Gabelli & Company
 (1995-1998)
Began business career in 1990

R. Scott Mayo, CFA
- ---------------------------------------
Second vice president of adviser
Joined fund team in 2000
Joined adviser in 1998
Analyst at Morgan Stanley (1998)
Analyst at Grantham, Mayo & Van Otterloo (1993-1996)
Began business career in 1993

PAST PERFORMANCE

[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with broad-based market
indices for reference). This information may help provide an indication of the
fund's risks. All figures assume dividend reinvestment. Past performance does
not indicate future results.


- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
                                        1996     1997    1998     1999     2000
                                       15.60%   29.12%   0.29%   101.91%  -4.30%

2001 total return as of March 31: -2.92%
Best quarter: Q4 '99, 46.48% Worst quarter: Q3 '98, -22.63%

- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/00
- --------------------------------------------------------------------------------
                                          Fund         Index 1        Index 2
1 year                                   -4.30%         -3.02%         22.83%
5 year                                   23.67%         10.31%         12.60%
Life of fund - began 4/19/95             21.74%         12.80%         14.48%

Index 1: Russell 2000 Index, an unmanaged index of 2,000 U.S.
small-capitalization stocks.


Index 2: Russell 2000 Value Index, an unmanaged index containing those stocks
from the Russell 2000 Index with a value orientation.


10


MAIN RISKS

[Clip Art] The value of your investment will fluctuate in response to movements
in the stock market. Because the fund concentrates on small-capitalization
companies, its performance may be more volatile than that of a fund that invests
primarily in larger companies.

Stocks of smaller companies are more risky than those of larger companies. Many
of these companies are young and have a limited track record. Because their
businesses frequently rely on narrow product lines and niche markets, they can
suffer severely from isolated business setbacks.

The fund's investment strategy will influence performance significantly.
Small-capitalization stocks could fall out of favor, causing the fund to
underperform funds that focus on other types of stocks. Also, value stocks as a
group could fall out of favor with the market, causing the fund to underperform
funds that focus on growth stocks. Similarly, if industries or individual
securities do not perform as the management team expects, the fund could
underperform its peers or lose money.

To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:

o     In a down market, derivatives and other higher-risk securities could
      become harder to value or to sell at a fair price; this risk could also
      affect small-capitalization stocks, especially those with low trading
      volumes.

o     Certain derivatives could produce disproportionate losses.

o     Foreign investments carry additional risks, including potentially
      unfavorable currency exchange rates, inadequate or inaccurate financial
      information and social or political instability.

o     The credit rating of any bonds held by the fund could be downgraded, or
      the issuer could default. Bond prices generally fall when interest rates
      rise. Junk bond prices can fall on bad news about the economy, an industry
      or a company.

================================================================================

YOUR EXPENSES

[Clip Art] Operating expenses are paid from the fund's assets, and therefore are
paid by shareholders indirectly.


- --------------------------------------------------------------------------------
Annual operating expenses
- --------------------------------------------------------------------------------
Management fee                                                         0.70%
Other expenses                                                         0.35%
Total fund operating expenses                                          1.05%
Expense reimbursement (at least until 6/30/02)                         0.25%
Net annual operating expenses                                          0.80%

The hypothetical example below shows what your expenses would be after the
expense reimbursement (first year only) if you invested $10,000 over the time
frames indicated, assuming you reinvested all distributions, that the average
annual return was 5% and that your shares were redeemed at the end of the time
frames. The example is for comparison only, and does not represent the fund's
actual expenses and returns, either past or future.

- --------------------------------------------------------------------------------
Expenses                        Year 1       Year 3       Year 5       Year 10
- --------------------------------------------------------------------------------
                                $82          $309         $554         $1,256


FUND CODES

- ---------------------------------------
Ticker            JHFVX
CUSIP             410132500
Newspaper         SmCpVal
JHfund number     437


                                                                              11


Focused Small Cap Growth Fund

GOAL AND STRATEGY


[Clip Art] The fund seeks long-term growth of capital. To pursue this goal, the
fund normally invests at least 80% of assets in stocks of small-capitalization
companies -- companies in the capitalization range of the Russell 2000 Growth
Index. On May 31, 2001, that range was $10 million to $4.9 billion. The fund
utilizes a focused investment strategy and will typically concentrate its
investments in 50 to 70 companies.


In managing the portfolio, the managers look for companies in the emerging
growth phase of development that are not yet widely recognized. The fund also
may invest in established companies that, because of new management, products or
opportunities, offer the possibility of accelerating earnings.

In choosing individual securities, the managers use fundamental financial
analysis to identify rapidly growing companies. The managers favor companies
that dominate their market niches or are poised to become market leaders. They
look for strong senior management teams and coherent business strategies. They
generally maintain personal contact with the senior management of the companies
the fund invests in.

The fund may invest in preferred stock and other types of equities, and may
invest up to 10% of assets in foreign securities.

The fund may also make limited use of certain derivatives (investments whose
value is based on indexes or currencies). The fund may not invest more than 5%
of assets, at time of purchase, in any one security.

Under normal conditions, the fund may not invest more than 10% of assets in cash
or cash equivalents.

In abnormal conditions, the fund may temporarily invest in U.S. government
securities with maturities of up to three years and more than 10% of assets in
cash or cash equivalents. In these and other cases, the fund might not achieve
its goal.


The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.


================================================================================

PORTFOLIO MANAGERS

Bernice S. Behar, CFA
- ---------------------------------------
Senior vice president of adviser
Joined team in 1996
Joined adviser in 1991
Began business career in 1986

Anurag Pandit, CFA
- ---------------------------------------
Vice president of adviser
Joined fund team in 1996
Joined adviser in 1996
Equity analyst at Loomis Sayles
 (1992-1996)
Began business career in 1984

PAST PERFORMANCE

[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment. Past performance
does not indicate future results.


- --------------------------------------------------------------------------------
Class I year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
                                                  1997    1998    1999     2000
                                                 14.86%  16.54%  77.12%  -23.10%

2001 total return as of March 31: -28.76%
Best quarter: Q4 '99, 47.34% Worst quarter: Q3 '98, -21.25%

- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/00
- --------------------------------------------------------------------------------
                                                           Class I       Index
1 year                                                     -23.10%      -22.43%
Life of Class I - began 5/2/96                              16.86%        4.58%

Index: Russell 2000 Growth Index, an unmanaged index containing those stocks
from the Russell 2000 Index with a greater-than-average growth orientation.



12


MAIN RISKS

[Clip Art] The value of your investment will fluctuate in response to movements
in the stock market. Because the fund concentrates on smaller companies, its
performance may be more volatile than that of a fund that invests primarily in
larger companies. In addition, the fund focuses on a limited number of
companies, which could cause greater fluctuations in share price than would
occur in a more diversified fund.

Stocks of smaller companies are more risky than those of larger companies. Many
of these companies are young and have a limited track record. Because their
businesses frequently rely on narrow product lines and niche markets, they can
suffer severely from isolated business setbacks.

The fund's investment strategy will influence performance significantly.
Small-company stocks could fall out of favor, causing the fund to underperform
funds that focus on other types of stocks. Also, growth stocks as a group could
fall out of favor with the market, causing the fund to underperform funds that
focus on value stocks. To the extent the fund invests in a given industry, its
performance will be hurt if that industry performs poorly. Similarly, if the
individual securities do not perform as the management team expects, the fund
could underperform its peers or lose money.

To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:

o     In a down market, derivatives and other higher-risk securities could
      become harder to value or to sell at a fair price; this risk could also
      affect small-capitalization stocks, especially those with low trading
      volumes.

o     Certain derivatives could produce disproportionate losses.

o     Foreign investments carry additional risks, including potentially
      unfavorable currency exchange rates, inadequate or inaccurate financial
      information and social or political instability.

================================================================================

YOUR EXPENSES

[Clip Art] Operating expenses are paid from the fund's assets, and therefore are
paid by shareholders indirectly.


- --------------------------------------------------------------------------------
Annual operating expenses
- --------------------------------------------------------------------------------
Management fee                                                         0.80%
Other expenses                                                         1.28%
Total fund operating expenses                                          2.08%
Expense reimbursement (at least until 6/30/02)                         1.14%
Net annual operating expenses                                          0.94%

The hypothetical example below shows what your expenses would be after the
expense reimbursement (first year only) if you invested $10,000 over the time
frames indicated, assuming you reinvested all distributions, that the average
annual return was 5% and that your shares were redeemed at the end of the time
frames. The example is for comparison only, and does not represent the fund's
actual expenses and returns, either past or future.

- --------------------------------------------------------------------------------
Expenses                        Year 1       Year 3       Year 5       Year 10
- --------------------------------------------------------------------------------
                                $95          $541         $1,012       $2,317


FUND CODES

Class I
- ---------------------------------------
Ticker            JCGYX
CUSIP             410132856
Newspaper         --
JHfund number     418


                                                                              13


International Equity Fund

GOAL AND STRATEGY

[Clip Art] The fund seeks long-term growth of capital. To pursue this goal, the
fund normally invests at least 80% of assets in stocks of foreign companies. The
fund may invest up to 30% of assets in emerging markets as classified by Morgan
Stanley Capital International (MSCI). The fund does not maintain a fixed
allocation of assets, either with respect to securities type or geography.

In managing the portfolio, the managers focus on a "bottom-up" analysis on the
financial conditions and competitiveness of individual foreign companies. In
analyzing specific companies for possible investment, the managers ordinarily
look for several of the following characteristics that will enable the companies
to compete successfully in their respective markets:

o     above-average per share earnings growth

o     high return on invested capital

o     a healthy balance sheet

o     sound financial and accounting policies and overall financial strength

o     strong competitive advantages

o     effective research, product development and marketing

The managers consider whether to sell a particular security when any of those
factors materially changes. The managers allocate the fund's assets among
securities of countries that are expected to provide the best opportunities for
meeting the fund's investment objective.

Although the fund invests primarily in common stocks, it may invest in virtually
any type of equity security. To manage risk, the fund does not invest more than
5% of assets, at time of purchase, in any one security. The fund may use certain
derivatives (investments whose value is based on indexes, securities or
currencies).

In abnormal conditions, the fund may temporarily invest more than 20% of assets
in investment-grade short-term securities. In these and other cases, the fund
might not achieve its goal.


The fund may trade securities actively, which could increase its transaction
costs (thus lowering performance) and increase your taxable distributions.


================================================================================

SUBADVISER

Nicholas-Applegate
Capital Management
- ---------------------------------------
U.S.-based team responsible for
day-to-day investment management
since December 2000

Supervised by the adviser

Founded in 1984

PAST PERFORMANCE

[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment. Past performance
does not indicate future results.

- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
                                         1996     1997    1998    1999     2000
                                         8.49%   -7.34%  18.77%  34.52%  -25.60%

2001 total return as of March 31: -18.99%
Best quarter: Q4 '99, 26.62% Worst quarter: Q3 '98, -17.16%

- --------------------------------------------------------------------------------
Average annual total returns -- for periods ending 12/31/00
- --------------------------------------------------------------------------------
                                                           Fund         Index
1 year                                                   -25.60%      -16.34%
5 year                                                     3.62%        4.89%
Life of fund - began 3/30/95                               4.29%        5.86%

Index: MSCI All Country World Ex-U.S. Free Index, an unmanaged index of freely
traded stocks of foreign companies.


14


MAIN RISKS

[Clip Art] The value of your investment will fluctuate in response to movements
in the stock market.

Foreign investments are more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social instability
and political actions ranging from tax code changes to governmental collapse.
These risks are more significant in emerging markets.

The fund's investment strategy will influence performance significantly. If the
fund invests in countries or regions that experience economic downturns,
performance could suffer. Similarly, if the individual securities or industries
do not perform as the management team expects, the fund could underperform its
peers or lose money.

To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:

o Emerging market securities, derivatives and other higher-risk securities can
be hard to value or to sell at a fair price.

o Certain derivatives could produce disproportionate losses.

================================================================================

YOUR EXPENSES

[Clip Art] Operating expenses are paid from the fund's assets, and therefore are
paid by shareholders indirectly.


- --------------------------------------------------------------------------------
Annual operating expenses
- --------------------------------------------------------------------------------
Management fee                                                         0.90%
Other expenses                                                         2.59%
Total fund operating expenses                                          3.49%
Expense reimbursement (at least until 6/30/02)                         2.49%
Net annual operating expenses                                          1.00%

The hypothetical example below shows what your expenses would be after the
expense reimbursement (first year only) if you invested $10,000 over the time
frames indicated, assuming you reinvested all distributions, that the average
annual return was 5% and that your shares were redeemed at the end of the time
frames. The example is for comparison only, and does not represent the fund's
actual expenses and returns, either past or future.

- --------------------------------------------------------------------------------
Expenses                        Year 1       Year 3       Year 5       Year 10
- --------------------------------------------------------------------------------
                                $102         $839         $1,598       $3,599


FUND CODES

- ---------------------------------------
Ticker            JHIEX
CUSIP             410132609
Newspaper         IntlEq
JHfund number     448


                                                                              15


Your account

- --------------------------------------------------------------------------------
WHO CAN BUY SHARES


John Hancock Institutional Funds are offered without any sales charge to certain
types of investors, as noted below:

      o     Retirement and other benefit plans and their participants

      o     Rollover assets for participants whose plans are invested in the
            fund

      o     Certain trusts, endowment funds and foundations

      o     Any state, county or city, or its instrumentality, department,
            authority or agency

      o     Insurance companies, trust companies and bank trust departments
            buying shares for their own account

      o     Investment companies not affiliated with the adviser

      o     Clients of service agents and broker-dealers who have entered into
            an agreement with John Hancock Funds, Inc.

      o     Investors who participate in fee-based, wrap and other investment
            platform programs

      o     Any entity that is considered a corporation for tax purposes

- --------------------------------------------------------------------------------
OPENING AN ACCOUNT

1     Read this prospectus carefully.

2     Determine if you are eligible, by referring to "Who can buy shares" on the
      left.

3     Determine how much you want to invest. The minimum initial investment is
      $10,000. There is no minimum investment for retirement plans with at least
      350 eligible employees.

4     Complete the appropriate parts of the account application, carefully
      following the instructions. By applying for privileges now, you can avoid
      the delay and inconvenience of having to file an additional application if
      you want to add privileges later. You must submit additional documentation
      when opening trust, corporate or power of attorney accounts.

5     Make your initial investment using the table on the next page.

6     If you have questions or need more information, please contact your
      financial representative or call Signature Services at 1-888-972-8696.

John Hancock Funds may pay significant compensation out of its own resources to
your financial representative.

Your broker or agent may charge you a fee to effect transactions in fund shares.


16 YOUR ACCOUNT


- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
            Opening an account                Adding to an account

By check

[Clip Art]  o Make out a check for the        o Make out a check for the
              investment amount, payable to     investment amount payable to
              "John Hancock Signature           "John Hancock Signature
              Services, Inc."                   Services, Inc."

            o Deliver the check and your      o Fill out the detachable
              completed application to your     investment slip from an account
              financial representative, or      statement. If no slip is
              mail them to Signature            available, include a note
              Services (address below).         specifying the fund name(s),
                                                your share class, your account
                                                number and the name(s) in which
                                                the account is registered.

                                              o Deliver the check and investment
                                                slip or note to your financial
                                                representative, or mail them to
                                                Signature Services (address
                                                below).

By exchange

[Clip Art]  o Call your financial             o Call your financial
              representative or Signature       representative or Signature
              Services to request an            Services to request an exchange.
              exchange.
                                              o You may only exchange for shares
            o You may only exchange for         of other institutional funds or
              shares of other institutional     Class I shares.
              funds or Class I shares.

By wire

[Clip Art]  o Deliver your completed          o Instruct your bank to wire the
              application to your financial     amount of your investment to:
              representative or mail it to        First Signature Bank & Trust
              Signature Services.                 Account # 900022260
                                                  Routing # 211475000
            o Obtain your account number by
              calling your financial          Specify the fund name(s), your
              representative or Signature     share class, your account number
              Services.                       and the name(s) in which the
                                              account is registered. Your bank
            o Instruct your bank to wire the  may charge a fee to wire funds.
              amount of your investment to:
                First Signature Bank & Trust
                Account # 900022260
                Routing # 211475000

            Specify the fund name(s), the
            share class, the new account
            number and the name(s) in which
            the account is registered. Your
            bank may charge a fee to wire
            funds.

By phone

[Clip Art]  See "By exchange" and "By wire."  o Verify that your bank or credit
                                                union is a member of the
                                                Automated Clearing House (ACH)
                                                system.

                                              o Complete the "To Purchase,
                                                Exchange or Redeem Shares via
                                                Telephone" and "Bank
                                                Information" sections on your
                                                account application.

                                              o Call Signature Services to
                                                verify that these features are
                                                in place on your account.

                                              o Call your financial
                                                representative or Signature
                                                Services with the fund name(s),
                                                your share class, your account
                                                number, the name(s) in which the
                                                account is registered and the
                                                amount of your investment.

- --------------------------------------------------------------------------------
Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1001
Boston, MA 02217-1001

Phone Number: 1-888-972-8696

Or contact your financial representative for instructions and assistance.
- --------------------------------------------------------------------------------


                                                                 YOUR ACCOUNT 17


- --------------------------------------------------------------------------------
Selling shares
- --------------------------------------------------------------------------------
            Designed for                      To sell some or all of your shares

By letter

[Clip Art]  o Sales of any amount; however,   o Write a letter of instruction
              sales of $5 million or more       indicating the fund name, your
              must be made by letter.           account number, your share
                                                class, the name(s) in which the
            o Certain requests will require     account is registered and the
              a Medallion signature             dollar value or number of shares
              guarantee. Please refer to        you wish to sell.
              "Selling shares in writing".
                                              o Include all signatures and any
                                                additional documents that may be
                                                required (see next page).

                                              o Mail the materials to Signature
                                                Services.


                                              o A check or wire will be sent
                                                according to your letter of
                                                instruction.


By phone

[Clip Art]  o Sales of up to $5 million.      o To place your request with a
                                                representative at John Hancock
                                                Funds, call Signature Services
                                                between 8 A.M. and 4 P.M.
                                                Eastern Time on most business
                                                days.

                                              o Redemption proceeds of up to
                                                $100,000 may be sent by wire or
                                                by check. A check will be mailed
                                                to the exact name(s) and address
                                                on the account. Redemption
                                                proceeds exceeding $100,000 must
                                                be wired to your designated bank
                                                account.

By wire or electronic funds transfer (EFT)

[Clip Art]  o Requests by letter to sell any  o To verify that the telephone
              amount.                           redemption privilege is in place
                                                on an account, or to request the
            o Requests by phone to sell up      forms to add it to an existing
              to $5 million (accounts with      account, call Signature
              telephone redemption              Services.
              privileges).
                                              o Amounts of $5 million or more
                                                will be wired on the next
                                                business day.

                                              o Amounts up to $100,000 may be
                                                sent by EFT or by check. Funds
                                                from EFT transactions are
                                                generally available by the
                                                second business day. Your bank
                                                may charge a fee for this
                                                service.

By exchange

[Clip Art]  o Sales of any amount.            o Obtain a current prospectus for
                                                the fund into which you are
                                                exchanging by calling your
                                                financial representative or
                                                Signature Services.

                                              o You may only exchange for shares
                                                of other institutional funds or
                                                Class I shares.

                                              o Call your financial
                                                representative or Signature
                                                Services to request an exchange.


18 YOUR ACCOUNT


Selling shares in writing In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below, unless they were previously provided
to Signature Services and are still accurate. You may also need to include a
Medallion signature guarantee, which protects you against fraudulent orders. You
will need a signature guarantee if:

o     your address of record has changed within the past 30 days

o     you are selling more than $100,000 worth of shares and are requesting
      payment by check

o     you are selling more than $5 million worth of shares

You will need to obtain your Medallion signature guarantee from a member of the
Signature Guarantee Medallion Program. Most brokers and securities dealers are
members of this program. A notary public CANNOT provide a signature guarantee.

- --------------------------------------------------------------------------------
Seller                                         Requirements for written requests
                                                                      [Clip Art]
- --------------------------------------------------------------------------------

Owners of individual, joint or UGMA/UTMA      o Letter of instruction.
accounts (custodial accounts for minors).
                                              o On the letter, the signatures of
                                                all persons authorized to sign
                                                for the account, exactly as the
                                                account is registered.

                                              o Medallion signature guarantee if
                                                applicable (see above).

Owners of corporate, sole proprietorship,     o Letter of instruction.
general partner or association accounts.
                                              o Corporate business/organization
                                                resolution, certified within the
                                                past 12 months, or a John
                                                Hancock Funds business/
                                                organization certification form.

                                              o On the letter and the
                                                resolution, the signature of the
                                                person(s) authorized to sign for
                                                the account.

                                              o Medallion signature guarantee if
                                                applicable (see above).

Owners or trustees of retirement plan,        o Letter of instruction.
pension trust and trust accounts.
                                              o On the letter, the signature(s)
                                                of the trustee(s).

                                              o Copy of the trust document
                                                certified within the past 12
                                                months or a John Hancock Funds
                                                trust certification form.

                                              o Medallion signature guarantee if
                                                applicable (see above).

Joint tenancy shareholders with rights of     o Letter of instruction signed by
survivorship whose co-tenants are deceased.     surviving tenant.

                                              o Copy of death certificate.

                                              o Medallion signature guarantee if
                                                applicable (see above).

Executors of shareholder estates.             o Letter of instruction signed by
                                                executor.

                                              o Copy of order appointing
                                                executor, certified within the
                                                past 12 months.

                                              o Medallion signature guarantee if
                                                applicable (see above).

Administrators, conservators, guardians and   o Call 1-888-972-8696 for
other sellers or account types not listed       instructions.
above.

- --------------------------------------------------------------------------------
Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1001
Boston, MA 02217-1001

Phone Number: 1-888-972-8696

Or contact your financial representative for instructions and assistance.
- --------------------------------------------------------------------------------


                                                                 YOUR ACCOUNT 19


- --------------------------------------------------------------------------------
TRANSACTION POLICIES

Valuation of shares The net asset value (NAV) per share for each fund is
determined each business day at the close of regular trading on the New York
Stock Exchange (typically 4 P.M. Eastern Time). The funds use market prices in
valuing portfolio securities, but may use fair-value estimates if reliable
market prices are unavailable. The funds may also value securities at fair value
if the value of these securities has been materially affected by events
occurring after the close of a foreign market. The funds may trade foreign stock
or other portfolio securities on U.S. holidays and weekends, even though the
funds' shares will not be priced on those days. This may change a fund's NAV on
days when you cannot buy or sell shares.

Buy and sell prices When you buy shares, you pay the NAV. When you sell shares,
you receive the NAV.

Execution of requests Each fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated after Signature Services receives your
request in good order.

At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing.

In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.

Telephone transactions For your protection, telephone requests may be recorded
in order to verify their accuracy. Also for your protection, telephone
redemption transactions are not permitted on accounts whose names or addresses
have changed within the past 30 days. Proceeds from telephone transactions can
only be mailed to the address of record.

Exchanges You may exchange Institutional Fund and Class I shares for shares of
any other Institutional Fund or Class I shares. The registration for both
accounts involved must be identical.

To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties who, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. The funds reserve the right to require that
previously exchanged shares and reinvested dividends be in a fund for 90 days
before a shareholder is permitted a new exchange. A fund may also refuse any
exchange order. A fund may change or cancel its exchange policies at any time,
upon 60 days' notice to its shareholders.

Certificated shares The funds no longer issue share certificates. Shares are
electronically recorded. Any existing certificated shares can only be sold by
returning the certificated shares to Signature Services, along with a letter of
instruction or a stock power and a signature guarantee.

Sales in advance of purchase payments When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but a fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten business days after
the purchase.


- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES

Account statements In general, you will receive account statements as follows:

o     after every transaction (except a dividend reinvestment) that affects your
      account balance

o     after any changes of name or address of the registered owner(s)

o     in all other circumstances, at least quarterly

Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.

Dividends Active Bond Fund declares income dividends daily and pays them
monthly. Your income dividends begin accruing the day after payment is received
by the fund and continue through the day your shares are actually sold. Dividend
Performers Fund declares and pays any income dividends quarterly. All other
funds declare and pay any income dividends annually. Capital gains, if any, are
typically distributed annually.

Dividend reinvestments Dividends will be reinvested automatically in additional
shares of the same fund on the dividend record date. Alternatively, you can
choose to have your dividends and capital gains sent directly to your bank
account or a check will be sent in the amount of more than $10. However, if the
check is not deliverable or the combined dividend and capital gains amount is
$10 or less, your proceeds will be reinvested. If five or more of your dividend
or capital gains checks remain uncashed after 180 days, all subsequent dividends
and capital gains will be reinvested.


20 YOUR ACCOUNT


Taxability of dividends For investors who are not exempt from federal income
taxes, dividends you receive from a fund, whether reinvested or taken as cash,
are generally considered taxable. Dividends from a fund's short-term capital
gains are taxable as ordinary income. Dividends from a fund's long-term capital
gains are taxable at a lower rate. Whether gains are short-term or long-term
depends on the fund's holding period. Some dividends paid in January may be
taxable as if they had been paid the previous December.

The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.

Taxability of transactions Any time you sell or exchange shares, it is
considered a taxable event for you if you are not exempt from federal income
taxes. Depending on the purchase price and the sale price of the shares you sell
or exchange, you may have a gain or a loss on the transaction. You are
responsible for any tax liabilities generated by your transactions.

- --------------------------------------------------------------------------------
BUSINESS STRUCTURE

The funds' board of trustees oversees each fund's business activities and
retains the services of the various firms that carry out the fund's operations.
The trustees have the power to change the funds' respective investment goals
without shareholder approval.

The investment adviser John Hancock Advisers, Inc., 101 Huntington Avenue,
Boston, MA 02199-7603.

The subadviser for the International Equity Fund Nicholas-Applegate Capital
Management, 600 West Broadway, Suite 2900, San Diego, California 92101.

Management fees The management fees paid to the investment adviser by the John
Hancock institutional funds last fiscal year are as follows:


- --------------------------------------------------------------------------------
Fund                                      % of net assets
- --------------------------------------------------------------------------------
Active Bond                               0.00%
Dividend Performers                       0.25%
Medium Capitalization Growth              0.42%
Small Capitalization Value                0.02%
Focused Small Cap Growth                  0.00%
International Equity                      0.00%



                                                                 YOUR ACCOUNT 21


- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

These tables detail the performance of each fund's share, including total return
information showing how much an investment in the fund has increased or
decreased each year.

Active Bond Fund

Figures audited by Deloitte & Touche LLP.




- ------------------------------------------------------------------------------------------------------------------------------
Period ended:                                                       2/97         2/98         2/99         2/00         2/01
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                                        
Per share operating performance
Net asset value, beginning of period                               $8.64        $8.54        $8.83        $8.59        $8.14
Net investment income (loss)(1)                                     0.60         0.59         0.56         0.58         0.56
Net realized and unrealized gain (loss) on investments             (0.09)        0.34        (0.02)       (0.43)        0.47
Total from investment operations                                    0.51         0.93         0.54         0.15         1.03
Less distributions:
  Dividends from net investment income                             (0.60)       (0.59)       (0.56)       (0.58)       (0.56)
  Distributions in excess of net investment income                    --           --(2)        --(2)        --(2)        --
  Distributions from net realized gain on investments sold         (0.01)       (0.05)       (0.22)       (0.02)          --
  Total distributions                                              (0.61)       (0.64)       (0.78)       (0.60)       (0.56)
Net asset value, end of period                                     $8.54        $8.83        $8.59        $8.14        $8.61
Total investment return(3,4) (%)                                    6.17        11.25         6.24         1.83        13.11
Ratios and supplemental data
Net assets, end of period (000s omitted) ($)                       2,191        5,158        5,686        4,222        6,805
Ratio of expenses to average net assets (%)                         0.60         0.60         0.60         0.60         0.60
Ratio of adjusted expenses to average net assets(5,6) (%)           4.05         2.64         2.33         2.93         2.03
Ratio of net investment income (loss) to average net assets (%)     7.10         6.78         6.36         6.88         6.74
Portfolio turnover rate (%)                                          136          230          356          301          327


(1)   Based on the average of the shares outstanding at the end of each month.

(2)   Less than $0.01 per share.

(3)   Total investment return assumes dividend reinvestment.

(4)   Total returns would have been lower had certain expenses not been reduced
      during the periods shown.

(5)   Does not take into consideration expense redutions during the periods
      shown.

(6)   Adjusted expenses as a percentage of average net assets are expected to
      decrease as the net assets of the fund grow.

- --------------------------------------------------------------------------------
The following returns are not audited and are not part of the audited financial
highlights presented above:

Without the expense reductions, returns for the Fund for the years ended
February 28, 1997, 1998, 1999, February 29, 2000 and February 28, 2001 would
have been 2.72%, 9.21%, 4.51%, (0.50%) and 11.68%, respectively.


22 FINANCIAL HIGHLIGHTS


Dividend Performers Fund

Figures audited by Deloitte & Touche LLP.



- -------------------------------------------------------------------------------------------------------------------------
Period ended:                                                        2/97       2/98       2/99       2/00       2/01
- -------------------------------------------------------------------------------------------------------------------------
                                                                                                
Per share operating performance
Net asset value, beginning of period                               $10.15     $11.91     $14.92     $14.46     $13.51
Net investment income (loss)(1)                                      0.21       0.18       0.15       0.11       0.10
Net realized and unrealized gain (loss) on investments               1.92       3.92       1.04       0.60       0.45
Total from investment operations                                     2.13       4.10       1.19       0.71       0.55
Less distributions:
  Dividends from net investment income                              (0.18)     (0.17)     (0.15)     (0.11)     (0.11)
  Distributions from net realized gain on investments sold          (0.19)     (0.92)     (1.50)     (1.55)     (2.81)
  Total distributions                                               (0.37)     (1.09)     (1.65)     (1.66)     (2.92)
Net asset value, end of period                                     $11.91     $14.92     $14.46     $13.51     $11.14
Total investment return(2,3) (%)                                    21.26      35.55       7.97       4.17       2.94
Ratios and supplemental data
Net assets, end of period (000s omitted) ($)                        8,668     20,884     17,743     14,863      6,202
Ratio of expenses to average net assets (%)                          0.70       0.70       0.70       0.70       0.70
Ratio of adjusted expenses to average net assets(4,5) (%)            1.89       1.02       0.95       1.05       1.08
Ratio of net investment income (loss) to average net assets (%)      1.94       1.31       0.95       0.71       0.73
Portfolio turnover rate (%)                                            37         77         64         46         58


(1)   Based on the average of the shares outstanding at the end of each month.

(2)   Total investment return assumes dividend reinvestment.

(3)   Total returns would have been lower had certain expenses not been reduced
      during the periods shown.

(4)   Does not take into consideration expense redutions during the periods
      shown.

(5)   Adjusted expenses as a percentage of average net assets are expected to
      decrease as the net assets of the fund grow.

- --------------------------------------------------------------------------------
The following returns are not audited and are not part of the audited financial
highlights presented above:

Without the expense reductions, returns for the fund for the years ended
February 28, 1997, 1998, 1999, February 29, 2000 and February 28, 2001 would
have been 20.07%, 35.23%, 7.72%, 3.82% and 2.56%, respectively.


                                                         FINANCIAL HIGHLIGHTS 23


Medium Capitalization Growth Fund

Figures audited by Deloitte & Touche LLP.



- ------------------------------------------------------------------------------------------------------------------------------------
Period ended:                                                             2/97         2/98         2/99         2/00          2/01
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              
Per share operating performance
Net asset value, beginning of period                                    $10.69       $12.67       $13.51       $10.99        $21.10
Net investment income (loss)(1)                                           0.01           --(2)     (0.02)       (0.05)        (0.07)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions                                         2.02         2.06        (0.68)       10.71         (7.44)
Total from investment operations                                          2.03         2.06        (0.70)       10.66         (7.51)
Less distributions:
  Dividends from net investment income                                      --           --(2)        --           --            --
  Distributions from net realized gain on investments sold               (0.05)       (1.22)       (1.72)       (0.55)        (3.33)
  Distributions in excess of net realized gain on investments sold          --           --        (0.10)          --            --
  Total distributions                                                    (0.05)       (1.22)       (1.82)       (0.55)        (3.33)
Net asset value, end of period                                          $12.67       $13.51       $10.99       $21.10        $10.26
Total investment return(3,4) (%)                                         19.00        17.39        (5.34)       98.13        (38.23)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($)                            29,085       40,302       16,687       36,893        11,499
Ratio of expenses to average net assets (%)                               0.90         0.90         0.90         0.90(7)       0.90
Ratio of adjusted expenses to average net assets(5,6) (%)                 1.42         1.10         1.11         1.28          1.15
Ratio of net investment income (loss) to average net assets (%)           0.06         0.03        (0.13)       (0.37)        (0.40)
Portfolio turnover rate (%)                                                281          341          116          153           181


(1)   Based on the average of the shares outstanding at the end of each month.

(2)   Less than $0.01 per share.

(3)   Total investment return assumes dividend reinvestment.

(4)   Total returns would have been lower had certain expenses not been reduced
      during the periods shown.

(5)   Does not take into consideration expense reductions during the periods
      shown.

(6)   Adjusted expenses as a percentage of average net assets are expected to
      decrease as the net assets of the fund grow.

(7)   Expense ratio does not include interest expense due to bank loans, which
      amounted to 0.01% for the year ended February 29, 2000.

- --------------------------------------------------------------------------------
The following returns are not audited and are not part of the audited financial
highlights presented above:

Without the expense reductions, returns for the Fund for the years ended
February 28, 1997, 1998, 1999, February 29, 2000 and February 28, 2001 would
have been 18.48%, 17.19%, (5.55%), 97.75% and (38.48%), respectively.


24 FINANCIAL HIGHLIGHTS


Small Capitalization Value Fund

Figures audited by Deloitte & Touche LLP.



- --------------------------------------------------------------------------------------------------------------------------------
Period ended:                                                            2/97        2/98        2/99        2/00        2/01
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                        
Per share operating performance
Net asset value, beginning of period                                    $9.09       $9.38      $11.74       $9.16      $18.09
Net investment income (loss)(1)                                          0.14        0.07        0.05        0.05       (0.04)
Net realized and unrealized gain (loss) on investments                   1.08        3.65       (1.23)      10.96       (2.18)
Total from investment operations                                         1.22        3.72       (1.18)      11.01       (2.22)
Less distributions:
  Dividends from net investment income                                  (0.12)      (0.10)      (0.04)      (0.06)      (0.03)
  Distributions from net realized gain on investments sold              (0.81)      (1.26)      (1.20)      (2.02)      (3.71)
  Distributions in excess of net realized gain on investments sold         --          --       (0.16)         --          --
  Total distributions                                                   (0.93)      (1.36)      (1.40)      (2.08)      (3.74)
Net asset value, end of period                                          $9.38      $11.74       $9.16      $18.09      $12.13
Total investment return(2,3) (%)                                        13.78       41.81       (9.46)     124.33      (10.14)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($)                            6,011       9,549       7,418      24,259      30,183
Ratio of expenses to average net assets (%)                              0.80        0.80        0.80        0.80        0.80
Ratio adjusted expenses to average net assets(4,5) (%)                   1.83        1.42        1.46        1.48        1.04
Ratio of net investment income (loss) to average net assets (%)          1.46        0.62        0.45        0.37       (0.25)
Portfolio turnover rate (%)                                                96         216         126         104         109


(1)   Based on the average of the shares outstanding at the end of each month.

(2)   Total investment return assumes dividend reinvestment.

(3)   Total returns would have been lower had certain expenses not been reduced
      during the periods shown.

(4)   Does not take into consideration expense reductions during the periods
      shown.

(5)   Adjusted expenses as a percentage of average net assets are expected to
      decrease as the net assets of the fund grow.

- --------------------------------------------------------------------------------
The following returns are not audited and are not part of the audited financial
highlights presented above:

Without the expense reductions, returns for the fund for the years ended
February 28, 1997, 1998, 1999, February 29, 2000 and February 28, 2001 would
have been 12.75%, 41.19%, (10.12%), 123.65% and (10.38%), respectively.


                                                         FINANCIAL HIGHLIGHTS 25


Focused Small Cap Growth Fund

Figures audited by Deloitte & Touche LLP.



- ------------------------------------------------------------------------------------------------------------------------------------
Class I - Period ended:                                                2/97(1)       2/98         2/99         2/00         2/01(2)
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           
Per share operating performance
Net asset value, beginning of period                                  $8.50         $9.24       $11.74       $11.65       $24.43
Net investment income (loss)(3)                                        0.03         (0.03)       (0.07)       (0.09)       (0.10)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions                                          0.73          2.53         0.61        15.13       (11.92)
Total from investment operations                                       0.76          2.50         0.54        15.04       (12.02)
Less distributions:
  Dividends from net investment income                                (0.02)           --(4)        --           --           --
  Distributions from net realized gain on investments sold               --            --        (0.63)       (2.26)       (1.92)
  Total distributions                                                 (0.02)           --(4)     (0.63)       (2.26)       (1.92)
Net asset value, end of period                                        $9.24        $11.74       $11.65       $24.43        10.49
Total investment return (5,6) (%)                                      8.89(7)      27.07         4.67       136.18       (50.27)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($)                            999         3,102        2,453        8,908        5,458
Ratio of expenses to average net assets (%)                            0.90(8)       0.90         0.90         0.90         0.90
Ratio of adjusted expenses to average net assets(9,10) (%)            16.24(8)       4.05         4.12         3.19         2.04
Ratio of net investment income (loss) to average net assets (%)        0.35(8)      (0.25)       (0.60)       (0.57)       (0.56)
Portfolio turnover rate (%)                                              92           117          125          238          242


(1)   Began operations on May 2, 1996.

(2)   Effective November 15, 2000, existing shares of the fund were designated
      Class I shares.

(3)   Based on the average of the shares outstanding at the end of each month.

(4)   Less than $0.01 per share.

(5)   Total investment return assumes dividend reinvestment.

(6)   Total returns would have been lower had certain expenses not been reduced
      during the periods shown.

(7)   Not annualized.

(8)   Annualized.

(9)   Does not take into consideration expense redutions during the periods
      shown.

(10)  Adjusted expenses as a percentage of average net assets are expected to
      decrease as the net assets of the fund grow.

- --------------------------------------------------------------------------------
The following returns are not audited and are not part of the audited financial
highlights presented above:

Without the expense reductions, returns for the Fund for the years ended
February 28, 1997, 1998, 1999, February 29, 2000 and February 28, 2001 would
have been (6.45%), 23.92%, 1.45%, 133.89% and (51.41%), respectively.


26 FINANCIAL HIGHLIGHTS


International Equity Fund

Figures audited by Deloitte & Touche LLP.



- ------------------------------------------------------------------------------------------------------------------------------------
Period ended:                                                           2/97         2/98         2/99         2/00          2/01
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
Per share operating performance
Net asset value, beginning of period                                   $9.24        $9.35        $9.63       $10.18        $13.33
Net investment income (loss)(1)                                         0.12         0.06         0.07         0.07          0.04
Net realized and unrealized gain (loss) on investments
and foreign currency transactions                                       0.14         0.23         0.59         3.83         (4.63)
Total from investment operations                                        0.26         0.29         0.66         3.90         (4.59)
Less distributions:
  Dividends from net investment income                                 (0.10)       (0.01)       (0.07)       (0.07)        (0.04)
  Distributions in excess of net investment income                        --           --        (0.04)       (0.04)           --
  Distributions from net realized gain on investments sold             (0.05)          --           --        (0.64)        (0.47)
  Total distributions                                                  (0.15)       (0.01)       (0.11)       (0.75)        (0.51)
Net asset value, end of period                                         $9.35        $9.63       $10.18       $13.33         $8.23
Total investment return(2,3) (%)                                        2.79         3.07         6.88        38.84        (34.85)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($)                           4,204        7,983        7,805       12,848         5,859
Ratio of expenses to average net assets (%)                             1.00         1.00         1.00         1.00          1.00
Ratio of adjusted expenses to average net assets(4,5) (%)               3.32         2.02         2.73         2.86          3.46
Ratio of net investment income (loss) to average net assets (%)         1.26         0.60         0.69         0.59          0.43
Portfolio turnover rate (%)                                               68          125           83          139           238


(1)   Based on the average of the shares outstanding at the end of each month.

(2)   Total investment return assumes dividend reinvestment.

(3)   Total returns would have been lower had certain expenses not been reduced
      during the periods shown.

(4)   Does not take into consideration expense reductions during the periods
      shown.

(5)   Adjusted expenses as a percentage of average net assets are expected to
      decrease as the net assets of the fund grow.

- --------------------------------------------------------------------------------
The following returns are not audited and are not part of the audited financial
highlights presented above:

Without the expense reductions, returns for the fund for the years ended
February 28, 1997, 1998, 1999, February 29, 2000 and February 28, 2001 would
have been 0.47%, 2.05%, 5.15%, 36.98 and (37.31%), respectively.



                                                         FINANCIAL HIGHLIGHTS 27


For more information
- --------------------------------------------------------------------------------

Two documents are available that offer further information on the John Hancock
institutional funds:

Annual/Semiannual Report to Shareholders

Includes financial statements, a discussion of the market conditions and
investment strategies that significantly affected performance, as well as the
auditors' report (in annual report only).

Statement of Additional Information (SAI)

The SAI contains more detailed information on all aspects of the funds. The
current annual report is included in the SAI.

A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into (is legally a part of) this prospectus.

To request a free copy of the current annual/semiannual report or the SAI,
please contact John Hancock:

By mail:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1001
Boston, MA 02217-1001


By phone: 1-888-972-8696


By EASI-Line: 1-800-597-1897

By TDD: 1-800-462-0825

On the Internet: www.jhfunds.com

Or you may view or obtain these documents from the SEC:

In person: at the SEC's Public Reference Room in Washington, DC. For access to
the Reference Room call 1-202-942-8090

By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)

By electronic request: publicinfo@sec.gov (duplicating fee required)

On the Internet: www.sec.gov

SEC file number: 811-8852

[LOGO](R)

John Hancock Funds, Inc.
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603

Mutual Funds
Institutional Services
Private Managed Accounts
Retirement Plans
Insurance Services

(C)2001 JOHN HANCOCK FUNDS, INC.                                     KB0PN  7/01






                     JOHN HANCOCK INSTITUTIONAL SERIES TRUST
                              101 Huntington Avenue
                           Boston, Massachusetts 02199


                          John Hancock Active Bond Fund
                      John Hancock Dividend Performers Fund
                 John Hancock Medium Capitalization Growth Fund
                  John Hancock Small Capitalization Value Fund
               John Hancock Focused Small Cap Growth Fund-Class I
                   (formerly Small Capitalization Growth Fund)
                     John Hancock International Equity Fund
        John Hancock Independence Diversified Core Equity Fund II-Class I
              John Hancock Independence Medium Capitalization Fund
                     John Hancock Independence Balanced Fund

                 (each, a "Fund" and collectively, the "Funds")

                       Statement of Additional Information

                                  July 1, 2001

This Statement of Additional Information provides information about the Funds in
addition to the information that is contained in the John Hancock Series Funds'
current Prospectus and in the Independence Funds' current Prospectus (together,
the "Prospectuses").

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Funds' Prospectuses, copies of which can be obtained
free of charge by writing or telephoning:


                      John Hancock Signature Services, Inc.
                          John Hancock Way, Suite 1001
                        Boston, Massachusetts 02217-1001
                                 1-800-755-4371




                                TABLE OF CONTENTS
                                                                           Page

         Organization of the Funds                                           2
         Investment Objectives and Policies                                  3
         -The John Hancock Series Funds                                      3
         -The Independence Funds                                             3
         Investment Restrictions                                            16
         Those Responsible for Management                                   19
         Investment Advisory and Other Services                             29
         Distribution Contract                                              34
         Sales Compensation                                                 34
         Net Asset Value                                                    34
         Additional Services and Programs                                   35
         Purchases and Redemptions Through Third Parties                    35
         Special Redemptions                                                36
         Description of the Funds' Shares                                   36
         Tax Status                                                         37
         Calculation of Performance                                         42
         Brokerage Allocation                                               44
         Transfer Agent Services                                            46
         Custody of Portfolio                                               46
         Independent Auditors                                               46
         Appendix A--Description of Securities Ratings                     A-1
         Financial Statements                                              F-1


ORGANIZATION OF THE FUNDS

Each Fund is a series of John Hancock Institutional Series Trust (the "Trust")
an open-end investment management company organized as a Massachusetts business
trust on October 31, 1994 under the laws of the Commonwealth of Massachusetts.

Focused Small Cap Growth Fund, Dividend Performers Fund, Active Bond Fund,
Medium Capitalization Growth Fund, Small Capitalization Value Fund and
International Equity Fund are sometimes referred to herein collectively as the
"John Hancock Series Funds." Independence Diversified Core Equity Fund II,
Independence Medium Capitalization Fund and Independence Balanced Fund are
sometimes referred to herein collectively as the "Independence Funds." Prior to
July 1, 2001, Focused Small Cap Growth Fund was called Small Capitalization
Growth Fund.


The investment adviser of each Fund is John Hancock Advisers, Inc. (the
"Adviser"). The Adviser is an indirect wholly-owned subsidiary of John Hancock
Life Insurance Company (formerly John Hancock Mutual Life Insurance Company)
(the "Life Company"), a Massachusetts life insurance company chartered in 1862,
with national headquarters at John Hancock Place, Boston, Massachusetts. The
Life Company is wholly owned by John Hancock Financial Services, Inc., a
Delaware corporation organized in February, 2000. The investment sub-adviser of
International Equity Fund is Nicholas-Applegate Capital Management
("Nicholas-Applegate") (the "Sub-Adviser"). The investment sub-adviser of each
Independence Fund is Independence Investment LLC ("Independence") (formerly
Independence Investment Associates, Inc.). Together, Independence and
Nicholas-Applegate are sometimes referred to herein collectively as the
"Sub-Advisers" or, individually, as the "Sub-Adviser." The Sub-Advisers are
responsible for providing investment advice to their respective funds, subject
to the review of the Trustees and overall supervision of the Adviser.
Independence is an affiliate of the Life Company.


                                       2



INVESTMENT OBJECTIVES AND POLICIES

The following information supplements the discussion of each Fund's investment
objective and policies as discussed in the Prospectuses. There is no assurance
that any Fund will achieve its investment objective.

Each Fund has adopted certain investment restrictions that are detailed under
"Investment Restrictions" in this Statement of Additional Information where they
are classified as fundamental or nonfundamental. Those restrictions designated
as fundamental may not be changed without shareholder approval. Each Fund's
investment objective, investment policies and nonfundamental restrictions,
however, may be changed by a vote of the Trustees without shareholder approval.
If there is a change in a Fund's investment objective, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then current financial position and needs.

A.  The John Hancock Series Funds.


For a further description of the John Hancock Series Funds' investment
objectives, policies and restrictions see "Goal and Strategy" and "Main Risks"
in the John Hancock Series Funds' Prospectus and "Investment Restrictions" in
this Statement of Additional Information. Effective November 15, 2000, existing
shares of Focused Small Cap Growth Fund were designated as "Class I" shares. See
Appendix A to this Statement of Additional Information for a description of the
quality categories of corporate bonds in which certain of the John Hancock
Series Funds may invest.


B.  The Independence Funds.

For a further description of the Independence Funds' investment objectives,
policies and restrictions see "Goal and Strategy" and "Main Risks" in their
respective Prospectuses and "Investment Restrictions" in this Statement of
Additional Information. Effective October 1, 1999, existing shares of
Independence Diversified Core Equity Fund II were designated as "Class I"
shares.

Common stocks. Dividend Performers Fund, Medium Capitalization Growth Fund,
International Equity Fund, Small Capitalization Value Fund, Focused Small Cap
Growth Fund and each Independence Fund may invest in common stocks. Common
stocks are shares of a corporation or other entity that entitle the holder to a
pro rata share of the profits of the corporation, if any, without preference
over any other shareholder or class of shareholders, including holders of such
entity's preferred stock and other senior equity. Ownership of common stock
usually carries with it the right to vote and, frequently, an exclusive right to
do so. Common stocks have the potential to outperform fixed-income securities
over the long term. Common stocks provide the most potential for growth, yet are
the more volatile of the two asset classes.

Debt securities. Active Bond Fund and Independence Balanced Fund may regularly
invest in debt obligations. Small Capitalization Value Fund invests primarily in
U.S. stocks, but may invest up to 15% of total assets in a combination of
foreign securities and/or bonds rated as low as CC/Ca and their unrated
equivalents. Under normal conditions, Dividend Performers Fund, Medium
Capitalization Growth Fund, and Focused Small Cap Growth Fund will not invest in
any fixed income securities. However, in abnormal conditions, Dividend
Performers Fund, Medium Capitalization Growth Fund, and Focused Small Cap Growth
Fund may temporarily invest in U.S. Government securities and U.S. Government
agency securities with maturities of up to three years, and may also invest more
than 10% of total assets in cash and/or cash equivalents (including U.S.
Government securities maturing in 90 days or less.) Debt securities of corporate
and governmental issuers in which the Funds may invest are subject to the risk
of an issuer's inability to meet principal and interest payments on the
obligations (credit risk) and may also be subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market liquidity (market risk).


                                       3



Preferred stocks. Dividend Performers Fund, International Equity Fund, Medium
Capitalization Growth Fund, Small Capitalization Value Fund, Focused Small Cap
Growth Fund and each Independence Fund may invest in preferred stocks. Preferred
stock generally has a preference to dividends and, upon liquidation, over an
issuer's common stock but ranks junior to debt securities in an issuer's capital
structure.
Preferred stock generally pays dividends in cash (or additional shares of
preferred stock) at a defined rate but, unlike interest payments on debt
securities, preferred stock dividends are payable only if declared by the
issuer's board of directors. Dividends on preferred stock may be cumulative,
meaning that, in the event the issuer fails to make one or more dividend
payments on the preferred stock, no dividends may be paid on the issuer's common
stock until all unpaid preferred stock dividends have been paid. Preferred stock
also may be subject to optional or mandatory redemption provisions.

Convertible securities. Small Capitalization Value Fund, International Equity
Fund and Independence Balanced Fund may invest in convertible securities which
may include corporate notes or preferred stock. Active Bond Fund may invest in
convertible debt securities. Dividend Performers Fund, Medium Capitalization
Growth Fund, and Focused Small Cap Growth Fund may invest in convertible
preferred stocks. Investments in convertible securities are not subject to the
rating criteria with respect to non-convertible debt obligations. As with all
debt securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates decline.
The market value of convertible securities can also be heavily dependent upon
the changing value of the equity securities into which such securities are
convertible, depending on whether the market price of the underlying security
exceeds the conversion price. Convertible securities generally rank senior to
common stocks in an issuer's capital structure and consequently entail less risk
than the issuer's common stock. However, the extent to which such risk is
reduced depends upon the degree to which the convertible security sells above
its value as a fixed-income security.

Investments in Foreign Securities and Emerging Countries. Each of the Funds may
invest in the securities of foreign issuers to the following extent:

o    Each Independence Fund and Dividend  Performers Fund may invest in U.S.
     dollar denominated securities of foreign issuers and in American Depositary
     Receipts.  Independence Balanced Fund may also invest in Yankee Bonds.

o    Medium Capitalization Growth Fund and Focused Small Cap Growth Fund may
     invest up to 10% of total assets in foreign securities. Foreign equities
     include but are not limited to common stocks, convertible preferred stocks,
     preferred stocks, warrants, American Depositary Receipts ("ADRs"), Global
     Depositary Receipts ("GDRs"), and European Depositary Receipts ("EDRs").

o    Small Capitalization Value Fund invests primarily in U.S. stocks, but may
     invest up to 15% of total assets in a combination of foreign securities
     and/or bonds rated as low as CC/Ca and their unrated equivalents.

o    Active Bond Fund may invest up to 25% of total assets in Yankee Bonds, U.S.
     dollar (excluding U.S. dollar denominated Canadian securities) and foreign
     currency denominated securities of foreign issuers.

o    International Equity Fund normally invests at least 80% of total assets in
     a diversified portfolio of foreign stocks from both developed and emerging
     countries. The fund may invest up to 30% of total assets in emerging
     markets as classified by Morgan Stanley Capital International ("MSCI").
     Foreign equities include but are not limited to common stocks, convertible
     preferred stocks, preferred stocks, warrants, ADRs, GDRs and EDRs.


                                       4



Risks of Foreign Securities. Investments in foreign securities may involve a
greater degree of risk than those in domestic securities. There is generally
less publicly available information about foreign companies in the form of
reports and ratings similar to those that are published about issuers in the
United States. Also, foreign issuers are generally not subject to uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to United States issuers.

Because foreign securities may be denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will affect the Fund's net
asset value, the value of dividends and interest earned, gains and losses
realized on the sale of securities, and any net investment income and gains that
the Fund distributes to shareholders. Securities transactions undertaken in some
foreign markets may not be settled promptly so that the Fund's investments on
foreign exchanges may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement.

Foreign securities will be purchased in the best available market, whether
through over-the-counter markets or exchanges located in the countries where
principal offices of the issuers are located. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.

With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States' economy in terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.

The dividends, in some cases capital gains and interest payable on certain of
the Fund's foreign portfolio securities, may be subject to foreign withholding
or other foreign taxes, thus reducing the net amount of income or gains
available for distribution to the Fund's shareholders.

These risks may be intensified in the case of investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominantly based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of substantial holdings difficult or
impossible at times. The Fund may be required to establish special custodial or
other arrangements before making certain investments in those countries.
Securities of issuers located in these countries may have limited marketability
and may be subject to more abrupt or erratic price movements.


                                       5



The U.S. Government has from time to time in the past imposed restrictions,
through taxation and otherwise, on foreign investments by U.S. investors such as
the Fund. If such restrictions should be reinstituted, it might become necessary
for the Fund to invest all or substantially all of its assets in U.S.
securities. In such event, the Fund would review its investment objective and
investment policies to determine whether changes are appropriate.

The Fund's ability and decisions to purchase or sell portfolio securities may be
affected by laws or regulations relating to the convertibility and repatriation
of assets. Because the shares of the Fund are redeemable on a daily basis in
U.S. dollars, the Fund intends to manage its portfolio so as to give reasonable
assurance that it will be able to obtain U.S. dollars. Under present conditions,
it is not believed that these considerations will have any significant effect on
its portfolio strategy.

Foreign Currency Transactions. Each John Hancock Series Fund, other than
Dividend Performers Fund, may engage in foreign currency transactions. Foreign
currency transactions may be conducted on a spot (i.e., cash) basis at the spot
rate for purchasing or selling currency prevailing in the foreign exchange
market.

Each John Hancock Series Fund, other than Dividend Performers Fund, may also
enter into forward foreign currency exchange contracts to hedge against
fluctuations in currency exchange rates affecting a particular transaction or
portfolio position. Forward contracts are agreements to purchase or sell a
specified currency at a specified future date and price set at the time of the
contract. Transaction hedging is the purchase or sale of forward foreign
currency contracts with respect to specific receivables or payables of a Fund
accruing in connection with the purchase and sale of its portfolio securities
quoted or denominated in the same or related foreign currencies. Portfolio
hedging is the use of forward foreign currency contracts to offset portfolio
security positions denominated or quoted in the same or related foreign
currencies. A Fund may elect to hedge less than all of its foreign portfolio
positions as deemed appropriate by the Adviser. The Funds will not engage in
speculative forward foreign currency exchange transactions.

If a Fund purchases a forward contract, the Fund will segregate cash or liquid
securities in a separate account of the Fund in an amount equal to the value of
the Fund's total assets committed to the consummation of such forward contract.
The assets in the segregated account will be valued at market daily and if the
value of the securities in the separate account declines, additional cash or
securities will be placed in the account so that the value of the account will
be equal the amount of the Fund's commitment with respect to such contracts.

Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it may
not be possible for the Funds to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates.

Repurchase Agreements. Each Fund may enter into repurchase agreements. In a
repurchase agreement the Fund buys a security for a relatively short period
(usually not more than 7 days) subject to the obligation to sell it back to the
issuer at a fixed time and price plus accrued interest. The Fund will enter into
repurchase agreements only with member banks of the Federal Reserve System and
with "primary dealers" in U.S. Government securities. The Adviser will
continuously monitor the creditworthiness of the parties with whom the Fund
enters into repurchase agreements.

The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period in which the Fund seeks
to enforce its rights thereto, possible subnormal levels of income, decline in
value of the underlying securities or lack of access to income during this
period as well as the expense of enforcing its rights.


                                       6



Reverse Repurchase Agreements and Other Borrowings. Each Fund may also enter
into reverse repurchase agreements which involve the sale of U.S. Government
securities held in its portfolio to a bank with an agreement that a Fund will
buy back the securities at a fixed future date at a fixed price plus an agreed
amount of "interest" which may be reflected in the repurchase price. Reverse
repurchase agreements are considered to be borrowings by a Fund. Reverse
repurchase agreements involve the risk that the market value of securities
purchased by each Fund with proceeds of the transaction may decline below the
repurchase price of the securities sold by a Fund which it is obligated to
repurchase. Each Fund will also continue to be subject to the risk of a decline
in the market value of the securities sold under the agreements because it will
reacquire those securities upon effecting its repurchase. To minimize various
risks associated with reverse repurchase agreements, a Fund will establish a
separate account consisting of liquid securities, of any type or maturity, in an
amount at least equal to the repurchase prices of the securities (plus any
accrued interest thereon) under such agreements.

In addition, a Fund will not enter into reverse repurchase agreements or other
borrowings except from banks temporarily for extraordinary or emergency purposes
(not for leveraging) in amounts not to exceed 33 1/3% of a Fund's total assets
(including the amount borrowed) taken at market value. Each Fund will not use
leverage to attempt to increase income. Each Fund will enter into reverse
repurchase agreements only with federally insured banks which are approved in
advance as being creditworthy by the Trustees. Under the procedures established
by the Trustees, the Adviser will monitor the creditworthiness of the banks
involved.

Restricted Securities. Each Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. Each Fund will not invest more than 15% of its net
assets in illiquid investments. If the Trustees determine, based upon a
continuing review of the trading markets for specific Section 4(2) paper or Rule
144A securities, that they are liquid, they will not be subject to the 15% limit
on illiquid investments. The Trustees may adopt guidelines and delegate to the
Adviser the daily function of determining the monitoring and liquidity of
restricted securities. The Trustees, however, will retain sufficient oversight
and be ultimately responsible for the determinations. The Trustees will
carefully monitor the Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund if qualified institutional buyers become for a
time uninterested in purchasing these restricted securities.

Options on Securities, Securities Indices and Currency. Active Bond Fund may
purchase and write (sell) call and put options on any securities in which it may
invest or on any securities index based on securities in which it may invest.
International Equity Fund may purchase and write (sell ) call and put options on
any securities in which it may invest, on any securities index based on
securities in which it may invest or on any currency in which Fund investments
may be demoninated. Each of Dividend Performers Fund, Small Capitalization Value
Fund, Focused Small Cap Growth Fund and Medium Capitalization Growth Fund may
purchase and write (sell) call and put options on any securities index based on
securities in which it may invest. These options may be listed on national
domestic securities exchanges or foreign securities exchanges or traded in the
over-the-counter market. Each Fund may write covered put and call options and
purchase put and call options as a substitute for the purchase or sale of
securities (or, with respect to International Equity Fund, currency) or to
protect against declines in the value of portfolio securities and against
increases in the cost of securities to be acquired.


                                       7



Writing Covered Options. A call option on a security or currency written by a
Fund obligates the Fund to sell specified securities or currency to the holder
of the option at a specified price if the option is exercised at any time before
the expiration date. A put option on securities or currency written by a Fund
obligates the Fund to purchase specified securities or currency from the option
holder at a specified price if the option is exercised at any time before the
expiration date. Options on securities indices are similar to options on
securities, except that the exercise of securities index options requires cash
settlement payments and does not involve the actual purchase or sale of
securities. In addition, securities index options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. Writing covered call options may
deprive a Fund of the opportunity to profit from an increase in the market price
of the securities or foreign currency assets in its portfolio. Writing covered
put options may deprive a Fund of the opportunity to profit from a decrease in
the market price of the securities or foreign currency assets to be acquired for
its portfolio.

All call and put options written by the Fund are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities,
either of which may be quoted or denominated in any currency, in a segregated
account with a value at least equal to the Fund's obligation under the option,
(ii) entering into an offsetting forward commitment and/or (iii) purchasing an
offsetting option or any other option which, by virtue of its exercise price or
otherwise, reduces the Fund's net exposure on its written option position. A
written call option on securities is typically covered by maintaining the
securities that are subject to the option in a segregated account. Each Fund may
cover call options on a securities index by owning securities whose price
changes are expected to be similar to those of the underlying index.

Each Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."

Purchasing Options. A Fund would normally purchase call options in anticipation
of an increase, or put options in anticipation of a decrease ("protective
puts"), in the market value of securities or currencies of the type in which it
may invest. A Fund may also sell call and put options to close out its purchased
options.

The purchase of a call option would entitle a Fund, in return for the premium
paid, to purchase specified securities or currency at a specified price during
the option period. A Fund would ordinarily realize a gain on the purchase of a
call option if, during the option period, the value of such securities or
currency exceeded the sum of the exercise price, the premium paid and
transaction costs; otherwise the Fund would realize either no gain or a loss on
the purchase of the call option.

The purchase of a put option would entitle a Fund, in exchange for the premium
paid, to sell specified securities or currency at a specified price during the
option period. The purchase of protective puts is designed to offset or hedge
against a decline in the market value of the Fund's portfolio securities or the
currencies in which they are denominated. Put options may also be purchased by a
Fund for the purpose of affirmatively benefiting from a decline in the price of
securities or currencies which it does not own. A Fund would ordinarily realize
a gain if, during the option period, the value of the underlying securities or
currency decreased below the exercise price sufficiently to cover the premium
and transaction costs; otherwise the Fund would realize either no gain or a loss
on the purchase of the put option. Gains and losses on the purchase of put
options may be offset by countervailing changes in the value of a Fund's
portfolio securities.

Each Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or


                                       8



purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.

Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
currencies or dispose of assets held in a segregated account until the options
expire or are exercised. Similarly, if the Fund is unable to effect a closing
sale transaction with respect to options it has purchased, it would have to
exercise the options in order to realize any profit and will incur transaction
costs upon the purchase or sale of underlying securities or currencies.

Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.

A Fund's ability to terminate over-the-counter options is more limited than with
exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.

The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities or currency markets.

Futures Contracts and Options on Futures Contracts. International Equity Fund
may purchase and sell futures contracts based on various securities (such as
U.S. Government securities) and securities indices, foreign currencies and any
other financial instruments and indices and purchase and write call and put
options on these futures contracts. Active Bond Fund may purchase and sell
futures contracts based on various securities (such as U.S. Government
securities) and securities indices, and any other financial instruments and
indices and purchase and write call and put options on these futures contracts.
Dividend Performers Fund, Small Capitalization Value Fund, Focused Small Cap
Growth Fund and Medium Capitalization Growth Fund may purchase and sell futures
contracts based on securities indices and purchase and write call and put
options on these futures contracts. Each Fund may purchase and sell futures and
options on futures for hedging or other non-speculative purposes. Each Fund may
also enter into closing purchase and sale transactions with respect to any of
these contracts and options. All futures contracts entered into by a Fund are
traded on U.S. or foreign exchanges or boards of trade that are licensed,
regulated or approved by the Commodity Futures Trading Commission ("CFTC").


                                       9



Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments or
currencies for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).

Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, the Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
contracts are traded guarantees that, if still open, the sale or purchase will
be performed on the settlement date.

Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that a Fund proposes to acquire or the
exchange rate of currencies in which the portfolio securities are quoted or
denominated. When securities prices are falling, a Fund can seek to offset a
decline in the value of its current portfolio securities through the sale of
futures contracts. When securities prices are rising, a Fund, through the
purchase of futures contracts, can attempt to secure better rates or prices than
might later be available in the market when it effects anticipated purchases. A
Fund may seek to offset anticipated changes in the value of a currency in which
its portfolio securities, or securities that it intends to purchase, are quoted
or denominated by purchasing and selling futures contracts on such currencies.

A Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated decline
in market prices or foreign currency rates that would adversely affect the value
of the Fund's portfolio securities. Such futures contracts may include contracts
for the future delivery of securities held by a Fund or securities with
characteristics similar to those of the Fund's portfolio securities. Similarly,
a Fund may sell futures contracts on any currencies in which its portfolio
securities are quoted or denominated or in one currency to hedge against
fluctuations in the value of securities denominated in a different currency if
there is an established historical pattern of correlation between the two
currencies.

If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for the Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in the Fund's portfolio
may be more or less volatile than prices of such futures contracts, the Adviser
will attempt to estimate the extent of this volatility difference based on
historical patterns and compensate for any differential by having the Fund enter
into a greater or lesser number of futures contracts or by attempting to achieve
only a partial hedge against price changes affecting the Fund's portfolio
securities.

When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.

On other occasions, a Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency rates then available in the applicable market to
be less favorable than prices that are currently available. Subject to the
limitations imposed on the funds, as described above, a Fund may also purchase
futures contracts as a substitute for transactions in securities or foreign
currency, to alter the investment characteristics of or currency exposure
associated with portfolio securities or to gain or increase its exposure to a
particular securities market or currency.


                                       10



Options on Futures Contracts. The purchase of put and call options on futures
contracts will give a Fund the right (but not the obligation) for a specified
price to sell or to purchase, respectively, the underlying futures contract at
any time during the option period. As the purchaser of an option on a futures
contract, a Fund obtains the benefit of the futures position if prices move in a
favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.

The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of a Fund's assets. By writing a call
option, a Fund becomes obligated, in exchange for the premium (upon exercise of
the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to purchase. However,
a Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by each Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.

The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. A Fund's ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid market.

Other Considerations. Each John Hancock Series Fund will engage in futures and
related options transactions either for bona fide hedging or for other
non-speculative purposes as permitted by the CFTC. These purposes may include
using futures and options on futures as substitute for the purchase or sale of
securities or currencies to increase or reduce exposure to particular markets.
To the extent that a Fund is using futures and related options for hedging
purposes, futures contracts will be sold to protect against a decline in the
price of securities (or the currency in which they are quoted or denominated)
that the Fund owns or futures contracts will be purchased to protect the Fund
against an increase in the price of securities or the currency in which they are
quoted or denominated) it intends to purchase. Each Fund will determine that the
price fluctuations in the futures contracts and options on futures used for
hedging purposes are substantially related to price fluctuations in securities
held by the Fund or securities or instruments which it expects to purchase. As
evidence of its hedging intent, each Fund expects that on 75% or more of the
occasions on which it takes a long futures or option position (involving the
purchase of futures contracts), the Fund will have purchased, or will be in the
process of purchasing, equivalent amounts of related securities in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.

To the extent that a Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. The Fund will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), for maintaining its qualification as a
regulated investment company for federal income tax purposes.

Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating a Fund to purchase securities or currencies, require the Fund to
establish a segregated account consisting of cash or liquid securities in an
amount equal to the underlying value of such contracts and options.


                                       11



While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates, securities prices or currency
exchange rates may result in a poorer overall performance for a Fund than if it
had not entered into any futures contracts or options transactions.

Perfect correlation between a Fund's futures positions and portfolio positions
will be impossible to achieve. In the event of an imperfect correlation between
a futures position and a portfolio position which is intended to be protected,
the desired protection may not be obtained and the Fund may be exposed to risk
of loss. In addition, it is not possible to hedge fully or protect against
currency fluctuations affecting the value of securities denominated in foreign
currencies because the value of such securities is likely to fluctuate as a
result of independent factors not related to currency fluctuations.

Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.

Forward Commitment and When-Issued Securities. Each Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. A Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, a Fund
contracts to purchase securities for a fixed price at
a future date beyond customary settlement time. When a Fund engages in forward
commitment and when-issued transactions, it relies on the seller to consummate
the transaction. The failure of the issuer or seller to consummate the
transaction may result in the Funds losing the opportunity to obtain a price and
yield considered to be advantageous. The purchase of securities on a when-issued
and forward commitment basis also involves a risk of loss if the value of the
security to be purchased declines prior to the settlement date.

On the date a Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, a Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.

Warrants. Each John Hancock Series Fund may invest in warrants. Warrants entitle
the holder to buy equity securities at a specific price for a specific period of
time. Warrants tend to be more volatile than their underlying securities. Also,
the value of the warrant does not necessarily change with the value of the
underlying securities and a warrant ceases to have value if it is not exercised
prior to the expiration date.

Government Securities. Each Fund may invest in government securities. However,
under normal conditions, Dividend Performers Fund, Focused Small Cap Growth Fund
and Medium Capitalization Growth Fund will not invest in any fixed income
securities, with the exception of cash equivalents (which include U.S.
Government securities maturing in 90 days or less). In abnormal conditions,
these funds may temporarily invest in U.S. Government securities and U.S.
Government agency securities with maturities of up to three years, and may also
invest more than 10% of total assets in cash and/or cash equivalents. Certain
U.S. Government securities, including U.S. Treasury bills, notes and bonds, and


                                       12



Government National Mortgage Association certificates ("GNMA"), are supported by
the full faith and credit of the United States. Certain other U.S. Government
securities, issued or guaranteed by Federal agencies or government sponsored
enterprises, are not supported by the full faith and credit of the United
States, but may be supported by the right of the issuer to borrow from the U.S.
Treasury. These securities include obligations of the Federal Home Loan Mortgage
Corporation ("FHLMC"), and obligations supported by the credit of the
instrumentality, such as Federal National Mortgage Association Bonds ("FNMA").
No assurance can be given that the U.S. Government will provide financial
support to such Federal agencies, authorities, instrumentalities and government
sponsored enterprises in the future.

Mortgage-Backed Securities. Active Bond Fund and each Independence Fund may
invest in mortgage pass-through certificates and multiple-class pass-through
securities, such as real estate mortgage investment conduits ("REMIC")
pass-through certificates, collateralized mortgage obligations ("CMOs") and
stripped mortgage-backed securities ("SMBS"), and other types of
"Mortgage-Backed securities" that may be available in the future.

Guaranteed Mortgage Pass-Through Securities. Guaranteed mortgage pass-through
securities represent participation interests in pools of residential mortgage
loans and are issued by U.S. Governmental or private lenders and guaranteed by
the U.S. Government or one of its agencies or instrumentalities, including but
not limited to the GNMA, the FNMA and the FHLMC. GNMA certificates are
guaranteed by the full faith and credit of the U.S. Government for timely
payment of principal and interest on the certificates. FNMA certificates are
guaranteed by FNMA, a federally chartered and privately owned corporation, for
full and timely payment of principal and interest on the certificates. FHLMC
certificates are guaranteed by FHLMC, a corporate instrumentality of the U.S.
Government, for timely payment of interest and the ultimate collection of all
principal of the related mortgage loans.

Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. Government agencies and instrumentalities as well as private
lenders. CMOs and REMIC certificates are issued in multiple classes and the
principal of and interest on the mortgage assets may be allocated among the
several classes of CMOs or REMIC certificates in various ways. Each class of
CMOs or REMIC certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis.

Typically, CMOs are collateralized by GNMA, FNMA or FHLMC certificates but also
may be collateralized by other mortgage assets such as whole loans or private
mortgage pass-through securities. Debt service on CMOs is provided from payments
of principal and interest on collateral of mortgaged assets and any reinvestment
income thereon.

A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Funds do not
intend to invest in residual interests.

Stripped Mortgage-Backed Securities. SMBS are derivative multiple-class
mortgage-backed securities. SMBS are usually structured with two classes that
receive different proportions of interest and principal distributions on a pool
of mortgage assets. A typical SMBS will have one class receiving some of the
interest and most of the principal, while the other class will receive most of
the interest and the remaining principal. In the most extreme case, one class
will receive all of the interest (the "interest only" class) while the other
class will receive all of the principal (the "principal only" class). The yields
and market risk of interest only and principal only SMBS, respectively, may be
more volatile than those of other fixed income securities. The staff of the SEC
considers privately issued SMBS to be illiquid.


                                       13



Structured or Hybrid Notes. Funds that may invest in mortgage-backed securities
may invest in "structured" or "hybrid" notes. The distinguishing feature of a
structured or hybrid note is that the amount of interest and/or principal
payable on the note is based on the performance of a benchmark asset or market
other than fixed-income securities or interest rates. Examples of these
benchmarks include stock prices, currency exchange rates and physical commodity
prices. Investing in a structured note allows a Fund to gain exposure to the
benchmark market while fixing the maximum loss that the Fund may experience in
the event that market does not perform as expected. Depending on the terms of
the note, a Fund may forego all or part of the interest and principal that would
be payable on a comparable conventional note; a Fund's loss cannot exceed this
foregone interest and/or principal. An investment in structured or hybrid notes
involves risks similar to those associated with a direct investment in the
benchmark asset.

Risk Factors Associated with Mortgage-Backed Securities. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counter-party to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. In addition, investing in the
lowest tranche of CMOs and REMIC certificates involves risks similar to those
associated with investing in equity securities. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of interest
rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.

Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental, agency or other guarantee. When a Fund reinvests amounts
representing payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on existing adjustable rate
mortgage pass-through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government securities as a means of "locking
in" interest rates.

Conversely, in a rising interest rate environment, a declining prepayment rate
will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates.

Risk Associated With Specific Types of Derivative Debt Securities. Different
types of derivative debt securities are subject to different combinations of
prepayment, extension and/or interest rate risk. Conventional mortgage
pass-through securities and sequential pay CMOs are subject to all of these
risks, but are typically not leveraged. Thus, the magnitude of exposure may be
less than for more leveraged Mortgage-Backed Securities.

The risk of early prepayments is the primary risk associated with interest only
debt securities ("IOs"), super floaters, other leveraged floating rate
instruments and Mortgage-Backed Securities purchased at a premium to their par
value. In some instances, early prepayments may result in a complete loss of
investment in certain of these securities. The primary risks associated with
certain other derivative debt securities are the potential extension of average
life and/or depreciation due to rising interest rates.


                                       14



These securities include floating rate securities based on the Cost of Funds
Index ("COFI floaters"), other "lagging rate" floating rate securities, floating
rate securities that are subject to a maximum interest rate ("capped floaters"),
Mortgage-Backed Securities purchased at a discount, leveraged inverse floating
rate securities ("inverse floaters"), principal only debt securities ("POs"),
certain residual or support tranches of CMOs and index amortizing notes. Index
amortizing notes are not Mortgage-Backed Securities, but are subject to
extension risk resulting from the issuer's failure to exercise its option to
call or redeem the notes before their stated maturity date. Leveraged inverse
IOs combine several elements of the Mortgage-Backed Securities described above
and thus present an especially intense combination of prepayment, extension and
interest rate risks.

Planned amortization class ("PAC") and target amortization class ("TAC") CMO
bonds involve less exposure to prepayment, extension and interest rate risk than
other Mortgage-Backed Securities, provided that prepayment rates remain within
expected prepayment ranges or "collars." To the extent that prepayment rates
remain within these prepayment ranges, the residual or support tranches of PAC
and TAC CMOs assume the extra prepayment, extension and interest rate risk
associated with the underlying mortgage assets.

Other types of floating rate derivative debt securities present more complex
types of interest rate risks. For example, range floaters are subject to the
risk that the coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate band or collar. Dual
index or yield curve floaters are subject to depreciation in the event of an
unfavorable change in the spread between two designated interest rates. X-reset
floaters have a coupon that remains fixed for more than one accrual period.
Thus, the type of risk involved in these securities depends on the terms of each
individual X-reset floater.

Ratings as Investment Criteria. In general, the ratings of Moody's and S&P
represent the opinions of these agencies as to the quality of the securities
which they rate. It should be emphasized however, that ratings are relative and
subjective and are not absolute standards of quality. These ratings will be used
by the Funds as initial criteria for the selection of portfolio securities.
Among the factors which will be considered are the long-term ability of the
issuer to pay principal and interest and general economic trends. Appendix A
contains further information concerning the rating of Moody's and S&P and their
significance. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. Neither of these events will require the sale of the
securities by the Fund, but the Adviser will consider the event in its
determination of whether the Fund should continue to hold the securities.

Lower Rated High Yield Debt Obligations. Active Bond Fund and Small
Capitalization Value Fund may invest in high yielding, fixed income securities
rated below investment grade (e.g., rated below Baa by Moody's Investors
Service, Inc. ("Moody's") or below BBB by Standard & Poor's Ratings Group
("S&P")). Active Bond Fund will not invest in securities rated below Ca by
Moody's or CC by S&P. Small Capitalization Value Fund may invest up to 15% of
its net assets in securities rated as low as Ca by Moody's or CC by S & P and
their equivalents.

Ratings are based largely on the historical financial condition of the issuer.
Consequently, the rating assigned to any particular security is not necessarily
a reflection of the issuer's current financial condition, which may
be better or worse than the rating would indicate. See Appendix A to this
Statement of Additional Information which describes the characteristics of
corporate bonds in the various ratings categories. The Funds may invest in
comparable quality unrated securities which, in the opinion of the Adviser or
Subadviser, offer comparable yields and risks to those securities which are
rated.

Debt obligations rated in the lower ratings categories, or which are unrated,
involve greater volatility of price and risk of loss of principal and income. In
addition, lower ratings reflect a greater possibility of an adverse change in
financial condition affecting the ability of the issuer to make payments of
interest and principal. The high yield fixed income market is relatively new and
its growth occurred during a period of economic expansion. The market has not
yet been fully tested by an economic recession.


                                       15



The market price and liquidity of lower rated fixed income securities generally
respond to short term corporate and market developments to a greater extent than
do the price and liquidity of higher rated securities because such developments
are perceived to have a more direct relationship to the ability of an issuer of
such lower rated securities to meet its ongoing debt obligations.

Reduced volume and liquidity in the high yield bond market or the reduced
availability of market quotations will make it more difficult to dispose of the
bonds and to value accurately the Funds' assets. The reduced availability of
reliable, objective data may increase the Funds' reliance on management's
judgment in valuing high yield bonds. In addition, the Funds' investments in
high yield securities may be susceptible to adverse publicity and investor
perceptions, whether or not justified by fundamental factors. A Fund's
investments, and consequently its net asset value, will be subject to the market
fluctuations and risks inherent in all securities.

Lending of Securities. The Funds may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Funds may reinvest any cash collateral in short-term securities and money market
funds. When a Fund lends portfolio securities, there is a risk that the borrower
may fail to return the securities involved in the transaction. As a result, the
Fund may incur a loss or, in the event of the borrower's bankruptcy, the Fund
may be delayed in or prevented from liquidating the collateral. Each Fund can
lend portfolio securities having a total value of 33 1/3% of its total assets.

Short-Term Trading. Each John Hancock Series Fund may engage in short-term
trading. These Funds intend to use short-term trading of securities as a means
of managing their portfolio to achieve their respective investment objective. In
reaching a decision to sell one security and purchase another security at
approximately the same time, the Funds will take into account a number of
factors, for fixed income funds. These include the quality ratings, interest
rates, yields, maturity dates, call prices, and refunding and sinking fund
provisions of the securities under consideration, as well as historical yield
spreads and current economic information. Equity funds may engage in short-term
trading for special situations. These special situations may include arbitrage
opportunities, extraordinary positive or negative earnings surprises, takeover
situations, spin-offs, asset plays, management changes or a reorganization. The
success of short-term trading will depend upon the ability of the Funds to
evaluate particular securities, to anticipate relevant market factors, including
trends of interest rates and earnings and variations from such trends, to obtain
relevant information, to evaluate it promptly, and to take advantage of its
evaluations by completing transactions on a favorable basis. It is expected that
the expenses involved in short-term trading, which would not be incurred by an
investment company which does not use this portfolio technique, will be less
than the profits and other benefits which will accrue to shareholders.

INVESTMENT RESTRICTIONS

Fundamental Investment Restrictions. Each Fund has adopted the following
investment restrictions which may not be changed without the approval of a
majority of the applicable Fund's outstanding voting securities which, as used
in the Prospectuses and this Statement of Additional Information means the
approval by the lesser of (1) the holders of 67% or more of a Fund's shares
represented at a meeting if more than 50% of a Fund's outstanding shares are
present in person or by proxy or (2) more than 50% of the outstanding shares.


                                       16



A Fund may not:

1.       Issue senior securities, except as permitted by paragraphs 3, 6 and 7
         below. For purposes of this restriction, the issuance of shares of
         beneficial interest in multiple classes or series, the deferral of
         trustees' fees, the purchase or sale of options, futures contracts,
         forward commitments and repurchase agreements entered into in
         accordance with the Fund's investment policies or within the meaning of
         paragraph 6 below, are not deemed to be senior securities.

2.       Purchase securities on margin or make short sales [see non-fundamental
         investment restriction (d)], or unless, by virtue of its ownership of
         other securities, the Fund has the right to obtain securities
         equivalent in kind and amount to the securities sold and, if the right
         is conditional, the sale is made upon the same conditions, except (i)
         in connection with arbitrage transactions, (ii) for hedging the Fund's
         exposure to an actual or anticipated market decline in the value of its
         securities, (iii) to profit from an anticipated decline in the value of
         a security, and (iv) obtaining such short-term credits as may be
         necessary for the clearance of purchases and sales of securities.

3.       Borrow money, except for the following extraordinary or emergency
         purposes: (i) from banks for temporary or short-term purposes or for
         the clearance of transactions in amounts not to exceed 33 1/3% of the
         value of the Fund's total assets (including the amount borrowed) taken
         at market value; (ii) in connection with the redemption of Fund shares
         or to finance failed settlements of portfolio trades without
         immediately liquidating portfolio securities or other assets; (iii) in
         order to fulfill commitments or plans to purchase additional securities
         pending the anticipated sale of other portfolio securities or assets;
         and (iv) in the case of Focused Small Cap Growth Fund, in connection
         with entering into reverse repurchase agreements and dollar rolls, but
         only if after each such borrowing there is asset coverage of at least
         300% as defined in the 1940 Act. A Fund, other than Focused Small Cap
         Growth Fund, may not borrow money for the purpose of leveraging the
         Funds' assets. For purposes of this investment restriction, the
         deferral of Trustees' fees and transactions in short sales, futures
         contracts, options on futures contracts, securities or indices and
         forward commitment transactions shall not constitute borrowing. Focused
         Small Cap Growth Fund has no current intention of entering into reverse
         repurchase agreements or dollar rolls.

4.       Act as an underwriter, except to the extent that in connection with the
         disposition of portfolio securities, the Fund may be deemed to be an
         underwriter for purpose of the 1933 Act.

5.       Purchase or sell real estate except that the Fund may (i) acquire or
         lease office space for its own use, (ii) invest in securities of
         issuers that invest in real estate or interests therein, (iii) invest
         in securities that are secured by real estate or interests therein,
         (iv) purchase and sell mortgage-related securities and (v) hold and
         sell real estate acquired by the Fund as a result of the ownership of
         securities.

6.       Invest in commodities, except the Fund may purchase and sell options on
         securities, securities indices and currency, futures contracts on
         securities, securities indices and currency and options on such
         futures, forward foreign currency exchange contracts, forward
         commitments, securities index put or call warrants and repurchase
         agreements entered into in accordance with the Fund's investment
         policies [see non-fundamental investment restriction (f)].

7.       Make loans, except that the Fund (1) may lend portfolio securities in
         accordance with the Fund's investment policies up to 33 1/3% of the
         Fund's total assets taken at market value, (2) enter into repurchase
         agreements, and (3) purchase all or a portion of an issue of debt
         securities, bank loan participation interests, bank certificates of
         deposit, bankers' acceptances, debentures or other securities, whether
         or not the purchase is made upon the original issuance of the
         securities.


                                       17



8.       Purchase the securities of issuers conducting their principal activity
         in the same industry if, immediately after such purchase, the value of
         its investments in such industry would exceed 25% of its total assets
         taken at market value at the time of such investment. This limitation
         does not apply to investments in obligations of the U.S. Government or
         any of its agencies, instrumentalities or authorities.

9.       For each Fund with respect to 75% of total assets [see non-fundamental
         investment restriction (e)], purchase securities of an issuer (other
         than the U.S. Government, its agencies, instrumentalities or
         authorities), if:

                  (a) such purchase would cause more than 5% of the Fund's total
                  assets taken at market value to be invested in the securities
                  of such issuer; or

                  (b) such purchase would at the time result in more than 10% of
                  the outstanding voting securities of such issuer being held by
                  the Fund.

Non-Fundamental Investment Restrictions. The following investment restrictions
are designated as non-fundamental and may be changed by the Trustees without
shareholder approval.

A Fund may not:

(a)      Purchase a security if, as a result, (i) more than 10% of the
         Fund's total assets would be invested in the securities of other
         investment companies, (ii) the Fund would hold more than 3% of the
         total outstanding voting securities of any one investment company, or
         (iii) more than 5% of the Fund's total assets would be invested in the
         securities of any one investment company. These limitations do not
         apply to (a) the investment of cash collateral, received by the Fund in
         connection with lending the Fund's portfolio securities, in the
         securities of open-end investment companies or (b) the purchase of
         shares of any investment company in connection with a merger,
         consolidation, reorganization or purchase of substantially all of the
         assets of another investment company. Subject to the above percentage
         limitations the Fund may, in connection with the John Hancock Group of
         Funds Deferred Compensation Plan for Independent Trustees/Directors,
         purchase securities of other investment companies within the John
         Hancock Group of Funds.

(b)      Invest more than 15% of the net assets of the Fund, taken at market
         value, in illiquid securities.

(c)      Invest for the purpose of exercising control over or management of any
         company.

In addition:

(d)      Dividend Performers Fund, International Equity Fund, Medium
         Capitalization Growth Fund, Focused Small Cap Growth Fund, and Small
         Capitalization Value Fund may not make short sales.

(e)      Dividend Performers Fund, International Equity Fund, Medium
         Capitalization Growth Fund, Small Capitalization Value Fund, and
         Focused Small Cap Growth Fund may not invest more than 5% of total
         assets at time of purchase in any one security (other than U.S.
         Government securities).


                                       18



(f)    Dividend Performers Fund, Medium Capitalization Growth Fund, Small
       Capitalization Value Fund, and Focused Small Cap Growth Fund may only
       purchase or sell stock index options, stock index futures, and stock
       index options on futures.

(g)    Under normal conditions, Active Bond Fund, Dividend Performers Fund,
       Medium Capitalization Growth Fund, Small Capitalization Value Fund, and
       Focused Small Cap Growth Fund may not invest more than 10% of total
       assets in cash and/or cash equivalents (except cash segregated in
       relation to futures, forward and option contracts).

(h)    Under normal conditions Dividend Performers Fund, Medium Capitalization
       Growth Fund, and Focused Small Cap Growth Fund will not invest in any
       fixed income securities. However, in abnormal conditions, these funds may
       temporarily invest in U.S. Government securities and U.S. Government
       agency securities with maturities of up to three years, and may also
       invest more than 10% of total assets in cash and/or cash equivalents
       (including U.S. Government securities maturing in 90 days or less).

(i)    International Equity Fund normally invests at least 80% of total assets
       in a diversified portfolio of foreign stocks from both developed and
       emerging countries. The Fund may invest up to 30% of total assets in
       emerging markets as classified by Morgan Stanley Capital International
       ("MSCI"). Foreign equities include but are not limited to common stocks,
       convertible preferred stocks, preferred stocks, warrants, ADRs, GDRs and
       EDRs.

(j)    Small Capitalization Value Fund invests primarily in U.S. stocks, buy may
       invest up to 15% of total assets in a combination of foreign securities
       and/or bonds rated as low as CC/Ca and their unrated equivalents.

(k)    Medium Capitalization Growth Fund and Focused Small Cap Growth Fund may
       invest up to 10% of total assets in foreign securities. Foreign equities
       include but are not limited to common stocks, convertible preferred
       stocks, preferred stocks, warrants, ADRs, GDRs and EDRs.

If a percentage restriction on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the values of a Fund's assets will not be
considered a violation of the restriction.

The Funds will invest only in countries on the Adviser's Approved Country
Listing. The Approved Country Listing is a list maintained by the Adviser's
investment department that outlines all countries, including the United States,
that have been approved for investment by Funds managed by the Adviser.

THOSE RESPONSIBLE FOR MANAGEMENT

The business of the Funds is managed by the Trustees who elect officers who are
responsible for the day-to-day operations of the Funds and who execute policies
formulated by the Trustees. Several of the officers and Trustees of the Funds
are also officers or directors of the Funds' Adviser and/or one or more or the
Subadvisers, or officers and/or directors of the Funds' principal distributor,
John Hancock Funds, Inc. ("John Hancock Funds").


                                       19





                              Positions Held                  Principal Occupation(s)
Name and Address              With the Company                During the Past Five Years
- ----------------              ----------------                --------------------------
                                                                   


Maureen R. Ford *             Trustee, Chairman, President    Executive Vice President John
101 Huntington Avenue         and Chief Executive Officer     Hancock Financial Services, Inc.,
Boston, MA  02199             (1,2)                           John Hancock Life Insurance
March 1950                                                    Company; Chairman, Director,
                                                              President and Chief Executive
                                                              Officer, John Hancock Advisers,
                                                              Inc. (the "Adviser") and The
                                                              Berkeley Financial Group, Inc.
                                                              ("The Berkeley Group"); Chairman,
                                                              Director and Chief Executive
                                                              Officer, John Hancock Funds, Inc.
                                                              ("John Hancock Funds"); Chairman,
                                                              Director and President, John
                                                              Hancock Insurance Agency, Inc.
                                                              ("Insurance Agency, Inc.");
                                                              Chairman, Director and Chief
                                                              Executive Officer, Sovereign Asset
                                                              Management Corporation (SAMCorp.);
                                                              Director, Independence Investment
                                                              LLC and Independence Fixed Income
                                                              LLC; Senior Vice President,
                                                              MassMutual Insurance Co. (until
                                                              1999); Senior Vice President,
                                                              Connecticut Mutual Insurance Co.
                                                              (until 1996).


John M. DeCiccio*             Trustee                         Executive Vice President and Chief
P.O. Box 111                                                  Investment Officer John Hancock
Boston, MA 02117                                              Financial Services, Inc.; Director,
July 1948                                                     Executive Vice President and Chief
                                                              Investment Officer, John Hancock
                                                              Life Insurance Company; Chairman of
                                                              the Committee of Finance of John
                                                              Hancock Life Insurance Company;
                                                              Director, John Hancock
                                                              Subsidiaries, Inc., Hancock Natural
                                                              Resource Group, Independence
                                                              Investment LLC, Independence Fixed
                                                              Income LLC, The Berkeley Group, the
                                                              Adviser, John Hancock Funds,
                                                              Massachusetts Business Development
                                                              Corporation; Director, Insurance
                                                              Agency Inc. (until 1999) and John
                                                              Hancock Signature Services, Inc.
                                                              (until 1997).



- -------------------
*   Trustee may be deemed to be an "interested person" of the Fund as defined in
    the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
    exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.


                                       20




                              Positions Held                  Principal Occupation(s)
Name and Address              With the Company                During the Past Five Years
- ----------------              ----------------                --------------------------
                                                                   

James F. Carlin               Trustee                         Chairman and CEO, Alpha Analytical
101 Huntington Avenue                                         Laboratories (chemical analysis),
Boston, MA  02199                                             Carlin Consolidated, Inc.
April 1940                                                    (management/investments); Trustee,
                                                              Massachusetts Health and Education
                                                              Tax Exempt Trust; Director, Uno
                                                              Restaurant Corp., Arbella Mutual
                                                              (insurance) (until September 2000),
                                                              HealthPlan Services, Inc. (until
                                                              February 1999), Flagship
                                                              Healthcare, Inc. (until November
                                                              1999), Carlin Insurance Agency,
                                                              Inc. (until April 1999), Chairman,
                                                              Massachusetts Board of Higher
                                                              Education (until July 1999) and
                                                              Trustee of 35 funds managed by the
                                                              Adviser.

William H. Cunningham         Trustee                         Former Chancellor, University of
101 Huntington Avenue                                         Texas System and former President
Boston, MA  02199                                             of the University of Texas, Austin,
January 1944                                                  Texas; James L. Bayless Chair of
                                                              Free Enterprise; Director, LaQuinta
                                                              Motor Inns, Inc. (hotel management
                                                              company) (1985-1998);
                                                              Jefferson-Pilot Corporation
                                                              (diversified life insurance
                                                              company) Billing Concepts,
                                                              Southwest Airlines and Introgen ;
                                                              Advisory Director, Chase Bank
                                                              (formerly Texas Commerce Bank -
                                                              Austin).

Ronald R. Dion                Trustee                         Chairman and Chief Executive
101 Huntington Avenue                                         Officer, R.M. Bradley & Co., Inc.;
Boston, MA  02199                                             Director, The New England Council
March 1946                                                    and Massachusetts Roundtable;
                                                              Trustee, North Shore Medical
                                                              Center, Director, BJ's Wholesale
                                                              Club, Inc. and a corporator of the
                                                              Eastern Bank; Trustee, Emmanuel
                                                              College.

Charles L. Ladner             Trustee                         Chairman and Trustee, Dunwoody
101 Huntington Avenue                                         Village, Inc.; Senior Vice
Boston, MA  02199                                             President and Chief Financial
February 1938                                                 Officer, UGI Corporation (Public
                                                              Utility Holding Company) (retired
                                                              1998); Vice President and Director
                                                              for AmeriGas, Inc. (retired 1998);
                                                              Vice President of AmeriGas
                                                              Partners, L.P. (until 1997);
                                                              Director, EnergyNorth, Inc. (until
                                                              1995).


- -------------------
*   Trustee may be deemed to be an "interested person" of the Fund as defined in
    the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
    exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.


                                       21




                              Positions Held                  Principal Occupation(s)
Name and Address              With the Company                During the Past Five Years
- ----------------              ----------------                --------------------------
                                                                   

Steven R. Pruchansky          Trustee (1)                     Chairman and Chief Executive
101 Huntington Avenue                                         Officer, Mast Holdings, Inc. (since
Boston, MA  02199                                             June 1, 2000); Director and
August 1944                                                   President, Mast Holdings, Inc.
                                                              (until May 31, 2000); Director,
                                                              First Signature Bank & Trust
                                                              Company (until August 1991);
                                                              Director, Mast Realty Trust (until
                                                              1994); President, Maxwell Building
                                                              Corp. (until 1991).

Norman H. Smith               Trustee                         Lieutenant General, United States
101 Huntington Avenue                                         Marine Corps; Deputy Chief of Staff
Boston, MA  02199                                             for Manpower and Reserve Affairs,
March 1933                                                    Headquarters Marine Corps;
                                                              Commanding General III Marine
                                                              Expeditionary Force/3rd Marine
                                                              Division (retired 1991).

John P. Toolan                Trustee                         Director, The Smith Barney Muni
101 Huntington Avenue                                         Bond Funds, The Smith Barney
Boston, MA  02199                                             Tax-Free Money Funds, Inc., Vantage
September 1930                                                Money Market Funds (mutual funds),
                                                              The Inefficient-Market Fund, Inc.
                                                              (closed-end investment company) and
                                                              Smith Barney Trust Company of
                                                              Florida; Chairman, Smith Barney
                                                              Trust Company (retired December,
                                                              1991); Director, Smith Barney,
                                                              Inc., Mutual Management Company and
                                                              Smith Barney Advisers, Inc.
                                                              (investment advisers) (retired
                                                              1991); Senior Executive Vice
                                                              President, Director and member of
                                                              the Executive Committee, Smith
                                                              Barney, Harris Upham & Co.,
                                                              Incorporated (investment bankers)
                                                              (until 1991).

William L. Braman             Executive Vice President and    Executive Vice President and Chief
101 Huntington Avenue         Chief Investment Officer (2)    Investment Officer, the Adviser and
Boston, MA 02199                                              each of the John Hancock Funds;
December 1953                                                 Executive Vice President and Chief
                                                              Investment Officer, Barring Asset
                                                              Management, London UK (until May
                                                              2000).


- -------------------
*   Trustee may be deemed to be an "interested person" of the Fund as defined in
    the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
    exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.


                                       22




                              Positions Held                  Principal Occupation(s)
Name and Address              With the Company                During the Past Five Years
- ----------------              ----------------                --------------------------
                                                                   

Richard A. Brown             Senior Vice President and        Senior Vice President and Chief
101 Huntington Avenue        Chief Financial Officer (2)      Financial Officer of the Adviser,
Boston, MA  02199                                             John Hancock Funds, and The
April 1949                                                    Berkeley Group; Second Vice
                                                              President and Senior Associate
                                                              Controller, Corporate Tax
                                                              Department, John Hancock Financial
                                                              Services, Inc. (until January
                                                              2001).

Susan S. Newton              Senior Vice President,           Senior Vice President and Chief
101 Huntington Avenue        Secretary and Chief Legal        Legal Officer the Adviser; John
Boston, MA 02199             Officer                          Hancock Funds; Vice President,
March 1950                                                    Signature Services (until May
                                                              2000), The Berkeley Group, NM
                                                              Capital and SAMCorp.



Thomas H. Connors            Vice President and Compliance    Vice President and Compliance
101 Huntington Avenue        Officer                          Officer, the Adviser; Vice
Boston, MA  02199                                             President, John Hancock Funds.
September 1959



- -------------------
*   Trustee may be deemed to be an "interested person" of the Fund as defined in
    the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
    exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.



                                       23




The following table provides information regarding the compensation paid by the
Fund and other investment companies in the John Hancock Fund Complex to the
Independent Trustees for their services. Mr. DeCiccio and Ms. Ford, each a
non-Independent Trustee, and each of the officers of the Fund are interested
persons of the Adviser, and/or affiliates are compensated by the Adviser and
receive no compensation from the Fund for their services.

                                                    Total Compensation from all
                            Aggregate Compensation  Funds in John Hancock Fund
Trustees                    from the Funds(1)       Complex to Trustees (2)
- --------                    ----------------------  ---------------------------

James F. Carlin                 $ 2,217                       $ 72,000
William H. Cunningham*            2,221                         72,100
Ronald R. Dion*                   2,217                         72,000
Charles L. Ladner                 2,333                         75,100
Steven R. Pruchansky*             2,329                         75,000
Norman H. Smith*                  2,440                         78,000
John P. Toolan*                   2,191                         70,250
                               --------                     ----------
Total                           $15,948                       $514,450

      (1)    Compensation is for the fiscal year ended February 28, 2001.

      (2)    Total compensation paid by the John Hancock Fund Complex to the
             Independent Trustees is for the calendar year ended December 31,
             2000 As of that date, there were sixty-nine funds in the John
             Hancock Fund Complex, with each of these Independent Trustees
             serving on thirty four funds.

      (*)    As of December 31, 2000, the value of the aggregate accrued
             deferred compensation from all Funds in the John Hancock fund
             complex for Mr. Cunningham was $514,062, for Mr. Dion was $80,629,
             for Ms. McCarter was $179,156 (resigned as of October 1, 1998) for
             Mr. Pruchansky was $123,670, for Mr. Smith was $182,867 and for Mr.
             Toolan was $623,506 under the John Hancock Deferred Compensation
             Plan for Independent Trustees (the "Plan").

All of the officers listed are officers or employees of the Adviser or
affiliated companies. Some of the Trustees and officers may also be officers
and/or Directors and/or Trustees of one or more other funds for which the
Adviser serves as investment adviser.

As of June 4, 2001, the officers and Trustees of the Fund as a group
beneficially owned less than 1% of the outstanding shares of the Fund. As of
that date, the following shareholders of record beneficially owned 5% or more of
the outstanding shares of the Fund.


                                       24



                                                             Percentage of Total
Name and Address of Shareholder          Fund                Outstanding Shares
- -------------------------------          ----                -------------------

The Investment Incentive Plan            Active Bond                    24.36%
101 Huntington Avenue
Boston MA  02199-7603

The Chase Manhattan Bank                 Active Bond                    33.80%
450 West 33rd Street
New York NY  10001

Manistique Papers, Inc.                  Active Bond                    6.65%
453 S Mackinac Avenue
Manistique, MI

Sterling Trust Company                   Active Bond                    9.23%
FBO SIPEX Tax Deferred Savings Plan
1380 Lawrence Street
Denver CO

Sterling Trust Company                   Active Bond                    6.49%
FBO Arden Group 401 (k)
Retirement Savings Plan
1380 Lawrence Street
Denver CO

Gilbane                                  International Equity           44.16%
Gilbane Profit Sharing Plan
7 Jackson Walkway
Providence RI 02902-3623

Sterling Trust Company                   International Equity           12.45%
FBO Southern Industrial 401(k) Plan
1380 Lawrence Street
Denver CO

The Investment Incentive Plan            International Equity           18.65%
101 Huntington Avenue
Boston MA 02199-7603

Sterling Trust Company                   International Equity           7.63%
FBO Texon USA, Inc.
Savings Plan for Employees of
Texon USA Inc.
1380 Lawrence Street
Denver CO

Miter & Co                               Independence Diversified Core  7.10%
c/o Marshall & Iisley Trust Co.          Equity Fund II-Class I
P.O. Box 2977
Milwaukee WI  53201


                                       25



                                                             Percentage of Total
Name and Address of Shareholder     Fund                     Outstanding Shares
- -------------------------------     ----                     -------------------

Northern Trust                      Independence Diversified Core        10.79%
FBO AM Castle and Co Pension Plan   Equity Fund II-Class I
P.O. Box 92956
Chicago IL

NABANK                              Independence Diversified Core        6.18%
P.O. Box 2180                       Equity Fund II-Class I
Tulsa OK  74101

Peter Kamin                         Independence Diversified Core        5.50%
Knowles Electronics Inc.            Equity Fund II-Class I
Pension Trust
1151 Maplewood Drive
Itasca IL

Sterling Trust Company              Independence Diversified Core        5.85%
FBO BAO Retirement & Savings Plan   Equity Fund II-Class I
1380 Lawrence Street
Denver CO

Independence Investment Associates  Independence Medium Capitalization   7.65%
53 State Street
Boston MA 02109-2809

Hancock Investment Subsidiaries     Independence Medium Capitalization   14.42%
401K Plan & Trust
Independence Investment Assoc Ttee
53 State Street
Boston MA 02109-2809

Gilbane                             Independence Medium Capitalization   6.91%
7 Jackson Walkway
Providence RI  02903-323

The Investment Incentive Plan       Dividend Performers                  56.09%
101 Huntington Avenue
Boston MA 02199-7603

The Chase Manhattan Bank            Dividend Performers                  11.70%
450 West 33rd Street
New York NY  10001


                                       26



                                                             Percentage of Total
Name and Address of Shareholder          Fund                Outstanding Shares
- -------------------------------          ----                -------------------

Sterling Trust Company               Dividend Performers             11.39%
FBO Texon USA, Inc.
Savings Plan for Employees of
Texon USA Inc.
1380 Lawrence Street
Denver CO

CG Enterprises Inc                   Dividend Performers             7.95%
12001 Guilford Road
Annapolis Junction MD 20701

Liguori Deferred Savings Plan        Dividend Performers             6.81%
Liguori Publications Inc
1 Liguori Drive
Liguori, MO  63057

Gilbane                              Independence Balanced           16.09%
Gilbane Profit Sharing Plan
7 Jackson Walkway
Providence RI 02902-3623

Sterling Trust Company               Independence Balanced           5.78%
FBO ACP-ASIM A
1380 Lawrence Street
Denver CO

Dan River, Inc.                      Independence Balanced           7.54%
Dan River, Inc.401(K) Plan
917 West Main Street
Danville VA  24541

Sterling Trust Company               Independence Balanced           8.57%
FBO BAO Retirement & Savings Plan
1380 Lawrence Street
Denver CO

The Investment Incentive Plan        Medium Capitalization Growth    32.49%
101 Huntington Avenue
Boston MA 02199-7603

Sterling Trust Company               Medium Capitalization Growth    11.97%
FBO Southern Industrial 401(k) Plan
1380 Lawrence Street
Denver CO


                                       27



                                                             Percentage of Total
Name and Address of Shareholder       Fund                   Outstanding Shares
- -------------------------------       ----                   -------------------

Sterling Trust Company                Medium Capitalization Growth       7.85%
FBO Texon USA, Inc.
Savings Plan for Employees of
Texon USA Inc.
1380 Lawrence Street
Denver CO

Globe Manufacturing Co                Medium Capitalization Growth       6.90%
401K Plan
456 Bedford Street
Fall River MA 02720-4802

Sterling Trust Company                Medium Capitalization Growth       7.72%
FBO SIPEX Tax Deferred Savings Plan
1380 Lawrence Street
Denver CO

Sterling Trust Company                Medium Capitalization Growth       6.21%
FBO One Color Comm 401(k)
Retirement Plan
1380 Lawrence Street
Denver CO

Gilbane                               Small Capitalization Value         55.89%%
Gilbane Profit Sharing Plan
7 Jackson Walkway
Providence RI 02902-3623

The Investment Incentive Plan         Small Capitalization Value         19.45%
101 Huntington Avenue
Boston MA 02199-7603

Sheldon & Co.                         Small Capitalization Value         5.37%
c/o National City Bank
P.O. Box 94984
Cleveland OH  44101

Fidelity Investment Institutional     Small Capitalization Value         11.60%
 Operations Co. As Agent for certain
 employee Benefit plans
100 Magellan Way
Covington KY  41015

The Investment Incentive Plan         Focused Small Cap Growth Fund-     36.00%
101 Huntington Avenue                 Class I
Boston MA 02199-7603


                                       28


                                                             Percentage of Total
Name and Address of Shareholder     Fund                     Outstanding Shares
- -------------------------------     ----                     -------------------

Cape Ann Local Lodge #2654         Focused Small Cap Growth Fund        14.00%
401K Plan                          -Class I
c/o Gloucester Engineering
PO Box 900
Gloucester MA 01931-0900

Manistique Papers, Inc.            Focused Small Cap Growth Fund        5.64%
453 S. Mackinac Avenue             -Class I
Manistique MI.  49854

CG Enterprises Inc                 Focused Small Cap Growth             5.91%
12001 Guilford Road                Fund-Class I
Annapolis Junction MD 20701

Sealol Inc. Retirement and 401(k)  Focused Small Cap Growth             5.77%
EG&G Sealol Inc                    Fund-Class I
15 Pioneer avenue
Warwick, RI

The Chase Manhattan Bank           Focused Small Cap Growth             6.63%
450 West 33rd Street               Fund-Class I
New York NY  10001

Sterling Trust Company             Focused Small Cap Growth             8.73%
FBO ACP-ASIM A                     Fund-Class I
1380 Lawrence St Ste 1400
Denver CO  80204

Sterling Trust Company             Focused Small Cap Growth             7.02%
FBO ARA-Individual Retirement      Fund-Class I
1380 Lawrence St Ste 1400
Denver CO  80204

Sterling Trust Company             Focused Small Cap Growth             5.80%
FBO ACP-ASIM B                     Fund-Class I
1380 Lawrence St Ste 1400
Denver CO  80204


Shareholders of a Fund having beneficial ownership of more than 25% of the
shares of a Fund may be deemed for purposes of the Investment Company Act of
1940, as amended, to control that Fund.

INVESTMENT ADVISORY AND OTHER SERVICES

The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has more than $30 billion in assets under management
in its capacity as investment adviser to the Funds and the other funds and
publicly traded investment companies in the John Hancock group of funds as well
as retail and institutional privately managed accounts. The Adviser is an
affiliate of the Life Company, one of the most recognized and respected
financial institutions in the nation. With total assets under management of more


                                       29



than $100 billion, the Life Company is one of the ten largest life insurance
companies in the United States, and carries a high rating from Standard & Poor's
and A.M. Best. Founded in 1862, the Life Company has been serving clients for
over 130 years. The Small Capitalization Value Fund is managed by Timothy E.
Quinlisk, CFA. Mr. Quinlisk is a Senior Vice President of the Adviser and has
managed the Fund since 1998 except between January and March 2000.

The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser which was approved by the Funds' shareholders.
Pursuant to the Advisory Agreement, the Adviser will: (a) furnish continuously
an investment program for the Fund and determine, subject to the overall
supervision and review of the Trustees, which investments should be purchased,
held, sold or exchanged, and (b) provide supervision over all aspects of the
Fund's operations except those which are delegated to a custodian, transfer
agent or other agent.

The Fund bears all costs of its organization and operation, including but not
limited to expenses of preparing, printing and mailing all shareholders'
reports, notices, prospectuses, proxy statements and reports to regulatory
agencies; expenses relating to the issuance, registration and qualification of
shares; government fees; interest charges; expenses of furnishing to
shareholders their account statements; taxes; expenses or redeeming shares;
brokerage and other expenses connected with the execution of portfolio
securities transactions; expenses pursuant to the Fund's plan of distribution;
fees and expenses of custodians including those for keeping books and accounts,
maintaining a committed line of credit and calculating the net asset value of
shares; fees and expenses of transfer agents and dividend disbursing agents;
legal, accounting, financial, management, tax and auditing fees and expenses of
the Fund (including an allocable portion of the cost of the Adviser's employees
rendering such services to the Fund); the compensation and expenses of Trustees
who are not otherwise affiliated with the Trust, the Adviser or any of their
affiliates; expenses of Trustees' and shareholders, meetings; trade association
membership; insurance premiums; and any extraordinary expenses.

As of December 14, 2000, with respect to International Equity Fund, the Adviser
has entered into a sub-investment management contract (the "Sub-Advisory
Agreement") with Nicholas-Applegate under which, subject to the review of the
Trustees and the overall supervision of the Adviser, Nicholas-Applegate is
responsible for providing the Fund with investment advice. Nicholas-Applegate
will also provide the Fund on a continuous basis with economic, financial and
political information, research and assistance concerning international markets.
Nicholas-Applegate is a California limited partnership, with offices at 600 West
Broadway, 30th Floor, San Diego, California 92101. Nicholas-Applegate was
organized in August 1984 to manage discretionary accounts investing primarily in
publicly traded equity securities and securities convertible into or exercisable
for publicly traded equity securities, with the goal of capital appreciation. On
January 31, 2001, Nicholas-Applegate was acquired by Allianz of America, Inc.
("AZOA"). Allianz AG, the parent of AZOA, is a German Aktiengesellschaft, a
German publicly traded company, which, together with its subsidiaries, comprises
the world's largest insurance group (the "Allianz Group"). Allianz Group
currently has assets under management of approximately $690 billion, and in its
last fiscal year wrote approximately $50 billion in gross insurance premiums.
Allianz AG's address is: Koeniginstrasse 28, D-80802, Munich, Germany.

Until December 14, 2000, the Sub-Adviser to the International Equity Fund was
Indocam International Investment Services ("IIIS"). IIIS is organized under the
laws of France and is a wholly owned subsidiary of Indocam, the asset management
affiliate of Credit Agricole, a French banking group. Indocam is an indirect
subsidiary of certain holding companies of Caisse Nationale de Credit Agricole
("CNCA"), 91-93 Boulevard Pasteur, Paris, France 75015, one of the largest
financial and industrial groups in Europe. The Sub-Advisory Agreement with IIIS
was terminated effective December 14, 2000. Until March 1, 2000, International
Equity Fund had another Sub-Adviser, John Hancock Advisers International Limited
("JHAI"), located at 6th Floor, Duke's Court, 32-36 Duke Street, St. James's,
London SWIY 6DF, England. JHAI is a wholly owned subsidiary of the Adviser
formed in 1987 to provide investment research and advisory services to U.S.
institutional clients. The Sub-Advisory Agreement with JHAI was terminated
effective March 1, 2000.


                                       30



With respect to each Independence Fund, the Adviser has entered into a
Sub-Advisory Agreement with Independence Investment LLC. ("Independence")
(formerly Independence Investment Associates, Inc. Independence, located at 53
State Street, Boston, Massachusetts 02109, and organized in 1982, is a wholly
owned indirect subsidiary of John Hancock Subsidiaries, Inc.

Under each respective Sub-Advisory Agreement, the corresponding Sub-Adviser,
subject to the review of the Trustees and the over-all supervision of the
Adviser, is responsible for managing the investment operations of the
corresponding Fund and the composition of the Fund's portfolio and furnishing
the Fund with advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities.

As compensation for its services under the Advisory Agreement, each Fund pays
the Adviser monthly a fee based on a stated percentage of the average daily net
assets of each Fund.




Funds                                                   Rate
- ------                                                  ----
                                                      

Active Bond  Fund                          .50% of average daily net assets up to $1.5 billion
                                           .45% of such assets in excess of $1.5 billion

Small Capitalization Value Fund            .70% of average daily net assets up to $500 million
                                           .65% of such assets in excess of $500 million

Dividend Performers Fund                   .60% of average daily net assets up to $500 million
                                           .55% of such assets in excess of $500 million

Medium Capitalization Growth Fund          .80% of average daily net assets up to $500 million
                                           .75% of such assets in excess of $500 million

Focused Small Cap Growth Fund              .80% of average daily net assets

International Equity Fund                  .90% of average daily net assets up to $500 million
                                           .65% of such assets in excess of $500 million

Balanced Fund                              .70% of the average daily net assets up to $500 million
                                           .65% of such assets in excess of $500 million

Diversified Core Equity Fund II            .50% of the average daily net assets up to $1 billion
                                           .45% of such assets in excess of $1 billion

Medium Capitalization Fund                 .80% of the average daily net assets up to $500 million
                                           .75% of such assets in excess of $500 million


The advisory fees paid by Focused Small Cap Growth Fund and International Equity
Fund are greater than those paid by most funds. Due to the added complexity of
managing funds with investment strategies similar to these Funds, advisory fees
of similar funds tend to be higher than those paid by most funds. Also, the
advisory fees paid by Medium Capitalization Fund are greater, but they are
comparable to those paid by many investment companies with similar investment
objectives and policies.

Under each Sub-Advisory Agreement, the Adviser (not the Fund) pays a portion of
its fee to the corresponding Sub-Adviser. Sub-Advisory fees are paid at the
following rates: Diversified Core Equity Fund II, 80% of the advisory fee
payable on the Fund's average daily net assets; Medium Capitalization Fund, 55%
of the advisory fee payable on the Fund's average daily net assets and Balanced
Fund, 60% of the advisory fee payable on the Fund's average daily net assets.
With respect to International Equity Fund, the Adviser pays Nicholas-Applegate a


                                       31



Sub-Advisory fee quarterly equal on an annual basis to (i) 0.90% of the first
$500,000,000 of the average daily net asset value of the Fund; and (ii) 0.65% of
the average daily net asset value of the Fund in excess of $500,000,000. From
December 14, 2000 until May 11, 2001, the Adviser paid Nicholas-Applegate a
Sub-Advisory fee equal to 55% of the gross management fee received by the
Adviser with respect to the International Equity Fund's average daily net
assets. Until December 14, 2000 with respect to International Equity Fund, the
Adviser paid IIIS a Sub-Advisory fee equal to 55% of the gross management fee
received by the Adviser with respect to the International Equity Fund's average
daily net assets. The Sub-Advisory Agreement with IIIS was terminated effective
December 14, 2000. For International Equity Fund, the Adviser also paid JHAI a
Sub-Advisory fee equal to 70% of the advisory fee payable on the Fund's average
daily net assets up to $500 million and 90% of the advisory fee payable on the
Fund's assets exceeding $500 million. JHAI agreed to waive all but 0.05% of this
fee beginning January 1, 2000. The Sub-Advisory Agreement with JHAI was
terminated effective March 1, 2000.

For the period ended February 28, 1999, the Adviser waived the entire investment
management fee for all Funds except Small Capitalization Value Fund, Dividend
Performers Fund, Medium Capitalization Growth Fund, Balanced Fund, Diversified
Core Equity Fund II and Medium Capitalization Fund. For the period ended
February 28, 1999, the Adviser received $3,095, $69,056, $189,004, $511,989,
$2,716,529 and $20,569 after expense limitation from Small Capitalization Value
Fund, Dividend Performers Fund, Medium Capitalization Growth Fund, Balanced
Fund, Diversified Core Equity Fund II and Medium Capitalization Fund,
respectively.

For the period ended February 29, 2000, the Adviser waived the entire investment
management fee for all Funds except Small Capitalization Value Fund, Dividend
Performers Fund, Medium Capitalization Growth Fund, Balanced Fund, Diversified
Core Equity Fund II and Medium Capitalization Fund. For the period ended
February 29, 2000, the Adviser received $2,775, $42,132, $89,049, $479,968,
$2,710,449 and $31,290 after expense limitation from Small Capitalization Value
Fund, Dividend Performers Fund, Medium Capitalization Growth Fund, Balanced
Fund, Diversified Core Equity Fund II and Medium Capitalization Fund,
respectively.


For the period ended February 28, 2001, the Adviser waived the entire investment
management fee for all Funds except Small Capitalization Value Fund, Dividend
Performers Fund, Medium Capitalization Growth Fund, Balanced Fund, Diversified
Core Equity Fund II and Medium Capitalization Fund. For the period ended
February 28, 2001, the Adviser received $123,547, $29,197, $154,799, $352,005,
$1,707,364 and $70,479 after expense limitation from Small Capitalization Value
Fund, Dividend Performers Fund, Medium Capitalization Growth Fund, Balanced
Fund, Diversified Core Equity Fund II and Medium Capitalization Fund,
respectively.


From time to time, the Adviser may reduce its fee or make other arrangements to
limit the Fund's expenses to a specified percentage of average daily net assets.
The Adviser retains the right to reimpose a fee and recover any other payments
to the extent that, at the end of any fiscal year, the Fund's annual expenses
fall below this limit. The Adviser has agreed to limit the Funds' expenses as
follows: Active Bond 0.60%; Dividend Performers 0.70%; Medium Capitalization
Growth 0.90%; Small Capitalization Value 0.80%; Focused Small Cap Growth
(excluding transfer agent expenses) 0.85%; International Equity 1.00%;
Diversified Core Equity II 0.70%; Medium Capitalization 1.00% and Balanced Fund
0.90%.

Securities held by the Funds may also be held by other funds or investment
advisory clients for which the Adviser, the Sub-Advisers or their respective
affiliates provide investment advice. Because of different investment objectives
or other factors, a particular security may be bought for one or more funds or
clients when one or more are selling the same security. If opportunities for
purchase or sale of securities by the Adviser or Sub-Adviser for a Fund or for
other funds or clients for which the Adviser or Sub-Advisers render investment
advice arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective funds or
clients in a manner deemed equitable to all of them. To the extent that
transactions on behalf of more than one client of the Adviser, Sub-Advisers or
their respective affiliates may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse effect
on price.


                                       32



Pursuant to each Advisory Agreement, where applicable, Sub-Advisory Agreement,
the Adviser and Sub-Adviser are not liable for any error of judgment or mistake
of law or for any loss suffered by the Funds in connection with the matters to
which their respective Agreements relate, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser or
Sub-Adviser in the performance of their duties or from their reckless disregard
of the obligations and duties under the applicable Agreement.

Under each Advisory Agreement, each Fund may use the name "John Hancock" or any
name derived from or similar to it only for as long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If a Fund's
Advisory Agreement is no longer in effect, the Fund (to the extent that it
lawfully can) will cease to use such name or any other name indicating that it
is advised by or otherwise connected with the Adviser. In addition, the Adviser
or the Life Company may grant the non-exclusive right to use the name "John
Hancock" or any similar name to any other corporation or entity, including but
not limited to any investment company of which the Life Company or any
subsidiary or affiliate thereof or any successor to the business of any
subsidiary or affiliate thereof shall be the investment adviser.

Under the Sub-Advisory Agreement of each Independence Fund, each Independence
Fund may use the name "Independence" or any name derived from or similar to it
only for as long as the Sub-Advisory Agreement is effect. When the Sub-Advisory
Agreement is no longer in effect, the Fund (to the extent that it lawfully can)
will cease to use any name indicating that it is advised by or otherwise
connected with Independence. In addition, Independence or the Life Company may
grant the non-exclusive right to use the name "Independence" or any similar name
to any other corporation or entity, including but not limited to any investment
company of which Independence or any subsidiary or affiliate thereof or any
successor to the business of any subsidiary or affiliate thereof shall be the
investment adviser.

The continuation of the Advisory Agreement, the Sub-Advisory Agreements and the
Distribution Agreement was approved by all of the Trustees in June of 2001. With
respect to International Equity Fund, on December 12, 2000, the Trustees
approved the termination of IIIS as Sub-Adviser and appointed Nicholas-Applegate
as Sub-Adviser effective December 14, 2000. This appointment was approved by
International Equity Fund's shareholders on April 25, 2001. The Advisory
Agreement, the Sub-Advisory Agreements and the Distribution Agreement will
continue in effect from year to year, provided that its continuance is approved
annually both (i) by the holders of a majority of the outstanding voting
securities of the Trust or by the Trustees, and (ii) by a majority of the
Trustees who are not parties to the Agreement or "interested persons" of any
such parties. Each of these Agreements may be terminated on 60 days written
notice by any party or by vote of a majority of the outstanding voting
securities of the Fund and will terminate automatically if assigned.


Accounting and Legal Services Agreement. The Trust, on behalf of the Funds, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this Agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the fiscal years ended February 28, 1999, February 29,
2000 February 28, 2001, the Fund paid the Adviser the following for services
under this Agreement: Balanced Fund $12,152, $13,666 and $10,633, Medium
Capitalization Fund $1,587, $2,048 and $2,759, Diversified Core Equity Fund II
$84,538, $98,578 and $64,547, Active Bond Fund $858, $902 and $1,045, Dividend
Performers Fund $3,109, $3,096 and $2,436, Medium Capitalization Growth Fund
$5,047, $3,853 and $5,315, Small Capitalization Value Fund $1,235, $2,289 and
$5,168, Focused Small Cap Growth Fund $352, $752 and $1,491 and International
Equity Fund $1,324, $1,587 and $1,913.


Personnel of the Adviser and its affiliates may trade securities for their
personal accounts. The Funds also may hold, or may be buying or selling, the
same securities. To prevent the Fund from being disadvantaged, the adviser and
its affiliates and the Fund have adopted a code of ethics which restricts the
trading activity of those personnel.


                                       33



DISTRIBUTION CONTRACT

The Fund has a Distribution Agreement with John Hancock Funds. Under the
Agreement, John Hancock Funds is obligated to use its best efforts to sell
shares of each Fund. Shares of the Fund are also sold by selected broker-dealers
(the "Selling Brokers") which have entered into selling agency agreements with
John Hancock Funds. These Selling Brokers are authorized to designate other
intermediaries to receive purchase and redemption orders on behalf of the Fund.
John Hancock Funds accepts orders for the purchase of the shares of the Funds
which are continually offered at net asset value next determined.

SALES COMPENSATION

As part of its business strategy, John Hancock Funds may pay compensation to
financial services firms that sell the Fund's shares. These firms typically pass
along a portion of this compensation to your financial representative.

John Hancock Funds may make a one-time payment at the time of initial purchase
out of its own resources to a Selling Broker who sells shares of the Fund. This
payment may not exceed 0.15% of the amount invested.

In addition, from time to time, John Hancock Funds, at its expense, may provide
significant additional compensation to financial services firms in connection
with the sale of shares of the Fund. Such compensation provided by John Hancock
Funds may include, for example, financial assistance to financial services firms
in connection with their marketing and sales development programs for their
registered representatives and other employees, as well as payment for travel
expenses, including lodging, incurred by registered representatives and other
employees for such marketing and sales development programs, seminars for the
public, advertising and sales campaigns regarding one or more Funds, and/or
other financial services firms-sponsored events or activities. From time to
time, John Hancock Funds may make expense reimbursements for special training of
a financial services firm's registered representatives and other employees in
group meetings. Other compensation, such as asset retention fees, finder's fees
and reimbursement for wire transfer fees, may be offered to the extent not
prohibited by law or any self-regulatory agency, such as the NASD.

NET ASSET VALUE

For purposes of calculating the net asset value ("NAV") of a Fund's shares, the
following procedures are utilized wherever applicable.

Debt investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.

Equity securities traded on a principal exchange or NASDAQ National Market
Issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the last
available bid price.

Short-term debt investments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.


                                       34



Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time (12:00 noon,
New York time) on the date of any determination of the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by events
occurring after the closing of a foreign market, assets are valued by a method
that the Trustees believe accurately reflects fair value.

The NAV for each Fund is determined each business day at the close of regular
trading on the New York Stock Exchange (typically 4 p.m. Eastern Time) by
dividing the net assets by the number of its shares outstanding. On any day an
international market is closed and the New York Stock Exchange is open, any
foreign securities will be valued at the prior day's close with the current
day's exchange rate. Trading of foreign securities may take place on Saturdays
and U.S. business holidays on which the Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.

ADDITIONAL SERVICES AND PROGRAMS

Exchange Privilege. The Fund permits exchanges of shares of any class of a fund
for shares of the same class in any other John Hancock fund offering that class.

The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.

The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.

An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".

PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES


Shares of the Funds may be purchased or redeemed through certain broker-dealers
or Service Agents ("Brokers"). Brokers may charge for their services or place
limitations on the extent to which you may use the services of the Funds. A Fund
will be deemed to have received a purchase or redemption order when an
authorized broker, or if applicable, a broker's authorized designee, receives
the order. If a broker is an agent or designee of the Fund, orders are processed
at the NAV next calculated after the broker receives the order. The broker must
segregate any orders it receives after the close of regular trading on the New
York Stock Exchange and transmit those orders to the Fund for execution at NAV
next determined. Some brokers that maintain nominee accounts with the Funds for
their clients charge an annual fee on the average net assets held in such
accounts for accounting, servicing and/or distribution services they provide
with respect to the underlying Fund shares. John Hancock Funds, Inc. (the Fund's
principal distributor), is responsible for paying these fees.


SPECIAL REDEMPTIONS

Although the Funds would not normally do so, each Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, the shareholder will incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. Each Fund has,
however, elected to be governed by Rule 18f-1 under the Investment Company Act.
Under that rule, each Fund must redeem its shares for cash except to the extent
that the redemption payments to any shareholder during any 90-day period would
exceed the lesser of $250,000 or 1% of the Fund's net asset value at the
beginning of that period.


                                       35



DESCRIPTION OF THE FUNDS' SHARES

The Trustees of the Trust are responsible for the management and supervision of
the Funds. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Funds,
without par value. Under the Declaration of Trust, the Trustees have the
authority to create and classify shares of beneficial interest in separate
series, without further action by shareholders. As of the date of this Statement
of Additional Information, the Trustees have authorized shares of eleven series
of which nine series are described herein. Additional series may be added in the
future. The Declaration of Trust also authorizes the Trustees to classify and
reclassify the shares of the Funds, or any other series of the Trust, into one
or more classes. Effective October 1, 1999, the Trustees authorized the issuance
Class P shares for Independence Diversified Core Equity Fund II. Existing shares
of the Fund were designated "Class I" shares. Class P shares are discussed in a
separate Statement of Additional Information. Effective November 15, 2000, the
Trustees authorized the issuance of Class A, Class B, and Class C shares for
Focused Small Cap Growth Fund. Existing shares of Focused Small Cap Growth Fund
were designated "Class I" shares. Class A, Class B and Class C shares are
discussed in a separate Statement of Additional Information.

Each share of a Fund represents an equal proportionate interest in the assets
belonging to that Fund. When issued, shares are fully paid and nonassessable. In
the event of liquidation of a Fund, shareholders are entitled to share pro rata
in the net assets of the Fund available for distribution to such shareholders.
Shares of the Trust are freely transferable and have no preemptive, subscription
or conversion rights.

In accordance with the provisions of the Declaration of Trust, the Trustees have
initially determined that shares entitle their holders to one vote per share on
any matter on which such shares are entitled to vote. The Trustees may determine
in the future, without the vote or consent of shareholders, that each dollar of
net asset value (number of shares owned times net asset value per share) will be
entitled to one vote on any matter on which such shares are entitled to vote.

Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Funds have no intention of holding annual meetings of shareholders.
Each Fund's shareholders may remove a Trustee by the affirmative vote of at
least two-thirds of the Trust's outstanding shares and the Trustees shall
promptly call a meeting for such purpose when requested to do so in writing by
the record holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.

Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the trust. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Trust. The Declaration of Trust also provides for indemnification out of the
Trust's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Liability is therefore limited to circumstances in which a
Fund itself would be unable to meet its obligations, and the possibility of this
occurrence is remote.

A Fund reserves the right to reject any application which conflicts with a
Fund's internal policies or the policies of any regulatory authority. John
Hancock Funds does not accept starter, credit card or third party checks. All
checks returned by the post office as undeliverable will be reinvested in the
fund or funds from which a redemption was made or dividend paid. Information


                                       36



provided on the account application may be used by a Fund to verify the accuracy
of the information or for background or financial history purposes. A joint
account will be administered as a joint tenancy with right of survivorship,
unless the joint owners notify Signature Services of a different intent. A
shareholder's account is governed by the laws of The Commonwealth of
Massachusetts. For telephone transactions, the transfer agent will take measures
to verify the identity of the caller, such as asking for name, account number,
Social Security or other taxpayer ID number and other relevant information. If
appropriate measures are taken, the transfer agent is not responsible for any
losses that may occur to any account due to an unauthorized telephone call. Also
for your protection telephone transactions are not permitted on accounts whose
names or addresses have changed within the past 30 days. Proceeds from telephone
transactions can only be mailed to the address of record.

Selling activities for the Fund may not take place outside the U.S. except with
U.S. military bases, APO addresses and U.S. diplomats. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A Foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.

TAX STATUS

Each Fund is treated as a separate entity for accounting and tax purposes, has
qualified as a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and intends to continue to qualify
for each taxable year. As such and by complying with the applicable provisions
of the Code regarding the sources of its income, the timing of its
distributions, and the diversification of its assets, a Fund will not be subject
to Federal income tax on its taxable income (including net realized capital
gains) which is distributed to shareholders in accordance with the timing
requirements of the Code.

Each Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. Each Fund
intends, under normal circumstances, to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.

Distributions from each Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from a Fund's "investment company taxable income,"
they will be taxable as ordinary income; and if they are paid from the Fund's
"net capital gain," they will be taxable as long-term capital gain. (Net capital
gain is the excess (if any) of net long-term capital gain over net short-term
capital loss, and investment company taxable income is all taxable income and
capital gains, other than those gains and losses included in computing net
capital gain, after reduction by deductible expenses.) Some distributions may be
paid in January but may be taxable to shareholders as if they had been received
on December 31 of the previous year. The tax treatment described above will
apply without regard to whether distributions are received in cash or reinvested
in additional shares of the Fund.

Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.

Foreign exchange gains and losses realized by a Fund in connection with certain
transactions involving foreign currency-denominated debt securities, certain
foreign currency options and futures, foreign currency forward contracts,
foreign currencies, or payables or receivables denominated in a foreign currency
are subject to Section 988 of the Code, which generally causes such gains and


                                       37



losses to be treated as ordinary income and losses and may affect the amount,
timing and character of distributions to shareholders. Transactions in foreign
currencies that are not directly related to a Fund's investment in stock or
securities, including speculative currency positions, could under future
Treasury regulations produce income not among the types of "qualifying income"
from which the Fund must derive at least 90% of its annual gross income for each
taxable year. If the net foreign exchange loss for a year treated as ordinary
loss under Section 988 were to exceed a Fund's investment company taxable income
computed without regard to such loss, the resulting overall ordinary loss for
such year would not be deductible by a Fund or its shareholders in future years.

If a Fund invests (either directly or through depository receipts such as ADRs,
GDRs or EDRs) in stock (including an option to acquire stock such as is inherent
in a convertible bond) of certain foreign corporations that receive at least 75%
of their annual gross income from passive sources (such as interest, dividends,
certain rents and royalties, or capital gain) or hold at least 50% of their
assets in investments producing such passive income ("passive foreign investment
companies"), the Fund could be subject to Federal income tax and additional
interest charges on "excess distributions" received from these passive foreign
investment companies or gain from the sale of stock in such companies, even if
all income or gain actually received by the Fund is timely distributed to its
shareholders. The Funds would not be able to pass through to their respective
shareholders any credit or deduction for such a tax. An election may be
available to ameliorate these adverse tax consequences, but could require the
Funds to recognize taxable income or gain without the concurrent receipt of
cash. These investments could also result in the treatment of associated capital
gains as ordinary income. Each Fund may limit and/or manage its investments in
passive foreign investment companies to minimize its tax liability or maximize
its return from these investments.

The amount of a Fund's net realized capital gains, if any, in any given year
will vary depending upon the current investment strategy of the Adviser and
Subadvisers and whether the Adviser and the Subadvisers believes it to be in the
best interest of the Funds to dispose of portfolio securities and/or engage in
options, futures or forward transactions that will generate capital gains. At
the time of an investor's purchase of Fund shares, a portion of the purchase
price is often attributable to realized or unrealized appreciation in a Fund's
portfolio or undistributed taxable income of a Fund. Consequently, subsequent
distributions on those shares from such appreciation or income may be taxable to
such investor even if the net asset value of the investor's shares is, as a
result of the distributions, reduced below the investor's cost for such shares,
and the distributions in reality represent a return of a portion of the purchase
price.

Upon a redemption or other disposition of shares of a Fund (including by
exercise of the exchange privilege), in a transaction that is treated as a sale
for tax purposes, a shareholder may realize a taxable gain or loss depending
upon the amount of the proceeds and the investor's basis in his shares. Such
gain or loss will be treated as capital gain or loss if the shares are capital
assets in the shareholder's hands. Any loss realized on a redemption or exchange
may be disallowed to the extent the shares disposed of are replaced with other
shares of the same Fund within a period of 61 days beginning 30 days before and
ending 30 days after the shares are disposed of, such as pursuant to the
automatic dividend reinvestments. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.

Also, any loss realized upon the redemption of shares with a tax holding period
of six months or less will be treated as a long-term capital loss to the extent
of any amounts treated as distributions of long-term capital gain with respect
to such shares. Shareholders should consult their own tax advisers regarding
their particular circumstances to determine whether a disposition of Fund shares
is properly treated as a sale for tax purposes, as is assumed in the foregoing
discussion.

The Funds reserve the right to retain and reinvest all or any portion of the
excess, as computed for Federal income tax purposes, of net long-term capital
gain over net short-term capital loss in any year. Although each Fund's present
intention is to distribute all net capital gains, if any, the Fund will not in
any event distribute net capital gains realized in any year to the extent that a
capital loss is carried forward from prior years against such gain. To the
extent such excess was retained and not exhausted by the carryforward of prior


                                       38



years' capital losses, it would be subject to Federal income tax in the hands of
the Fund. Upon proper designation of this amount by the Fund, each shareholder
would be treated for Federal income tax purposes as if such Fund had distributed
to him on the last day of its taxable year his pro rata share of such excess,
and he had paid his pro rata share of the taxes paid by such Fund and reinvested
the remainder in the Fund. Accordingly, each shareholder would (a) include his
pro rata share of such excess as long-term capital gain in his return for his
taxable year in which the last day of the Fund's taxable year falls, (b) be
entitled either to a tax credit on his return for, or a refund of, his pro rata
share of the taxes paid by the Fund, and (c) be entitled to increase the
adjusted tax basis for his Fund shares by the difference between his pro rata
share of such excess and his pro rata share of such taxes.

For Federal income tax purposes, each Fund is permitted to carry forward a net
realized capital loss in any year to offset net capital gains of that Fund, if
any, during the eight years following the year of the loss. To the extent
subsequent net capital gains are offset by such losses, they would not result in
Federal income tax liability to a Fund and, as noted above, would not be
distributed as such to shareholders. As of February 28, 2001, Active Bond Fund
had a capital loss carryforwards of $49,819 and $79,391 which will expire in
2008 and 2009, respectively. Focused Small Cap Growth Fund had a capital loss
carryforwards of $332,423 which will expire in 2009. International Fund had a
capital loss carryforwards of $636,448 which will expire in 2009. The remaining
Funds do not have any capital loss carryforwards.

For purposes of dividends received deduction available to corporations,
dividends received by a Fund, if any, from U.S. domestic corporations in respect
of any share of stock held by the Fund, for U.S. Federal income tax purposes,
for at least 46 days (91 days in the case of certain preferred stock) during a
prescribed period extending before and after such dividend and distributed and
properly designated by the Fund may be treated as qualifying dividends.
Corporate shareholders must meet the holding period requirements stated above
with respect to their shares of the applicable Fund for each dividend in order
to qualify for the deduction and, if they have any debt that is deemed under the
Code directly attributable to such shares, may be denied a portion of the
dividends-received deduction. The entire qualifying dividend, including the
otherwise deductible amount, will be included in determining alternative minimum
tax liability, if any. Additionally, any corporate shareholder should consult
its tax adviser regarding the possibility that its tax basis in its shares may
be reduced, for Federal income tax purposes, by reason of "extraordinary
dividends" received with respect to the shares and, to the extent such basis
would be reduced below zero, that current recognition of income would be
required.

Each Fund that invests in securities of foreign issuers may be subject to
withholding and other taxes imposed by foreign countries with respect to its
investments in foreign securities. Some tax conventions between certain
countries and the United States may reduce or eliminate such taxes. With respect
to each Fund, other than International Equity Fund, because more than 50% of the
Fund's total assets at the close of any taxable year will not consist of stock
or securities of foreign corporations, the Funds will not be able to pass such
taxes through to their shareholders, who in consequence will not include any
portion of such taxes in their incomes and will not be entitled to tax credits
or deductions with respect to such taxes. However, such Funds will be entitled
to deduct such taxes in determining the amounts they must distribute in order to
avoid Federal income tax. If more than 50% of the value of the total assets of
International Equity Fund at the close of any taxable year consists of stock or
securities of foreign corporations, the International Equity Fund may file an
election with the Internal Revenue Service pursuant to which shareholders of the
Fund will be required to (i) include in ordinary gross income (in addition to
taxable dividends and distributions actually received) their pro rata shares of
qualified foreign taxes paid by the Fund even though not actually received, and
(ii) treat such respective pro rata portions as foreign taxes paid by them.


                                       39



If the election is made, shareholders of the International Equity Fund may then
deduct such pro rata portions of qualified foreign taxes in computing their
taxable incomes, or, alternatively, use them as foreign tax credits, subject to
holding period requirements and other limitations, against their U.S. federal
income taxes. Shareholders who do not itemize deductions for Federal income tax
purposes will not, however, be able to deduct their pro rata portion of
qualified foreign taxes paid by International Equity Fund, although such
shareholders will be required to include their shares of such taxes in gross
income. Shareholders who claim a foreign tax credit for such foreign taxes may
be required to treat a portion of dividends received from International Equity
Fund as a separate category of income for purposes of computing the limitations
on the foreign tax credit. Tax-exempt shareholders will ordinarily not benefit
from this election. Each year (if any) that International Equity Fund files the
election described above, its shareholders will be notified of the amount of (i)
each shareholder's pro rata share of qualified foreign taxes paid by the Fund
and (ii) the portion of Fund dividends which represents income from each foreign
country. If the Fund cannot or does not make this election, the Fund will deduct
the foreign taxes it pays in determining the amount it has available for
distribution to shareholders, and shareholders will not include these foreign
taxes in their income, nor will they be entitled to any tax deductions or
credits with respect to such taxes.

Each Fund that invests in zero coupon securities or certain PIK or increasing
rate securities and any other securities with original issue discount (or with
market discount if the Fund elects to include market discount in income
currently) accrues income on such securities prior to the receipt of the
corresponding cash payments. The mark to market or constructive sale rules
applicable to certain options, futures, forwards, short sales or other
transactions, may also require the Fund to recognize income or gain without a
concurrent receipt of cash. Additionally, some countries restrict repatriation
which may make it difficult or impossible for the Fund to obtain cash
corresponding to its earnings or assets in those countries. Each Fund must
distribute, at least annually, all or substantially all of its net income and
net capital gains, including such accrued income or gain, to shareholders to
qualify as a regulated investment company under the Code and avoid Federal
income and excise taxes. Therefore, a Fund may have to dispose of its portfolio
securities under disadvantageous circumstances to generate cash, or may have to
borrow cash, to satisfy these distribution requirements.

Active Bond Fund and Small Capitalization Value Fund may invest in debt
obligations that are in the lower rating categories or are unrated, including
debt obligations of issuers not currently paying interest as well as issuers who
are in default. Investments in debt obligations that are at risk of or in
default present special tax issues for the Funds. Tax rules are not entirely
clear about issues such as when the Funds may cease to accrue interest, original
issue discount, or market discount, when and to what extent deductions may be
taken for bad debts or worthless securities, how payments received on
obligations in default should be allocated between principal and income, and
whether exchanges of debt obligations in a workout context are taxable. These
and other issues will be addressed by Active Bond Fund and Small Capitalization
Value Fund in the event they invest in such securities, in order to seek to
ensure that they distribute sufficient income to preserve their status as
regulated investment companies and to avoid becoming subject to Federal income
or excise tax.

The Federal income tax rules applicable to certain structured or hybrid
securities, currency swaps, interest rate swaps, caps, floors and collars, and
possibly other investments or transactions are or may be unclear in certain
respects, and each Fund will account for these investments or transactions in a
manner intended to preserve its qualification as a regulated investment company
and avoid material tax liability.

Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions, and certain
prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.


                                       40



With respect to each Fund that may enter into foreign currency positions,
forwards, futures and options transactions, limitations imposed by the Code on
regulated investment companies may restrict the Funds' ability to enter into
options, futures, foreign currency positions, and forward foreign currency
contracts.

Certain options, futures and forward foreign currency contracts undertaken by a
Fund may cause the Fund to recognize gains or losses from marking to market even
though its positions have not been sold or terminated and affect their character
as long-term or short-term (or in the case of certain foreign currency
contracts, as ordinary income or loss) and timing of some capital gains and
losses realized by the Fund. Additionally, the Fund may be required to recognize
gain, but not loss, if an option, futures contract, short sale or other
transaction is treated as a constructive sale of an appreciated financial
position in the Fund's portfolio. Also, certain of a Fund's losses on its
transactions involving options, futures or forward contracts and/or offsetting
or successor portfolio positions may be deferred rather than being taken into
account currently in calculating the Fund's taxable income or gains. Certain of
such transactions may also cause the Fund to dispose of investments sooner than
would otherwise have occurred. These transactions may therefore affect the
amount, timing and character of the Funds' distributions to shareholders. A Fund
will also take into account the special tax rules (including consideration of
available elections) applicable to options, futures and forward contracts in
order to minimize any potential adverse tax consequence.

A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) a Fund's distributions
are derived from interest on (or, in the case of intangible property taxes, the
value of its assets is attributable to) certain U.S. Government obligations,
provided in some states that certain thresholds for holdings of such obligations
and/or reporting requirements are satisfied. The Funds will not seek to satisfy
any threshold or reporting requirements that may apply in particular taxing
jurisdictions, although a Fund may in its sole discretion provide relevant
information to shareholders.

Each Fund will be required to report to the Internal Revenue Service (the "IRS")
all distributions to shareholders, as well as gross proceeds from the redemption
or exchange of Fund shares, except in the case of certain exempt recipients,
i.e., corporations and certain other investors distributions to which are exempt
from the information reporting provisions of the Code. Under the backup
withholding provisions of Code Section 3406 and applicable Treasury regulations,
all such reportable distributions and proceeds may be subject to backup
withholding of federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish a Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholder
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. The Funds may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability. Investors should consult their
tax advisers about the applicability of the backup withholding provisions.

The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain types of
investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. Shareholders should consult their own tax
advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Funds in their particular
circumstances.


                                       41



Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Funds is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to a non-resident alien withholding tax at the rate of
30% (or a lower rate under an applicable tax treaty) on amounts treated as
ordinary dividends from a Fund and unless an effective IRS Form W-8, Form
W-8BEN, or other authorized withholding certificate on file, to 31% back up
withholding on certain other payments from the Fund. Non U.S. investors should
consult their tax advisers regarding such treatment and the application of
foreign taxes to an investment in the Funds.

The Funds are not subject to Massachusetts corporate excise or franchise taxes.
The Funds anticipate that, provided that the Funds qualify as regulated
investment companies under the Code, they will also not be required to pay any
Massachusetts income tax.

CALCULATION OF PERFORMANCE

Yield
- -----


For the 30-day period ended February 28, 2001, the yield of Active Bond Fund was
5.93%.


A Fund's yield is computed by dividing its net investment income per share
determined for a 30-day period by the maximum offering price per share on the
last day of the period, according to the following standard formula:

                                               6
                  Yield = 2 ( [ ( a - b ) + 1 ] - 1 )
                                 -------
                                   cd

Where:
         a =      dividends and interest earned during the period.
         b =      net expenses accrued during the period.
         c =      the average daily number of fund shares outstanding during
                  the period that would be entitled to receive dividends.
         d =      the maximum offering price per share on the last day of the
                  period (NAV).

Total Return
- ------------
The average annual total return for the 1 year and life of that Fund for the
period ended February 28, 2001 is as follows:


                                      One Year Ended  Commencement of Operations
                                    February 28, 2001    to February 28, 2001
                                    ----------------- --------------------------

Active Bond Fund                           13.11%            7.83%  (c)
Small Capitalization Value Fund           -10.14%           21.93%  (d)
Dividend Performers Fund                    2.94%           15.42%  (c)
Medium Capitalization Growth Fund         -38.23%           12.87%  (e)
Focused Small Cap Growth Fund             -50.27%           11.63%  (b)
International Equity Fund                 -34.85%            2.01%  (c)
Balanced Fund                               3.13%           10.93%  (f)
Diversified Core Equity Fund II            -2.68%           16.76%  (a)
Medium Capitalization Fund                 13.14%           16.67%  (g)



                                       42



  (a) Commencement of operations, March 10, 1995.
  (b) From commencement of operations, May 2, 1996.
  (c) Commencement of operations, March 30, 1995.
  (d) Commencement of operations April 19, 1995.
  (e) Commencement of operations, April 11, 1995.
  (f) Commencement of operations, July 6, 1995.
  (g) From commencement of operations, October 2, 1995.

A Fund's total return is computed by finding the average annual compounded rate
of return over the indicated period that would equate the initial amount
invested to the ending redeemable value according to the following formula:


                      n _____
                 T = \ /ERV/P - 1

Where:

         P   =    a hypothetical initial investment of $1,000.
         T   =    average annual total return.
         n   =    number of years.
         ERV =    ending redeemable value of a hypothetical $1,000
                  investment made at the beginning of the one year and life of
                  fund periods.

This calculation assumes that all dividends and distributions are reinvested at
net asset value on the reinvestment dates during the period.

In addition to average annual total returns, the Funds may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments, and/or a series of redemptions, over any time period.

From time to time, in reports and promotional literature, a Fund's total return
will be ranked or compared to indices of mutual funds and bank deposit vehicles.
Such indices may include Lipper Analytical Services, Inc.'s "Lipper-Mutual
Performance Analysis," a monthly publication which tracks net assets and total
return on equity mutual funds in the United States, as well as those published
by Frank Russell, Callan Associates, Wilshire Associates and SEI.

Performance rankings and ratings reported periodically in, and excerpts from,
national financial publications such as Money magazine, Forbes, Business Week,
The Wall Street Journal, Micropal, Inc., Morningstar, Stanger's, and Barron's,
Pensions & Investments and Institutional Investor may also be utilized. The
Funds' promotional and sales literature may make reference to a Fund's "beta".
Beta is a reflection of the market related risk of the Fund by showing how
responsive the Fund is to the market.


                                       43



The performance of the Funds is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of any Fund for
any period in the future. The performance of a Fund is a function of many
factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease a
Fund's performance.

BROKERAGE ALLOCATION

Decisions concerning the purchase and sale of portfolio securities of the Funds
are made by officers of the Adviser pursuant to recommendations made by an
investment policy committee of the Adviser, which consists of officers and
directors of the Adviser, corresponding Subadviser (if applicable), officers and
Trustees who are interested persons of the Trust. Orders for purchases and sales
of securities are placed in a manner, which, in the opinion of the officers of
the Trust, will offer the best price and market for the execution of each such
transaction. Purchases from underwriters of portfolio securities may include a
commission or commissions paid by the issuer and transactions with dealers
serving as market makers reflect a "spread." Debt securities are generally
traded on a net basis through dealers acting for their own account as principals
and not as brokers; no brokerage commissions are payable on such transactions.

Each Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and such other policies as the Trustees may determine, the Adviser may consider
sales of shares of the Funds as a factor in the selection of broker-dealers to
execute a Fund's portfolio transactions.


To the extent consistent with the foregoing, each Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser and corresponding
Subadviser (if applicable) of the Funds. It is not possible to place a dollar
value on information and services to be received from brokers and dealers, since
it is only supplementary to the research efforts of the Adviser and
corresponding Subadviser (if applicable). The receipt of research information is
not expected to reduce significantly the expenses of the Adviser and Subadviser.
The research information and statistical assistance furnished by brokers and
dealers may benefit the Life Company or other advisory clients of the Adviser,
and, conversely, brokerage commissions and spreads paid by other advisory
clients of the Adviser may result in research information and statistical
assistance beneficial to the Funds. Similarly, research information and
assistance provided to a Subadviser by brokers and dealers may benefit other
advisory clients or affiliates of such Subadviser. The Funds will not make any
commitment to allocate portfolio transactions upon any prescribed basis. While
the Adviser, in connection with the corresponding Subadviser (if applicable),
will be primarily responsible for the allocation of the Funds' brokerage
business, the policies and practices of the Adviser in this regard must be
consistent with the foregoing and will, at all times, be subject to review by
the Trustees. For the fiscal years ended on February 28, 1999, February 29, 2000
and February 28, 2001, the Funds paid negotiated brokerage commissions in the
amount as follows: Independence Diversified Core Equity Fund II $559,111,
$711,968 and $472,331, Independence Medium Capitalization Fund $8,985, $16,377
and $26,148, Independence Balanced Fund $49,743, $51,745 and $47,389, Dividend
Performers Fund $32,953, $22,210 and $24,294, Medium Capitalization Growth Fund
$96,224, $51,580 and $54,895, Small Capitalization Value Fund $39,784, $42,422
and $82,735, International Equity $38,053, $62,440 and $98,834, Focused Small
Cap Growth Fund $5,313, $9,166 and $16,301. Active Bond Fund had no negotiated
brokerage commissions.


                                       44



As permitted by Section 28(e) of the Securities Exchange Act of 1934, each Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Trustees that such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. During the fiscal year ended February 28,
2001, Dividend Performers Fund, Medium Capitalization Growth Fund, Small
Capitalization Value Fund, Focused Small Cap Growth and Diversified Core Equity
Fund II directed commissions in the amount of $750, $24,730, $20,734, $3,582 and
$74,236, respectively to compensate brokers for research services such as
industry, economics and company reviews and evaluations of securities.

The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of Signator Investors, Inc., a broker-dealer (until January 1, 1999,
John Hancock Distributors, Inc.) ("Signator" or "Affiliated Broker"). Credit
Agricole, IIIS parent, has several affiliates engaged in the brokerage business
in Europe and Asia: Credit Agricole Indosuez Cheuvreux; CPR Action (ex-Schelcher
Prince Cheuvreux de Virieu International Ltd), London; Cheuvreux de Virieu,
Nordic AB, Stockholm, Cheuvreux de Virieu, Espana, Madrid, Credit Agricole
Indosuez Cheuvreux Deutschland GMBH, Frankfourt/ Main; Caboto Sim in Italy; Carr
Securities; Carr Futures SNC. (Paris) and Carr Futures PTE, Singapore (all
"Affiliated Brokers"). Pursuant to procedures determined by the Trustees and
consistent with the above policy of obtaining best net results, the Fund may
execute portfolio transactions with or through Affiliated Brokers. During the
fiscal years ending February 28, 1999, February 29, 2000 and from the period
from March 1, 2000 to December 12, 2000, the Fund did not execute any portfolio
transactions with Affiliated Brokers.


Signator may act as broker for the Funds on securities or commodities exchange
transactions, subject, however, to the general policy of the Funds set forth
above and the procedures adopted by the Trustees pursuant to the Investment
Company Act. Commissions paid to an Affiliated Broker must be at least as
favorable as those which the Trustees believe to be contemporaneously charged by
other brokers in connection with comparable transactions involving similar
securities being purchased or sold. A transaction would not be placed with an
Affiliated Broker if a Fund would have to pay a commission rate less favorable
than the Affiliated Broker's contemporaneous charges for comparable transactions
for its other most favored, but unaffiliated, customers except for accounts for
which the Affiliated Broker acts as clearing broker for another brokerage firm,
and any customers of the Affiliated Broker not comparable to the Fund as
determined by a majority of the Trustees who are not interested persons (as
defined in the Investment Company Act) of the Funds, the Adviser, the
corresponding Subadviser (if applicable) or the Affiliated Broker. Because the
Adviser, which is affiliated with the Affiliated Broker, and the corresponding
Subadviser (if applicable), have, as investment advisers to the Funds, the
obligation to provide investment management services, which includes elements of
research and related investment skills, such research and related skills will
not be used by the Affiliated Broker as a basis for negotiating commissions at a
rate higher than that determined in accordance with the above criteria.

Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Funds. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Funds. In some
instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate the securities
to be sold or purchased for the Funds with those to be sold or purchased for
other clients managed by it in order to obtain best execution.

For purchases of equity securities, when a complete order is not filled, a
partial allocation will be made to each account pro rata based on the order
size. For high demand issues (for example, initial public offerings), shares
will be allocated pro rata by account size as well as on the basis of account
objective, account size ( a small account's allocation may be increased to
provide it with a meaningful position), and the account's other holdings. In
addition, an account's allocation may be increased if that account's portfolio


                                       45



manager was responsible for generating the investment idea or the portfolio
manager intends to buy more shares in the secondary market. For fixed income
accounts, generally securities will be allocated when appropriate among accounts
based on account size, except if the accounts have different objectives or if an
account is too small to get a meaningful allocation. For new issues, when a
complete order is not filled, a partial allocation will be made to each account
pro rata based on the order size. However, if a partial allocation is too small
to be meaningful, it may be reallocated based on such factors as account
objectives, duration benchmarks and credit and sector exposure. For example,
value funds will likely not participate in initial public offerings s frequently
as growth funds. In some instances, this investment procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtainable for it. On the other hand, to the extent permitted by law, the
Adviser may aggregate securities to be sold or purchased for the Fund with those
to be sold or purchased for other clients managed by it in order to obtain best
execution.

TRANSFER AGENT SERVICES


John Hancock Signature Services, Inc., John Hancock Way, Suite 1001, Boston, MA
02217-1001, a wholly-owned indirect subsidiary of the Life Company is the
transfer and dividend paying agent for each Fund. Each Fund pays Signature
Services a fee of 0.05% of its average daily net assets plus certain
out-of-pocket expenses.


CUSTODY OF PORTFOLIO

Portfolio securities of International Equity Fund are held pursuant to a Master
Custodian Agreement, as amended, between the Adviser and State Street Bank and
Trust Company, 200 Berkeley Street, Boston, Massachusetts 02116. Portfolio
securities of the other Funds are held pursuant to a Master Custodian Agreement,
as amended, between the Adviser and Investors Bank & Trust Company, 200
Clarendon Street, Boston, Massachusetts 02116. Under the Master Custodian
Agreements, Investors Bank & Trust Company and State Street Bank and Trust
Company perform custody, portfolio and fund accounting services for their
respective Funds.

INDEPENDENT AUDITORS

The independent auditors of the Funds are Deloitte & Touche LLP, 200 Berkeley
Street, Boston, Massachusetts 02116. Deloitte & Touche LLP audits and renders
opinions on the Funds' annual financial statements and reviews the Funds' annual
Federal income tax returns.


                                       46



APPENDIX A

Description of Securities Ratings1

Moody's Investors Service, Inc.


Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium grade obligations i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

The ratings described here are believed to be the most recent ratings available
at the date of this Statement of Additional Information for the securities
listed. Ratings are generally given to securities at the time of issuance. While
the rating agencies may from time to time revise these ratings, they undertake
no obligation to do so, and the ratings indicated do not necessarily represent
those which would be given to these securities on the date of a Fund's fiscal
year-end.

Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

- --------
1 The ratings described here are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise these ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent those which would be given to these securities on the date
of a Fund's fiscal year-end.


                                      A-1



C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Absence of Rating: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

         1.       An application for rating was not received or accepted.

         2.       The issue or issuer belongs to a group of securities or
                  companies that are not rated as a matter of policy.

         3.       There is a lack of essential data pertaining to the issue or
                  issuer.

         4.       The issue was privately placed, in which case the rating is
                  not published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.

Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

Commercial Paper

Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months.

Issuers rated Prime-1 or P-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-I or P-1
repayment ability will often be evidenced by the following characteristics:

         _        Leading market positions in well established industries.

         _        High rates of return on funds employed.

         _        Conservative capitalization structures with moderate reliance
                  on debt and ample asset protection.

         _        Broad margins in earnings coverage of fixed financial charges
                  and high internal cash generation.

         _        Well established access to a range of financial markets and
                  assured sources of alternate liquidity.

Prime-2

Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong ability
for repayment of senior short-term obligations. This will normally be evidenced
by many of the characteristics cited above, but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.


                                      A-2



Prime-3

Issuers (or supporting institutions) rated Prime-3 (P-3) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Standard & Poor's Ratings Group

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

Speculative Grade

Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.

BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.

The B rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.


                                      A-3



The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.

CC: The rating CC is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating.

C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus of minus sign to show relative standing within the major
rating categories.

Provisional Ratings: The letter "P" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.

L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Saving & Loan Insurance Corp. or the Federal Deposit Insurance Corp.
and interest is adequately collateralized. In the case of certificates of
deposit the letter "L" indicates that the deposit, combined with other deposits,
being held in the same right and capacity will be honored for principal and
accrued pre-default interest up to the federal insurance limits within 30 days
after closing of the insured institution or, in the event that the deposit is
assumed by a successor insured institution, upon maturity.

NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.

Commercial Paper

Standard & Poor's describes its three highest ratings for commercial paper as
follows:

A-1. This designation indicated that the degree of safety regarding timely
payment is very strong.

A-2. Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated A-1.

A-3. Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
********

Notes: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. A Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.

Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.


                                      A-4



FINANCIAL STATEMENTS

The financial statements listed below are included in the Fund's 2001 Annual
Report to Shareholders for the year ended February 28, 2001; (filed
electronically on April 30, 2001, accession number 0000928816-01-500082) and are
included in and incorporated by reference into Part B of the Registration
Statement for John Hancock Institutional Series Trust (file nos. 33-86102 and
811-8852).

John Hancock Institutional Series Trust
    John Hancock Active Bond Fund
    John Hancock Dividend Performers Fund
    John Hancock Medium Capitalization Growth Fund
    John Hancock Small Capitalization Value Fund
    John Hancock Focused Small Cap Growth Fund
    John Hancock International Equity Fund
    John Hancock Independence Diversified Core Equity Fund II
    John Hancock Independence Medium Capitalization Fund
    John Hancock Independence Balanced Fund

    Statement of Assets and Liabilities as of February 28, 2001 (audited).
    Statement of Operations for the year ended February 28, 2001 (audited).
    Statement of Changes in Net Asset for each of the two years in the period
      ended February 28, 2001 (audited).
    Financial Highlights for each of the 5 years in the period ended February
      28, 2001 (audited).
    Schedule of Investments as of February 28, 2001 (audited).
    Notes to Financial Statements.
    Report of Independent Auditors.


                                      F-1





The latest report from your
Fund's management team

ANNUAL REPORT

Institutional Series Trust

Active Bond Fund

Dividend Performers Fund

Medium Capitalization Growth Fund

Small Capitalization Growth Fund

Small Capitalization Value Fund

International Equity Fund

FEBRUARY 28, 2001

[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]



Table of Contents

                                                                      Page

1) CEO Corner                                                            3

2) Portfolio Manager Commentary

   This commentary reflects the views of the portfolio managers or
   portfolio management teams through the end  of each Fund's period
   discussed in this report. Of course, the managers' or teams' views are
   subject to change as market and other conditions warrant.

   John Hancock Active Bond Fund                                         4
   John Hancock Dividend Performers Fund                                 7
   John Hancock Medium Capitalization Growth Fund                       10
   John Hancock Small Capitalization Growth Fund                        13
   John Hancock Small Capitalization Value Fund                         16
   John Hancock International Equity Fund                               19

3) Financial Statements                                                 22

4) Notes to Financial Statements                                        60



TRUSTEES

Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan*
* Members of Audit Committee

OFFICERS

Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Richard A. Brown
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Senior Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer

CUSTODIANS

International Equity Fund
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110

Active Bond Fund
Dividend Performers Fund
Medium Capitalization Growth Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116

TRANSFER AGENT

John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000

INVESTMENT ADVISER

John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603

SUB-INVESTMENT ADVISER

International Equity Fund
Nicholas-Applegate Capital Management
600 West Broadway
San Diego, CA 92101

PRINCIPAL DISTRIBUTOR

John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603

LEGAL COUNSEL

Hale and Dorr LLP
60 State Street
Boston, MA 02109

INDEPENDENT AUDITORS

Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022



CEO CORNER

[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive
Officer, flush right next to first paragraph.]

DEAR FELLOW SHAREHOLDERS:

The stock market brought investors back to earth in 2000 after a run of
nine consecutive years of positive stock-market results. The first two
months of 2001 have been equally sobering. Investors have grown
increasingly worried about the slowing economy and declining corporate
earnings. High-priced growth stocks have been the hardest hit.
Technology stocks, which got pounded in 2000, went into another free
fall in February, sending the NASDAQ Composite Index down 54% by the end
of February from its near high a year ago. While the broad stock market
has remained volatile, and in negative territory year-to-date, bonds
have done well in response to falling interest rates.

The year 2001 finds us with lingering uncertainties, a new U.S.
president and new possibilities. Questions remain about how successful
the Federal Reserve will be in preventing a recession. Even though the
Fed remains a key force impacting financial markets, we are also
watching Washington, D.C. as President George W. Bush attempts to enact
tax cuts.

This market environment serves to highlight the importance of having a
diversified portfolio and maintaining a long-term perspective,
particularly during tempestuous market times, to avoid making emotional,
perhaps costly, investment decisions. Now could be a good time to
connect with your investment professional for some insight and advice.

In addition to reviewing your investments, this is also a good time to
speak to your investment professional about tax-planning strategies. As
you pay this year's taxes and look ahead, there are a variety of options
to consider for minimizing and deferring tax payments -- in an effort to
maximize results. These include focusing on tax-exempt funds,
contributing the maximum to retirement plans, establishing or adding to
IRAs and funding a variable annuity.

Sincerely,

/S/ MAUREEN R. FORD

MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER



BY JAMES K. HO, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
BENJAMIN A. MATTHEWS, PORTFOLIO MANAGER

[A 3" x 2" photo at bottom middle of page of John Hancock Active Bond
Fund. Caption below reads "Fund management team leader Jim Ho."]

John Hancock
Active Bond Fund

Fund produces solid gains in an uneasy market

For bond investors, this past year proved generally hospitable, though
at times the market experienced extreme unease. The past 12 months were
marked by price surges in the U.S. Treasury arena and bouts of extreme
weakness in the corporate sector. Economic growth and inflation were
primary concerns for all. In late summer, after dubious signs of
slowing, the economy finally responded to the Fed's earlier campaign of
interest-rate increases. This past January, fearing too much of a
slowdown, the Fed changed tack and cut interest rates twice.

"...this past
 year proved
 generally
 hospitable..."

Strong performance

John Hancock Active Bond Fund benefited from investment flexibility and
intensive credit research. For the year ended February 28, 2001, the
Fund produced a total return of 13.11% at net asset value. This compares
with the 11.80% return of the average corporate debt A-rated fund,
according to Lipper, Inc.  The Fund's benchmark, the Lehman Brothers
Government/Corporate Bond Index, posted a total return of 13.51% in the
same period. Historical performance information can be found on page
six.

Defensive investments emphasized

At the fiscal year's outset, it became increasingly clear the economy
would heavily influence stock- and bond-market performance. The
possibility of an economic slowdown or even a recession prompted
investors to worry about corporations' missing their earnings targets
and defaulting on debt. Any hint of financial woe or pullback in profit
growth sent investors running for cover many times during the period,
with the worst of the credit spread widening happening in October and
November.

Not surprisingly, many dot-com millionaires sought safer havens for the
profits they had already made, turning to the relative safety of
higher-quality fixed-income investments such as U.S. Treasury securities
and mortgage-backed issues. After the plunge in stock and bond prices
last March, we anticipated that volatility would continue. With this in
mind, we focused our attention on higher-quality securities and on
corporate industry sectors that tend to be relatively insulated from
economic changes.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the year ended February 28,
2001." The chart is scaled in increments of 7% with 0% at the bottom and
14% at the top. The first bar represents the 13.11% total return for
John Hancock Active Bond Fund. The second bar represents the 11.80%
total return for Average corporate debt A-rated fund. The third bar
represents the 13.51% total return for Lehman Brothers
Government/Corporate Bond Index. A note below the chart reads "The total
return for John Hancock Active Bond Fund is at net asset value with all
distributions reinvested. The average corporate debt A-rated fund is
tracked by Lipper, Inc. See the following page for historical
performance information."]

We added to the Fund's position in U.S. Treasury securities, spreading
our holdings across the maturity spectrum. We also boosted the Fund's
stake in mortgage-backed and agency issues such as Ginnie Mae and Fannie
Mae. We made no major bets on interest-rate movements, keeping the
portfolio's duration, or interest-rate sensitivity, relatively neutral
throughout much of the fiscal year.

In the corporate sector, individual credit selection -- and avoidance --
became a key driver of Fund performance. Our practice of regularly
monitoring credits enabled us to avoid some troubled securities
altogether and move out of others before yields skyrocketed and prices
plummeted. We avoided such issues as Xerox and Crown, Cork & Seal and
sold FINOVA, Pacific Gas, Southern California Energy and Dillard's
before the brunt of their downturns. We also trimmed our high-yield
exposure, particularly telecommunications issues, and targeted somewhat
recession- resistant industries such as defense, utilities, healthcare,
media and energy. Noteworthy performers include Verizon, KeySpan, Tenet
Healthcare, HCA -- The Healthcare Co. and Amerada Hess.

"...stringent
 analysis and
 prudence will
 continue to
 dictate
 portfolio
 composition."

Rate cuts point toward recovery

The Fed's recent rate cuts -- and the possibility of more to come --
spurred a rebound in credit-sensitive securities. The yield curve has
begun to steepen and credit spreads (the difference in yields between
bonds of different  quality) have narrowed. Believing that yields do not
have much more room to fall, we recently began moving assets into
shorter-term Treasury securities and shortened the portfolio's duration
slightly. We have also selectively increased the Fund's high-yield
weighting, purchasing such holdings as Crown Castle International and
Nextel Communications (which we had sold in the fall.) We've initiated
positions in cyclical issues, such as Stone Container, and bolstered the
portfolio's stake in financial companies that stand to benefit from
lower interest rates. These include Bank One Corp., CIT Group and Heller
Financial.

While it appears a recovery may be under way, experience tells us it
could be long and drawn out and that caution is necessary. An economic
slowdown means more financially weak companies and jittery markets.
Therefore, stringent analysis and prudence will continue to  dictate
portfolio composition.



A LOOK AT PERFORMANCE

For the period ended February 28, 2001

                                                               SINCE
                                       ONE       FIVE      INCEPTION
                                      YEAR      YEARS      (3/30/95)
                                     -----      -----      ---------
Cumulative Total Returns             13.11%     44.49%         56.18%
Average Annual Total Returns(1)      13.11%      7.64%          7.83%

YIELD

As of February 28, 2001
                                                          SEC 30-DAY
                                                               YIELD
                                                          ----------
John Hancock Active Bond Fund                                  5.93%

Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.

Note to Performance

(1) The Fund's performance results reflect any applicable expense
    reductions, without which the expenses would increase and results would
    have been less favorable. These reductions can be terminated in the
    future. See the prospectus for details.


WHAT HAPPENED TO
A $250,000 INVESTMENT...

The chart below shows how much a $250,000 investment in John Hancock
Active Bond Fund would be worth, assuming all distributions were
reinvested for the period indicated. For  comparison, we've shown the
same $250,000 investment in the Lehman Brothers Government/ Corporate
Bond Index -- an unmanaged index that measures the performance of U.S.
government bonds, U.S. corporate bonds and Yankee bonds. It is not
possible to invest in an index. Past performance is no guarantee of
future results.

[Line chart with the heading John Hancock Active Bond Fund, representing
the growth of a hypothetical $250,000 investment over the life of the
fund. Within the chart are two lines. The first line represents the
Lehman Brothers Government/Corporate Bond Index and is equal to $394,747
as of February 28, 2001. The second line represents the value of the
hypothetical $250,000 investment made in the John Hancock Active Bond
Fund on March 30, 1995 and is equal to $390,524 as of February 28, 2001.]



BY JOHN F. SNYDER, III, PORTFOLIO MANAGEMENT TEAM LEADER AND
PETER M. SCHOFIELD, CFA, PORTFOLIO MANAGER

[A 3" x 2" photo at bottom middle of page of John Hancock Dividend Performers
Fund. Caption below reads "Fund management team leader John Snyder."]

John Hancock
Dividend Performers Fund

Tech stocks lead market down as economy slows

As the Fund's year began last March, the stock market was about to
undergo a major shift. Technology stocks, which led the market up in
1999, had risen to exorbitant valuation levels just as the economy began
to soften after a series of interest-rate hikes. As a result, the
tech-heavy NASDAQ Composite Index started a descent that lasted most of
the year, ending down 54.18% by the end of February. New economy stocks
gave way to the old, and value stocks finally overtook growth stocks, as
investors ended their tech-at-any-price mania and returned to the kinds
of companies that the Fund favors -- those with stable earnings growth
and reasonable valuations. But the overall market remained choppy
nonetheless, as many companies reported earnings disappointments and
warned of slower revenue growth. The year ended in red ink for the broad
market, with the Standard & Poor's 500 Index returning -8.20% for the
12 months ended February 28, 2001.

Fund outperforms market

With our main focus primarily on "dividend performer" companies that
have a 10-year history of rising dividends, the Fund managed to
outperform the market. For the year ended February 28, 2001, John
Hancock Dividend Performers Fund posted a total return of 2.94% at net
asset value. That was lower, however, than the 6.63% return of the
average large-cap value fund, according to Lipper, Inc. Historical
performance information can be found on page nine. Although we were
underweighted in technology versus the S&P 500 Index, which served us
well, our tech overweight versus our peer group held back our relative
performance. Being underweighted in the solid-performing utilities
sector also ate into relative performance.

"As investors
 turned away
 from technol-
 ogy stocks,
 the more
 defensive,
 less expensive
 areas
 benefited."

Defensive names help

As investors turned away from technology stocks, the more defensive,
less expensive areas benefited. These included health care, where our
overweight helped performance with such holdings as Baxter
International. Consumer staples also had a strong showing, with PepsiCo
and Philip Morris among our top performers. Bestfoods and Nabisco were
also boosted by takeovers.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the year ended February 28,
2001." The chart is scaled in increments of 5% with -10% at the bottom
and 10% at the top. The first bar represents the 2.94% total return for
John Hancock Dividend Performers Fund. The second bar represents the
6.63% total return for Average large-cap value fund. The third bar
represents the -8.20% total return for S&P 500 Index. A note below the
chart reads "The total return for John Hancock Dividend Performers Fund
is at net asset value with all distributions reinvested. The average
large-cap value fund is tracked by Lipper, Inc. See the following page
for historical performance information."]

"...the
 market will
 undoubtedly
 remain
 under stress
 in the near
 term."

Financial stocks were lifted by the growing prospect of lower interest
rates, an environment that favors this rate-sensitive sector. Some of
our larger holdings were among this group and they were main
contributors to performance, including mortgage guarantors Fannie Mae
and Freddie Mac, consumer finance company Household International and
insurers Aflac and American International Group. With the Federal
Reserve launching a campaign of lowering rates to prevent the economy
from stalling, we added to our financial stake as the year progressed.

Technology hurts

As with the market in general, our technology stocks went from being our
biggest contributor last year to our main detractor this year. Even
quality names such as Nortel Networks, Cisco Systems, Sun Microsystems
and Intel could not avoid the carnage, especially in the fall when tech
stocks were hit particularly hard by earnings disappointments. In fact,
after this latest downdraft, we selectively bought some high-quality
technology names, since their long-range prospects remain good and their
valuations had fallen to compelling levels. These included Texas
Instruments and AOL Time Warner.

A look ahead

With the economy slowing and earnings warnings abounding, the market
will undoubtedly remain under stress in the near term. We believe the
market's focus will stay on companies with stable earnings growth that
will outperform the market, and reasonable valuations -- exactly the
kinds of stocks the Fund targets. In this environment, we will continue
to maintain a mix of financial stocks, which should benefit from lower
rates; defensive health-care and consumer staples names, and technology
stocks that have the biggest rebound potential.



A LOOK AT PERFORMANCE

For the period ended February 28, 2001

                                                                  SINCE
                                            ONE       FIVE    INCEPTION
                                           YEAR      YEARS    (3/30/95)
                                          -----     ------     --------
Cumulative Total Returns                  2.94%     90.28%      133.64%
Average Annual Total Returns(1)           2.94%     13.73%       15.42%

Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.

Note to Performance

(1) The Fund's performance results reflect any applicable expense
    reductions, without which the expenses would increase and results would
    have been less favorable. These reductions can be terminated
    in the future. See the prospectus for details.


WHAT HAPPENED TO
A $250,000 INVESTMENT...

The chart below shows how much a $250,000 investment in John Hancock
Dividend Performers Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $250,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index. Past performance is no guarantee of future
results.

[Line chart with the heading John Hancock Dividend Performers Fund,
representing the growth of a hypothetical $250,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Index and is equal to $684,041 as
of February 28, 2001. The second line represents the value of the
hypothetical $250,000 investment made in the John Hancock Dividend
Performers Fund on March 30, 1995 and is equal to $584,117 as of
February 28, 2001.]



BY BARBARA FRIEDMAN, CFA, PORTFOLIO MANAGEMENT TEAM LEADER

[A 2" x 3" photo at bottom middle of page of John Hancock Medium
Capitalization Growth Fund. Caption below reads "Fund management team
leader Barbara Friedman."]

John Hancock
Medium Capitalization
Growth Fund

Growth stocks sink as corporate and consumer spending slow

The stock market reached new highs early last year, shortly before
rising interest rates and the prospect of an economic slowdown sent
leading technology stocks sliding. Value stocks moved into favor,
benefiting sectors like utilities, financials, health care and energy.
Although interest rates stabilized over the summer, concerns about the
economy's rapid deceleration caused further deterioration in technology
and telecommunications stock prices. During the fall and winter, the
downturn spread. Mid-cap growth stocks, which had previously held up
well because of their strong earnings and reasonable valuations,
collapsed late in the year. The Russell Mid Cap Growth Index closed
February 2001 with a disappointing 12-month return of -36.23%.

"We also
 began
 focusing on
 companies
 that would
 be among
 the first
 to benefit
 from an
 economic
 rebound..."

Performance review

In this difficult environment, John Hancock Medium Capitalization Growth
Fund maintained its disciplined focus on mid-size companies with strong
earnings growth prospects. For the year ended February 28, 2001, the
Fund returned -38.23% at net asset value. By comparison, the average
mid-cap growth fund returned -35.25% over the same period, according to
Lipper, Inc. Historical performance information can be found on page 12.

Tech tumbles

During the year, the Fund's largest stake remained in technology, where
stock prices declined by 50% for the period. We reduced our technology
investments to a market weight by last fall, but remained focused on the
faster-growth areas of data storage and fiber optics -- names like
Brocade Communications Systems and Aeroflex -- which got hit hard late
in the year. In addition, companies like Lexmark International, a
printer manufacturer (which we sold), and software companies like
Parametric Technology also suffered as the economic outlook dimmed. An
exception was  E-Tek Dynamics, a leading producer of fiber-optic equipment
that did well when it was bought out over the summer.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the year ended February 28,
2001." The chart is scaled in increments of 10% with -40% at the bottom
and 0% at the top. The first bar represents the -38.23% total return for
John Hancock Medium Capitalization Growth Fund. The second bar
represents the -35.25% total return for Average mid-cap growth fund. The
third bar represents the -36.23% total return for Russell Midcap Growth
Index. A note below the chart reads "The total return for John Hancock
Medium Capitalization Growth Fund is at net asset value with all
distributions reinvested. The average mid-cap growth fund is tracked by
Lipper, Inc. See the following page for historical performance information."]

Telecom and radio hurt

The Fund also maintained a sizable stake in competitive local exchange
carriers (CLECs)  like Global Crossing, McLeodUSA, XO Communications
(formerly NEXTLINK), and Allegiance Telecom. Funding concerns at
selected CLECs devastated the entire sector last summer, unfairly
squeezing companies like ours that remained fully funded with strong
execution on their business plans. Dobson Communications, a rural direct
television provider, and Scientific-Atlanta, a leading  producer of
digital set-top boxes for cable television, also suffered in this
negative environment. Radio stocks declined significantly in
anticipation of a huge slowdown in ad spending in 2001, causing us to
sell all except market leader Clear Channel Communications.

Energy cut; finance boosted

In the fall, we reduced our energy stake, including top-performing oil
service stocks like Baker-Hughes, Weatherford International and
Transocean Sedco Forex (which acquired R&B Falcon). We also took profits
in health care, eliminating strong performers like Stryker, which makes
medical devices. We held on, however, to other top contributors like
Waters, a company that makes analytical equipment for drug companies, as
well as Allergan, a drug company that specializes in eye diseases. We
also began focusing on companies that would be among the first to
benefit from an economic rebound, including Ambac Financial Group, a
municipal bond insurer; Mellon Financial, a bank with significant
fee-based income; and USA Education, an education loan company that we
recently sold. All benefited performance, as did transaction processors
like Concord EFS, Fiserv and SunGard Data Systems. We also added to our
retail stake, buying names like Bed Bath & Beyond, Talbots and TJX.

"The Fund's
 assets span
 a wide array
 of sectors
 with a focus
 on the
 strongest
 mid caps
 in each
 industry..."

Cautious outlook

We expect the environment over the next six months to be one of
uncertainty and continued volatility. The Federal Reserve began to cut
interest rates this past January, but no one knows exactly how long it
will take for these rate cuts to stimulate economic activity. Currently,
earnings disappointments are on the rise and the outlook for earnings
and revenue growth in the second half of the year remains murky. We
believe that whenever a rebound comes, both mid-cap stocks and the Fund
should benefit. The Fund's assets span a wide array of sectors with a
focus on the strongest mid caps in each industry -- companies that
should be among the first to snap back in an economic recovery.



A LOOK AT PERFORMANCE

For the period ended February 28, 2001

                                                                  SINCE
                                          ONE         FIVE    INCEPTION
                                         YEAR        YEARS    (4/11/95)
                                        -----        -----    ---------
Cumulative Total Returns               (38.23%)      61.84%      103.88%
Average Annual Total Returns(1)        (38.23%)      10.11%       12.87%

Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.

Note to Performance

(1) The Fund's performance results reflect any applicable expense
    reductions, without which the expenses would increase and results
    would have been less favorable. These reductions can be terminated
    in the future. See the prospectus for details.


WHAT HAPPENED TO
A $250,000 INVESTMENT...

The chart below shows how much a $250,000 investment in John Hancock
Medium Capitalization Growth Fund would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $250,000 investment in the Russell Midcap Growth
Index -- an unmanaged index that contains those Russell Midcap
securities with a greater-than-average growth orientation. It is not
possible to invest in an index. Past performance is no guarantee of
future results.

[Line chart with the heading John Hancock Medium Capitalization Growth
Fund, representing the growth of a hypothetical $250,000 investment over
the life of the fund. Within the chart are two lines. The first line
represents the Russell Midcap Growth Index and is equal to $598,655 as
of February 28, 2001. The second line represents the value of the
hypothetical $250,000 investment made in the John Hancock Medium
Capitalization Growth Fund on April 11, 1995 and is equal to $509,712 as
of February 28, 2001.]



BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGEMENT TEAM LEADER,
AND ANURAG PANDIT, CFA, PORTFOLIO MANAGER

[A 2" x 2" photo at bottom middle of page of John Hancock Small
Capitalization Growth Fund. Caption below reads "Fund management team
leader Bernice Behar."]

John Hancock
Small Capitalization
Growth Fund

Growth stocks fall from favor as technology stocks plummet

Small-cap growth stocks sank under the weight of falling technology and
telecommunications stocks over the last 12 months. Growing earnings
concerns in the face of a slowing economy caused investors to flee these
high-priced stocks, sending the tech-heavy NASDAQ Composite Index down
54.18% for the year despite a summer rally. Investors became more
focused on  valuations and on more defensive segments of the market like
health care, financial and energy stocks, and value replaced growth as
the place to be. The result was a huge gap in performance between the
two major indexes that track small-cap stocks. For the year ended
February 28, 2001, the Russell 2000 Value Index gained 21.97%, while the
Russell 2000 Growth Index lost 40.75%.

Tech hurts performance

For the year ended February 28, 2001, John Hancock Small Capitalization
Growth Fund posted a total return of -50.27% at net asset value,
compared with the -30.68% return of the average small-cap growth fund,
according to Lipper, Inc.

"In June,
 we began a
 restructur-
 ing of the
 Fund's
 portfolio..."

While we were underweighted in technology versus our benchmark Russell
2000 Growth Index, we remained overweighted versus our peer group and
that hurt relative performance, as a growing number of companies
announced earnings disappointments and forecast slower growth. Tech and
telecom companies suffered from growing inventories and slowing demand
for all types of equipment and services just as the economy started to
ebb. This group, including semiconductor, software and telecom-related
companies, handed us some of our biggest disappointments, including
M-Systems Flash Disk Pioneers, a wireless semiconductor company;
WatchGuard, which provides Internet security solutions to small and
mid-size companies; and PRI Automation, a supplier of advanced
automation systems and software to the semiconductor industry.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the year ended February 28,
2001." The chart is scaled in increments of 10% with -60% at the bottom
and 0% at the top. The first bar represents the -50.27% total return for
John Hancock Small Capitalization Growth Fund. The second bar represents
the -30.68% total return for Average small-cap growth fund. The third
bar represents the -40.75% total return for Russell 2000 Growth Index. A
note below the chart reads "The total return for John Hancock Small
Capitalization Growth Fund is at net asset value with all distributions
reinvested. The average small-cap growth fund is tracked by Lipper, Inc.
See the following page for historical performance information."]

"...small-cap
 growth
 stock
 valuation
 levels have
 become
 more
 attractive..."

Ad slowdown hits consumer cyclicals

Our overweighting in consumer cyclical companies -- especially anything
related to advertising -- also hurt our performance, as advertising by
Internet companies dried up. The group includes broadcasters such as
Radio One and media, advertising and even Internet analytical software
companies like Accrue Software, which helps companies understand their
Internet strategies.

Fund restructuring

In June, we began a restructuring of the Fund's portfolio to adopt a
more concentrated approach. This provides us with the opportunity to act
in a more aggressive manner on our convictions about both individual
companies and sectors. We reduced the number of holdings from 180 to
around 60, redeploying assets into high-quality companies that we
believe have the best potential for success in the current environment.
While this helped us in the summer rally, it hurt us on the downside
later, which is typical of a more focused portfolio -- greater
short-term swings on both the up and down sides. That was especially
true for some of the telecom service providers that we added or held
onto in January and February, such as WinStar Communications, AirGate
PCS and SBA Communications.

As part of the restructuring, we eliminated most of our positions in the
lagging Internet software sector and increased our stake in health-care
companies, which were 22% of net assets by the end of February. At first
we focused on biotechnology companies and later took profits after these
stocks rose significantly. We then moved into the more defensive area of
health-care services. Our top holding by the end of the period was
Rightchoice Managed Care, an HMO which stands to benefit from a more
favorable environment for government expense reimbursements.

A look ahead

In the short term, we expect small-cap stocks to remain volatile while
the economy slows and companies adjust their earnings downward. We're
more optimistic further out, however, as small-cap growth stock
valuation levels have become more attractive and companies will have a
better chance of beating lowered expectations, especially in a falling
interest-rate environment. Historically, small-cap stocks have been some
of the first to recover from an economic slump, because they have the
potential to provide the strongest earnings growth.

- ---------------------------------------------------------------------
See the prospectus for the the risks of investing in small-cap stocks.



A LOOK AT PERFORMANCE

For the period ended February 28, 2001

                                                               SINCE
                                                    ONE    INCEPTION
                                                   YEAR     (5/2/96)
                                             ----------   ----------
Cumulative Total Returns                        (50.27%)      70.09%
Average Annual Total Returns(1)                 (50.27%)      11.63%

Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.

Note to Performance

(1) The Fund's performance results reflect any applicable expense
    reductions, without which the expenses would increase and results would
    have been less favorable. These reductions can be terminated in the
    future. See the prospectus for details.


WHAT HAPPENED TO
A $250,000 INVESTMENT...

The chart below shows how much a $250,000 investment in John Hancock
Small Capitalization Growth Fund would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $250,000 investment in the Russell 2000 Index and
the Russell 2000 Growth Index. The Russell 2000 Index is an unmanaged
small-cap index comprised of 2,000 U.S. stocks. The Russell 2000 Growth
Index is an unmanaged index containing Russell 2000 Index stocks with a
greater-than-average growth orientation. It is not possible to invest in
an index. Past performance is no guarantee of future results.

[Line chart with the heading John Hancock Small Capitalization Growth
Fund, representing the growth of a hypothetical $250,000 investment over
the life of the fund. Within the chart are three lines. The first line
represents the value of the hypothetical $250,000 investment made in the
John Hancock Small Capitalization Growth Fund on May 2, 1996 and is equal
to $425,236 as of February 28, 2001. The second line represents the
Russell 2000 Index and is equal to $362,582 as of February 28, 2001. The
third line represents the Russell 2000 Growth Index and is equal to
$289,179 as of February 28, 2001.]



BY TIMOTHY E. QUINLISK, CFA, PORTFOLIO MANAGEMENT TEAM LEADER,
R. SCOTT MAYO, CFA, AND JAMES S. YU, CFA, PORTFOLIO MANAGER

[A 2" x 3" photo at bottom middle of page of John Hancock Small
Capitalization Value Fund. Caption below reads "Fund management team
leader Tim Quinlisk."]

John Hancock Small
Capitalization Value Fund

Market volatility leads to renewed focus on valuation

Rising interest rates pushed investors out of expensive technology names
last spring and into more value-oriented sectors. Small-cap stocks,
particularly financials, utilities and energy, benefited. During the
summer and fall, telecommunications and technology stocks posted steep
declines, as the slowing economy caused capital markets to tighten and
demand to weaken. While growth sectors took hard hits, small-cap value
stocks held up well. But in the fourth quarter, gross domestic product
figures came in much lower than expected, causing a broad market
downturn. In an effort to revive economic growth, the Federal Reserve
cut interest rates early in the New Year. But continued economic
uncertainty, along with a growing number of earnings disappointments,
kept most market indexes in negative territory.

"Among our
 strongest
 performers
 were less
 economi-
 cally
 sensitive
 names..."

Performance review

John Hancock Small Capitalization Value Fund posted a -10.14% total
return at net asset value for the year ended February 28, 2001. This
beat the -16.84% return posted by the Russell 2000 Index, but trailed
the -6.96% return of the average small-cap core fund, according to
Lipper, Inc. Historical performance information can be found on page 18.
The Fund's strong stock selection and value  orientation helped
performance relative to the index. But above-average stakes in both
technology and telecommunications caused the Fund to lag its peer group.

Staying the course

We found some of the greatest value opportunities this past year in the
telecommunications sector, where investors indiscriminately punished
strong and weak companies. Increased competition and difficulty funding
the build-out of new high-speed networks chopped many telecom stock
prices in half. We added to our stakes in companies like NTELOS
(formerly CFW Communications) and CTC Communications Group -- newcomers
that continue to execute on their plans for adding subscribers and
building out access lines. We also held on to investments like ANTEC,
which provides telephone services over cable, even as a pullback in
capital spending dampened near-term prospects.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the year ended February 28,
2001." The chart is scaled in increments of 6% with -18% at the bottom
and 0% at the top. The first bar represents the -10.14% total return for
John Hancock Small Capitalization Value Fund. The second bar represents
the -6.96% total return for Average small-cap core fund. The third bar
represents the -16.84% total return for Russell 2000 Index. A note below
the chart reads "The total return for John Hancock Small Capitalization
Value Fund is at net asset value with all distributions reinvested. The
average small-cap core fund is tracked by Lipper, Inc. See the following
page for historical performance information."]

Riding with technology

In the technology sector, we also maintained or added to investments on
weakness, including Wind River Systems, the leading supplier of software
for embedded microprocessor systems, and Electronics for Imaging, a
company that supplies software used in office equipment. E-commerce
consulting firms like Viant and Xpedior tumbled, but we held on,
believing that huge pent-up demand will re-ignite the stocks. We also
kept our investment in Bell & Howell, a company that develops software
solutions to help clients like libraries access information more
efficiently. The stock declined sharply, but should benefit as the
company sells its non-core assets to focus on information services. In a
related area, Pegasus Communications, a direct satellite television
provider, tumbled when expected industry consolidation was postponed.

Benefiting from defensive stocks

Among our strongest performers were less economically sensitive names
like Corinthian Colleges and Career Education, both of which own and
operate for-profit colleges that benefited from growing enrollment
trends. Other defensive names that did well included Valassis
Communications, which does freestanding ad inserts for Sunday
newspapers, and Heidrick & Struggles International, a leading executive
search firm that we sold when it reached our price target. Covance, a
contract research organization serving the pharmaceutical industry,
benefited from restructuring and an improved health-care outlook. Some
of our capital goods companies, including Amphenol, which makes
connectors, also turned in strong results, thanks to solid demand.
Finally, AC Nielsen, a market research company, was recently bought out
at a premium.

"The great
 value oppor-
 tunities, in
 our opinion,
 are now in
 beaten-down
 technology
 stocks."

Looking ahead

The future looks uncertain as earnings growth outlooks continue to erode
in this slower economic environment. Our strategy is to position the
Fund for the return of the economy's operating leverage. We feel that
traditional value sectors -- like financials, utilities and energy --
have run their course. The great value opportunities, in our opinion,
are now in beaten-down technology stocks. We're focusing there, as well
as in stocks that should do well in a slower growth environment, such as
NOVA, a large transaction processor that serves small to mid-size
businesses. We'll continue to look for opportunities to buy good
businesses like these whose stocks are selling at cheap prices.

- ---------------------------------------------------------------------
See the prospectus for a discussion of the risks of investing in
small-cap stocks.



A LOOK AT PERFORMANCE

For the period ended February 28, 2001

                                                                   SINCE
                                           ONE         FIVE    INCEPTION
                                          YEAR        YEARS    (4/19/95)
                                         ------      -------    ---------
Cumulative Total Returns                (10.14%)     194.46%     219.83%
Average Annual Total Returns(1)         (10.14%)      24.11%      21.93%

Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.

Note to Performance

(1) The Fund's performance results reflect any applicable expense
    reductions, without which the expenses would increase and results would
    have been less favorable. These reductions can be terminated in the
    future. See the prospectus for details.


WHAT HAPPENED TO
A $250,000 INVESTMENT...

The chart below shows how much a $250,000 investment in the John Hancock
Small Capitalization Value Fund would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $250,000 investment in the Russell 2000 Index -- an
unmanaged, small-cap index comprised of 2,000 U.S stocks. It is not
possible to invest in an index. Past performance is no guarantee of
future results.

[Line chart with the heading John Hancock Small Capitalization Value
Fund, representing the growth of a hypothetical $250,000 investment over
the life of the fund. Within the chart are two lines. The first line
represents the value of the hypothetical $250,000 investment made in the
John Hancock Small Capitalization Value Fund on April 19, 1995 and is
equal to $799,565 as of February 28, 2001. The second line represents
the Russell 2000 Index and is equal to $492,921 as of February 28,
2001.]



BY LORETTA MORRIS AND RANDY KAHN
FOR THE PORTFOLIO MANAGEMENT TEAM

John Hancock
International Equity Fund

Volatility afflicts overseas markets

On December 14, 2000, Nicholas-Applegate Capital Management assumed
management responsibility for the Fund under a new subadvisory agreement
that shareholders will be asked to formally approve in an upcoming proxy
solicitation. Founded in 1984, Nicholas-Applegate is a recognized leader
in U.S. equity, global and international equity management and currently
manages more than $35 billion for institutional and individual
investors.

By nearly every measure, the 12-month period ended February 28, 2001 was
a challenging one for international stock investors. An abnormally high
level of volatility stemming from a slowdown in economic growth, a
deceleration in corporate earnings and a rise in energy prices sent the
global equity markets lower practically across the board.

The contagion that began to spread early last year during the selloff of
technology, media and telecommunications (TMT) stocks continued to
linger in 2001. Contributing to the  ongoing weakness was a tightening
bias by  central banks worldwide in 2000. All told, there were nearly
130 interest-rate hikes in 2000, and the cumulative effect of tighter
monetary policy ultimately precipitated a sharp slowdown in global
growth.

Japan was especially hard hit by the investor rotation out of TMT
stocks, since at its February 2000 peak this sector represented over 40%
of Japanese stock-market capitalization. By February 2001, the country
appeared to be sinking deeper into recession, and its chief index, the
Nikkei, was on the verge of declining to a 15-year low. Meanwhile, tight
monetary conditions in Europe served to dampen corporate spending,
consumer credit growth, auto sales and the housing market.

"On
 December
 14, 2000,
 Nicholas-
 Applegate
 Capital
 Management
 assumed
 manage'
 ment..."

Fund performance

In this difficult environment, John Hancock International Equity Fund
returned -34.85% at net asset value for the 12-month period ended
February 28, 2001. That compares with a return of -21.16% for the
average international fund, according to Lipper, Inc., and the -18.18%
return of the MSCI All Country World Free ex-U.S. Index. See page 21 for
historical performance information.

The Fund's underperformance stemmed in large part from investments in
the volatile TMT sectors. Although overweighted versus the MSCI index,
the Fund had a lighter weighting than its peers when tech stocks
skyrocketed early last year. After boosting the TMT stake, the Fund was
hit by having an overweighted position as the stocks came back down to
earth. The Fund was particularly hard-hit by significant declines in
telecommunications companies in the U.K. and Mexico.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the year ended February 28,
2001." The chart is scaled in increments of 10% with -40% at the bottom
and 0% at the top. The first bar represents the -34.85% total return for
John Hancock International Equity Fund. The second bar represents the
- -21.16% total return for Average international fund. The third bar
represents the -18.18% total return for MSCI All Country World Free
Ex-U.S. Index. A note below the chart reads "The total return for John
Hancock International Equity Fund is at net asset value with all
distributions reinvested. The average international fund is tracked by
Lipper, Inc. See the following page for historical performance information."]

"...we will
 continue to
 focus on
 companies
 with out-
 standing
 fundamen-
 tals..."

New management: Strategies and changes

On December 14, 2000, Nicholas-Applegate Capital Management assumed
management of the Fund. The cornerstone of our investment philosophy
rests on identifying companies possessing three attributes: they are
poised to benefit from positive change such as innovation or
higher-than-expected earnings; they are positioned to sustain this
positive change over time; and they are beginning to be recognized by
the market through rising stock prices. In addition, we regularly assess
political, economic, monetary and technology factors in each country and
help to determine whether to overweight or underweight specific
countries in the portfolio.

Since assuming management of the Fund, we have gradually transitioned
the portfolio to be consistent with our investment approach, paring the
number of holdings to build larger positions in fewer companies. We also
further reduced the Fund's exposure to the volatile technology sector
and began cutting holdings in Japan, as the prospects for growth there
remain dim. In its place, we have identified more attractive
opportunities in the United Kingdom, where growth rates are projected to
be solid in 2001.

Looking ahead

Many of the uncertainties that plagued the world's markets in 2000 may
linger in 2001. Technology stocks could remain under pressure in the
coming quarters, as valuations for many of this sector's leaders remain
high. In addition, although global central banks have begun to reduce
interest rates, the lagged effects of their tightenings should continue
to slow world activity well into 2001, according to an analysis by
International Strategy and Investment, an economic data and research
firm. Going forward, we will continue to focus on companies with
outstanding fundamentals, in the belief that their strengths will
ultimately be recognized by the markets.

- ---------------------------------------------------------------------
International investing involves special risks such as political,
economic and currency risks, and differences in accounting standards
and financial reporting.



A LOOK AT PERFORMANCE

For the period ended February 28, 2001

                                                                   SINCE
                                           ONE         FIVE    INCEPTION
                                          YEAR        YEARS    (3/30/95)
                                         -----        -----        -----
Cumulative Total Returns                (34.85%)       2.43%       12.47%
Average Annual Total Returns(1)         (34.85%)       0.48%        2.01%

Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.

Note to Performance

(1) The Fund's performance results reflect any applicable expense
    reductions, without which the expenses would increase and results would
    have been less favorable. These reductions can be terminated in the
    future. See the prospectus for details.


WHAT HAPPENED TO
A $250,000 INVESTMENT...

The chart below shows how much a $250,000 investment in the John Hancock
International Equity Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $250,000 investment in the Morgan Stanley Capital International
(MSCI) All Country World Free Ex-U.S. Index -- an unmanaged index that
measures the performance of both developed and emerging foreign stock
markets. The index represents freely traded stocks. It is not possible
to invest in an index. Past performance is no guarantee of future
results.

[Line chart with the heading John Hancock International Equity Fund,
representing the growth of a hypothetical $250,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the MSCI All Country World Free Ex-U.S. Index and is equal to
$355,151 as of February 28, 2001. The second line represents the value
of the hypothetical $250,000 investment made in the John Hancock
International Equity Fund on March 30, 1995 and is equal to $281,186 as
of February 28, 2001.]



FINANCIAL STATEMENTS

John Hancock Funds -- Institutional Series Trust




Statements of Assets and Liabilities
February 28, 2001
- ----------------------------------------------------------------------------------------------------------
                                                        ACTIVE              DIVIDEND                MEDIUM
                                                          BOND            PERFORMERS        CAPITALIZATION
                                                          FUND                  FUND           GROWTH FUND
                                             -----------------     -----------------     -----------------
                                                                                
Assets:
Investments at value -- Note C:
Bonds (cost -- $6,219,298, none and
none, respectively)                                 $6,388,770                    --                    --
Common stocks (cost -- none, $5,098,709
and $11,013,857, respectively)                              --            $6,122,039           $11,270,366
Warrants (cost -- $103, none and none,
respectively)                                              970                    --                    --
Short-term investments (cost --
$387,000, $109,000 and $428,000,
respectively)                                          387,000               109,000               428,000
Corporate savings account                                  705                   331                   590
                                             -----------------     -----------------     -----------------
                                                     6,777,445             6,231,370            11,698,956
Receivable for investments sold                         72,338                    --               300,244
Dividends and interest receivable                       76,302                 9,917                 2,535
Other assets                                               512                 1,735                 3,680
                                             -----------------     -----------------     -----------------
Total Assets                                         6,926,597             6,243,022            12,005,415
- ----------------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased                       69,504                    --               454,913
Payable for shares repurchased                           9,975                    --                 5,803
Dividends payable                                        3,358                    --                    --
Payable to John Hancock Advisers, Inc.
and affiliates                                           2,132                 9,712                 6,109
Accounts payable and accrued expenses                   36,415                31,003                39,737
                                             -----------------     -----------------     -----------------
Total Liabilities                                      121,384                40,715               506,562
- ----------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in                                      6,803,914             4,107,506            10,644,410
Accumulated net realized gain (loss) on
investments, financial futures
contracts and foreign currency
transactions                                          (166,078)            1,060,523               599,986
Net unrealized appreciation of
investments                                            170,339             1,023,330               256,509
Undistributed (distributions in excess
of) net investment income                               (2,962)               10,948                (2,052)
                                             -----------------     -----------------     -----------------
Net Assets                                          $6,805,213            $6,202,307           $11,498,853
==========================================================================================================
Net Asset Value Per Share:
(Based on 790,144, 556,604 and
1,120,973 shares, respectively, of
beneficial interest outstanding --
unlimited number of shares authorized
with no par value)                                       $8.61                $11.14                $10.26
==========================================================================================================

The Statement of Assets and Liabilities is each Fund's balance sheet and
shows the value of what the Fund owns, is due and owes as of February 28,
2001. You'll also find the net asset value per share as of that date.

See notes to financial statements.







Statement of Assets and Liabilities (continued)
February 28, 2001
- ----------------------------------------------------------------------------------------------------------
                                                         SMALL                 SMALL         INTERNATIONAL
                                                CAPITALIZATION        CAPITALIZATION                EQUITY
                                                   GROWTH FUND            VALUE FUND                  FUND
                                             -----------------     -----------------     -----------------
                                                                                
Assets:
Investments at value -- Note C:
Common stocks and warrants (cost --
$5,545,155, $32,424,457 and
$5,222,120, respectively)                           $5,170,562           $30,703,773            $5,058,956
Preferred stocks (cost -- none, none
and $70,749, respectively)                                  --                    --                62,959
Short-term investments (cost --
$297,000, $26,000 and $1,516,471,
respectively)                                          297,000                26,000             1,516,471
Corporate savings account                                  829                   448                    --
                                             -----------------     -----------------     -----------------
                                                     5,468,391            30,730,221             6,638,386
Cash                                                        --                    --                21,401
Foreign currency, at value (cost --
none, none and $67,454, respectively)                       --                    --                67,446
Receivable for forward foreign currency
exchange contracts purchased                                --                    --                   105
Receivable for investments sold                         37,334                84,938               166,044
Dividends and interest receivable                           46                 3,650                14,446
Deferred organization expenses                             714                    --                    --
Receivable from John Hancock Advisers,
Inc. and affiliates                                      7,494                    --                    --
Other assets                                               479                 1,113                 1,156
                                             -----------------     -----------------     -----------------
Total Assets                                         5,514,458            30,819,922             6,908,984
- ----------------------------------------------------------------------------------------------------------
Liabilities:
Payable for open forward foreign
currency exchange contracts sold                            --                    --                   263
Payable for investments purchased                       23,141               582,638               132,140
Payable for shares repurchased                             411                 2,533                 1,544
Payable for securities on loan                              --                    --               844,471
Payable to John Hancock Advisers, Inc.
and affiliates                                              --                12,064                 7,397
Accounts payable and accrued expenses                   32,500                39,265                63,777
                                             -----------------     -----------------     -----------------
Total Liabilities                                       56,052               636,500             1,049,592
- ----------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in                                      7,097,867            31,030,185             7,286,654
Accumulated net realized gain (loss) on
investments, financial futures
contracts and foreign currency
transactions                                        (1,264,576)              874,987            (1,214,255)
Net unrealized depreciation of
investments and foreign currency
transactions                                          (374,593)           (1,720,684)             (171,606)
Distributions in excess of net
investment income                                         (292)               (1,066)              (41,401)
                                             -----------------     -----------------     -----------------
Net Assets                                          $5,458,406           $30,183,422            $5,859,392
==========================================================================================================
Net Asset Value Per Share:
(Based on 520,388, 2,489,110 and
712,203 shares, respectively, of
beneficial interest outstanding --
unlimited number of shares authorized
with no par value)                                      $10.49                $12.13                 $8.23
==========================================================================================================

See notes to financial statements.







Statement of Operations
Year ended February 28, 2001
- ----------------------------------------------------------------------------------------------------------
                                                        ACTIVE              DIVIDEND                MEDIUM
                                                          BOND            PERFORMERS        CAPITALIZATION
                                                          FUND                  FUND           GROWTH FUND
                                             -----------------     -----------------     -----------------
                                                                                
Investment Income:
Interest (including income from
securities loaned of none, none and
$13,642, respectively)                                $394,594               $45,185              $104,462
Dividends (net of foreign withholding
tax of none, $593 and $301,
respectively)                                            7,235               141,055                36,606
                                             -----------------     -----------------     -----------------
                                                       401,829               186,240               141,068
                                             -----------------     -----------------     -----------------
Expenses:
Investment management fee                               27,380                77,983               224,846
Custodian fee                                           36,563                10,978                35,721
Registration and filing fees                            17,723                12,590                12,093
Auditing fee                                            17,800                18,625                19,225
Printing                                                 7,161                 5,482                 7,095
Transfer agent fee                                       2,738                 6,498                14,052
Accounting and legal services fee                        1,045                 2,436                 5,315
Miscellaneous                                              325                 1,128                 1,800
Organization expense                                       131                   132                   230
Trustees' fees                                             169                   170                 1,460
Legal fees                                                  66                    86                    37
Interest expense                                            --                 3,830                 1,365
                                             -----------------     -----------------     -----------------
Total Expenses                                         111,101               139,938               323,239
- ----------------------------------------------------------------------------------------------------------
Less Expense Reductions                                (78,188)              (48,786)              (70,047)
- ----------------------------------------------------------------------------------------------------------
Net Expenses                                            32,913                91,152               253,192
- ----------------------------------------------------------------------------------------------------------
Net Investment Income (Loss)                           368,916                95,088              (112,124)
- ----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments, Financial Futures
Contracts and Foreign Currency Transactions:
Net realized gain on investments sold                   15,289             2,388,602             2,260,504
Net realized loss on financial futures
contracts                                                   --                (7,744)                   --
Net realized gain on foreign currency
transactions                                             3,483                    --                    --
Change in net unrealized appreciation
(depreciation) of investments                          305,118            (1,416,018)          (12,919,604)
Change in net unrealized appreciation
(depreciation) of financial futures
contracts                                                   --                59,771                    --
Change in net unrealized appreciation
(depreciation) of foreign currency
transactions                                              (323)                   --                    --
                                             -----------------     -----------------     -----------------
Net Realized and Unrealized Gain (Loss)
on Investments, Financial Futures
Contracts and Foreign Currency
Transactions                                           323,567             1,024,611           (10,659,100)
- ----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations                             $692,483            $1,119,699          ($10,771,224)
==========================================================================================================

The Statement of Operations summarizes, for each of the Funds, the
investment income earned and expenses incurred in operating the Fund. It
also shows net gains (losses) for the period stated.

See notes to financial statements.







Statement of Operations (continued)
Year ended February 28, 2001
- ----------------------------------------------------------------------------------------------------------
                                                         SMALL                 SMALL         INTERNATIONAL
                                                CAPITALIZATION        CAPITALIZATION                EQUITY
                                                   GROWTH FUND            VALUE FUND                  FUND
                                             -----------------     -----------------     -----------------
                                                                                
Investment Income:
Interest (including income from
securities loaned of $9,214, $9,082
and $6,649, respectively)                              $25,333               $80,636               $34,453
Dividends (net of foreign withholding
tax of none, none and $17,877,
respectively)                                            1,570                67,132               110,146
                                             -----------------     -----------------     -----------------
                                                        26,903               147,768               144,599
                                             -----------------     -----------------     -----------------
Expenses:
Investment management fee                               62,735               189,558                90,945
Custodian fee                                           39,371                24,015               206,240
Registration and filing fees                            24,865                19,158                16,574
Auditing fee                                            15,550                18,025                18,431
Organization expense                                     4,079                   219                   130
Printing                                                 5,604                 5,487                 6,435
Miscellaneous                                              789                 1,399                   773
Transfer agent fee                                       3,921                13,540                 5,052
Accounting and legal services fee                        1,491                 5,168                 1,913
Trustees' fees                                             265                 1,186                   412
Interest expense                                         1,355                 4,798                 2,992
Legal fees                                                  --                   251                    --
                                             -----------------     -----------------     -----------------
Total Expenses                                         160,025               282,804               349,897
- ----------------------------------------------------------------------------------------------------------
Less Expense Reductions                                (89,398)              (66,011)             (248,764)
- ----------------------------------------------------------------------------------------------------------
Net Expenses                                            70,627               216,793               101,133
- ----------------------------------------------------------------------------------------------------------
Net Investment Income (Loss)                           (43,724)              (69,025)               43,466
- ----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments, Financial Futures
Contracts and Foreign Currency Transactions:
Net realized gain (loss) on investments
sold                                                (1,172,422)            6,208,030              (440,411)
Net realized loss on financial futures
contracts                                                   --              (132,737)                   --
Net realized gain (loss) on foreign
currency transactions                                       --                 3,027              (729,497)
Change in net unrealized appreciation
(depreciation) of investments                       (3,958,158)           (8,772,416)           (3,005,518)
Change in net unrealized appreciation
(depreciation) of foreign currency
transactions                                                --                    --                   415
                                             -----------------     -----------------     -----------------
Net Realized and Unrealized Loss on
Investments, Financial Futures
Contracts and Foreign Currency
Transactions                                        (5,130,580)           (2,694,096)           (4,175,011)
- ----------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting
from Operations                                    ($5,174,304)          ($2,763,121)          ($4,131,545)
==========================================================================================================

See notes to financial statements.







Statement of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
                                                      ACTIVE BOND                              DIVIDEND PERFORMERS
                                                          FUND                                        FUND
                                        ---------------------------------------     ---------------------------------------
                                               YEAR ENDED            YEAR ENDED            YEAR ENDED            YEAR ENDED
                                        FEBRUARY 29, 2000     FEBRUARY 28, 2001     FEBRUARY 29, 2000     FEBRUARY 28, 2001
                                        -----------------     -----------------     -----------------     -----------------
                                                                                              
Increase in Net Assets:
From Operations:
Net investment income                            $342,798              $368,916              $120,862               $95,088
Net realized gain (loss) on
investments sold, financial
futures contracts and foreign
currency transactions                            (167,990)               18,772             1,960,778             2,380,858
Change in net unrealized
appreciation (depreciation) of
investments, financial futures
contracts and foreign currency
transactions                                      (88,968)              304,795            (1,240,327)           (1,356,247)
                                        -----------------     -----------------     -----------------     -----------------
Net Increase in Net Assets
Resulting from Operations                          85,840               692,483               841,313             1,119,699
                                        -----------------     -----------------     -----------------     -----------------
Distributions to Shareholders: *
Dividends from net investment
income                                           (342,798)             (370,991)             (125,515)             (100,614)
Distributions in excess of net
investment income                                     (47)                   --                    --                    --
Distributions from net realized
gain on investments sold                          (11,387)                   --            (1,568,997)           (2,068,903)
                                        -----------------     -----------------     -----------------     -----------------
Total Distributions to
Shareholders                                     (354,232)             (370,991)           (1,694,512)           (2,169,517)
                                        -----------------     -----------------     -----------------     -----------------
From Portfolio Share Transactions: **
Shares sold                                     3,005,999             4,430,138             5,626,668             4,639,407
Shares issued to shareholders in
reinvestment of distributions                     351,436               366,504             1,694,964             2,169,758
                                        -----------------     -----------------     -----------------     -----------------
                                                3,357,435             4,796,642             7,321,632             6,809,165
Less shares repurchased                        (4,552,479)           (2,535,098)           (9,348,646)          (14,419,671)
                                        -----------------     -----------------     -----------------     -----------------
Net Increase (Decrease)                        (1,195,044)            2,261,544            (2,027,014)           (7,610,506)
                                        -----------------     -----------------     -----------------     -----------------
Net Assets:
Beginning of period                             5,685,613             4,222,177            17,742,844            14,862,631
                                        -----------------     -----------------     -----------------     -----------------
End of period (including
undistributed (distribution in
excess of) net investment income
of ($1,213), ($2,963), $16,484
and $10,948 respectively)                      $4,222,177            $6,805,213           $14,862,631            $6,202,307
                                        =================     =================     =================     =================
* Distributions to Shareholders:
Per share dividends from net
investment income                                 $0.5791               $0.5579               $0.1106               $0.1073
                                        -----------------     -----------------     -----------------     -----------------
Per share distributions in excess
of net investment income                          $0.0001                    --                    --                    --
                                        -----------------     -----------------     -----------------     -----------------
Per share distributions from net
realized gain on investments sold                 $0.0206                    --               $1.5543               $2.8091
                                        -----------------     -----------------     -----------------     -----------------
** Analysis of Portfolio
Share Transactions:
Shares sold                                       358,987               535,238               375,404               320,516
Shares issued to shareholders in
reinvestment of distributions                      42,197                44,172               116,345               183,485
                                        -----------------     -----------------     -----------------     -----------------
                                                  401,184               579,410               491,749               504,001
Less shares repurchased                          (544,753)             (307,954)             (618,694)           (1,047,503)
                                        -----------------     -----------------     -----------------     -----------------
Net Increase (Decrease)                          (143,569)              271,456              (126,945)             (543,502)
                                        =================     =================     =================     =================

The Statement of Changes in Net Assets shows how the value of each
Fund's net assets has changed since the previous period. The difference
reflects net investment income, any investment and foreign currency
gains and losses, distributions paid to shareholders and any increase or
decrease in money shareholders invested in each Fund. The footnotes
illustrate the number of Fund shares sold, reinvested and repurchased
during the period, along with the per share amount of distributions
made to shareholders of each Fund for the period indicated.

See notes to financial statements.







Statement of Changes in Net Assets (continued)
- ---------------------------------------------------------------------------------------------------------------------------
                                                 MEDIUM CAPITALIZATION                         SMALL CAPITALIZATION
                                                      GROWTH FUND                                  GROWTH FUND
                                        ---------------------------------------     ---------------------------------------
                                               YEAR ENDED            YEAR ENDED            YEAR ENDED            YEAR ENDED
                                        FEBRUARY 29, 2000     FEBRUARY 28, 2001     FEBRUARY 29, 2000     FEBRUARY 28, 2001
                                        -----------------     -----------------     -----------------     -----------------
                                                                                              
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss                              ($76,769)            ($112,124)             ($23,200)             ($43,724)

Net realized gain (loss) on
investments sold                                4,019,150             2,260,504             1,195,121            (1,172,422)

Change in net unrealized
appreciation (depreciation) of
investments                                    12,122,951           (12,919,604)            3,128,562            (3,958,158)
                                        -----------------     -----------------     -----------------     -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations               16,065,332           (10,771,224)            4,300,483            (5,174,304)
                                        -----------------     -----------------     -----------------     -----------------
Distributions to Shareholders: *
Distributions from net realized
gain on investments sold                         (808,355)           (4,552,005)             (579,250)             (853,819)
                                        -----------------     -----------------     -----------------     -----------------
From Portfolio Share Transactions: **
Shares sold                                    13,799,897            23,310,057             9,505,733             8,114,648
Shares issued to shareholders in
reinvestment of distributions                     802,909             4,512,270               579,258               856,091
                                        -----------------     -----------------     -----------------     -----------------
                                               14,602,806            27,822,327            10,084,991             8,970,739
Less shares repurchased                        (9,653,548)          (37,893,065)           (7,350,836)           (6,392,389)
                                        -----------------     -----------------     -----------------     -----------------
Net Increase (Decrease)                         4,949,258           (10,070,738)            2,734,155             2,578,350
                                        -----------------     -----------------     -----------------     -----------------
Net Assets:
Beginning of period                            16,686,585            36,892,820             2,452,791             8,908,179
                                        -----------------     -----------------     -----------------     -----------------
End of period (including
distributions in excess of net
investment income of $1,664,
$2,052, $59 and $292,
respectively)                                 $36,892,820           $11,498,853            $8,908,179            $5,458,406
                                        =================     =================     =================     =================
* Distributions to Shareholders:
Per share distributions from net
realized gain on investments sold                 $0.5502               $3.3259               $2.2594               $1.9194
                                        -----------------     -----------------     -----------------     -----------------
** Analysis of Portfolio
Share Transactions:
Shares sold                                       887,756             1,245,050               558,531               432,156
Shares issued to shareholders in
reinvestment of distributions                      46,642               366,810                32,488                70,365
                                        -----------------     -----------------     -----------------     -----------------
                                                  934,398             1,611,860               591,019               502,521
Less shares repurchased                          (703,733)           (2,239,222)             (436,856)             (346,807)
                                        -----------------     -----------------     -----------------     -----------------
Net Increase (Decrease)                           230,665              (627,362)              154,163               155,714
                                        =================     =================     =================     =================

See notes to financial statements.







Statement of Changes in Net Assets (continued)
- ---------------------------------------------------------------------------------------------------------------------------
                                                   SMALL CAPITALIZATION                         INTERNATIONAL
                                                        VALUE FUND                               EQUITY FUND
                                        ---------------------------------------     ---------------------------------------
                                               YEAR ENDED            YEAR ENDED            YEAR ENDED            YEAR ENDED
                                        FEBRUARY 29, 2000     FEBRUARY 28, 2001     FEBRUARY 29, 2000     FEBRUARY 28, 2001
                                        -----------------     -----------------     -----------------     -----------------
                                                                                             
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)                      $45,648              ($69,025)              $50,863               $43,466
Net realized gain (loss) on
investments sold, financial
futures contracts and foreign
currency transactions                           3,502,891             6,078,320               855,747            (1,169,908)
Change in net unrealized
appreciation (depreciation) of
investments and foreign currency
transactions                                    6,887,323            (8,772,416)            2,049,079            (3,005,103)
                                        -----------------     -----------------     -----------------     -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations               10,435,862            (2,763,121)            2,955,689            (4,131,545)
                                        -----------------     -----------------     -----------------     -----------------
Distributions to Shareholders: *
Dividends from net investment
income                                            (52,590)              (49,153)              (50,863)              (32,472)
Distributions in excess of net
investment income                                      --                    --               (28,356)                   --
Distributions from net realized
gain on investments sold                       (1,849,452)           (6,670,587)             (475,044)             (387,846)
                                        -----------------     -----------------     -----------------     -----------------
Total Distributions to
Shareholders                                   (1,902,042)           (6,719,740)             (554,263)             (420,318)
                                        -----------------     -----------------     -----------------     -----------------
From Portfolio Share Transactions: **
Shares sold                                    12,736,754            17,123,240             5,684,244             5,627,681
Shares issued to shareholders in
reinvestment of distributions                   1,902,123             6,721,015               554,265               420,270
                                        -----------------     -----------------     -----------------     -----------------
                                               14,638,877            23,844,255             6,238,509             6,047,951
Less shares repurchased                        (6,332,233)           (8,436,558)           (3,596,999)           (8,484,719)
                                        -----------------     -----------------     -----------------     -----------------
Net Increase (Decrease)                         8,306,644            15,407,697             2,641,510            (2,436,768)
                                        -----------------     -----------------     -----------------     -----------------
Net Assets:
Beginning of period                             7,418,122            24,258,586             7,805,087            12,848,023
                                        -----------------     -----------------     -----------------     -----------------
End of period (including
undistributed (distributions in
excess of) net investment income
of $48,651, ($1,066), ($78,887)
and ($41,401) respectively)                   $24,258,586           $30,183,422           $12,848,023            $5,859,392
                                        =================     =================     =================     =================
* Distributions to Shareholders:
Per share dividends from net
investment income                                 $0.0575               $0.0273               $0.0688               $0.0391
                                        -----------------     -----------------     -----------------     -----------------
Per share distributions in excess
of net investment income                               --                    --               $0.0383                    --
                                        -----------------     -----------------     -----------------     -----------------
Per share distributions from net
realized gain on investments sold                 $2.0232               $3.7103               $0.6428               $0.4683
                                        -----------------     -----------------     -----------------     -----------------
** Analysis of Portfolio
Share Transactions:
Shares sold                                       857,366             1,077,952               464,681               469,845
Shares issued to shareholders in
reinvestment of distributions                     124,240               611,557                44,555                45,781
                                        -----------------     -----------------     -----------------     -----------------
                                                  981,606             1,689,509               509,236               515,626
Less shares repurchased                          (449,846)             (541,612)             (312,613)             (766,906)
                                        -----------------     -----------------     -----------------     -----------------
Net Increase (Decrease)                           531,760             1,147,897               196,623              (251,280)
                                        =================     =================     =================     =================

See notes to financial statements.







John Hancock Funds -- Institutional Series Trust -- Active Bond Fund

Financial Highlights
Selected data for a share of beneficial interest
outstanding throughout each period indicated, investment returns, key
ratios and supplemental data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
                                                YEAR ENDED FEBRUARY 28,                    YEAR ENDED        YEAR ENDED
                                  -------------------------------------------------       FEBRUARY 29,      FEBRUARY 28,
                                           1997              1998              1999              2000              2001
                                  -------------     -------------     -------------     -------------     -------------
                                                                                           
Per Share Operating Performance
Net Asset Value, Beginning
of Period                                 $8.64             $8.54             $8.83             $8.59             $8.14
                                  -------------     -------------     -------------     -------------     -------------
Net Investment Income (1)                  0.60              0.59              0.56              0.58              0.56
Net Realized and Unrealized
Gain (Loss) on Investments                (0.09)             0.34             (0.02)            (0.43)             0.47
                                  -------------     -------------     -------------     -------------     -------------
Total from Investment
Operations                                 0.51              0.93              0.54              0.15              1.03
                                  -------------     -------------     -------------     -------------     -------------
Less Distributions:
Dividends from Net
Investment Income                         (0.60)            (0.59)            (0.56)            (0.58)            (0.56)
Distributions in Excess of
Net Investment Income                        --                -- (2)            -- (2)            -- (2)            --
Distributions from Net
Realized Gain on
Investments Sold                          (0.01)            (0.05)            (0.22)            (0.02)               --
                                  -------------     -------------     -------------     -------------     -------------
Total Distributions                       (0.61)            (0.64)            (0.78)            (0.60)            (0.56)
                                  -------------     -------------     -------------     -------------     -------------
Net Asset Value, End of
Period                                    $8.54             $8.83             $8.59             $8.14             $8.61
                                  =============     =============     =============     =============     =============
Total Investment Return
(3,4)                                     6.17%            11.25%             6.24%             1.83%            13.11%

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                           $2,191            $5,158            $5,686            $4,222            $6,805
Ratio of Expenses to Average
Net Assets                                0.60%             0.60%             0.60%             0.60%             0.60%
Ratio of Adjusted Expenses
to Average Net Assets (5,6)               4.05%             2.64%             2.33%             2.93%             2.03%
Ratio of Net Investment
Income to Average Net
Assets                                    7.10%             6.78%             6.36%             6.88%             6.74%
Portfolio Turnover Rate                    136%              230%              356%              301%              327%

(1) Based on the average of the shares outstanding at the end of each month.

(2) Less than $0.01 per share.

(3) Total investment return assumes dividend reinvestment.

(4) Total returns would have been lower had certain expenses not been
    reduced during the periods shown.

(5) Does not take into consideration expense reductions during the
    periods shown.

(6) Adjusted expenses as a percentage of average net assets are expected
    to decrease as the net assets of the Fund grow.

The Financial Highlights summarizes the impact of the following factors
on a single share for each period indi cated: net investment income,
gains (losses), dividends and total investment return of the Fund. It
shows how the Fund's net asset value for a share has changed since the
end of the previous period. Additionally, important rela tionships
between some items presented in the financial statements are  expressed
in ratio form.

See notes to financial statements.







John Hancock Funds -- Institutional Series Trust -- Dividend Performers Fund

Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
                                                YEAR ENDED FEBRUARY 28,                    YEAR ENDED        YEAR ENDED
                                  -------------------------------------------------       FEBRUARY 29,      FEBRUARY 28,
                                           1997              1998              1999              2000              2001
                                  -------------     -------------     -------------     -------------     -------------
                                                                                           
Per Share Operating Performance
Net Asset Value, Beginning
of Period                                $10.15            $11.91            $14.92            $14.46            $13.51
                                  -------------     -------------     -------------     -------------     -------------
Net Investment Income (1)                  0.21              0.18              0.15              0.11              0.10
Net Realized and Unrealized
Gain on Investments                        1.92              3.92              1.04              0.60              0.45
                                  -------------     -------------     -------------     -------------     -------------
Total from Investment
Operations                                 2.13              4.10              1.19              0.71              0.55
                                  -------------     -------------     -------------     -------------     -------------
Less Distributions:
Dividends from Net
Investment Income                         (0.18)            (0.17)            (0.15)            (0.11)            (0.11)

Distributions from Net
Realized Gain on
Investments Sold                          (0.19)            (0.92)            (1.50)            (1.55)            (2.81)
                                  -------------     -------------     -------------     -------------     -------------
Total Distributions                       (0.37)            (1.09)            (1.65)            (1.66)            (2.92)
                                  -------------     -------------     -------------     -------------     -------------
Net Asset Value, End of
Period                                   $11.91            $14.92            $14.46            $13.51            $11.14
                                  =============     =============     =============     =============     =============
Total Investment Return
(2,3)                                    21.26%            35.55%             7.97%             4.17%             2.94%

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                           $8,668           $20,884           $17,743           $14,863            $6,202
Ratio of Expenses to Average
Net Assets                                0.70%             0.70%             0.70%             0.70%             0.70%
Ratio of Adjusted Expenses
to Average Net Assets (4,5)               1.89%             1.02%             0.95%             1.05%             1.08%
Ratio of Net Investment
Income to Average Net
Assets                                    1.94%             1.31%             0.95%             0.71%             0.73%
Portfolio Turnover Rate                     37%               77%               64%               46%               58%

(1) Based on the average of the shares outstanding at the end of each month.

(2) Total investment return assumes dividend reinvestment.

(3) Total returns would have been lower had certain expenses not been
    reduced during the periods shown.

(4) Does not take into consideration expense reductions during the
    periods shown.

(5) Adjusted expenses as a percentage of average net assets are expected
    to decrease as the net assets of the Fund grow.

See notes to financial statements.







John Hancock Funds -- Institutional Series Trust -- Medium Capitalization Growth Fund

Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
                                                YEAR ENDED FEBRUARY 28,                    YEAR ENDED        YEAR ENDED
                                  -------------------------------------------------       FEBRUARY 29,      FEBRUARY 28,
                                           1997              1998              1999              2000              2001
                                  -------------     -------------     -------------     -------------     -------------
                                                                                           
Per Share Operating Performance
Net Asset Value, Beginning
of Period                                $10.69            $12.67            $13.51            $10.99            $21.10
                                  -------------     -------------     -------------     -------------     -------------
Net Investment Income (Loss)
(1)                                        0.01                -- (2)         (0.02)            (0.05)            (0.07)

Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions                               2.02              2.06             (0.68)            10.71             (7.44)
                                  -------------     -------------     -------------     -------------     -------------
Total from Investment
Operations                                 2.03              2.06             (0.70)            10.66             (7.51)
                                  -------------     -------------     -------------     -------------     -------------
Less Distributions:
Dividends from Net
Investment Income                            --                -- (2)            --                --                --
Distributions from Net
Realized Gain on
Investments Sold                          (0.05)            (1.22)            (1.72)            (0.55)            (3.33)
Distributions in Excess of
Net Realized Gain on
Investments Sold                             --                --             (0.10)               --                --
                                  -------------     -------------     -------------     -------------     -------------
Total Distributions                       (0.05)            (1.22)            (1.82)            (0.55)            (3.33)
                                  -------------     -------------     -------------     -------------     -------------
Net Asset Value, End of
Period                                   $12.67            $13.51            $10.99            $21.10            $10.26
                                  =============     =============     =============     =============     =============
Total Investment Return
(3,4)                                    19.00%            17.39%            (5.34%)           98.13%           (38.23%)

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                          $29,085           $40,302           $16,687           $36,893           $11,499
Ratio of Expenses to Average
Net Assets                                0.90%             0.90%             0.90%             0.90%(7)          0.90%
Ratio of Adjusted Expenses
to Average Net Assets (5,6)               1.42%             1.10%             1.11%             1.28%             1.15%
Ratio of Net Investment
Income (Loss) to Average
Net Assets                                0.06%             0.03%            (0.13%)           (0.37%)           (0.40%)
Portfolio Turnover Rate                    281%              341%              116%              153%              181%

(1) Based on the average of the shares outstanding at the end of each month.

(2) Less than $0.01 per share.

(3) Total investment return assumes dividend reinvestment.

(4) Total returns would have been lower had certain expenses not been
    reduced during the periods shown.

(5) Does not take into consideration expense reductions during the
    periods shown.

(6) Adjusted expenses as a percentage of average net assets are expected
    to decrease as the net assets of the Fund grow.

(7) Expense ratio does not include interest expense due to bank loans,
    which amounted to 0.01% for the year ended February 29, 2000.

See notes to financial statements.







John Hancock Funds -- Institutional Series Trust -- Small Capitalization Growth Fund

Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -------------------------------------------------------------------------------------------------------------------------
                                   PERIOD ENDED         YEAR ENDED FEBRUARY 28,            YEAR ENDED        YEAR ENDED
                                    FEBRUARY 28,    -------------------------------       FEBRUARY 29,      FEBRUARY 28,
                                         1997(1)             1998              1999              2000              2001
                                  -------------     -------------     -------------     -------------     -------------
                                                                                           
Per Share Operating Performance
Net Asset Value, Beginning
of Period                                 $8.50             $9.24            $11.74            $11.65            $24.43
                                  -------------     -------------     -------------     -------------     -------------
Net Investment Income (Loss)
(2)                                        0.03             (0.03)            (0.07)            (0.09)            (0.10)

Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions                               0.73              2.53              0.61             15.13            (11.92)
                                  -------------     -------------     -------------     -------------     -------------
Total from Investment
Operations                                 0.76              2.50              0.54             15.04            (12.02)
                                  -------------     -------------     -------------     -------------     -------------
Less Distributions:
Dividends from Net
Investment Income                         (0.02)               -- (3)            --                --                --
Distributions from Net
Realized Gain on
Investments Sold                             --                --             (0.63)            (2.26)            (1.92)
                                  -------------     -------------     -------------     -------------     -------------
Total Distributions                       (0.02)               -- (3)         (0.63)            (2.26)            (1.92)
                                  -------------     -------------     -------------     -------------     -------------
Net Asset Value, End of
Period                                    $9.24            $11.74            $11.65            $24.43            $10.49
                                  =============     =============     =============     =============     =============
Total Investment Return
(4,5)                                     8.89%(6)         27.07%             4.67%           136.18%           (50.27%)

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                             $999            $3,102            $2,453            $8,908            $5,458
Ratio of Expenses to Average
Net Assets                                0.90%(7)          0.90%             0.90%             0.90%             0.90%
Ratio of Adjusted Expenses
to Average Net Assets (8,9)              16.24%(7)          4.05%             4.12%             3.19%             2.04%
Ratio of Net Investment
Income (Loss) to Average
Net Assets                                0.35%(7)         (0.25%)           (0.60%)           (0.57%)           (0.56%)
Portfolio Turnover Rate                     92%              117%              125%              238%              242%

(1) The Fund commenced operations on May 2, 1996.

(2) Based on the average of the shares outstanding at the end of each month.

(3) Less than $0.01 per share.

(4) Total investment return assumes dividend reinvestment.

(5) Total returns would have been lower had certain expenses not been
    reduced during the periods shown.

(6) Not annualized.

(7) Annualized.

(8) Does not take into consideration expense reductions during the
    periods shown.

(9) Adjusted expenses as a percentage of average net assets are expected
    to decrease as the net assets of the Fund grow.


See notes to financial statements.







John Hancock Funds -- Institutional Series Trust -- Small Capitalization Value Fund

Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
                                                YEAR ENDED FEBRUARY 28,                    YEAR ENDED        YEAR ENDED
                                  -------------------------------------------------       FEBRUARY 29,      FEBRUARY 28,
                                           1997              1998              1999              2000              2001
                                  -------------     -------------     -------------     -------------     -------------
                                                                                           
Per Share Operating Performance
Net Asset Value, Beginning
of Period                                 $9.09             $9.38            $11.74             $9.16            $18.09
                                  -------------     -------------     -------------     -------------     -------------
Net Investment Income (1)                  0.14              0.07              0.05              0.05             (0.04)

Net Realized and Unrealized
Gain (Loss) on Investments                 1.08              3.65             (1.23)            10.96             (2.18)
                                  -------------     -------------     -------------     -------------     -------------
Total from Investment
Operations                                 1.22              3.72             (1.18)            11.01             (2.22)
                                  -------------     -------------     -------------     -------------     -------------
Less Distributions:
Dividends from Net
Investment Income                         (0.12)            (0.10)            (0.04)            (0.06)            (0.03)

Distributions from Net
Realized Gain on
Investments Sold                          (0.81)            (1.26)            (1.20)            (2.02)            (3.71)
Distributions in Excess of
Net Realized Gain on
Investments Sold                             --                --             (0.16)               --                --
                                  -------------     -------------     -------------     -------------     -------------
Total Distributions                       (0.93)            (1.36)            (1.40)            (2.08)            (3.74)
                                  -------------     -------------     -------------     -------------     -------------
Net Asset Value, End of
Period                                    $9.38            $11.74             $9.16            $18.09            $12.13
                                  =============     =============     =============     =============     =============
Total Investment Return
(2,3)                                    13.78%            41.81%            (9.46%)          124.33%           (10.14%)

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                           $6,011            $9,549            $7,418           $24,259           $30,183
Ratio of Expenses to Average
Net Assets                                0.80%             0.80%             0.80%             0.80%             0.80%
Ratio of Adjusted Expenses
to Average Net Assets (4,5)               1.83%             1.42%             1.46%             1.48%             1.04%
Ratio of Net Investment
Income to Average Net
Assets                                    1.46%             0.62%             0.45%             0.37%            (0.25%)
Portfolio Turnover Rate                     96%              216%              126%              104%              109%

(1) Based on the average of the shares outstanding at the end of each month.

(2) Total investment return assumes dividend reinvestment.

(3) Total returns would have been lower had certain expenses not been
    reduced during the periods shown.

(4) Does not take into consideration expense reductions during the
    periods shown.

(5) Adjusted expenses as a percentage of average net assets are expected
    to decrease as the net assets of the Fund grow.

See notes to financial statements.







John Hancock Funds -- Institutional Series Trust -- International Equity Fund

Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
                                                YEAR ENDED FEBRUARY 28,                    YEAR ENDED        YEAR ENDED
                                  -------------------------------------------------       FEBRUARY 29,      FEBRUARY 28,
                                           1997              1998              1999              2000              2001
                                  -------------     -------------     -------------     -------------     -------------
                                                                                           
Per Share Operating Performance
Net Asset Value, Beginning
of Period                                 $9.24             $9.35             $9.63            $10.18            $13.33
                                  -------------     -------------     -------------     -------------     -------------
Net Investment Income (1)                  0.12              0.06              0.07              0.07              0.04
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions                               0.14              0.23              0.59              3.83             (4.63)
                                  -------------     -------------     -------------     -------------     -------------
Total from Investment
Operations                                 0.26              0.29              0.66              3.90             (4.59)
                                  -------------     -------------     -------------     -------------     -------------
Less Distributions:
Dividends from Net
Investment Income                         (0.10)            (0.01)            (0.07)            (0.07)            (0.04)
Distributions in Excess of
Net Investment Income                        --                --             (0.04)            (0.04)               --
Distributions from Net
Realized Gain on
Investments Sold                          (0.05)               --                --             (0.64)            (0.47)
                                  -------------     -------------     -------------     -------------     -------------
Total Distributions                       (0.15)            (0.01)            (0.11)            (0.75)            (0.51)
                                  -------------     -------------     -------------     -------------     -------------
Net Asset Value, End of
Period                                    $9.35             $9.63            $10.18            $13.33             $8.23
                                  =============     =============     =============     =============     =============
Total Investment Return
(2,3)                                     2.79%             3.07%             6.88%            38.84%           (34.85%)

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                           $4,204            $7,983            $7,805           $12,848            $5,859
Ratio of Expenses to Average
Net Assets                                1.00%             1.00%             1.00%             1.00%             1.00%
Ratio of Adjusted Expenses
to Average Net Assets (4,5)               3.32%             2.02%             2.73%             2.86%             3.46%
Ratio of Net Investment
Income to Average Net
Assets                                    1.26%             0.60%             0.69%             0.59%             0.43%
Portfolio Turnover Rate                     68%              125%               83%              139%              238%

(1) Based on the average of the shares outstanding at the end of each month.

(2) Total investment return assumes dividend reinvestment.

(3) Total returns would have been lower had certain expenses not been
    reduced during the periods shown.

(4) Does not take into consideration expense reductions during the
    periods shown.

(5) Adjusted expenses as a percentage of average net assets are expected
    to decrease as the net assets of the Fund grow.

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Active Bond Fund

Schedule of Investments
February 28, 2001
- ----------------------------------------------------------------------------------------------------------

The Schedule of Investments is a complete list of all securities owned
by the Active Bond Fund on February 28, 2001. It's divided into three
main categories: bonds, warrants and short-term investments. The bonds
are further broken down by industry groups. Short-term investments,
which represent the Fund's "cash" position, are listed last.

                                                                               PAR VALUE
                                                    INTEREST     CREDIT           (000s
ISSUER, DESCRIPTION                                   RATE       RATING*        OMITTED)            VALUE
- -------------------                                 --------     ------         -------      -------------
                                                                                 
BONDS
Aerospace (0.69%)
Northrop Grumman Corp.,
Deb 02-15-31 (R)                                       7.750%     BBB-               $20           $20,416
Raytheon Co.,
Note 03-01-03                                          7.900      BBB-                15            15,584
Note 03-01-10                                          8.300      BBB-                10            11,175
                                                                                             -------------
                                                                                                    47,175
                                                                                             -------------
Automobile/Trucks (2.32%)
ERAC USA Finance Co.,
Note 02-15-05 (R)                                      6.625      BBB+                 6             5,889
Note 12-15-09 (R)                                      7.950      BBB+                10            10,426
Ford Credit Auto Owner Trust,
Pass Thru Ctf Ser 2000-F Class A-3 11-15-04            6.580      AAA                 30            30,945
Ford Motor Co.,
Note 07-16-31                                          7.450      A                   15            14,546
Honda Auto Receivables Owner Trust,
Pass Thru Ctf Ser 2001-1 Class A-4 06-19-06            5.560      AAA                 70            70,413
Toyota Auto Receivables Owner Trust,
Asset Backed Note Ser 2000-B Class A-4 04-15-07        6.800      AAA                 25            25,898
                                                                                             -------------
                                                                                                   158,117
                                                                                             -------------
Banks -- Foreign (1.21%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04                     8.200      AA-                 20            21,563
Royal Bank of Scotland Group Plc,
Bond (United Kingdom) 03-31-49                         8.817      A-                  10            10,754
Scotland International Finance No. 2, B.V.,
Gtd Sub Note (United Kingdom) 11-01-06 (R)             8.850      A                   35            38,961
UBS Preferred Funding Trust I,
Perpetual Bond (8.622  to 10-01-10 then variable)
10-01-49                                               8.622      AA-                 10            10,846
                                                                                             -------------
                                                                                                    82,124
                                                                                             -------------
Banks -- United States (2.61%)
Bank of New York,
Cap Security 12-01-26 (R)                              7.780      A-                  25            24,898
Bank One Corp.,
Sub Note 08-01-10                                      7.875      A-                  15            16,198
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21                                  9.750      AA-                 25            26,371
BNP Paribas Capital Trust,
Perpetual Bond (9.003  to 10-27-10 then variable)
12-27-49 (R)                                           9.003      A                   20            21,683
Capital One Bank,
Sr Note 02-01-06                                       6.875      BBB-                15            14,946
National Westminster Bank Plc -- New York Branch,
Sub Note 05-01-01                                      9.450      A+                  15            15,079
RBSG Capital Corp.,
Gtd Cap Note 03-01-04                                 10.125      A                   30            33,410
Security Pacific Corp.,
Sub Note 03-01-01                                     11.000      A                   25            25,000
                                                                                             -------------
                                                                                                   177,585
                                                                                             -------------
Beverages (0.22%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03                             8.750      B+                  15            15,038
                                                                                             -------------
Broker Services (0.15%)
Goldman Sachs Group, Inc.,
Bond 01-15-11                                          6.875      A+                  10            10,199
                                                                                             -------------
Building (0.15%)
Vulcan Materials Co.,
Note 02-01-06                                          6.400      A+                  10            10,075
                                                                                             -------------
Chemicals (0.22%)
Akzo Nobel, Inc.,
Bond 11-15-03 (R)                                      6.000      A-                  15            14,903
                                                                                             -------------
Containers (0.08%)
Stone Container Corp.,
Sr Note 02-01-11 (R)                                   9.750      B                    5             5,138
                                                                                             -------------
Energy (0.85%)
CalEnergy Co., Inc.,
Sr Bond 09-15-28                                       8.480      BBB-                15            16,248
Enron Corp.,
Note 08-15-05 (R)                                      8.000      BBB+                15            15,722
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08                             9.625      B                   15            15,750
Progress Energy, Inc.,
Sr Note 03-01-11                                       7.100      BBB                 10            10,290
                                                                                             -------------
                                                                                                    58,010
                                                                                             -------------
Finance (5.24%)
Boeing Capital Corp.,
Note 09-27-10                                          7.375      AA-                 15            16,525
Bombardier Capital, Inc.,
Note 01-15-02 (R)                                      6.000      A-                  20            20,072
CIT Group, Inc.,
Note 02-07-06                                          6.500      A+                  25            25,075
Citigroup, Inc.,
Note 01-18-11                                          6.500      AA-                 10            10,010
Sub Note 10-01-10                                      7.250      A+                  10            10,522
Ford Capital B.V.,
Gtd Deb (Netherlands) 05-15-02                         9.875      A                   35            36,557
Ford Motor Credit Co.,
Bond 02-01-11                                          7.375      A                   15            15,314
Note 04-28-03                                          6.125      A                   20            20,050
General Electric Capital Corp.,
Global Medium Term Note Ser A 11-15-10                 6.875      AAA                 15            16,031
General Motors Acceptance Corp.,
Note 07-15-05                                          7.500      A                   15            15,599
Heller Financial, Inc.,
Note 01-15-03                                          6.400      A-                  15            14,970
Household Finance Corp.,
Note 11-01-02                                          5.875      A                   25            25,067
Note 01-24-06                                          6.500      A                   10            10,085
HSBC Capital Funding LP,
Perpetual Note (9.547  to 06-30-10 then variable)
(Channel Islands) 12-31-49 (R)                         9.547      A-                  15            17,169
ING Capital Funding Trust III,
Perpetual Bond (8.439  to 12-31-10 then variable)
12-31-49                                               8.439      A                   10            10,607
Marlin Water Trust/Marlin Water Capital Corp.,
Sr Sec Note 12-15-01 (R)                               7.090      BBB                 15            15,020
MBNA Master Credit Card Trust,
Pass Thru Ctf Ser 1999-G Class A 12-15-06              6.350      AAA                 30            30,919
MMCA Auto Owner Trust,
Pass Thru Ctf Ser 2000-2 Class A-4 06-15-05            6.860      AAA                 25            26,075
Qwest Capital Funding, Inc.,
Bond 02-15-31 (R)                                      7.750      BBB+                20            20,518
                                                                                             -------------
                                                                                                   356,185
                                                                                             -------------
Food (0.23%)
Earthgrains Co. (The),
Note 08-01-03                                          8.375      BBB                 15            15,389
                                                                                             -------------
Government -- Foreign (0.77%)
Brazil, Federative Republic of,
Bond (Brazil) 01-11-06                                10.250      BB-                 10             9,900
Nova Scotia, Province of,
Deb (Canada) 11-15-19                                  8.250      A-                  15            17,879
Quebec, Government of,
Deb (Canada) 01-22-11                                  6.125      A+                  25            24,899
                                                                                             -------------
                                                                                                    52,678
                                                                                             -------------
Government -- U.S. (21.56%)
United States Treasury,
Bond 08-15-17                                          8.875      AAA                137           187,775
Bond 02-15-23                                          7.125      AAA                199           238,987
Bond 08-15-29                                          6.125      AAA                180           196,144
Note 08-15-03                                          5.750      AAA                342           351,405
Note 02-15-05                                          7.500      AAA                 69            75,954
Note 07-15-06                                          7.000      AAA                174           191,917
Note 05-15-08                                          5.625      AAA                120           124,950
Note 08-15-10                                          5.750      AAA                 95           100,121
                                                                                             -------------
                                                                                                 1,467,253
                                                                                             -------------
Government -- U.S. Agencies (21.01%)
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf 06-01-14                           6.000      AAA                 20            19,794
15 Yr Pass Thru Ctf 12-01-14                           5.500      AAA                140           137,820
15 Yr Pass Thru Ctf 07-01-15                           7.000      AAA                 19            19,347
30 Yr Pass Thru Ctf 06-01-29                           6.000      AAA                 19            18,209
Note 12-15-05                                          6.000      AAA                 65            66,990
Note 09-15-09                                          6.625      AAA                270           287,466
Note 01-15-30                                          7.125      AAA                 35            39,676
Sub Note 02-01-11                                      6.250      AA-                 15            15,412
Government National Mortgage Assn.,
30 Yr Pass Thru Ctf 04-15-28 to 06-15-29               6.500      AAA                506           507,154
30 Yr Pass Thru Ctf 04-15-29 to 01-15-31               7.000      AAA                272           275,530
30 Yr Pass Thru Ctf 11-15-24 to 07-15-30               8.000      AAA                 41            42,412
                                                                                             -------------
                                                                                                 1,429,810
                                                                                             -------------
Insurance (1.57%)
AXA SA,
Sub Note (France) 12-15-30                             8.600      A-                  10            10,925
Equitable Life Assurance Society USA,
Surplus Note 12-01-05 (R)                              6.950      A+                  10            10,249
Hartford Life, Inc.,
Sr Note 03-01-31                                       7.375      A                   15            15,270
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R)                              7.625      AA                  15            15,291
MONY Group, Inc. (The),
Sr Note 12-15-05                                       7.450      A-                  10            10,272
New York Life Insurance Co.,
Surplus Note 12-15-23 (R)                              7.500      AA-                 15            14,138
Sun Canada Financial Co.,
Sub Note 12-15-07 (R)                                  6.625      AA-                 20            19,900
URC Holdings Corp.,
Sr Note 06-30-06 (R)                                   7.875      A-                  10            10,800
                                                                                             -------------
                                                                                                   106,845
                                                                                             -------------
Leisure (0.59%)
Harrah's Operating Co., Inc.,
Sr Sub Note 12-15-05                                   7.875      BB+                 10             9,950
HMH Properties, Inc.,
Sr Note Ser A 08-01-05                                 7.875      BB                  10             9,900
MGM Mirage, Inc.,
Sr Note 09-15-10                                       8.500      BBB-                10            10,498
Station Casinos, Inc.,
Sr Note 02-15-08 (R)                                   8.375      BB-                  5             5,025
Waterford Gaming LLC,
Sr Note 03-15-10 (R)                                   9.500      B+                   5             4,950
                                                                                             -------------
                                                                                                    40,323
                                                                                             -------------
Media (3.52%)
Adelphia Communications Corp.,
Sr Note Ser B 10-01-02                                 9.250      B+                  15            15,075
Sr Note Ser B 07-15-03                                 8.125      B+                   8             7,840
British Sky Broadcasting Group Plc,
Sr Note (United Kingdom) 07-15-09                      8.200      BB+                 10            10,103
Clear Channel Communications, Inc.,
Note 06-15-05                                          7.875      BBB-                10            10,581
Continental Cablevision, Inc.,
Sr Note 05-15-06                                       8.300      A                   15            16,212
Cox Radio, Inc.,
Sr Note 02-15-06                                       6.625      BBB                 10            10,020
CSC Holdings, Inc.,
Sr Note Ser B 07-15-09                                 8.125      BB+                 20            20,738
Sr Sub Deb 05-15-16                                   10.500      BB-                 10            11,250
EchoStar DBS Corp.,
Sr Note 02-01-09                                       9.375      B+                  10            10,125
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11                                   8.625      B+                  10             9,500
Jones Intercable, Inc.,
Sr Note 04-15-08                                       7.625      BBB                 20            21,072
Lenfest Communications, Inc.,
Sr Note 11-01-05                                       8.375      BBB                 10            10,898
Mediacom LLC/Mediacom Capital Corp.,
Sr Note Ser B 04-15-08                                 8.500      B+                  10             9,600
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18                                    8.250      BBB-                15            15,126
TCI Communications, Inc.,
Sr Deb 02-15-26                                        7.875      A                   10             9,964
Time Warner, Inc.,
Deb 01-15-13                                           9.125      BBB+                21            25,153
Viacom, Inc.,
Deb 07-30-30 (R)                                       7.875      A-                  15            16,254
Note 01-30-06 (R)                                      6.400      A-                  10            10,136
                                                                                             -------------
                                                                                                   239,647
                                                                                             -------------
Medical (1.11%)
Athena Neuro Finance LLC,
Sr Note 02-21-08                                       7.250      BBB                 15            15,190
Dynacare, Inc.,
Sr Note (Canada) 01-15-06                             10.750      B+                  13            13,000
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security 02-01-08                  7.875      B+                  15            14,588
HCA -- The Healthcare Co.,
Note 09-01-10                                          8.750      BB+                 10            10,512
Healthsouth Corp.,
Note 02-01-08, (R)                                     8.500      BBB-                 5             4,988
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06                                  10.750      B+                  11            12,155
Tenet Healthcare Corp.,
Sr Note 01-15-05                                       8.000      BB+                  5             5,100
                                                                                             -------------
                                                                                                    75,533
                                                                                             -------------
Metal (1.13%)
Noranda, Inc.,
Note (Canada) 02-15-11                                 8.375      BBB                 15            15,068
WMC Finance (USA) Ltd.,
Gtd Note (Australia) 11-15-03                          6.500      A                   55            55,804
Yanacocha Receivables Master Trust,
Pass Thru Ctf Ser 1997-A 06-15-04 (R)                  8.400      BBB-                 6             6,006
                                                                                             -------------
                                                                                                    76,878
                                                                                             -------------
Mortgage Banking (7.75%)
Commercial Mortgage Acceptance Corp.,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-08           6.790      Aaa                 27            27,966
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3 Class A-9 02-15-29            6.570      AAA                 40            40,649
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1998-C1 Class A-1 11-15-07           6.411      Aaa                 58            58,956
Pass Thru Ctf Ser 1997-C1 Class A-2 09-15-06           6.853      Aaa                 20            20,638
Pass Thru Ctf Ser 1997-C2 Class A-3 11-15-07           6.566      Aaa                 60            60,654
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-4 03-20-25            6.600      AAA                 20            20,106
LB Commercial Mortgage Trust,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-07           6.410      Aaa                 14            14,261
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D Class AF-7 12-15-38           6.485      AAA                 24            23,714
Morgan Stanley Capital I, Inc.,
Pass Thru Ctf Ser 1997-WF1 Class A-1 10-15-06 (R)      6.830      AAA                109           112,212
Pass Thru Ctf Ser 1999-CAM1 Class A-3 11-15-08         6.920      AAA                 50            51,779
Salomon Brothers Mortgage Securities VII, Inc.,
Pass Thru Ctf Ser 1997-HUD2 Class A-2 07-25-24         6.750      Aaa                 11            11,085
Saxon Asset Securities Trust,
Pass Thru Ctf Ser 2000-2 Class AF-2 06-25-15           7.965      AAA                 30            30,745
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1 Class A-8 06-15-28           7.220      AAA                 26            26,811
Pass Thru Ctf Ser 1997-B Class A-6 10-15-28            6.900      AAA                 27            27,730
                                                                                             -------------
                                                                                                   527,306
                                                                                             -------------
Oil & Gas (2.09%)
Alberta Energy Co., Ltd.,
Note (Canada) 09-15-30                                 8.125      BBB+                10            11,128
Amerada Hess Corp.,
Bond 10-01-29                                          7.875      BBB+                20            21,681
Apache Finance Canada Corp.,
Note (Canada) 12-15-29                                 7.750      A-                  20            21,902
El Paso Energy Corp.,
Medium Term Note 10-15-30                              8.050      BBB                 20            21,837
Louis Dreyfus Natural Gas Corp.,
Sr Note 12-01-07                                       6.875      BBB                 10            10,075
Occidental Petroleum Corp.,
Sr Deb 09-15-09                                       10.125      BBB-                 5             6,075
Ocean Energy, Inc.,
Sr Sub Note Ser B 07-15-07                             8.875      BB+                  5             5,250
Petroleum Geo-Services ASA,
Sr Note (Norway) 03-30-28                              7.125      BBB-                15            11,313
Snyder Oil Corp.,
Sr Sub Note 06-15-07                                   8.750      BBB+                10            10,561
Tosco Corp.,
Note 02-15-30                                          8.125      BBB                 20            22,527
                                                                                             -------------
                                                                                                   142,349
                                                                                             -------------
Paper & Paper Products (0.23%)
International Paper Co.,
Note 07-08-05                                          8.125      BBB+                15            15,600
                                                                                             -------------
Real Estate Operations (0.07%)
EOP Operating L.P.,
Note 02-15-05                                          6.625      BBB+                 5             5,041
                                                                                             -------------
Real Estate Investment Trust (1.11%)
American Health Properties, Inc.,
Note 01-15-07                                          7.500      BBB-                10             9,750
Cabot Industrial Properties, L.P.,
Note 05-01-04                                          7.125      BBB-                15            15,125
Camden Property Trust,
Note 04-15-04                                          7.000      BBB                 10            10,105
Liberty Property L.P.,
Medium Term Note 06-05-02                              6.600      BBB-                10            10,259
Mack-Cali Realty, L.P.,
Note 02-15-11                                          7.750      BBB                 10            10,239
ProLogis Trust,
Note 04-15-04                                          6.700      BBB+                10            10,095
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01                                          7.300      BB                  10             9,915
                                                                                             -------------
                                                                                                    75,488
                                                                                             -------------
Retail (0.37%)
Archer-Daniels-Midland Co.,
Deb 02-01-31                                           7.000      A+                  10             9,904
Sears Roebuck Acceptance Corp.,
Note 02-01-11                                          7.000      A-                  15            15,045
                                                                                             -------------
                                                                                                    24,949
                                                                                             -------------
Telecommunications (4.27%)
BellSouth Capital Funding Corp.,
Deb 02-15-30                                           7.875      AA-                 20            21,645
Clearnet Communications, Inc.,
Sr Disc Note, Step Coupon (10.125 , 05-01-04)
(Canada) 05-01-09, (A)                                  Zero      B3                  10             8,400
Cox Communications, Inc.,
Note 11-01-10                                          7.750      BBB                 10            10,630
Crown Castle International Corp.,
Sr Note 05-15-11                                       9.000      B                    5             5,075
Deutsche Telekom International Finance B.V.,
Bond (Netherlands) 06-15-05                            7.750      A-                  25            25,800
Bond (Netherlands) 06-15-30                            8.250      A-                  15            15,167
Dominion Resources, Inc.,
Sr Note Ser A 06-15-10                                 8.125      BBB+                15            16,350
Global Crossing Ltd.,
Sr Note (Bermuda) 11-15-09                             9.500      BB                  10             9,875
LCI International, Inc.,
Sr Note 06-15-07                                       7.250      BBB+                15            15,163
Level 3 Communications, Inc.,
Sr Note 03-15-08                                      11.000      B                   10             9,125
McLeodUSA, Inc.,
Sr Note 11-01-08                                       9.500      B+                  10             9,425
MetroNet Communications Corp.,
Sr Note (Canada) 08-15-07                             12.000      BBB                 10            11,100
Nextel Communications, Inc.,
Sr Note 11-15-09                                       9.375      B                   10             9,350
Nortel Networks Ltd.,
Note (Canada) 02-15-06                                 6.125      A                   15            14,477
NTL Communications Corp.,
Sr Note Ser B 10-01-08                                11.500      B                   10             9,700
TeleCorp PCS, Inc.,
Sr Sub Disc Note, Step Coupon (11.625 , 04-15-04)
04-15-09 (A)                                            Zero      B3                  10             7,150
Telefonos de Mexico S.A. de C.V.,
Sr Note (Mexico) 01-26-06, (R)                         8.250      BB+                 15            14,925
Tritel PCS, Inc.,
Sr Sub Note 01-15-11 (R)                              10.375      B3                   5             5,000
Triton PCS, Inc.,
Sr Sub Note 02-01-11 (R)                               9.375      CCC+                10            10,000
Verizon Global Funding Corp.,
Deb 12-01-30 (R)                                       7.750      A+                  25            26,971
VoiceStream Wireless Corp.,
Sr Note 09-15-09                                      11.500      B-                   5             5,450
Sr Note 11-15-09                                      10.375      B-                   5             5,600
WorldCom, Inc.,
Note 05-15-06                                          8.000      BBB+                15            15,458
Note 08-15-28                                          6.950      BBB+                10             8,655
                                                                                             -------------
                                                                                                   290,491
                                                                                             -------------
Transport (3.06%)
America West Airlines,
Pass Thru Ctf Ser 1996-1B 01-02-08                     6.930      A-                   3             3,312
Burlington Northern Santa Fe Corp.,
Deb 08-15-30                                           7.950      BBB+                20            21,290
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1997-2C 06-30-04                     7.206      BBB                 19            19,127
Pass Thru Ctf Ser 1999-1A 02-02-19                     6.545      AA+                 19            18,713
Delta Air Lines, Inc.,
Pass Thru Ctf Ser 2000-1 Class A-2 11-18-10            7.570      AAA                 10            10,708
Norfolk Southern Corp.,
Sr Note 02-15-31                                       7.250      BBB                 15            15,152
Northwest Airlines 1996-1 Pass Through Trusts,
Pass Thru Ctf Ser 1996-1D 01-02-15                     8.970      BBB-                 4             4,628
Northwest Airlines, Inc.,
Note 03-15-04                                          8.375      BB                  10             9,907
NWA Trust,
Sr Note Ser A 12-21-12                                 9.250      AA                  32            35,681
U.S. Airways, Inc.,
Pass Thru Ctf Ser 1990-A1 03-19-05                    11.200      BB-                 17            17,886
United Air Lines, Inc.,
Pass Thru Ctf Ser 2000-1 Class A-1 01-01-14            7.783      AAA                 28            29,689
Pass Thru Ctf Ser 2000-2 Class A-1 10-01-10            7.032      AAA                 15            15,122
Wisconsin Central Transportation Corp.,
Note 04-15-08                                          6.625      BBB-                 7             6,755
                                                                                             -------------
                                                                                                   207,970
                                                                                             -------------
Utilities (9.63%)
AES Corp.,
Sr Note 06-01-09                                       9.500      BB                  10            10,550
Sr Note 09-15-10                                       9.375      BB                   5             5,200
Sr Sub Note 07-15-06                                  10.250      B+                  12            12,420
AES Eastern Energy L.P.,
Pass Thru Ctf Ser 1999-A 01-02-17                      9.000      BBB-                15            15,694
Avon Energy Partners Holdings,
Sr Note (United Kingdom) 12-11-02 (R)                  6.730      BBB+                10            10,032
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-17                          9.000      BB-                  9             9,765
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17                     8.890      BB-                  7             7,709
Calpine Corp.,
Sr Note 08-15-05                                       8.250      BB+                 15            15,356
Sr Note 04-01-08                                       7.875      BB+                  5             4,875
Sr Note 02-15-11                                       8.250      BB+                  5             5,056
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05                                 9.500      BB+                 35            36,444
Sec Note Ser D 11-01-17                                7.880      BB+                 20            20,418
CMS Energy Corp.,
Sr Note 05-15-02                                       8.125      BB                  15            15,163
Sr Note 10-15-07                                       9.875      BB                   5             5,312
Sr Note Ser B 01-15-04                                 6.750      BB                  15            14,400
Connecticut Light & Power Co.,
1st Ref Mtg Ser C 06-01-02                             7.750      BBB+                15            15,314
East Coast Power LLC,
Sec Note 03-31-12                                      7.066      BBB-                10             9,712
EIP Funding-PNM,
Sec Fac Bond 10-01-12                                 10.250      BBB-                23            25,472
GG1B Funding Corp.,
Deb 01-15-11                                           7.430      BBB-                11            11,517
Hydro-Quebec,
Gtd Bond (Canada) 02-01-21                             9.400      A+                  15            19,418
Gtd Bond Ser HY (Canada) 01-15-22                      8.400      A+                  10            11,932
Gtd Deb Ser IF (Canada) 02-01-03                       7.375      A+                  25            26,013
Iberdrola International B.V.,
Note (Spain) 10-01-02                                  7.500      AA-                 25            25,827
Note (Spain) 06-01-03 (R)                              7.125      AA-                 25            25,914
KeySpan Corp.,
Note 11-15-10                                          7.625      A                   10            10,851
Long Island Lighting Co.,
Deb 03-15-23                                           8.200      A-                  20            20,400
Midland Funding Corp. II,
Deb Ser A 07-23-05                                    11.750      BB+                 35            40,425
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18                                  8.770      BBB                 25            27,343
Nisource Finance Corp.,
Bond 11-15-10 (R)                                      7.875      BBB                 15            16,149
North Atlantic Energy Corp.,
1st Mtg Ser A 06-01-02                                 9.050      BB+                  6             6,105
Northeast Utilities,
Note Ser A 12-01-06                                    8.580      BBB                  3             3,235
PECO Energy Transition Trust,
Pass Thru Ctf Ser 1999-A Class A-6 03-01-09            6.050      AAA                 15            15,183
Pass Thru Ctf Ser 2000-A Class A-3 03-01-10            7.625      AAA                 40            44,083
Pinnacle Partners,
Sr Note 08-15-04 (R)                                   8.830      BBB-                10            10,332
PNPP II Funding Corp.,
Deb 05-30-16                                           9.120      BB-                 15            16,308
PSEG Energy Holdings Inc.,
Sr Note 02-15-08 (R)                                   8.625      BBB-                15            14,978
Sierra Pacific Resources,
Note 05-15-05                                          8.750      BBB                 15            15,301
System Energy Resources, Inc.,
1st Mtg 08-01-01                                       7.710      BBB-                 5             4,963
TXU Electric Capital V.,
Capital Sec 01-30-37                                   8.175      BBB-                10             9,415
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17                     8.090      BBB-                25            25,850
Xcel Energy, Inc.,
Sr Note 12-01-10                                       7.000      BBB+                15            15,201
                                                                                             -------------
                                                                                                   655,635
                                                                                             -------------
Waste Disposal Service & Equip. (0.07%)
Waste Management, Inc.,
Sr Note 08-01-10                                       7.375      BBB                  5             5,036
                                                                                             -------------
TOTAL BONDS
(Cost $6,219,298)                                                                (93.88%)        6,388,770
                                                                                --------     -------------

                                                                               NUMBER OF
                                                                                WARRANTS
                                                                                --------
WARRANTS
MetroNet Communications Corp. (Canada) (R)**                                          10               970
                                                                                --------     -------------
TOTAL WARRANTS
(Cost $103)                                                                       (0.01%)              970
                                                                                --------     -------------

                                                                INTEREST        PAR VALUE
                                                                  RATE      (000s OMITTED)
                                                                --------     ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.69%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 02-28-01, due
03-01-01 (Secured by U.S. Treasury
Bonds 7.25% thru 13.25%, due 11-15-09
thru 02-15-19) -- Note A                                          5.380%             $387         $387,000
                                                                                              ------------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account Current
Rate 4.20%                                                                                             705
                                                                                              ------------
TOTAL SHORT-TERM INVESTMENTS                                                       (5.70%)         387,705
                                                                                ---------     ------------
TOTAL INVESTMENTS                                                                 (99.59%)       6,777,445
                                                                                ---------     ------------
OTHER ASSETS AND LIABILITIES, NET                                                  (0.41%)          27,768
                                                                                ---------     ------------
TOTAL NET ASSETS                                                                 (100.00%)      $6,805,213
                                                                                =========     ============

  * Credit ratings are unaudited and rated by Standard & Poor's where
    available, or Moody's Investor Services or John Hancock Advisers, Inc.
    where Standard & Poor's ratings are not available.

 ** Non-income producing security.

(A) Cash interest will be paid on this obligation at the stated rate
    beginning on the stated date.

(R) These securities are exempt from registration under Rule 144A of the
    Securities Act of 1933. Such securities may be resold, normally to
    qualified institutional buyers, in transactions exempt from
    registration. Rule 144A securities amounted to $596,035 or 8.76% of net
    assets as of February 28, 2001.

Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.

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

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Dividend Performers Fund

Schedule of Investments
February 28, 2001
- ------------------------------------------------------------------------------

The Schedule of Investments is a complete list of all securities owned
by the Dividend Performers Fund on February 28, 2001. It's divided into
two main categories: common stocks and short-term investments. The
common stocks are further broken down by industry groups. Short-term
investments, which represent the Fund's "cash" position, are listed last.

                                                              NUMBER OF
ISSUER, DESCRIPTION                                              SHARES            VALUE
- -------------------                                          ----------     ------------
                                                                      
COMMON STOCKS
Advertising (2.61%)
Interpublic Group of Cos., Inc. (The)                             4,300         $161,680
                                                                            ------------
Banks -- United States (3.87%)
State Street Corp.                                                  930           93,419
Wells Fargo & Co.                                                 2,950          146,438
                                                                            ------------
                                                                                 239,857
                                                                            ------------
Beverages (4.14%)
Anheuser-Busch Cos., Inc.                                         2,720          118,864
PepsiCo, Inc.                                                     3,000          138,240
                                                                            ------------
                                                                                 257,104
                                                                            ------------
Broker Services (1.66%)
Merrill Lynch & Co., Inc.                                         1,720          103,028
                                                                            ------------
Building (1.58%)
Black & Decker Corp. (The)                                        2,360           97,964
                                                                            ------------
Computers (11.44%)
Cisco Systems, Inc.*                                              2,580           61,114
Compaq Computer Corp.                                             5,740          115,948
EMC Corp.*                                                        1,960           77,930
International Business Machines Corp.                             1,040          103,896
KPMG Consulting, Inc.*                                            4,000           92,250
McDATA Corp. (Class A)*                                              72            1,287
Microsoft Corp.*                                                  2,150          126,850
Oracle Corp.*                                                     3,800           72,200
Sun Microsystems, Inc.*                                           2,925           58,134
                                                                            ------------
                                                                                 709,609
                                                                            ------------
Containers (1.32%)
Bemis Co., Inc.                                                   2,400           81,648
                                                                            ------------
Diversified Operations (2.74%)
Minnesota Mining & Manufacturing Co.                                600           67,650
Tyco International Ltd.                                           1,870          102,196
                                                                            ------------
                                                                                 169,846
                                                                            ------------
Electronics (7.62%)
Emerson Electric Co.                                                800           53,520
General Electric Co.                                              4,350          202,275
Intel Corp.                                                       3,400           97,113
Motorola, Inc.                                                    3,260           49,454
Texas Instruments, Inc.                                           2,380           70,329
                                                                            ------------
                                                                                 472,691
                                                                            ------------
Finance (6.77%)
Citigroup, Inc.                                                   3,266          160,622
Household International, Inc.                                     1,900          110,048
J.P. Morgan Chase & Co.                                           2,000           93,320
Morgan Stanley Dean Witter & Co.                                    860           56,012
                                                                            ------------
                                                                                 420,002
                                                                            ------------
Insurance (4.43%)
AFLAC, Inc.                                                       1,225           73,696
American General Corp.                                            1,540          117,410
American International Group, Inc.                                1,020           83,436
                                                                            ------------
                                                                                 274,542
                                                                            ------------
Media (2.82%)
AOL Time Warner, Inc.*                                            2,100           92,463
McGraw-Hill Cos., Inc. (The)                                      1,400           82,544
                                                                            ------------
                                                                                 175,007
                                                                            ------------
Medical (12.08%)
Abbott Laboratories                                               1,500           73,485
American Home Products Corp.                                      2,240          138,365
Baxter International, Inc.                                        1,950          179,576
Johnson & Johnson                                                 1,500          145,995
Merck & Co., Inc.                                                 1,790          143,558
Schering-Plough Corp.                                             1,700           68,425
                                                                            ------------
                                                                                 749,404
                                                                            ------------
Mortgage Banking (4.63%)
Fannie Mae                                                        1,700          135,490
Freddie Mac                                                       2,300          151,455
                                                                            ------------
                                                                                 286,945
                                                                            ------------
Office (1.07%)
Avery Dennison Corp.                                              1,250           66,250
                                                                            ------------

Oil & Gas (8.81%)
Anadarko Petroleum Corp.                                          1,100           68,750
Chevron Corp.                                                     1,140           97,652
Conoco Inc. (Class A)                                             3,440           97,180
Exxon Mobil Corp.                                                 1,696          137,457
Halliburton Co.                                                   1,900           75,658
Royal Dutch Petroleum Co.,  American Depositary
Receipts (ADR)  (Netherlands)                                     1,200           69,996
                                                                            ------------
                                                                                 546,693
                                                                            ------------
Paper & Paper Products (2.43%)
Kimberly-Clark Corp.                                              2,110          150,865
                                                                            ------------
Retail (5.95%)
CVS Corp.                                                         1,900          115,900
Home Depot, Inc. (The)                                            2,150           91,375
Lowe's Cos., Inc.                                                 2,900          162,052
                                                                            ------------
                                                                                 369,327
                                                                            ------------
Telecommunications (4.12%)
ADC Telecommunications, Inc.*                                     5,100           56,738
Nokia Corp., (ADR) (Finland)                                      2,360           51,920
Nortel Networks Corp. (Canada)                                    2,040           37,720
Verizon Communications                                            2,200          108,900
                                                                            ------------
                                                                                 255,278
                                                                            ------------
Tobacco (2.80%)
Philip Morris Cos., Inc.                                          3,600          173,448
                                                                            ------------
Utilities (5.82%)
ALLTEL Corp.                                                      1,500           80,550
Duke Energy Corp.                                                 3,800          154,850
SBC Communications, Inc.                                          2,630          125,451
                                                                            ------------
                                                                                 360,851
                                                                            ------------
TOTAL COMMON STOCKS
(Cost $5,098,709)                                               (98.71%)       6,122,039
                                                              ---------     ------------

                                               INTEREST        PAR VALUE
                                                 RATE      (000s OMITTED)
                                               --------     ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.76%)
Investment in a joint repurchase
agreement transaction with  UBS
Warburg, Inc. -- Dated  02-28-01, due
03-01-01 (Secured by U.S. Treasury
Bonds, 7.25% thru 13.25%  due 11-15-09
thru 02-15-19)  -- Note A                        5.38%             $109         $109,000
                                                                            ------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company  Daily
Interest Savings Account
Current Rate 4.20%                                                                   331
                                                                            ------------
TOTAL SHORT-TERM INVESTMENTS                                     (1.76%)         109,331
                                                              ---------     ------------
TOTAL INVESTMENTS                                              (100.47%)       6,231,370
                                                              ---------     ------------
OTHER ASSETS AND LIABILITIES, NET                                (0.47%)         (29,063)
                                                              ---------     ------------
TOTAL NET ASSETS                                               (100.00%)      $6,202,307
                                                              =========     ============

* Non-income-producing security.

Parenthetical disclosure of a foreign country in the security
description  represents country of a foreign issuer.

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

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Medium Capitalization Growth Fund

Schedule of Investments
February 28, 2001
- ------------------------------------------------------------------------------

The Schedule of Investments is a complete list of all securities owned
by the Medium Capitalization Growth Fund on February 28, 2001. It's
divided into two main categories: common stocks and short-term
investments. The common stocks are further broken down by industry
groups. Short-term investments, which represent the Fund's "cash"
position, are listed last.

                                                              NUMBER OF
ISSUER, DESCRIPTION                                              SHARES            VALUE
- -------------------                                          ----------     ------------
                                                                      
COMMON STOCKS
Advertising (0.32%)
TMP Worldwide, Inc.*                                                700          $36,619
                                                                            ------------
Banks -- United States (3.04%)
Mellon Financial Corp.                                            3,948          182,832
Northern Trust Corp.                                              2,350          167,144
                                                                            ------------
                                                                                 349,976
                                                                            ------------
Beverages (0.99%)
Pepsi Bottling Group, Inc.                                        2,833          114,312
                                                                            ------------
Broker Services (1.52%)
Bear Stearns Cos., Inc.                                             955           49,832
Lehman Brothers Holdings, Inc.                                    1,817          124,737
                                                                            ------------
                                                                                 174,569
                                                                            ------------
Computers (15.63%)
Brocade Communications Systems, Inc.*                             3,035          117,796
DST Systems, Inc.*                                                  830           50,630
EMC Corp.*                                                          994           39,521
Emulex Corp.*                                                     2,100           64,706
Exodus Communications, Inc.*                                      5,370           78,536
Fiserv, Inc.*                                                     1,600           79,200
Handspring, Inc.*                                                 2,600           65,163
i2 Technologies, Inc.*                                            3,050           81,969
Interwoven, Inc.*                                                 3,200           53,000
Intuit, Inc.*                                                     3,300          135,712
Manugistics Group, Inc.*                                            950           29,450
McDATA Corp. (Class A)*                                              36              644
McDATA Corp. (Class B)*                                           1,500           29,906
Mercury Interactive Corp.*                                        1,400           88,113
Micromuse, Inc.*                                                  1,600           65,700
Palm, Inc.*                                                       5,550           96,431
Parametric Technology Corp.*                                     16,600          220,988
Rational Software Corp.*                                          2,450           85,597
Research in Motion, Ltd.* (Canada)                                1,200           46,425
SunGard Data Systems, Inc.*                                       3,407          189,770
TIBCO Software, Inc.*                                             2,700           36,450
VeriSign, Inc.*                                                   2,950          141,508
                                                                            ------------
                                                                               1,797,215
                                                                            ------------

Electronics (12.89%)
Aeroflex, Inc.*                                                  10,574          141,427
Analog Devices, Inc.*                                             1,162           43,343
Applied Micro Circuits Corp.*                                     1,420           37,985
Atmel Corp.*                                                      2,700           28,350
Flextronics International, Ltd.*  (Singapore)                     3,850          102,025
Jabil Circuit, Inc.*                                              4,874          109,568
KLA-Tencor Corp.*                                                 2,650           94,737
Lam Research Corp.*                                               4,800          103,200
Molex, Inc.                                                       1,410           51,201
Novellus Systems, Inc.*                                           2,600          100,425
PMC-Sierra, Inc.* (Canada)                                        1,050           35,175
QLogic Corp.*                                                     1,650           61,669
Sanmina Corp.*                                                    2,080           62,010
Tektronix, Inc.*                                                  5,374          132,684
Vitesse Semiconductor Corp.*                                      2,300           90,706
Waters Corp.*                                                     4,362          287,281
                                                                            ------------
                                                                               1,481,786
                                                                            ------------
Energy (2.32%)
Calpine Corp.*                                                    4,662          207,412
Dynegy, Inc. (Class A)                                            1,261           59,267
                                                                            ------------
                                                                                 266,679
                                                                            ------------
Fiber Optics (0.71%)
Sycamore Networks, Inc.*                                          4,500           81,562
                                                                            ------------
Finance (5.71%)
Affiliated Managers Group, Inc.*                                  2,103          108,304
Capital One Financial Corp.                                       1,120           61,880
Concord EFS, Inc.*                                                2,972          137,455
Golden West Financial Corp.                                       2,696          147,876
Providian Financial Corp.                                         4,014          200,740
                                                                            ------------
                                                                                 656,255
                                                                            ------------
Instruments -- Scientific (1.68%)
Applera Corp. -- Applied Biosystems  Group                        2,799          193,411
                                                                            ------------
Insurance (6.30%)
ACE, Ltd. (Bermuda)                                               3,360          122,976
AFLAC, Inc.                                                       2,324          139,812
Ambac Financial Group, Inc.                                       4,139          233,440
American General Corp.                                              893           68,082
Everest Re Group, Ltd. (Bermuda)                                  2,535          160,339
                                                                            ------------
                                                                                 724,649
                                                                            ------------
Media (2.62%)
Charter Communications, Inc.  (Class A)*                          4,750          101,531
Clear Channel Communications, Inc.*                               2,103          120,186
Reader's Digest Association, Inc.  (Class A)                      2,491           79,936
                                                                            ------------
                                                                                 301,653
                                                                            ------------
Medical (12.31%)
Alkermes, Inc.*                                                   1,950           60,450
Allergan, Inc.                                                    1,411          122,686
ALZA Corp.*                                                       4,398          173,941
HEALTHSOUTH Corp.*                                                9,675          154,026
Human Genome Sciences, Inc.*                                      1,700           93,394
IDEC Pharmaceuticals Corp.*                                       1,780          100,347
Immunex Corp.*                                                    4,400          143,275
Inhale Therapeutic Systems, Inc.*                                 2,250           62,719
MedImmune, Inc.*                                                  2,300          100,481
Millennium Pharmaceuticals, Inc.*                                 4,100          138,375
Oxford Health Plans, Inc.*                                        3,700          122,331
Trigon Healthcare, Inc.*                                            967           58,204
Wellpoint Health Networks, Inc.*                                    868           85,802
                                                                            ------------
                                                                               1,416,031
                                                                            ------------
Oil & Gas (8.24%)
Baker Hughes, Inc.                                                2,169           85,025
BJ Services Co.*                                                  1,405          106,780
Cooper Cameron Corp.*                                             1,804          107,843
El Paso Corp.                                                     2,414          169,704
Santa Fe International Corp.                                      3,903          146,167
Transocean Sedco Forex, Inc.                                      3,714          178,755
Weatherford International, Inc.*                                  2,938          152,864
                                                                            ------------
                                                                                 947,138
                                                                            ------------
Pollution Control (1.56%)
Waste Management, Inc.                                            7,095          180,000
                                                                            ------------
Retail (7.03%)
Abercrombie & Fitch Co. (Class A)*                                4,082          115,766
Bed Bath & Beyond, Inc.*                                          6,000          147,750
BJ's Wholesale Club, Inc.*                                        2,723          123,924
Ethan Allen Interiors, Inc.                                       2,781           94,443
RadioShack Corp.                                                  2,041           87,355
Talbots, Inc.                                                     2,337          118,766
TJX Cos., Inc.                                                    3,919          119,843
                                                                            ------------
                                                                                 807,847
                                                                            ------------
Telecommunications (14.05%)
Allegiance Telecom, Inc.*                                         6,650          134,662
American Tower Corp. (Class A)*                                   5,236          151,530
Comverse Technology, Inc.*                                        1,420          106,411
Crown Castle International Corp.*                                 4,850          121,856
Dobson Communications Corp.  (Class A)*                          13,050          242,241
Global Crossing, Ltd.* (Bermuda)                                  7,041          114,275
McLeodUSA, Inc. (Class A)*                                       16,615          218,072
Scientific-Atlanta, Inc.                                          4,645          217,850
Western Wireless Corp. (Class A)*                                 4,350          183,516
XO Communications, Inc. (Class A)*                                8,400          124,950
                                                                            ------------
                                                                               1,615,363
                                                                            ------------
Textile (1.04%)
Jones Apparel Group, Inc.*                                        3,119          119,770
                                                                            ------------
Utilities (0.05%)
NewPower Holdings, Inc.*                                            885            5,531
                                                                            ------------
TOTAL COMMON STOCKS
(Cost $11,013,857)                                              (98.01%)      11,270,366
                                                              ---------     ------------

                                               INTEREST        PAR VALUE
                                                 RATE      (000s OMITTED)
                                               --------     ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.72%)
Investment in a joint repurchase
agreement transaction with  UBS
Warburg, Inc. -- Dated  02-28-01, due
03-01-01 (Secured by U.S. Treasury
Bonds, 7.25% thru 13.25%  due 11-15-09
thru 02-15-19)  -- Note A                        5.38%             $428         $428,000
                                                                            ------------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company  Daily
Interest Savings Account
Current Rate 4.20%                                                                   590
                                                                            ------------
TOTAL SHORT-TERM INVESTMENTS                                     (3.73%)         428,590
                                                              ---------     ------------
TOTAL INVESTMENTS                                              (101.74%)      11,698,956
                                                              ---------     ------------
OTHER ASSETS AND LIABILITIES, NET                                (1.74%)        (200,103)
                                                              ---------     ------------
TOTAL NET ASSETS                                               (100.00%)     $11,498,853
                                                              =========     ============

* Non-income producing security.

Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.

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

See notes to financial statements.




Portfolio Concentration (Unaudited)
- ----------------------------------------------------------------------

The Medium Capitalization Growth Fund invests primarily in common stocks
of U.S. and foreign issuers. The performance of the Fund is closely tied
to the economic and financial conditions within the countries in which
it invests. The concentration of investments by industry category for
individual securities held by the Fund is shown in the schedule of
investments. In addition, concentration of investments can be aggregated
by various countries. The table below shows the percentages of the
Fund's investments at February 28, 2001, assigned to country categories.

                                        VALUE AS A
                                     PERCENTAGE OF
COUNTRY DIVERSIFICATION          FUND'S NET ASSETS
- -----------------------          -----------------
Bermuda                                      3.46%
Canada                                       0.71
Singapore                                    0.89
United States                               96.68
                                          -------
TOTAL INVESTMENTS                          101.74%
                                          =======

See notes to financial statements.






John Hancock Funds -- Institutional Series Trust -- Small Capitalization Growth Fund

Schedule of Investments
February 28, 2001
- ------------------------------------------------------------------------------

The Schedule of Investments is a complete list of all securities owned
by the Small Capitalization Growth Fund on February 28, 2001. It's
divided into two main categories: common stocks and short-term
investments. Common stocks are further broken down by industry groups.
Short-term investments, which represent the Fund's "cash" position, are
listed last.

                                                              NUMBER OF
ISSUER, DESCRIPTION                                             SHARES          VALUE
- -------------------                                          ----------     ------------
                                                                      
COMMON STOCKS
Advertising (1.76%)
Getty Images, Inc.*                                               3,820          $95,978
                                                                            ------------
Banks -- United States (1.41%)
Southwest Bancorp. of Texas, Inc.*                                2,000           77,000
                                                                            ------------
Business Services -- Misc (6.61%)
Corporate Executive Board Co. (The)*                              3,000          107,250
Forrester Research, Inc.*                                         1,550           60,547
Heidrick & Struggles International, Inc.*                         2,500           82,656
Management Network Group, Inc. (The)*                             7,350           83,606
Pivotal Corp.* (Canada)                                           2,000           26,625
                                                                            ------------
                                                                                 360,684
                                                                            ------------
Computers (10.59%)
Advent Software, Inc.*                                            2,990          115,115
Cerner Corp.*                                                     3,400          174,037
Embarcadero Technologies, Inc.*                                   2,300           67,850
IDX Systems Corp.*                                                3,400           66,300
Manugistics Group, Inc.*                                          2,000           62,000
M-Systems Flash Disk Pioneers Ltd.*  (Israel)                     7,000           57,532
Novatel Wireless, Inc.*                                           7,050           35,250
                                                                            ------------
                                                                                 578,084
                                                                            ------------
Electronics (8.37%)
Aeroflex, Inc.*                                                   5,000           66,875
Alpha Industries, Inc.*                                           2,100           33,862
DuPont Photomasks, Inc.*                                          1,050           69,234
Exar Corp.*                                                       3,920           74,480
Micrel, Inc.*                                                     2,740           77,063
PRI Automation, Inc.*                                             2,590           50,667
Semtech Corp.*                                                    3,380           84,711
                                                                            ------------
                                                                                 456,892
                                                                            ------------
Finance (5.19%)
Actrade Financial Technologies, Ltd.*                             2,428           60,396
Affiliated Managers Group, Inc.*                                  2,000          103,000
AmeriCredit Corp.*                                                3,500          119,630
                                                                            ------------
                                                                                 283,026
                                                                            ------------
Insurance (3.25%)
RenaissanceRe Holdings Ltd. (Bermuda)                             1,200           89,220
Triad Hospitals, Inc.*                                            2,700           88,256
                                                                            ------------
                                                                                 177,476
                                                                            ------------
Media (4.04%)
Entercom Communications Corp.*                                    3,200          130,400
Radio One, Inc. (Class A)*                                        6,000           90,000
                                                                            ------------
                                                                                 220,400
                                                                            ------------
Medical (22.08%)
Accredo Health, Inc.*                                             4,500          130,781
Alkermes, Inc.*                                                     750           23,250
AmeriSource Health Corp. (Class A)*                               2,200          118,184
Cytyc Corp.*                                                      1,500           94,313
DaVita, Inc.*                                                     4,600           80,868
Lincare Holdings, Inc.*                                           2,650          156,184
NPS Pharmaceuticals, Inc.*                                        2,600           83,850
Pharmaceutical Product Development, Inc.*                         1,900          105,806
Renal Care Group, Inc.*                                           4,850          128,222
Rightchoice Managed Care *                                        4,700          189,880
Wilson Greatbatch Technologies, Inc.*                             3,960           94,050
                                                                            ------------
                                                                               1,205,388
                                                                            ------------
Oil & Gas (7.69%)
Marine Drilling Cos., Inc.*                                       5,000          145,750
Newfield Exploration Co.*                                         3,050          106,811
Stone Energy Corp.*                                               1,800           97,200
Universal Compression Holdings, Inc.*                             2,000           70,000
                                                                            ------------
                                                                                 419,761
                                                                            ------------
Retail (3.98%)
Columbia Sportswear Co.*                                          2,000          110,750
Krispy Kreme Doughnuts, Inc.*                                       400           28,725
Whole Foods Market, Inc.*                                         1,800           77,625
                                                                            ------------
                                                                                 217,100
                                                                            ------------
Shoes & Related Apparel (1.40%)
Wolverine World Wide, Inc.                                        5,200           76,492
                                                                            ------------
Steel (2.16%)
Lone Star Technologies, Inc.*                                     2,650          117,899
                                                                            ------------
Telecommunications (14.31%)
AirGate PCS, Inc.*                                                3,950          174,294
Alamosa Holdings, Inc.*                                          11,000          115,500
CTC Communications Group, Inc.*                                  10,950           90,337
Dobson Communications Corp.  (Class A)*                           5,600          103,950
SBA Communications Corp.*                                         4,930          162,690
Sierra Wireless, Inc.* (Canada)                                   1,500           39,563
WinStar Communications, Inc.*                                     7,500           94,688
                                                                            ------------
                                                                                 781,022
                                                                            ------------
Textile (1.89%)
Tommy Hilfiger Corp.*                                             6,800          103,360
                                                                            ------------
TOTAL COMMON STOCKS
(Cost $5,545,155)                                               (94.73%)       5,170,562
                                                              ---------     ------------

                                               INTEREST        PAR VALUE
                                                 RATE      (000s OMITTED)
                                               --------     ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.44%)
Investment in a joint repurchase
agreement transaction with  UBS
Warburg, Inc. -- Dated  02-28-01, due
03-01-01 (Secured by U.S. Treasury
Bonds, 7.25% thru 13.25%  due 11-15-09
thru 02-15-19)  -- Note A                        5.38%             $297         $297,000
                                                                            ------------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company  Daily
Interest Savings Account
Current Rate 4.20%                                                                   829
                                                                            ------------
TOTAL SHORT-TERM INVESTMENTS                                     (5.45%)         297,829
                                                              ---------     ------------
TOTAL INVESTMENTS                                              (100.18%)       5,468,391
                                                              ---------     ------------
OTHER ASSETS AND LIABILITIES, NET                                (0.18%)          (9,985)
                                                              ---------     ------------
TOTAL NET ASSETS                                               (100.00%)      $5,458,406
                                                              =========     ============

* Non-income producing security.

Parenthetical disclosure of a foreign country in the security
description  represents country of a foreign issuer.

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

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Small Capitalization Value Fund

Schedule of Investments
February 28, 2001
- ------------------------------------------------------------------------------

The Schedule of Investments is a complete list of all securities owned
by the Small Capitalization Value Fund on February 28, 2001. It's
divided into two main categories: common stocks and short-term
investments. Common stocks are further broken down by industry groups.
Short-term investments, which represent the Fund's "cash" position, are
listed last.

                                                              NUMBER OF
ISSUER, DESCRIPTION                                              SHARES            VALUE
- -------------------                                          ----------     ------------
                                                                      
COMMON STOCK
Advertising (1.95%)
Penton Media, Inc.                                               16,000         $361,440
Ventiv Health, Inc.*                                             14,000          226,625
                                                                            ------------
                                                                                 588,065
                                                                            ------------
Aerospace (0.77%)
Innovative Solutions & Support, Inc.*                            15,950          232,272
                                                                            ------------
Broker Services (1.20%)
Jefferies Group, Inc.                                            12,100          361,790
                                                                            ------------
Business Services -- Misc (4.04%)
Iron Mountain, Inc.*                                             16,600          647,566
Sensormatic Electronics Corp                                     25,550          559,545
Xpedior, Inc.*                                                   17,750           12,203
                                                                            ------------
                                                                               1,219,314
                                                                            ------------
Computers (18.41%)
Aspen Technology, Inc.*                                          29,000          755,812
Bell & Howell Co.*                                               45,000        1,032,750
Electronics for Imaging, Inc.*                                   56,250        1,374,609
Hyperion Solutions Corp.*                                        23,250          398,156
NetRatings, Inc.*                                                 4,650           56,381
Parametric Technology Corp.*                                     23,200          308,850
Portal Software, Inc.*                                           30,850          220,772
Student Advantage, Inc.*                                         54,950          164,850
UNOVA, Inc. *                                                   141,250          627,150
Viant Corp.*                                                    124,900          382,506
Wind River Systems, Inc.*                                        10,000          235,000
                                                                            ------------
                                                                               5,556,836
                                                                            ------------
Containers (0.80%)
Pactiv Corp.*                                                    18,000          242,100
                                                                            ------------
Diversified Operations (1.45%)
ESCO Electronics Corp.                                           20,250          436,995
                                                                            ------------
Electronics (8.71%)
Alpha Industries, Inc.*                                          34,550          557,119
Axcelis Technologies, Inc.*                                      29,000          267,345
MKS Instruments, Inc.*                                           35,652          623,910
SBS Technologies, Inc.*                                          14,000          308,000
Vicor Corp.*                                                     40,650          873,975
                                                                            ------------
                                                                               2,630,349
                                                                            ------------
Finance (5.10%)
NOVA Corp.                                                       50,500          960,005
Sovereign Bancorp, Inc.                                          65,000          578,910
                                                                            ------------
                                                                               1,538,915
                                                                            ------------
Food (5.89%)
Galaxy Nutritional Foods, Inc.*                                  75,000          408,000
Hain Celestial Group, Inc.*                                      44,250        1,371,750
                                                                            ------------
                                                                               1,779,750
                                                                            ------------
Insurance (0.65%)
StanCorp Financial Group, Inc.*                                   5,000          195,500
                                                                            ------------
Leisure (2.44%)
Six Flags, Inc.*                                                 34,100          736,219
                                                                            ------------
Machinery (0.77%)
Zebra Technologies Corp. (Class A)*                               5,150          232,072
                                                                            ------------
Media (7.18%)
Pegasus Communications Corp.*                                    57,000        1,592,438
Regent Communications, Inc.*                                     60,500          484,000
Sinclair Broadcast Group, Inc.  (Class A)*                       10,000           90,625
                                                                            ------------
                                                                               2,167,063
                                                                            ------------
Medical (10.01%)
Alpharma, Inc. (Class A)                                         28,000          931,000
Covance, Inc.*                                                   92,600        1,389,000
Cyberonics, Inc.*                                                25,000          514,687
DENTSPLY International, Inc.                                      5,000          188,125
                                                                            ------------
                                                                               3,022,812
                                                                            ------------
Oil & Gas (1.98%)
Marine Drilling Cos., Inc.*                                       5,000          145,750
Petroleum Geo-Services ASA,  American Depositary
Receipts  (ADR) (Norway)*                                        15,000          131,250
Precision Drilling Corp. (Canada)*                                4,000          169,600
Seitel, Inc.                                                      4,000           74,800
Veritas DGC, Inc.*                                                2,500           75,375
                                                                            ------------
                                                                                 596,775
                                                                            ------------
Protection -- Safety Equip & Svc (4.17%)
Pittston Brink's Group                                           63,400        1,258,490
                                                                            ------------
Retail (3.38%)
Pathmark Stores, Inc.*                                           53,000          901,000
Ruddick Corp.                                                     9,100          119,210
                                                                            ------------
                                                                               1,020,210
                                                                            ------------
Schools/Education (2.40%)
Career Education Corp.*                                          15,900          725,438
                                                                            ------------
Telecommunications (18.44%)
AirGate PCS, Inc.*                                               16,500          728,063
Alaska Communications Systems  Holdings, Inc.*                   41,700          284,081
ANTEC Corp.*                                                     60,750          544,855
Commonwealth Telephone  Enterprises, Inc.*                        7,500          255,000
CT Communications, Inc.                                          17,000          267,750
CTC Communications Group, Inc.*                                 112,150          925,237
Intermedia Communications, Inc.*                                 11,850          187,378
Lightbridge, Inc.*                                               40,000          475,000
Motient Corp.                                                    95,000          350,313
NTELOS, Inc.                                                     60,000          963,750
TeleCorp PCS, Inc.*                                              12,000          256,500
XM Satellite Radio Holdings, Inc.  (Class A)*                    32,000          328,000
                                                                            ------------
                                                                               5,565,927
                                                                            ------------
Waste Disposal Service & Equip. (1.98%)
Casella Waste Systems, Inc. (Class A)*                           97,450          596,881
                                                                            ------------
TOTAL COMMON STOCKS
(Cost $32,424,457)                                             (101.72%)      30,703,773
                                                              ---------     ------------

                                               INTEREST        PAR VALUE
                                                 RATE      (000s OMITTED)
                                               --------     ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.09%)
Investment in a joint  repurchase
agreement  transaction with  UBS
Warburg, Inc.  -- Dated 02-28-01,  due
03-01-01 (Secured by U.S.  Treasury
Bonds,  7.25% thru 13.25%  due
11-15-09 thru  02-15-19) -- Note A               5.38%              $26          $26,000
                                                                            ------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account
Current Rate 4.20%                                                                   448
                                                                            ------------
TOTAL SHORT-TERM INVESTMENTS                                     (0.09%)          26,448
                                                              ---------     ------------
TOTAL INVESTMENTS                                              (101.81%)      30,730,221
                                                              ---------     ------------
OTHER ASSETS AND LIABILITIES, NET                                (1.81%)        (546,799)
                                                              ---------     ------------
TOTAL NET ASSETS                                               (100.00%)     $30,183,422
                                                              =========     ============

* Non-income producing security.

Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.

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

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- International Equity Fund

Schedule of Investments
February 28, 2001
- ------------------------------------------------------------------------------

The Schedule of Investments is a complete list of all securities owned
by the International Equity Fund on February 28, 2001.  It's divided
into four main categories: common stocks, warrants,  preferred stocks
and short-term investments. Common stocks, warrants and preferred stocks
are further broken down by country. Short-term investments, which
represent the Fund's "cash" position, are listed last.

                                                              NUMBER OF
ISSUER, DESCRIPTION                                              SHARES            VALUE
- -------------------                                          ----------     ------------
                                                                      
COMMON STOCKS
Brazil (0.99%)
Embratel Participacoes SA,  American Depositary
Receipts (ADR)  (Telecommunications)                              1,200          $14,520
Tele Norte Leste Participacoes SA (ADR)
(Telecommunications)                                              2,000           43,400
                                                                            ------------
                                                                                  57,920
                                                                            ------------
Canada (7.82%)
Alberta Energy Co. Ltd. (Oil & Gas)                               1,900           84,960
Anderson Exploration Ltd.* (Oil & Gas)                            3,100           65,970
Bombardier, Inc.  (Diversified Operations)                        4,100           58,721
Celestica, Inc.* (Electronics)                                      300           14,700
Manulife Financial Corp. (Insurance)                              2,100           57,603
Precision Drilling Corp.* (Oil & Gas)                             1,300           55,120
Research in Motion Ltd.* (Computers)                                600           23,212
Sun Life Financial Services (Insurance)                           3,000           67,074
Suncor Energy, Inc. (Oil & Gas)                                   1,200           30,879
                                                                            ------------
                                                                                 458,239
                                                                            ------------
Denmark (2.01%)
Novo Nordisk AS (Medical)                                           400           78,732
Vestas Wind Systems AS (Utilities)                                  800           39,193
                                                                            ------------
                                                                                 117,925
                                                                            ------------
France (10.59%)
Accor SA (Leisure)                                                  700           27,506
Assurances Generales de France SA  (Insurance)                    1,100           68,597
Aventis SA (Medical)                                              1,000           80,816
Cap Gemini SA (Computers)                                           200           35,051
Lafarge SA (Building)                                               400           39,027
PSA Peugeot Citroen SA  (Automobile/Trucks)                         200           54,251
Schneider Electric SA (Machinery)                                   720           47,053
Suez Lyonnaise des Eaux SA  (Diversified
Operations)                                                         300           49,704
Total Fina Elf SA (Oil & Gas)                                       889          125,606
Vivendi Environnement* (Utilities)                                1,300           55,031
Vivendi Universal SA  (Diversified Operations)                      600           37,886
                                                                            ------------
                                                                                 620,528
                                                                            ------------
Germany (5.79%)
Bayerische Motoren Werke AG  (Automobile/Trucks)                    800           27,724
Deutsche Bank AG  (Banks -- Foreign)                                600           49,544
Dresdner Bank AG  (Banks -- Foreign)                              1,200           49,760
E.On AG  (Utilities)                                              1,000           51,425
Ergo Versicherungs Gruppe AG  (Insurance)                           500           76,858
Muenchener Rueckversicherungs- Gesellschaft AG
(Insurance)                                                         258           83,722
                                                                            ------------
                                                                                 339,033
                                                                            ------------
Hong Kong (2.96%)
Cheung Kong Holdings Ltd.  (Real Estate
Operations)                                                       5,000           60,578
Citic Pacific Ltd.  (Diversified Operations)                     10,000           35,641
Hutchison Whampoa Ltd.  (Diversified Operations)                  4,000           47,437
Johnson Electric Holdings Ltd.  (Electronics)                    18,000           30,116
                                                                            ------------
                                                                                 173,772
                                                                            ------------
Ireland (1.86%)
Allied Irish Banks Plc  (Banks -- Foreign)                        6,600           71,381
CRH Plc (Building)                                                2,000           37,646
                                                                            ------------
                                                                                 109,027
                                                                            ------------
Israel (1.53%)
Check Point Software Technologies Ltd.*
(Computers)                                                         500           32,062
Teva Pharmaceutical Industries Ltd.  (ADR)
(Medical)                                                           900           57,375
                                                                            ------------
                                                                                  89,437
                                                                            ------------
Italy (4.91%)
Alleanza Assicurazioni SpA (Insurance)                            4,600           69,100
Banca Nazionale del Lavoro SpA  (Banks --
Foreign)                                                         18,200           60,810
Edison SpA (Utilities)                                            6,200           58,209
Finmeccanica SpA* (Aerospace)                                    33,600           32,814
Riunione Adriatica di Sicurta SpA  (Insurance)                    4,916           66,924
                                                                            ------------
                                                                                 287,857
                                                                            ------------
Japan (5.79%)
Daikin Industries, Ltd. (Building)                                2,000           37,084
Furukawa Electric Co., Ltd. (The)  (Wire & Cable
Products)                                                         1,000           13,214
Itochu Techno-Science Corp.  (Computers)                            200           28,048
Japan Airlines Co., Ltd. (Transport)                              7,000           29,957
Mitsui Fudosan Co., Ltd.  (Real Estate
Operations)                                                       3,000           28,977
NEC Corp. (Electronics)                                           1,000           16,275
Nikon Corp. (Computers)                                           2,000           23,717
Nippon Steel Corp. (Steel)                                       25,000           45,610
Pioneer Corp. (Electronics)                                       1,000           25,916
Sony Corp. (Electronics)                                            600           43,222
Takeda Chemical Industries, Ltd.  (Medical)                       1,000           47,315
                                                                            ------------
                                                                                 339,335
                                                                            ------------
Mexico (0.93%)
Grupo Financiero BBVA Bancomer,  SA de CV*
(Finance)                                                         4,000            2,683
Grupo Televisa SA* (ADR) (Media)                                    300           11,970
Telefonos de Mexico SA de CV (ADR)
(Telecommunications)                                              1,230           39,680
                                                                            ------------
                                                                                  54,333
                                                                            ------------
Netherlands (4.48%)
Akzo Nobel NV (Chemicals)                                         1,280           62,090
ASM Lithography Holding NV*  (Electronics)                        2,200           46,612
ING Groep NV  (Banks -- Foreign)                                    727           50,221
Koninklijke Ahold NV (Retail)                                     1,431           46,153
Qiagen NV* (Medical)                                              1,500           41,834
STMicroelectronics NV (Electronics)                                 500           15,690
                                                                            ------------
                                                                                 262,600
                                                                            ------------
Norway (0.64%)
Tomra Systems ASA (Pollution Control)                             2,050           37,778
                                                                            ------------
Portugal (1.89%)
Electricidade de Portugal SA (Utilities)                         16,100           47,866
Portugal Telecom SGPS SA  (Telecommunications)                    6,500           62,701
                                                                            ------------
                                                                                 110,567
                                                                            ------------
Singapore (0.50%)
Flextronics International Ltd.*  (Electronics)                    1,100           29,150
                                                                            ------------
Spain (1.87%)
Banco Bilbao Vizcaya Argentaria SA  (Banks --
Foreign)                                                          4,000           59,572
Corporacion Mapfre SA (Insurance)                                 1,200           27,613
Telefonica SA*  (Telecommunications)                              1,300           22,197
                                                                            ------------
                                                                                 109,382
                                                                            ------------
Sweden (2.64%)
Electrolux AB (Household)                                         2,400           39,572
Nordea AB (Bank-Foreign)                                          4,000           29,313
Svenska Handelsbanken AB  (Banks -- Foreign)                      5,100           85,649
                                                                            ------------
                                                                                 154,534
                                                                            ------------
Switzerland (4.57%)
ABB Ltd. (Engineering/R&D Services)                                 600           50,726
Nestle SA (Food)                                                     20           43,795
Serona SA* (ADR) (Medical)                                        3,400           69,088
Syngenta AG* (Chemicals)                                            700           40,611
UBS AG  (Banks -- Foreign)                                          400           63,572
                                                                            ------------
                                                                                 267,792
                                                                            ------------
Taiwan (0.46%)
United Microelectronics Corp.* (ADR)
(Electronics)                                                     2,800           26,908
                                                                            ------------
United Kingdom (20.51%)
Amdocs Ltd.*  (Telecommunications)                                  800           52,008
Anglo American Plc (Metal)                                          900           58,602
AstraZeneca PLC (Medical)                                         1,400           63,649
Barclays Plc  (Banks -- Foreign)                                  1,800           54,652
Billiton Plc (Metal)                                             14,000           64,377
BP Amoco Plc (Oil & Gas)                                          6,671           55,187
British Telecommunications Plc
(Telecommunications)                                              7,700           63,366
Centrica Plc (Utilities)                                         24,410           82,819
CMG Plc (Computers)                                               4,600           50,075
COLT Telecom Group Plc*  (Telecommunications)                     1,900           34,097
Diageo Plc (Beverages)                                            3,600           36,512
Dixons Group Plc (Electronics)                                   14,600           54,488
Energis Plc*  (Telecommunications)                                8,050           52,823
GlaxoSmithKline Plc* (Medical)                                    1,500           41,255
National Grid Group Plc (Utilities)                               9,700           82,066
Reckitt Benckiser Plc  (Soap & Cleaning
Preparations)                                                     6,800           93,266
Royal Bank of Scotland Group Plc  (Banks --
Foreign)                                                          4,000           87,780
Shell Transport & Trading Co. Plc  (Oil & Gas)                    8,700           72,224
Vodafone Group Plc  (Telecommunications)                         37,840          102,571
                                                                            ------------
                                                                               1,201,817
                                                                            ------------
United States (3.60%)
Santa Fe International Corp. (Oil & Gas)                          2,000           74,900
Schlumberger Ltd. (Oil & Gas)                                     1,000           63,750
Transocean Sedco Forex, Inc.  (Oil & Gas)                         1,500           72,195
                                                                            ------------
                                                                                 210,845
                                                                            ------------
TOTAL COMMON STOCKS
(Cost $5,222,030)                                               (86.34%)       5,058,779
                                                              ---------     ------------
WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs- Gesellschaft AG*
(Insurance)                                                           2              177
                                                                            ------------
TOTAL WARRANTS
(Cost $90)                                                       (0.00%)             177
                                                              ---------     ------------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $5,222,120)                                               (86.34%)       5,058,956
                                                              ---------     ------------
PREFERRED STOCKS
Germany (1.07%)
SAP AG (Computers)                                                  400           62,959
                                                                            ------------
TOTAL PREFERRED STOCKS
(Cost $70,749)                                                   (1.07%)          62,959
                                                              ---------     ------------

                                               INTEREST        PAR VALUE
                                                 RATE      (000s OMITTED)
                                               --------     ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (11.47%)
Investment in a joint repurchase
agreement transaction with  UBS
Warburg, Inc. -- Dated 02-28-01, due
03-01-01 (Secured by U.S. Treasury
Bonds, 6.00% and 8.75% due 05-15-17
and 02-15-26) -- Note A                          5.38%             $672         $672,000

                                                              NUMBER OF
                                                                 SHARES
                                                                 ------
Cash Equivalents (14.41%)
Navigator Securities Lending Prime
Portfolio **                                                        844          844,471
                                                                            ------------
TOTAL SHORT-TERM INVESTMENTS                                    (25.88%)       1,516,471
                                                              ---------     ------------
TOTAL INVESTMENTS                                              (113.29%)       6,638,386
                                                              ---------     ------------
OTHER ASSETS AND LIABILITIES, NET                               (13.29%)        (778,994)
                                                              ---------     ------------
TOTAL NET ASSETS                                               (100.00%)      $5,859,392
                                                              =========     ============

  * Non-income producing security.

 ** Represents investment of security lending collateral -- Note A.

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

See notes to financial statements.





Portfolio Concentration (Unaudited)
- ----------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other
countries. The performance of the Fund is closely tied to the economic
conditions within the countries in which it invests. The concentration
of investments by country for individual securities held by the Fund is
shown in the schedule of investments. In addition, the concentration of
investments can be aggregated by various industry groups. The table
below shows the percentages of the Fund's investments at February 28,
2001, assigned to the various investment categories.

                               VALUE OF SECURITIES
INVESTMENT CATEGORIES          AS A % OF NET ASSETS
- ---------------------          --------------------
Aerospace                                    0.56%
Automobile/Trucks                            1.40
Banks -- Foreign                            11.30
Beverages                                    0.62
Building                                     1.94
Chemicals                                    1.75
Computers                                    4.35
Diversified Operations                       3.91
Electronics                                  5.17
Engineering/R&D Services                     0.87
Finance                                      0.05
Food                                         0.75
Household                                    0.68
Insurance                                    8.84
Leisure                                      0.47
Machinery                                    0.80
Media                                        0.20
Medical                                      8.19
Metal                                        2.10
Oil & Gas                                   11.96
Pollution Control                            0.64
Real Estate Operations                       1.53
Retail                                       0.79
Soap & Cleaning Preparations                 1.59
Steel                                        0.78
Telecommunications                           8.32
Transport                                    0.51
Utilities                                    7.11
Wire & Cable Products                        0.23
Short-Term Investments                      25.88
                                          -------
TOTAL INVESTMENTS                          113.29%
                                          =======

See notes to financial statements.



John Hancock Funds -- Institutional Series Trust

NOTES TO FINANCIAL STATEMENTS

NOTE A --
ACCOUNTING POLICIES

John Hancock Active Bond Fund ("Active Bond Fund"), John Hancock
Dividend Performers Fund ("Dividend Performers Fund"), John Hancock
Medium Capitalization Growth Fund ("Medium Capitalization Growth Fund"),
John Hancock Small Capitalization Growth Fund ("Small Capitalization
Growth Fund"), John Hancock Small Capitalization Value Fund ("Small
Capitalization Value Fund") and John Hancock International Equity Fund
("International Equity Fund") (each, a "Fund," and collectively, the
"Funds") are separate portfolios of John Hancock Institutional Series
Trust (the "Trust") an open-end management investment company registered
under the Investment Company Act of 1940, organized as a Massachusetts
business trust in 1994. Each Fund's class of shares has equal rights as
to voting, redemption, dividends and liquidation within their respective
Fund. Effective November 15, 2000, the Board of Trustees designated the
existing shares of Small Capitalization Growth Fund as Class I shares
and authorized the issuance of Class A, Class B and Class C shares of
the Fund, which will become available for sale to individual investors
at a later time. The Trustees may authorize the creation of additional
portfolios from time to time to satisfy various investment objectives.

The investment objective of the Active Bond Fund is a high rate of total
return, consistent with prudent investment risk. The investment
objective of the Dividend Performers Fund is long-term growth of
capital, with income as a secondary objective. The investment objective
of the Medium Capitalization Growth Fund is long-term capital
appreciation. The investment objective of the Small Capitalization
Growth Fund is long-term growth of capital. The investment objective of
the Small Capitalization Value Fund is capital appreciation. The
investment objective of the International Equity Fund is long-term
growth of capital.

Significant accounting policies of the Funds are as follows:

VALUATION OF INVESTMENTS Securities in the Funds' 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. All portfolio transactions initially
expressed in terms of foreign currencies have been translated into U.S.
dollars as described in "Foreign Currency Translation" below.

JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, 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, Inc., 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 Funds' custodian bank
receives delivery of the underlying securities for the joint account on
the Funds' behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.

FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00 p.m.,
London time, on the date of any determination of the net asset value of
the Funds. Transactions affecting statement of operations accounts and
net realized gain (loss) on investments are translated at the rates
prevailing at the dates of the transactions.

The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized
gains or losses from investments.

Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the trade
and settlement dates on securities transactions and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Funds' books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in the value of assets and liabilities
other than investments in securities, resulting from changes in the
exchange rate.

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.
Capital gains realized on some foreign securities are subject to foreign
taxes and are accrued, as applicable.

DISCOUNT ON SECURITIES The Funds accrete discount from par value on
securities from either the date of issue or the date of purchase over
the life of the security.

EXPENSES The majority of the expenses are directly identifiable to an
individual Fund. Expenses which are not readily identifiable to a
specific Fund 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 Funds.

ORGANIZATION EXPENSE Expenses incurred in connection with the
organization of the Funds have been capitalized and are being charged to
the Funds' operations ratably over a five-year year that began with the
commencement of investment operations of the Funds.

BANK BORROWINGS The Funds are permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Funds have entered into a syndicated line of credit
agreement with various banks. This agreement enables the Funds to
participate with other Funds managed by the Adviser in an unsecured line
of credit with banks, which permit borrowings up to $500 million,
collectively. Interest is charged to each Fund, based on its borrowing.
In addition, a commitment fee is charged to each Fund based on the
average daily unused portion of the line of credit and is allocated
among the participating Funds.

The following funds had borrowings under the line of credit during the
year ended February 28, 2001:



                               AVERAGE DAILY LOAN BALANCE                        INTEREST EXPENSE
                              DURING THE PERIOD FOR WHICH    WEIGHTED AVERAGE      PAID UNDER THE
FUND                               LOANS WERE OUTSTANDING       INTEREST RATE      LINE OF CREDIT
- ----                          ---------------------------    ----------------      --------------
                                                                          
Dividend Performers Fund                       $2,764,125                6.33%             $3,830

Medium Capitalization
  Growth Fund                                   7,011,000               7.125               1,365

International Equity
  Fund                                          1,256,429                6.05               1,457


The Funds had no outstanding borrowing under the line of credit at
February 28, 2001.

SECURITIES LENDING The Funds may lend their securities to certain
qualified brokers who pay the Funds negotiated lender fees. These fees
are included in interest income. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. As with other extensions of
credit, the Funds may bear the risk of delay of the loaned securities in
recovery or even loss of rights in the collateral, should the borrower
of the securities fail financially. At February 28, 2001, Medium
Capitalization Growth Fund loaned securities having a market value of
$52,725 collateralized by securities in the amount of $53,780 and
International Equity Fund loaned securities having a market value of
$803,545 collateralized by cash in the amount of $844,471. The cash
collateral was invested in a short-term instrument.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Funds (except for
Dividend Performers Fund) may enter into forward foreign currency
exchange contracts as a hedge against the effect of fluctuations in
currency exchange rates. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the
contracts are marked to market daily at the applicable foreign currency
exchange rates. Any resulting unrealized gains and losses are included
in the determination of the Funds' daily net assets. The Funds record
realized gains and losses at the time the forward foreign currency
contracts are closed out or offset by matching contracts. Risks may
arise upon entering these contracts from the potential inability of
counterparties to meet the terms of the contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S.
dollar.

These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the Funds' Statement of Assets and
Liabilities. The Funds may also purchase and sell forward contracts to
facilitate the settlement of foreign currency-denominated portfolio
transactions, under which they intend to take delivery of the foreign
currency. Such contracts normally involve no market risk if they are
offset by the currency amounts of the underlying transactions.

The Funds had the following open forward foreign currency exchange
contracts at February 28, 2001:

                                                                UNREALIZED
                             PRINCIPAL AMOUNT   EXPIRATION    APPRECIATION
CURRENCY                  COVERED BY CONTRACT        MONTH   (DEPRECIATION)
- --------                  -------------------   ----------    ------------
INTERNATIONAL EQUITY FUND
Buys
Canadian Dollar                         5,006     March 01             ($2)

Pound Sterling                         41,357     March 01             107
                                                               -----------
                                                                      $105
                                                               ===========
Sells
Euro                                   14,121     March 01              $6

Pound Sterling                        103,240     March 01            (269)
                                                               -----------
                                                                     ($263)
                                                               ===========

FINANCIAL FUTURES CONTRACTS The Funds may buy and sell financial
futures. Buying futures tends to increase the Funds' exposure to the
underlying instrument. Selling futures tends to decrease the Funds'
exposure to the underlying instrument or hedge other Fund instruments.
At the time the Funds enter into a financial futures contract, they are
required to deposit with their 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 on
which it trades. Subsequent payments to and from the broker, known as
"variation margin," 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
Funds as unrealized gains or losses.

When the contracts are closed, the Funds recognize 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
contracts may not correlate with changes in the value of the underlying
securities. In addition, the Funds could be prevented from opening or
realizing the benefits of closing out futures positions because of
position limits or limits on daily price fluctuation imposed by an
exchange.

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

The Funds had no open financial futures contracts at February 28, 2001.

FEDERAL INCOME TAXES The Funds' policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of their taxable
income, including net realized gain on investments, to their
shareholders. Therefore, no federal income tax provisions are required.

The following Funds had capital loss carryforwards available, to the
extent provided by regulations, to offset future net realized gains. To
the extent such carryforwards are used by each Fund, no capital gain
distribution will be made. Additionally, net capital losses attributed
to security transactions occurring after October 31, 2000 are treated as
arising on the first day of the Funds' next taxable year (March 1,
2001).



                                                                      POST-        POST-OCTOBER
                       CAPITAL LOSS        CAPITAL LOSS    OCTOBER 31, 2000            CURRENCY
                       CARRYFORWARD        CARRYFORWARD        LOSS TREATED        LOSS TREATED
                           EXPIRING            EXPIRING          AS ARISING          AS ARISING
FUND                        2/29/08             2/28/09              3/1/01              3/1/01
- ----                   ------------        ------------    ----------------        -------------
                                                                       
Active Bond                 $49,819             $79,391                  --                  --
Small Capitalization
  Growth                         --             332,423            $924,258                  --
Small Capitalization
  Value                          --                  --              99,819                $303
International Equity             --             636,448             531,279                  --



Expired capital loss carryforwards are reclassified to capital paid-in,
in the year of expiration. Additionally, net capital losses attributable
to security transactions occuring after October 31, 2000 are treated as
arising on the first day of the Funds' next taxable year (March 1,
2001).

DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Funds identify the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign
withholding taxes, capital gains and repatriation taxes imposed by
certain countries in which it invests, which are accrued as applicable.

The Funds record all dividends and distributions to shareholders from
net investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax regulations,
which may differ from generally accepted accounting principles.

USE OF ESTIMATES The preparation of these financial statements, in
accordance with accounting principles generally accepted in the United
States of America, incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Funds. Actual results could differ from these estimates.

NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS

The Funds have an investment management contract with the Adviser. Under
the investment management contract, the Funds pay a monthly management
fee to the Adviser equivalent, on an annual basis, as follows:

FUND                    RATE
- ----                    ----
Active
  Bond Fund             0.50% of average daily net assets up to $1.5 billion
                        0.45% of such assets in excess of $1.5 billion
Dividend
  Performers
  Fund                  0.60% of average daily net assets up to $500 million
                        0.55% of such assets in excess of $500 million
Medium
  Capitalization
  Growth Fund           0.80% of average daily net assets up to $500 million
                        0.75% of such assets in excess of $500 million
Small
  Capitalization
  Growth Fund           0.80% of average daily net assets

Small
  Capitalization
  Value Fund            0.70% of average daily net assets up to $500 million
                        0.65% of such assets in excess of $500 million
International
  Equity Fund           0.90% of average daily net assets up to $500 million
                        0.65% of such assets in excess of $500 million

International Equity Fund and the Adviser had a subadvisory contract
with and Indocam International Investments Services ("IIIS"). The
Adviser terminated the contract with IIIS on December 14, 2000.
Effective December 14, 2000, the Fund and the Adviser entered into a
subadvisory contract with Nicholas-Applegate Capital Management LP, who
is the Funds' sole subadviser as of February 28, 2001. The Fund is not
responsible for payment of these subadvisory fees.

The Adviser has voluntarily agreed to limit each Funds' expenses to the
following: 0.60% of Active Bond Fund's average daily net assets, 0.70%
of Dividend Performers Fund's average daily net assets, 0.90% of Medium
Capitalization Growth Fund's average daily net assets, 0.90% of Small
Capitalization Growth Fund's average daily net assets, 0.80% of Small
Capitalization Value Fund's average daily net assets and 1.00% of
International Equity Fund's average daily net assets, at least until
June 30, 2001. Accordingly, for the year ended February 28, 2001, the
reduction in the Funds' expenses amounted to as follows: $78,188 for the
Active Bond Fund, $48,786 for the Dividend Performers Fund, $70,047 for
the Medium Capitalization Growth Fund, $89,398 for the Small
Capitalization Growth Fund, $66,011 for the Small Capitalization Value
Fund and $248,764 for the International Equity Fund. The Adviser
reserves the right to terminate this limitation in the future.

The Funds have a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly owned subsidiary of the Adviser. For the year
ended February 28, 2001, all sales of shares of beneficial interest were
sold at net asset value. The Funds pay all expenses of printing
prospectuses and other sales literature, all fees and expenses in
connection with qualification as a dealer in various states, and all
other expenses in connection with the sale and offering for sale of the
shares of the Funds which have not been herein specifically allocated to
the Trust.

The Funds have a transfer agent agreement with John Hancock
Signature Services, Inc., an indirect wholly owned subsidiary of John
Hancock Life Insurance Company. Each Fund pays transfer agent fees at an
annual fee accrued daily of 0.05% of its average daily net assets.

The Funds have an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Funds. The compensation for the
year was at an annual rate of less than 0.02% of the average net assets
of each Fund.

Mr. Stephen L. Brown and Ms. Maureen R. Ford are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Funds. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer, for tax purposes,
their receipt of this compensation under the John Hancock Group of Fund
Deferred Compensation Plan. The Funds make investments into other John
Hancock funds, as applicable, to cover their liability for the deferred
compensation. Investments to cover the Fund' deferred compensation
liability are recorded on the Funds' books as an other assets. The
deferred compensation liability and the related other assets are always
equal and are marked to market on a quarterly basis to reflect any
income earned by the investments as well as any unrealized gains or
losses. The Deferred Compensation Plan investments had no impact on the
operations of the Funds.

NOTE C --
INVESTMENT TRANSACTIONS

Purchases and proceeds from sales of securities for the Funds, other
than short-term securities and obligations of the U.S. Government,
during the year ended February 28, 2001, were as follows:

FUND                                       PURCHASES             SALES
- ----                                     -----------       -----------
Active Bond Fund                         $18,912,119       $16,825,288

Dividend Performers Fund                   7,062,302        15,472,435

Medium Capitalization Growth Fund         46,891,025        56,434,459

Small Capitalization Growth Fund          20,136,084        18,467,653

Small Capitalization Value Fund           42,102,790        28,902,221

International Equity Fund                 22,663,380        25,238,745

The cost of investments on February 28, 2001, and gross unrealized
appreciation and depreciation in value of investments owned by the
Funds, for federal income tax purposes, were as follows:



                                                                                 NET UNREALIZED
                                          GROSS UNREALIZED   GROSS UNREALIZED      APPRECIATION
FUND                               COST       APPRECIATION       DEPRECIATION     (DEPRECIATION)
- ----                               ----       ------------       ------------      ------------
                                                                      
Active Bond
  Fund                       $6,643,270           $189,638            $56,168          $133,470

Dividend
  Performers
  Fund                        5,218,322          1,427,610            414,893         1,012,717

Medium
  Capitalization
  Growth Fund                11,642,925          2,127,107          2,071,666            55,441

Small
  Capitalization
  Growth Fund                 5,850,051            532,878            915,367          (382,489)

Small
  Capitalization
  Value Fund                 32,450,457          4,452,002          6,172,686        (1,720,684)

International
  Equity
  Fund                        6,853,689            246,839            462,142          (215,303)


NOTE D --
RECLASSIFICATION OF ACCOUNTS

During the year ended February 28, 2001, reclassifications have been
made in each Fund's capital balances to report these balances on a tax
basis, excluding certain temporary difference, as of February 28, 2001.
Additional adjustments may be needed in subsequent reporting periods.
These reclassifications, which have no impact on the net asset value of
the Funds, are primarily attributable to certain differences in the
treatment of net operating losses, foreign currency gains and losses and
return of capital under federal tax rules versus accounting principles
generally accepted in the United States of America. The calculation of
net investment income (loss) per share in the financial highlights
excludes these adjustments.

                                           UNDISTRIBUTED      ACCUMULATED
                                CAPITAL   NET INVESTMENT      NET REALIZED
FUND                            PAID-IN     INCOME (LOSS)       GAIN (LOSS)
- ----                            -------    -------------       -----------
Active Bond Fund                  ($51)             $326             ($275)

Dividend Performers
  Fund                            (155)              (10)              165

Medium Capitalization
  Growth Fund                 (111,891)          111,736               155

Small Capitalization
  Growth Fund                  (43,524)           43,491                33

Small Capitalization
  Value Fund                      (713)           68,461           (67,748)

International Equity
  Fund                              (6)           26,492           (26,486)

NOTE E --
CHANGE IN ACCOUNTING PRINCIPLE

The Funds have adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies, as revised, effective for fiscal years
beginning after December 15, 2000. As required, the Funds began
amortizing premiums on debt securities effective March 1, 2001. Prior to
this date, the Funds did not amortize premiums on debt securities. The
cumulative effect of this accounting change will have no impact on the
total net assets of the Funds. The impact of this accounting change has
not been determined but will result in a reclassification between the
cost of securities and a corresponding reclassification in net
unrealized appreciation/depreciation, based on securities held as of
February 28, 2001.



INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Trustees of
John Hancock Institutional Series Trust:

We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of John Hancock Institutional
Series Trust (comprising, respectively, John Hancock Active Bond Fund,
John Hancock Dividend Performers Fund, John Hancock Medium
Capitalization Growth Fund, John Hancock Small Capitalization Growth
Fund, John Hancock Small Capitalization Value Fund and John Hancock
International Equity Fund (the "Funds")) as of February 28, 2001, the
related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of February 28, 2001 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of each
of the Funds constituting John Hancock Institutional Series Trust at
February 28, 2001, the results of their operations, the changes in their
net assets, and their financial highlights for the respective stated
periods in conformity with accounting principles generally accepted in
the United States of America.

DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 31, 2001


TAX INFORMATION (UNAUDITED)

For federal income tax purposes, the following information is  furnished
with respect to the taxable distributions of the Funds for the fiscal
year ended February 28, 2001.

The Funds designated the following as long-term capital gain  dividends
during the fiscal year ended February 28, 2001.

Additionally, the following dividend distributions qualify for the
dividends received deduction available to corporations.

                                                   LONG-TERM   DIVIDENDS
                                               CAPITAL GAINS    RECEIVED
                                                  DESIGNATED   DEDUCTION
                                            ----------------  ----------
Dividend Performers Fund                          $2,011,405         100%
Medium Capitalization Growth Fund                  1,987,361          --
Small Capitalization Growth Fund                     240,520          --
Small Capitalization Value Fund                    2,145,322        1.50
International Equity Fund                            218,244          --



NOTES

[This page intentionally left blank.]



[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]

John Hancock Funds, Inc.
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603

1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com

This report is for the information of shareholders of the John Hancock
Institutional Series Trust. It is not authorized for distribution to
prospective investors unless it is preceded or accompanied by the
current prospectus, which details charges, investment objectives and
operating policies.

[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]

KB00A   2/01
        4/01


The latest report from your
Fund's management team

SEMIANNUAL REPORT

Institutional
Series Trust

Active Bond Fund

Dividend Performers Fund

Medium Capitalization Growth Fund

Focused Small Cap Growth Fund
(formerly Small Capitalization Growth Fund)

Small Cap Equity Fund
(formerly Small Capitalization Value Fund)

International Equity Fund

AUGUST 31, 2001

[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]



Table of Contents
                                                               Page

1) CEO Corner                                                     3

2) Portfolio Manager Commentary

   This commentary reflects the views of the portfolio
   management teams through the end of the Fund's period
   discussed in this report. Of course, the teams' views
   are subject to change as market and other conditions warrant.

   John Hancock Active Bond Fund                                  4
   John Hancock Dividend Performers Fund                          7
   John Hancock Medium Capitalization Growth Fund                10
   John Hancock Focused Small Cap Growth Fund                    13
   John Hancock Small Cap Equity Fund                            16
   John Hancock International Equity Fund                        19

3) Financial Statements                                          22

4) Notes to Financial Statements                                 61


TRUSTEES

James F. Carlin*
William H. Cunningham
John M. DeCiccio
Ronald R. Dion
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan*
* Members of Audit Committee

OFFICERS

Maureen R. Ford
Chairman, President and
Chief Executive Officer

William L. Braman
Executive Vice President
and Chief Investment Officer

Richard A. Brown
Senior Vice President and
Chief Financial Officer

Susan S. Newton
Senior Vice President and Secretary

William H. King
Vice President and Treasurer

Thomas H. Connors
Vice President and Compliance Officer

TRANSFER AGENT

John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000

INVESTMENT ADVISER

John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603

SUB-INVESTMENT ADVISER

International Equity Fund
Nicholas-Applegate Capital Management
600 West Broadway
San Diego, CA 92101

PRINCIPAL DISTRIBUTOR

John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603

LEGAL COUNSEL

Hale and Dorr LLP
60 State Street
Boston, MA 02109



[A 1" x 1" photo of Maureen R. Ford, Chairman and Chief Executive
Officer, flush right next to second paragraph.]

CEO CORNER

DEAR FELLOW SHAREHOLDERS,

The U.S. stock market has had a very difficult time so far in 2001, as the
economy has slowed to a near standstill and the parade of corporate
earnings disappointments has continued. The Federal Reserve aggressively
began to attack the economic slowdown with interest-rate cuts totaling
three percentage points between January and the end of August.

The Standard & Poor's 500 Index, a leading benchmark of large-cap stocks,
lost 13.40% year-to-date through August. Bonds have outperformed stocks
overall, producing mostly positive results, as they were the beneficiaries
of the rate cuts and investors' search for safety. As we entered
September, the stock market remained in turmoil, as investors were trying
to get a clearer sense of the timetable for economic and corporate
recovery.

Then on September 11, 2001, a terrorist attack of unspeakable horror was
launched on the United States. We send our condolences to the victims'
families and friends.

Apart from the immediate impact of devastating human loss, the events have
understandably raised concerns about the broader repercussions on our
country's economy and financial markets. We have great confidence in the
United States economy, its financial systems and, above all, its people.
Throughout history, they have withstood a range of challenges -- from the
Great Depression, to wars, natural disasters and global financial turmoil
- -- and have emerged stronger thereafter. We encourage shareholders to keep
this longer-term perspective, difficult as it may seem, when making
investment decisions in the coming days.

Today, we are seeing the full resources of industry and the U.S.
government working to bolster and sustain our systems. Although we expect
market volatility in the near term, what remains certain is that the U.S.
economic and financial systems are working and resilient. "The American
economy is open for business," said Deputy Treasury Secretary Ken Dam the
day after the attack. We never had any doubts.

Sincerely,

/S/ MAUREEN R. FORD

MAUREEN R. FORD, CHAIRMAN AND CHIEF EXECUTIVE OFFICER



BY JAMES K. HO, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
BENJAMIN A. MATTHEWS, PORTFOLIO MANAGER

John Hancock
Active Bond Fund

Slowing economy was a positive influence
on fixed-income market

While stocks suffered from the lethargic economy and corporate earnings
retrenchment during the past six months, the broad fixed-income market
performed in historic fashion. The worse the economic news became and the
more aggressive the Federal Reserve Board was in cutting short-term
interest rates, the more yields fell and bond prices rose. All domestic
fixed-income sectors posted gains, with investment-grade and high-yield
corporate debt leading the pack.

"All domestic
 fixed-income
 sectors
 posted
 gains ..."

Corporate bonds enjoyed strong demand from domestic and foreign investors,
as the difference in their yields relative to U.S. government securities
with comparable maturities remained attractive. However, the generally
hospitable environment thinly veiled the corporate sector's minefields. A
number of issuers in the areas of telecommunications equipment and
wireless services, such as competitive local exchange carriers,
experienced quite a bit of distress. In-depth credit research and constant
monitoring of holdings enabled us to move out of problem issuers early on
or avoid them entirely.

[A 2" x 2 1/2" photo at bottom middle of page of John Hancock Active
Bond Fund. Caption below reads "Fund management team leader Jim Ho."]

Performance review

For the six months ended August 31, 2001, John Hancock Active Bond Fund
produced a total return of 4.56%. This compares with the 4.20% return of
the average corporate debt A-rated fund, according to Lipper, Inc.
Historical performance information can be found on page six.

Increased weighting in
corporate bonds

Since midyear, we continued our strategy of bolstering the Fund's stake in
corporate bonds when prices dipped, as they did in early June. We focused
primarily on investment-grade issues but also targeted high-yield bonds on
a selective basis. This strategy proved beneficial to the Fund as
investors began to take note of the corporate sector's attractive risk
premium and the Fed's ongoing commitment to cut interest rates as much as
is needed to stimulate economic growth. When risk premiums are attractive,
it means that the higher relative yields and total return potential
currently offered by a particular fixed-income sector tend to outweigh the
possible risks.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended August
31, 2001." The chart is scaled in increments of 1% with 0% at the bottom
and 5% at the top. The first bar represents the 4.56% total return for
John Hancock Active Bond Fund. The second bar represents the 4.20% total
return for Average corporate debt A-rated fund. The third bar represents
the 4.60% total return for Lehman Brothers Government/Corporate Bond
Index. A note below the chart reads "The total return for John Hancock
Active Bond Fund is at net asset value with all distributions
reinvested. The average corporate debt A-rated fund is tracked by
Lipper, Inc. See the following page for historical performance
information."]

In both the investment-grade and high-yield areas, we chose holdings on a
bond-by-bond basis, letting intensive research be our guide. Although a
few high-profile telecommunications companies such as Lucent, Motorola,
and Nortel Networks experienced financial deterioration (and whose bonds
we moved out of earlier in the period), we were not deterred from
investment-grade opportunities in the telecommunications sector. In fact,
we owned a number of domestic and foreign telecom issues that performed
well. These included Verizon, BellSouth, VoiceStream Wireless, Deutsche
Telekom and France Telecom. We did, however, exit a number of high-yield
telecom names that have since become problem credits, such as Nextel,
Level 3, Global Crossing and NEXTLINK.

We also avoided an esoteric fixed-income subsector called collateralized
debt obligations, believing they exhibit much greater risk than their
potential reward. These types of securities represent an underlying pool
of debt from a variety of issuers with varying credit quality and offer
high relative yields. Over the period, they proved quite volatile, and
many investors suffered losses.

"As the
 period
 progressed,
 we emphasized
 more
 cyclically
 oriented
 issuers..."

Cyclically oriented issues gain exposure

As the period progressed, we emphasized more cyclically oriented issuers
or "old economy" names, particularly higher-yielding, lower-quality issues
that stand to perform well once the economy gathers steam. We increased
the Fund's exposure to automotive, retail, paper, defense and railroad
holdings, purchasing or adding to such issues as Ford Motor, Delphi
Automotive Systems, Sears Roebuck, Georgia-Pacific, Lockheed Martin and
Burlington Northern.

Outlook

As we went to publication with this report, the tragic terrorist attacks
on the World Trade Center and Pentagon had just rocked the nation. Please
be assured that we will closely monitor the impact of these events on the
financial markets and will act to adjust our investment posture where we
see fit, continuing, of course, to focus on fundamentals and to apply
in-depth analysis. We are also fully confident that despite any short-term
impact, the resilience of the U.S. people and the economy will outlast the
shock of these events.



A LOOK AT PERFORMANCE

For the period ended August 31, 2001

                                                               SINCE
                                SIX       ONE       FIVE   INCEPTION
                             MONTHS      YEAR      YEARS    (3/30/95)
                            -------   -------    -------     -------
Cumulative Total Returns      4.56%    12.09%     50.49%      63.31%
Average Annual Total Returns     --    12.09%      8.52%       7.94%

YIELD

As of August 31, 2001
                                                          SEC 30-DAY
                                                               YIELD
                                                             -------
John Hancock Active Bond Fund                                  5.33%


Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. The performance table above and the chart on the right do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Keep in mind that the
total return and share price of the Fund's investments will fluctuate. As
a result, your Fund's shares may be worth more or less than their original
cost, depending on when you sell them. Please read your prospectus
carefully before you invest or send money.

Note to Performance


The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future. See the
prospectus for details.


WHAT HAPPENED TO
A $10,000 INVESTMENT...

The chart below shows how much a $10,000 investment in John Hancock
Active Bond Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Lehman Brothers Government/Credit Bond
Index -- an unmanaged index that measures the performance of U.S.
government bonds, U.S. corporate bonds and Yankee bonds. It is not
possible to invest in an index. Past performance is no guarantee of
future results.

[Line chart with the heading John Hancock Active Bond Fund, representing
the growth of a hypothetical $10,000 investment over the life of the
fund. Within the chart are two lines. The first line represents the
Lehman Brothers Government/Corporate Bond Index and is equal to $16,516
as of August 31, 2001. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Active Bond
Fund on March 30, 1995 and is equal to $16,333 as of August 31, 2001.]



BY JOHN F. SNYDER, III, PORTFOLIO MANAGEMENT TEAM LEADER, AND
PETER M. SCHOFIELD, CFA, PORTFOLIO MANAGER

John Hancock
Dividend Performers Fund

Slowing economy and corporate earnings
disappointments send market down

The stock market's malaise extended into 2001. Under the pressure of
disappointing corporate earnings and gloomy economic news, stocks
continued their treacherous decline. Several short-lived market rallies
sparked investors' hopes that stock prices might have bottomed out. Those
hopes, however, were repeatedly dashed as the dismal corporate results and
a continued soft economy sent the market spiraling downward again after
each rally. The period ended with doubt pervading the market and gun-shy
investors taking a cautious wait-and-see attitude. The result was negative
market returns, with the Standard & Poor's 500 Index returning -7.97% in
the six months ended August 30, 2001.

[A 2" x 2 1/2" photo at bottom middle of page of John Hancock Dividend
Performers Fund. Caption below reads "Fund management team leader John
Snyder."]

Performance scorecard

In the same period, John Hancock Dividend Performers Fund posted a total
return of -6.65% at net asset value. By comparison, the average large-cap
core fund returned -9.18% for the same period, according to Lipper Inc.
Historical performance can be found on page nine.

In this difficult environment, we were reminded of the importance of stock
selectivity. For example, thanks to its strong product cycle and
accelerating earnings, Baxter International turned in a strong
performance, despite the declining health-care sector. In the
communications sector, Verizon held up well, while long-distance carriers
AT&T and MCI/WorldCom suffered from intense price competition.

"In this
 difficult
 environment,
 we were
 reminded
 of the
 importance
 of stock
 selectivity."

Not all of our investments performed so strongly. With technology stocks
coming under pressure during the period, several of our tech holdings --
such as EMC and Compaq -- turned in disappointing returns. Drugstore chain
CVS was also a disappointment, dropping on the news of weakening
fundamentals.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended August
31, 2001." The chart is scaled in increments of 2% with -10% at the
bottom and 0% at the top. The first bar represents the -6.65% total
return for John Hancock Dividend Performers Fund. The second bar
represents the -9.18% total return for Average large-cap value fund. The
third bar represents the -7.97% total return for S&P 500 Index. A note
below the chart reads "The total return for John Hancock Dividend
Performers Fund is at net asset value with all distributions reinvested.
The average large-cap value fund is tracked by Lipper, Inc. See the
following page for historical performance information."]

"...a change
 that
 incorporates
 a broader
 definition of
 'dividend
 performers'..."

Enhancing investment flexibility

The Board of Trustees recently approved a change that we believe will
enhance the Fund's investment flexibility. Prior to July 2, 2001, Dividend
Performers Fund invested 65% of its stocks in "dividend performers,"
defined as companies that have increased their dividends for at least ten
consecutive years. The Board has approved a change that incorporates a
broader definition of "dividend performers" and increases the minimum
percentage of the Fund's stock investments in such companies by 15%. As of
July 2, 2001, the Fund will keep at least 80% of its common stock
investments in "dividend performers" -- companies that have typically
increased their dividend payments over time, or which the managers believe
demonstrate the potential for above-average stability of earnings or
dividends growth.

The reason for the change is simple. Today, many companies are putting
their cash flow back into their business rather than paying dividends.
Fewer than 25% of companies in the S&P 500 Index meet the 10-year rising
dividend test. This restriction has limited our flexibility to compete
effectively. What's more, regulatory changes have increased the portion of
the portfolio that has to meet the dividend performer test. Without a
change in the definition of "dividend performer," this new mandate would
have further limited the Fund's investment potential.

New opportunities

Our focus on stock selectivity has led us to make several additions to the
portfolio. We've beefed up our position in basic materials stocks, such as
Rohm & Haas and Dow Chemical, believing they will perform strongly when
the economy recovers. We've also purchased cosmetic giant Avon. With a new
CEO at the helm, Avon is expanding beyond its traditional catalogue
business into new retail channels.

A look ahead

As we were going to publication with this report, the tragic terrorist
attack on the World Trade Center and Pentagon had just rocked the nation.
While it's too early to understand the true impact this event will have on
the world financial markets, in the near term we are certain to see market
volatility. We will keep a close eye on the situation and adjust our
investment strategy accordingly. As always, we will maintain our steadfast
focus on high-quality stocks with strong growth potential and reasonable
valuations.


A LOOK AT PERFORMANCE

For the period ended August 31, 2001

                                                               SINCE
                                 SIX       ONE       FIVE  INCEPTION
                              MONTHS      YEAR      YEARS   (3/30/95)
                             -------   -------    -------    -------
Cumulative Total Returns      (6.65%)  (16.99%)    70.71%    118.11%
Average Annual Total Returns      --   (16.99%)    11.29%     12.91%

Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. The performance table above and the chart on the right do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Keep in mind that the
total return and share price of the Fund's investments will fluctuate. As
a result, your Fund's shares may be worth more or less than their original
cost, depending on when you sell them. Please read your prospectus
carefully before you invest or send money.

Note to Performance


The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future. See the
prospectus for details.


WHAT HAPPENED TO
A $10,000 INVESTMENT...

The chart below shows how much a $10,000 investment in John Hancock
Dividend Performers Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Index -- an unmanaged
index that includes 500 widely traded common stocks and is often used as a
measure of stock market performance. It is not possible to invest in an
index. Past performance is no guarantee of future results.

[Line chart with the heading John Hancock Dividend Performers Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Index and is equal to $25,181 as of
August 31, 2001. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Dividend
Performers Fund on March 30, 1995 and is equal to $21,811 as of August
31, 2001.]



BY PAUL J. BERLINGUET AND TIMOTHY N. MANNING
FOR THE PORTFOLIO MANAGEMENT TEAM

John Hancock Medium
Capitalization Growth Fund

Mid-cap growth stocks tumble

Recently, Paul Berlinguet assumed the role of portfolio management team
leader for John Hancock Medium Capitalization Growth Fund. Prior to
joining John Hancock Funds, Mr. Berlinguet spent more than 11 years as a
senior vice president for Baring Asset Management. He has been in the
investment business since 1986.

"...the
 economy
 remained
 weak and
 many
 companies
 missed
 earnings..."

The stock market continued to decline in 2001, despite a brief relief
rally in the second quarter. Stock prices fell early in the year, led by
technology and telecommunications names, which looked overly expensive
relative to deteriorating business fundamentals. In April, the market
recovered, but as the economy remained weak and many companies missed
earnings, the market soon resumed its slide, with the Standard & Poor's
500 Index returning -7.97% for the six months ended August 31, 2001. Over
the same period, the Russell Midcap Growth Index returned -13.89% due to
its heavier concentrations in technology, telecom and biotechnology names.

Disappointing performance

John Hancock Medium Capitalization Growth Fund maintained its long-term
focus on mid-cap companies with strong earnings growth prospects. The Fund
had an average stake in technology -- about one-third of assets -- but was
dogged by weak stock performance. Our higher-than-average investment in
telecom also hurt, leaving the Fund with a -21.64% return at net asset
value for the six months ended August 31, 2001. By comparison, the average
multi-cap growth fund returned -16.91%, according to Lipper, Inc.
Historical performance information can be found on page 12.

[A 2" x 2 1/2" photo at bottom middle of page of John Hancock Medium
Capitalization Growth Fund. Caption below reads "Fund management team
leader Paul Berlinguet."]

Declines in technology

Among the biggest drags on performance were McLeodUSA and XO
Communications, new telecom entrants that fell sharply as the sector moved
out of favor with investors. Several biotech-related stocks also cost the
Fund dearly, including Applera Corp.-Applied Biosystems Group, which
supplies analytical equipment to biotech companies, and Immunex, a
biopharmaceutical company that specializes in autoimmune disorders. In the
technology area, Mercury Interactive, a software testing company, and
Comverse Technology, a company that develops software for telecom
companies, suffered as tech spending slowed. We cut our losses and sold
all these names.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended August
31, 2001." The chart is scaled in increments of 5% with -25% at the
bottom and 0% at the top. The first bar represents the -21.64% total
return for John Hancock Medium Capitalization Growth Fund. The second
bar represents the -16.91% total return for Average mid-cap growth fund.
The third bar represents the -13.89% total return for Russell Midcap
Growth Index. A note below the chart reads "The total return for John
Hancock Medium Capitalization Growth Fund is at net asset value with all
distributions reinvested. The average mid-cap growth fund is tracked by
Lipper, Inc. See the following page for historical performance
information."]

Gains in finance and health care

By contrast, finance investments such as USA Education, a student loan
company; Concord EFS, a transaction processor; and Affiliated Managers, an
asset management company, all posted strong returns thanks to their steady
earnings growth. In the health-care area, Teva Pharmaceutical Industries,
which has a strong product pipeline, and King Pharmaceuticals, which has a
new cardiovascular drug, also did quite well. We took profits in the
latter. Retailers like Abercrombie & Fitch and BJ's Wholesale Club (which
we sold) also rallied nicely as consumer spending held steady.

Focus on predictability

In the spring, we stepped up the Fund's emphasis on companies that have
predictable or visible earnings growth and currently enjoy favorable
pricing trends. We reduced our total number of investments, selling more
volatile names in the telecom, biotech and software areas. Our disciplined
investment approach kept us focused on stocks like Dobson Communications,
a wireless company with long-term contracts and little direct competition,
as well as health-care companies like Wellpoint Health Networks, Universal
Health Services and Express Scripts that have predictable earnings growth.

"...we
 stepped up
 the Fund's
 emphasis on
 companies
 that have
 predictable
 or visible
 earnings
 growth..."

Buying opportunities

We added to our media investments, buying names like USA Networks that
should benefit from having a highly diversified portfolio. We also
increased our stake in semiconductor and semiconductor capital equipment
names, anticipating that corporations will soon be in the midst of a
personal computer upgrade cycle and chip makers will be upgrading to the
newest manufacturing technology.

A look ahead

Near term, our main concern for the market is whether the terrorist acts
that occurred shortly after the period ended could further delay a
recovery by derailing consumer and business confidence. We believe,
however, that the market outlook will improve over time, as the Federal
Reserve's interest-rate cuts and additional government economic stimulus
will lead eventually to economic recovery.



A LOOK AT PERFORMANCE

For the period ended August 31, 2001

                                                              SINCE
                                 SIX       ONE     FIVE   INCEPTION
                              MONTHS      YEAR    YEARS    (4/11/95)
                             -------   -------  -------     -------
Cumulative Total Returns     (21.64%)  (49.98%)  15.98%      59.77%
Average Annual Total Returns      --   (49.98%)   3.01%       7.61%

Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. The performance table above and the chart on the right do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Keep in mind that the
total return and share price of the Fund's investments will fluctuate. As
a result, your Fund's shares may be worth more or less than their original
cost, depending on when you sell them. Please read your prospectus
carefully before you invest or send money.

Note to Performance

The Fund's performance results reflect any applicable expense
reductions, without which the expenses would increase and results
would have been less favorable. These reductions can be terminated
in the future. See the prospectus for details.


WHAT HAPPENED TO
A $10,000 INVESTMENT...

The chart below shows how much a $10,000 investment in John Hancock Medium
Capitalization Growth Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Russell Midcap Growth Index -- an unmanaged
index that contains those Russell Midcap securities with a
greater-than-average growth orientation. It is not possible to invest in
an index. Past performance is no guarantee of future results.

[Line chart with the heading John Hancock Medium Capitalization Growth
Fund, representing the growth of a hypothetical $10,000 investment over
the life of the fund. Within the chart are two lines. The first line
represents the Russell Midcap Growth Index and is equal to $20,620 as of
August 31, 2001. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Medium
Capitalization Growth Fund on April 11, 1995 and is equal to $15,977 as
of August 31, 2001.]



BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGEMENT TEAM LEADER,
AND ANURAG PANDIT, CFA, PORTFOLIO MANAGER

John Hancock
Focused Small Cap
Growth Fund

Slowing economy and waning profits sink the stock market

See the prospectus for the the risks of investing in small-cap stocks.

On July 1, 2001, the John Hancock Small Capitalization Growth Fund was
renamed John Hancock Focused Small Cap Growth Fund to more accurately
reflect its concentrated management style.

Over the last six months, the stock market was hit by a continuing stream
of bad economic and corporate earnings news. With the exception of a rally
in growth stocks in April on the hopes that seven interest-rate cuts by
the Federal Reserve would reboot the economy by fall, stocks have mostly
headed south. Investors became increasingly discouraged about the sharp
drop in business spending -- particularly on technology -- as well as by
signs that the world's major economies may be shrinking at once, and a
growing number of layoffs that could eventually undermine consumer
confidence. Less expensive value stocks continued to hold up better than
growth stocks, and small stocks outperformed large. Overall, the major
market indexes ended the period in negative territory, and investor
sentiment remained decidedly wary.

"The recent
 decline in
 commodities
 prices
 caused a
 sharp selloff
 in
 energy
 stocks..."

[A 2" x 2 1/2" photo at bottom middle of page of John Hancock Focused
Small Cap Growth Fund. Caption below reads "Fund management team leader
Bernice Behar."]

Fund performance

For the six months ended August 31, 2001, John Hancock Focused Small Cap
Growth Fund posted a total return of -11.73% at net asset value. That
compared with the -5.10% return of the average small-cap growth fund,
according to Lipper, Inc., and the -8.03% of the Fund's benchmark index,
the Russell 2000 Growth Index. Historical performance information can be
found on page 15.

Energy, IT consultants, telecom hurt fund

Our relative underperformance stemmed from our overweightings in energy
and information technology (IT) consulting companies. The recent decline
in commodities prices caused a sharp sell-off in energy stocks, as
earnings estimates for next year got revised downward. As a result, we
have pared our energy stake in this less favorable environment, although
we continue to believe the longer-term outlook for the energy industry is
good, given the tight supply picture. Our stake in IT companies hurt us as
demand for IT services slowed dramatically, even for companies with strong
franchises and niche markets like Forrester Research and Management
Network Group.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended August
31, 2001." The chart is scaled in increments of 2% with -12% at the
bottom and 0% at the top. The first bar represents the -11.73% total
return for John Hancock Focused Small Cap Growth Fund. The second bar
represents the -5.10% total return for Average small-cap growth fund.
The third bar represents the -8.03% total return for Russell 2000 Growth
Index. A note below the chart reads "The total return for John Hancock
Focused Small Cap Growth Fund is at net asset value with all
distributions reinvested. The average small-cap growth fund is tracked
by Lipper, Inc. See the following page for historical performance
information."]

"More
 recently, we
 have begun
 to bring
 our tech
 weight back
 up to a
 market
 average..."

Our telecommunications services companies also fell hard as the demand for
all kinds of products and services ground to a halt. The telecom meltdown
hurt Fund holdings SBA Communications, Winstar Communications, CTC
Communications Group and Dobson Communications. We cut our losses and sold
all but SBA, which provides communications towers to wireless providers.

Defensive names help, tech boosted

Our investments in more defensive companies with relative earnings
stability served us well, although their gains were not enough to overcome
other losses. In particular, health-care service companies were boosted by
their perception as steady growers and by rising drug prices. Accredo
Health, a specialty pharmaceutical distributor, was one of our better
performers. We also did well with our defensive position in some
consumer-oriented companies such as Whole Foods Market, which owns the
chain of Bread & Circus gourmet stores.

At the beginning of the period, we had scaled back our technology
weighting to below the market average, given the lack of earnings
visibility or growth prospects. More recently, we have begun to bring our
tech weight back up to a market average, because we believe we need to be
positioned to take advantage of a potential rebound in fundamentals next
year.

Outlook

As we went to publication with this report, the tragic terrorist attacks
on the World Trade Center and Pentagon had just rocked the nation. Please
be assured that we will closely monitor the impact of these events on the
financial markets and will act to adjust our investment posture where we
see fit, continuing, of course, to focus on fundamentals and to apply
in-depth security analysis. We are also fully confident that despite any
short-term impact, the resilience of the U.S. people and the economy will
outlast the shock of these events.

See the prospectus for a discussion of the risks of investing in
small-cap stocks.



A LOOK AT PERFORMANCE

For the period ended August 31, 2001

                                                                        SINCE
                                   SIX          ONE         FIVE    INCEPTION
                                MONTHS         YEAR        YEARS     (5/2/96)
                               -------      -------      -------      -------
Cumulative Total Returns       (11.73%)     (50.87%)      36.65%       50.15%
Average Annual Total Returns        --      (50.87%)       6.44%        7.92%

Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. The performance table above and the chart on the right do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Keep in mind that the
total return and share price of the Fund's investments will fluctuate. As
a result, your Fund's shares may be worth more or less than their original
cost, depending on when you sell them. Please read your prospectus
carefully before you invest or send money.

Note to Performance

The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future. See the
prospectus for details.


WHAT HAPPENED TO
A $10,000 INVESTMENT...

The chart below shows how much a $10,000 investment in John Hancock
Focused Small Cap Growth Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Russell 2000 Index and the Russell 2000
Growth Index. The Russell 2000 Index is an unmanaged small-cap index
composed of 2,000 U.S. stocks. The Russell 2000 Growth Index is an
unmanaged index containing Russell 2000 Index stocks with a
greater-than-average growth orientation. It is not possible to invest in
an index. Past performance is no guarantee of future results.

[Line chart with the heading John Hancock Focused Small Cap Growth Fund,
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
John Hancock Focused Small Cap Growth Fund on May 2, 1996 and is equal to
$15,015 as of August 31, 2001. The second line represents the Russell
2000 Index and is equal to $14,430 as of August 31, 2001. The third line
represents the Russell 2000 Growth Index and is equal to $10,639 as of
August 31, 2001.]



BY TIMOTHY E. QUINLISK, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
R. SCOTT MAYO, CFA, AND JAMES S. YU, CFA, PORTFOLIO MANAGERS

John Hancock
Small Cap Equity Fund

Small-cap stocks shine in market decline

On September 30, 2001, John Hancock Small Capitalization Value Fund was
renamed John Hancock Small Cap Equity Fund to better reflect the Fund's
investment strategy.

Small-cap stocks held up well amid the stock market's continued
volatility. The market rallied in the spring on the belief that both the
Federal Reserve's numerous interest-rate cuts and strong consumer spending
would help the economy stabilize and then turn around. But further signs
of deterioration, followed by second-quarter earnings disappointments,
soon triggered sell-offs in the market. Small-cap stocks, however, fared
better than most other sectors, benefiting from access to cheaper capital
and a lack of overseas exposure. The Russell 2000 Index returned -0.51%
for the six months ended August 31, 2001, compared with the -7.87% return
for the broader Standard & Poor's 500 Index.

"We
 maintained
 above-
 average
 stakes in
 technology
 and
 telecom..."

Performance review

John Hancock Small Cap Equity Fund returned 2.31% at net asset value for
the six months ended August 31, 2001. Our results were slightly behind the
average small-cap core fund, which returned 3.71% over the same period,
according to Lipper, Inc. The Fund benefited from its strategy of buying
great businesses when their stocks are selling at cheap prices. Strong
stock selection and an above-average stake in technology, solid gains in
health care and a below-average investment in the weak energy sector also
helped performance. The Fund lost some ground from its underweighting in
the financial sector, as well as poor performance among selected media and
food stocks.

[A 2" x 2 1/2" photo at bottom middle of page of John Hancock Small Cap
Equity Fund. Caption below reads "Fund management team leader Tim
Quinlisk."]

Strong stock selection

Our technology related investments did quite well, especially Alpha
Industries, a wireless semiconductor company; MKS Instruments, a
semiconductor capital equipment company; and Three-Five Systems, a company
that makes liquid crystal displays for wireless phones. All moved up in
anticipation of improved business prospects related to the holiday selling
season and economic recovery. Several other stocks posted strong gains
from turnarounds, including Casella Waste Systems, a waste management
company; Covance, a pharmaceutical contract research organization;
ProQuest (formerly Bell & Howell), an information services firm; and
Pathmark Stores, a supermarket chain emerging from bankruptcy. Other
standouts included NOVA, a transactions processing company whose value was
realized through an acquisition by U.S. Bancorp, and XM Satellite Radio
Holdings, a satellite radio company that began rolling out its new
service.

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended August
31, 2001." The chart is scaled in increments of 1% with -1% at the
bottom and 4% at the top. The first bar represents the 2.31% total
return for John Hancock Small Cap Equity Fund. The second bar represents
the 3.71% total return for Average small-cap core fund. The third bar
represents the -0.51% total return for Russell 2000 Index. A note below
the chart reads "The total return for John Hancock Small Cap Equity Fund
is at net asset value with all distributions reinvested. The average
small-cap core fund is tracked by Lipper, Inc. See the following page
for historical performance information."]

Near-term weakness

Unfortunately, some of our worst performers were also large investments.
Pegasus Communications, a direct television company, suffered near term
from changing its business model to focus on cash flow and profitability
over subscriber growth. Hain Celestial Group struggled with integration
issues surrounding its recent merger. Vicor, a power supply company, and
Alpharma, a generic drug company, saw more modest stock price declines
related to the difficult market environment. In the leisure area,
disappointments included Six Flags, an amusement park chain hurt by rainy
weather this past summer, and Penton Media, a trade publication company
whose stock we sold. Selected software stocks like Aspen Technology and
Parametric Technology also suffered sharp drops as technology spending
slowed.

Opportunities ahead

We maintained above-average stakes in technology and telecom, which are
not traditional value sectors, because that was where we found companies
with great businesses whose stock prices were selling at a discount. We
also boosted our media stake, adding stocks like Cumulus Media, a radio
company that should benefit as the economy improves and companies increase
their spending on advertising. We began rebuilding our investment in
energy with companies like Chesapeake Energy whose stock price had fallen
as commodity prices weakened.

"Near term
 we expect
 further
 market
 volatility..."

Looking forward

Near term we expect further market volatility, as the terrorist acts that
occurred shortly after the end of the period could slow consumer spending
and delay a recovery. Further out, we expect small-cap stocks to benefit
from lower interest rates, which should provide them with access to
cheaper capital and eventually trigger an economic recovery. As always, we
plan to stick with our disciplined strategy, taking advantage of market
volatility to buy great companies at bargain prices.

See the prospectus for a discussion of the risks of investing in small-cap
stocks.



A LOOK AT PERFORMANCE

For the period ended August 31, 2001

                                                                        SINCE
                                   SIX          ONE         FIVE    INCEPTION
                                MONTHS         YEAR        YEARS     (4/19/95)
                               -------      -------      -------      -------
Cumulative Total Returns         2.31%      (11.49%)     189.87%      227.21%
Average Annual Total Returns        --      (11.49%)      23.72%       20.46%

Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. The performance table above and the chart on the right do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Keep in mind that the
total return and share price of the Fund's investments will fluctuate. As
a result, your Fund's shares may be worth more or less than their original
cost, depending on when you sell them. Please read your prospectus
carefully before you invest or send money.

Note to Performance

The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future. See the
prospectus for details.


WHAT HAPPENED TO
A $10,000 INVESTMENT...

The chart below shows how much a $10,000 investment in the John Hancock
Small Cap Equity Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Russell 2000 Index -- an unmanaged,
small-cap index composed of 2,000 U.S stocks. It is not possible to
invest in an index. Past performance is no guarantee of future results.

[Line chart with the heading John Hancock Small Cap Equity Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the value of the hypothetical $10,000 investment made in the
John Hancock Small Cap Equity Fund on April 19, 1995 and is equal to
$32,721 as of August 31, 2001. The second line represents the Russell
2000 Index and is equal to $19,617 as of August 31, 2001.]



BY LORETTA MORRIS AND RANDY KAHN
FOR THE PORTFOLIO MANAGEMENT TEAM

John Hancock
International Equity Fund

International stocks decline amid slowing global growth

During the six months ended August 31, 2001, international stock markets
continued to reflect weakness in economies worldwide. Slowing growth in
non-U.S. developed nations, coupled with the ongoing unwillingness of the
European Central Bank (ECB) to reduce interest rates and ongoing
uncertainty in Japan, sent international stocks lower. For the reporting
period, non-U.S. stocks -- as represented by the MSCI All-Country World
Free ex-U.S. Index -- shed 11.51% of their value.

The central theme for most of 2001 has been the fall from grace of growth
stocks, as cautious investors have instead turned to value-oriented stocks
or alternative asset classes. Throughout most of the Eurozone nations,
consumer spending declined, exports fell and confidence waned. Despite
such a bleak outlook, the ECB remained focused on its mission to fight
higher-than-mandated levels of inflation. While central bankers were
aggressively cutting rates in other parts of the world -- including seven
rate cuts totaling 3.0% in the U.S. -- the ECB held firm, lowering rates
only twice during the period.

Meanwhile, lingering structural problems with the Japanese economy weighed
heavily on investor sentiment. Investors were initially optimistic
following the election of popular Prime Minister Junichiro Koizumi.
However, as the magnitude of Japan's problems -- growing unemployment, an
aging populace that will require rising social spending, the overhang of
bad debts and a weakening manufacturing sector -- became clear, its
benchmark Nikkei 225 Index sank sharply in June, July and August to touch
lows not seen since the early 1980s. Investors were further dismayed as
Koizumi began to backpedal on some of his key campaign promises as the
economic and political costs of their implementation began to emerge.

"The central
 theme for
 most of 2001
 has been the
 fall from
 grace of
 growth
 stocks..."

Fund performance

Amid such challenging market conditions, John Hancock International Equity
Fund lost ground, returning -15.19% at net asset value. By comparison, the
average international fund returned -12.69%, according to Lipper, Inc.
See page 21 for historical performance information.

The Fund's underperformance for the period stemmed in large part from poor
stock selection in Japan and the United Kingdom. Despite a fundamentally
sound economic picture and stimulus from the Bank of England's surprise
rate cut in early August, U.K. stocks declined during the period. As for
Japan, the Fund had significantly decreased its exposure to that country
in light of its economic woes, but the Fund's holdings declined more than
the stocks in the benchmark as the growth segment continued to come under
tremendous pressure. During the reporting period, only holdings in
Singapore, Ireland and South Africa registered positive gains.

"...underperformance
 ...stemmed
 in large
 part from
 poor stock
 selection in
 Japan and
 the United
 Kingdom."

[Bar chart at top of left-hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended August
31, 2001." The chart is scaled in increments of 5% with -20% at the
bottom and 0% at the top. The first bar represents the -15.19% total
return for John Hancock International Equity Fund. The second bar
represents the -12.69% total return for Average international fund. The
third bar represents the -11.51% total return for MSCI All Country World
Free Ex-U.S. Index. A note below the chart reads "The total return for
John Hancock International Equity Fund is at net asset value with all
distributions reinvested. The average international fund is tracked by
Lipper, Inc. See the following page for historical performance
information."]

From a sector standpoint, commercial/industrial services, energy and
financial services stocks were especially hard hit. For the six months
ended August 31, 2001, every sector in the benchmark save energy was down
- -- in most cases by a significant margin. Holdings in the consumer
durables group were the lone bright spot for the period, while stock
selection in the health-care sector and an underweight position in the
technology area helped limit the Fund's overall decline.

Looking ahead

Days after the period ended, the world was stunned by the devastating
terrorist attack on the United States. Beyond any short-term volatility
that may be understandably triggered by such a catastrophe, we believe
that broader economic factors and events will influence stock markets
worldwide over the long term. We remain confident that the actions of
global central bankers will be positive for the financial markets.

In these difficult times, as always, we at Nicholas-Applegate continue to
adhere to our proven investment philosophy and process. We continue to
seek out and invest in companies with solid fundamentals that we believe
are poised to capitalize on positive, sustainable change in the
short-to-intermediate term. We believe this approach will reward investors
with significant capital appreciation over time.

International investing involves special risks such as political, economic
and currency risks, and differences in accounting standards and financial
reporting.



A LOOK AT PERFORMANCE

For the period ended August 31, 2001

                                                                        SINCE
                                   SIX          ONE         FIVE    INCEPTION
                                MONTHS         YEAR        YEARS     (3/30/95)
                               -------      -------      -------      -------
Cumulative Total Returns       (15.19%)     (35.50%)     (12.37%)      (4.61%)
Average Annual Total Returns        --      (35.50%)      (2.61%)      (0.73%)


Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested.

All figures represent past performance and are no guarantee of future
results. The performance table above and the chart on the right do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Keep in mind that the
total return and share price of the Fund's investments will fluctuate. As
a result, your Fund's shares may be worth more or less than their original
cost, depending on when you sell them. Please read your prospectus
carefully before you invest or send money.

Note to Performance

The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future. See the
prospectus for details.


WHAT HAPPENED TO
A $10,000 INVESTMENT...

The chart below shows how much a $10,000 investment in the John Hancock
International Equity Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Morgan Stanley Capital International (MSCI) All
Country World Free Ex-U.S. Index -- an unmanaged index that measures the
performance of both developed and emerging foreign stock markets. The
index represents freely traded stocks. It is not possible to invest in an
index. Past performance is no guarantee of future results.

[Line chart with the heading John Hancock International Equity Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the MSCI All Country World Free Ex-U.S. Index and is equal to
$12,554 as of August 31, 2001. The second line represents the value of
the hypothetical $10,000 investment made in the John Hancock
International Equity Fund on March 30, 1995 and is equal to $9,539 as of
August 31, 2001.]



FINANCIAL STATEMENTS

John Hancock Funds -- Institutional Series Trust



Statement of Assets and Liabilities
August 31, 2001 (Unaudited)
- ----------------------------------------------------------------------------------------------------------
                                                        ACTIVE              DIVIDEND                MEDIUM
                                                          BOND            PERFORMERS        CAPITALIZATION
                                                          FUND                  FUND           GROWTH FUND
                                             -----------------     -----------------     -----------------
                                                                                
Assets:
Investments at value (cost -
$8,479,023, $4,930,595 and
$6,288,327, respectively)                           $8,712,699            $5,399,683            $6,245,007
Cash                                                       578                   332                    --
Receivable for investments sold                         66,782                    --               190,350
Dividends and interest receivable                      106,548                 7,856                 1,179
Receivable from affiliates                               3,074                 2,538                 4,054
Other assets                                               580                 1,717                 3,515
                                                   -----------           -----------           -----------
Total assets                                         8,890,261             5,412,126             6,444,105
- ----------------------------------------------------------------------------------------------------------

Liabilities:
Due to custodian                                            --                    --               380,717
Payable for investments purchased                      143,519                    --                44,367
Accounts payable and accrued
expenses                                                22,683                15,133                23,935
                                                   -----------           -----------           -----------
Total liabilities                                      166,202                15,133               449,019
- ----------------------------------------------------------------------------------------------------------

Net Assets:
Capital paid-in                                      8,597,498             3,713,238             7,231,316
Accumulated net realized gain
(loss) on investments and foreign
currency transactions                                  (82,771)            1,207,529            (1,163,835)
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currencies                      233,507               469,088               (43,320)
Undistributed net investment income
(accumulated net investment loss)                      (24,175)                7,138               (29,075)
                                                   -----------           -----------           -----------
Net assets                                          $8,724,059            $5,396,993            $5,995,086
==========================================================================================================
Net Asset Value Per Share:
(Based on 999,237, 521,466 and
745,937 shares, respectively, of
beneficial interest outstanding -
unlimited number of shares
authorized with no par value)                            $8.73                $10.35                 $8.04
==========================================================================================================

The Statement of Assets and Liabilities is each Fund's balance sheet and
shows the value of what the Fund owns, is due and owes as of August 31,
2001. You'll also find the net asset value per share as of that date.

See notes to financial statements.







Statement of Assets and Liabilities (continued)
August 31, 2001 (Unaudited)
- ----------------------------------------------------------------------------------------------------------
                                                       FOCUSED             SMALL CAP         INTERNATIONAL
                                                     SMALL CAP                EQUITY                EQUITY
                                                   GROWTH FUND                  FUND                  FUND
                                             -----------------     -----------------     -----------------
                                                                                
Assets:
Investments at value (cost -
$4,778,687, $35,596,383 and
$5,116,029, respectively)                           $4,852,652           $32,491,151            $4,903,090
Cash                                                       144                    --                   492
Foreign currency, at value (cost -
none, none and $73,505,
respectively)                                               --                    --                73,500
Receivable for investments sold                             --             1,005,064                    --
Receivable for shares sold                                  --                11,171               157,239
Dividends and interest receivable                          129                 3,071                11,806
Receivable from affiliates                               2,395                    --                 7,047
Other assets                                               550                 1,618                 1,187
                                                   -----------           -----------           -----------
Total assets                                         4,855,870            33,512,075             5,154,361
- ----------------------------------------------------------------------------------------------------------
Liabilities:
Due to custodian                                            --               351,280                    --
Payable for investments purchased                       11,576                12,443               125,955
Payable for shares repurchased                           2,750                16,880                    --
Payable for securities on loan                              --                    --               585,960
Payable for forward foreign
currency exchange contracts                                 --                    --                 9,418
Payable to affiliates                                       --                15,526                    --
Accounts payable and accrued
expenses                                                17,426                28,638                34,739
                                                   -----------           -----------           -----------
Total liabilities                                       31,752               424,767               756,072
- ----------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in                                      7,102,710            33,435,585             6,713,718
Accumulated net realized gain
(loss) on investments and foreign
currency transactions                               (2,338,368)            2,816,393            (2,085,800)
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currencies                       73,965            (3,105,232)             (222,801)
Accumulated net investment loss,
distributions in excess of net
investment income                                      (14,189)              (59,438)               (6,828)
                                                   -----------           -----------           -----------
Net assets                                          $4,824,118           $33,087,308            $4,398,289
==========================================================================================================
Net Asset Value Per Share:
(Based on 520,896, 2,666,082 and
630,122 shares, respectively, of
beneficial interest outstanding -
unlimited number of shares
authorized with no par value)                            $9.26                $12.41                 $6.98
==========================================================================================================

See notes to financial statements.







Statement of Operations
Six months ended August 31, 2001 (Unaudited)
- ----------------------------------------------------------------------------------------------------------
                                                        ACTIVE              DIVIDEND                MEDIUM
                                                          BOND            PERFORMERS        CAPITALIZATION
                                                          FUND                  FUND           GROWTH FUND
                                             -----------------     -----------------     -----------------
                                                                                
Investment Income:
Dividends (net of foreign
withholding tax of none, $113 and
$45, respectively)                                          --               $39,144                $7,000
Interest                                              $263,115                 4,535                 5,874
Securities lending                                          --                    --                 1,531
                                                   -----------           -----------           -----------
Total investment income                                263,115                43,679                14,405
- ----------------------------------------------------------------------------------------------------------
Expenses:
Investment management fee                               20,149                17,512                36,825
Custodian fee                                           19,925                 4,615                13,042
Registration and filing fee                             10,500                13,742                10,646
Auditing fee                                             9,187                 7,814                 8,280
Printing                                                 3,323                 2,814                 3,185
Transfer agent fee                                       2,015                 1,459                 2,301
Accounting and legal services fee                          811                   586                   921
Miscellaneous                                              336                   601                   463
Trustees' fee                                              166                    55                   576
Legal fee                                                   47                    57                    62
                                                   -----------           -----------           -----------
Total expenses                                          66,459                49,255                76,301
Less expense reductions                                (42,280)              (28,825)              (34,873)
- ----------------------------------------------------------------------------------------------------------
Net expenses                                            24,179                20,430                41,428
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss)                           238,936                23,249               (27,023)
- ----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments                                             83,309               147,006            (1,763,818)
Foreign currency transactions                               (2)                   --                    (3)
Change in net unrealized
appreciation (depreciation) on:
Investments                                             46,818              (554,242)             (299,829)
Translation of assets and
liabilities in foreign currencies                         (169)                   --                    --
                                                   -----------           -----------           -----------
Net realized and unrealized gain
(loss)                                                 129,956              (407,236)           (2,063,650)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations                      $368,892             ($383,987)          ($2,090,673)
==========================================================================================================

The Statement of Operations summarizes, for each of the Funds,
the investment income earned and expenses incurred in operating the Fund.
It also shows net gains (losses) for the period stated.

See notes to financial statements.







Statement of Operations (continued)
Six months ended August 31, 2001 (Unaudited)
- ----------------------------------------------------------------------------------------------------------
                                                       FOCUSED             SMALL CAP         INTERNATIONAL
                                                     SMALL CAP                EQUITY                EQUITY
                                                   GROWTH FUND                  FUND                  FUND
                                             -----------------     -----------------     -----------------
                                                                                
Investment Income:
Dividends (net of foreign
withholding tax of none, none and
$6,985, respectively)                                     $626               $14,860               $48,480
Interest                                                 2,851                 3,618                 8,748
Securities lending                                       5,853                54,089                 5,444
                                                   -----------           -----------           -----------
Total investment income                                  9,330                72,567                62,672
- ----------------------------------------------------------------------------------------------------------
Expenses:
Investment management fee                               20,646               114,571                25,289
Registration and filing fee                             13,443                12,615                10,565
Custodian fee                                            8,487                13,826                59,122
Auditing fee                                             7,574                 8,835                 9,036
Printing                                                 3,322                 4,140                 5,653
Transfer agent fee                                       1,290                 8,184                 1,405
Organization expense                                       714                    --                    --
Accounting and legal services fee                          519                 3,300                   564
Miscellaneous                                              243                   398                   463
Trustees' fee                                              209                   725                   158
Legal fee                                                   36                   203                   255
Interest expense                                            --                 3,162                    --
                                                   -----------           -----------           -----------
Total expenses                                          56,483               169,959               112,510
Less expense reductions                                (33,256)              (39,020)              (84,411)
- ----------------------------------------------------------------------------------------------------------
Net expenses                                            23,227               130,939                28,099
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss)                           (13,897)              (58,372)               34,573
- ----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments                                         (1,073,792)            1,941,406              (719,804)
Foreign currency transactions                               --                    --              (151,741)
Change in net unrealized
appreciation (depreciation) on:
Investments                                            448,558            (1,384,548)              (41,985)
Translation of assets and
liabilities in foreign currencies                           --                    --                (9,210)
                                                   -----------           -----------           -----------
Net realized and unrealized gain
(loss)                                                (625,234)              556,858              (922,740)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations                     ($639,131)             $498,486             ($888,167)
==========================================================================================================

See notes to financial statements.








Statements of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
                                                      ACTIVE BOND                              DIVIDEND PERFORMERS
                                                          FUND                                       FUND
                                        ---------------------------------------     ---------------------------------------
                                                               SIX MONTHS ENDED                            SIX MONTHS ENDED
                                               YEAR ENDED       AUGUST 31, 2001            YEAR ENDED       AUGUST 31, 2001
                                        FEBRUARY 28, 2001           (UNAUDITED)     FEBRUARY 28, 2001           (UNAUDITED)
                                        -----------------     -----------------     -----------------     -----------------
                                                                                              
Increase (Decrease) in Net Assets:
From Operations:
Net investment income                            $368,916              $238,936               $95,088               $23,249
Net realized gain                                  18,772                83,307             2,380,858               147,006
Change in net unrealized
appreciation (depreciation)                       304,795                46,649            (1,356,247)             (554,242)
                                              -----------           -----------           -----------           -----------
Net increase (decrease) in net
assets resulting from operations                  692,483               368,892             1,119,699              (383,987)
                                              -----------           -----------           -----------           -----------
Distributions to Shareholders:
From net investment income                       (370,991)             (243,630)             (100,614)              (27,059)
From net realized gain                                 --                    --            (2,068,903)                   --
                                              -----------           -----------           -----------           -----------
Total distributions to shareholders              (370,991)             (243,630)           (2,169,517)              (27,059)
                                              -----------           -----------           -----------           -----------
From Portfolio Share Transactions: *
Shares sold                                     4,430,138             2,630,388             4,639,407               710,852
Shares issued to shareholders in
reinvestment of distributions                     366,504               226,404             2,169,758                27,227
Less shares repurchased                        (2,535,098)           (1,063,208)          (14,419,671)           (1,132,347)
                                              -----------           -----------           -----------           -----------
Net increase (decrease)                         2,261,544             1,793,584            (7,610,506)             (394,268)
                                              -----------           -----------           -----------           -----------

Net Assets:
Beginning of period                             4,222,177             6,805,213            14,862,631             6,202,307
                                              -----------           -----------           -----------           -----------
End of period (including
undistributed (distributions in
excess of) net investment  income
of ($2,962), ($24,175), $10,948
and $7,138, respectively)                      $6,805,213            $8,724,059            $6,202,307            $5,396,993
                                              ===========           ===========           ===========           ===========

*Analysis of Portfolio Share
Transactions:
Shares sold                                       535,238               306,342               320,516                64,522
Shares issued to shareholders in
reinvestment of distributions                      44,172                26,376               183,485                 2,521
Less shares repurchased                          (307,954)             (123,625)           (1,047,503)             (102,181)
                                              -----------           -----------           -----------           -----------
Net increase (decrease)                           271,456               209,093              (543,502)              (35,138)
                                              ===========           ===========           ===========           ===========

The Statement of Changes in Net Assets shows how the value of each Fund's
net assets has changed since the previous period. The difference reflects
net investment income, any investment and foreign currency gains and
losses, distributions paid to shareholders and any increase or decrease in
money shareholders invested in each Fund. The footnotes illustrate the
number of Fund shares sold, reinvested and repurchased during the period,
along with the per share amount of distributions made to shareholders of
each Fund for the period indicated.

See notes to financial statements.








Statements of Changes in Net Assets (continued)

- ---------------------------------------------------------------------------------------------------------------------------
                                                 MEDIUM CAPITALIZATION                          FOCUSED SMALL CAP
                                                      GROWTH FUND                                  GROWTH FUND
                                        ---------------------------------------     ---------------------------------------
                                                               SIX MONTHS ENDED                            SIX MONTHS ENDED
                                               YEAR ENDED       AUGUST 31, 2001            YEAR ENDED       AUGUST 31, 2001
                                        FEBRUARY 28, 2001           (UNAUDITED)     FEBRUARY 28, 2001           (UNAUDITED)
                                        -----------------     -----------------     -----------------     -----------------
                                                                                              
Increase (Decrease) in Net Assets:
From Operations:
Net investment loss                             ($112,124)            ($27,023)              ($43,724)            ($13,897)
Net realized gain (loss)                        2,260,504           (1,763,821)            (1,172,422)          (1,073,792)
Change in net unrealized
appreciation (depreciation)                   (12,919,604)            (299,829)            (3,958,158)             448,558
                                              -----------          -----------            -----------          -----------
Net increase (decrease) in net
assets resulting from operations              (10,771,224)          (2,090,673)            (5,174,304)            (639,131)
                                              -----------          -----------            -----------          -----------
Distributions to Shareholders:
From net investment income                             --                   --                     --                   --
From net realized gain                         (4,552,005)                  --               (853,819)                  --
                                              -----------          -----------            -----------          -----------
Total distributions to shareholders            (4,552,005)                  --               (853,819)                  --
                                              -----------          -----------            -----------          -----------
From Portfolio Share Transactions: *
Shares sold                                    23,310,057            1,791,537              8,114,648            1,049,251
Shares issued to shareholders in
reinvestment of distributions                   4,512,270                   --                856,091                   --
Less shares repurchased                       (37,893,065)          (5,204,631)            (6,392,389)          (1,044,408)
                                              -----------          -----------            -----------          -----------
Net Increase (Decrease)                       (10,070,738)          (3,413,094)             2,578,350                4,843
                                              -----------          -----------            -----------          -----------

Net Assets:
Beginning of period                            36,892,820           11,498,853              8,908,179            5,458,406
                                              -----------          -----------            -----------          -----------
End of period (including
accumulated net investment loss,
distributions  in excess of net
investment income, of ($2,052),
($29,075), ($292) and  ($14,189),
respectively)                                 $11,498,853           $5,995,086             $5,458,406           $4,824,118
                                              ===========          ===========            ===========          ===========

*Analysis of Portfolio Share
Transactions:
Shares sold                                     1,245,050              189,860                432,156              104,854
Shares issued to shareholders in
reinvestment of distributions                     366,810                   --                 70,365                   --
Less shares repurchased                        (2,239,222)            (564,896)              (346,807)            (104,346)
                                              -----------          -----------            -----------          -----------
Net increase (decrease)                          (627,362)            (375,036)               155,714                  508
                                              ===========          ===========            ===========          ===========
See notes to financial statements.








Statements of Changes in Net Assets (continued)
- ---------------------------------------------------------------------------------------------------------------------------
                                                        SMALL CAP                                 INTERNATIONAL
                                                       EQUITY FUND                                 EQUITY FUND
                                        ---------------------------------------     ---------------------------------------
                                                               SIX MONTHS ENDED                            SIX MONTHS ENDED
                                               YEAR ENDED       AUGUST 31, 2001            YEAR ENDED       AUGUST 31, 2001
                                        FEBRUARY 28, 2001           (UNAUDITED)     FEBRUARY 28, 2001           (UNAUDITED)
                                        -----------------     -----------------     -----------------     -----------------
                                                                                              
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)                    ($69,025)             ($58,372)               $43,466              $34,573
Net realized gain (loss)                       6,078,320             1,941,406             (1,169,908)            (871,545)
Change in net unrealized
appreciation (depreciation)                   (8,772,416)           (1,384,548)            (3,005,103)             (51,195)
                                             -----------           -----------            -----------          -----------
Net increase (decrease) in net
assets resulting from operations              (2,763,121)              498,486             (4,131,545)            (888,167)
                                             -----------           -----------            -----------          -----------
Distributions to Shareholders:
From net investment income                       (49,153)                   --                (32,472)                  --
From net realized gain                        (6,670,587)                   --               (387,846)                  --
                                             -----------           -----------            -----------          -----------
Total distributions to shareholders           (6,719,740)                   --               (420,318)                  --
                                             -----------           -----------            -----------          -----------
From Portfolio Share Transactions: *
Shares sold                                   17,123,240             6,869,840              5,627,681            9,037,017
Shares issued to shareholders in
reinvestment of distributions                  6,721,015                    --                420,270                   --
Less shares repurchased                       (8,436,558)           (4,464,440)            (8,484,719)          (9,609,953)
                                             -----------           -----------            -----------          -----------
Net increase (decrease)                       15,407,697             2,405,400             (2,436,768)            (572,936)
                                             -----------           -----------            -----------          -----------

Net Assets:
Beginning of period                           24,258,586            30,183,422             12,848,023            5,859,392
                                             -----------           -----------            -----------          -----------
End of period (including
accumulated net investment loss,
distributions  in excess of net
investment income, of ($1,066),
($59,438), ($41,401) and
($6,828), respectively)                      $30,183,422           $33,087,308             $5,859,392           $4,398,289
                                             ===========           ===========            ===========          ===========

*Analysis of Portfolio Share
Transactions:
Shares sold                                    1,077,952               532,620                469,845            1,181,823
Shares issued to shareholders in
reinvestment of distributions                    611,557                    --                 45,781                   --
Less shares repurchased                         (541,612)             (355,648)              (766,906)          (1,263,904)
                                             -----------           -----------            -----------          -----------
Net increase (decrease)                        1,147,897               176,972               (251,280)             (82,081)
                                             ===========           ===========            ===========          ===========

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Active Bond Fund

Financial Highlights

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

                                            YEAR ENDED FEBRUARY 28,              YEAR ENDED      YEAR ENDED   SIX MONTHS ENDED
                                   ----------------------------------------    FEBRUARY 29,    FEBRUARY 28,    AUGUST 31, 2001
                                       1997            1998            1999            2000            2001      (UNAUDITED)
                                   --------        --------        --------        --------        --------        --------
                                                                                                 
Per Share Operating Performance
Net Asset Value, Beginning of
Period                                $8.64           $8.54           $8.83           $8.59           $8.14           $8.61
                                   --------        --------        --------        --------        --------        --------
Net Investment Income (1)              0.60            0.59            0.56            0.58            0.56            0.25
Net Realized and Unrealized
Gain (Loss) on Investments            (0.09)           0.34           (0.02)          (0.43)           0.47            0.13
                                   --------        --------        --------        --------        --------        --------
Total from Investment
Operations                             0.51            0.93            0.54            0.15            1.03            0.38
                                   --------        --------        --------        --------        --------        --------

Less Distributions:
From Net Investment Income            (0.60)          (0.59)          (0.56)          (0.58)          (0.56)          (0.26)
In Excess of Net Investment
Income                                   --              --(2)           --(2)           --(2)           --              --
From Net Realized Gain                (0.01)          (0.05)          (0.22)          (0.02)             --              --
                                   --------        --------        --------        --------        --------        --------
Total Distributions                   (0.61)          (0.64)          (0.78)          (0.60)          (0.56)          (0.26)
                                   --------        --------        --------        --------        --------        --------
Net Asset Value, End of
Period                                $8.54           $8.83           $8.59           $8.14           $8.61           $8.73
                                   ========        ========        ========        ========        ========        ========
Total Investment Return (3,4)         6.17%          11.25%           6.24%           1.83%          13.11%           4.56%(5)

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                       $2,191          $5,158          $5,686          $4,222          $6,805          $8,724
Ratio of Expenses to Average
Net Assets                            0.60%           0.60%           0.60%           0.60%           0.60%           0.60%(6)
Ratio of Adjusted Expenses to
Average Net Assets (7,8)              4.05%           2.64%           2.33%           2.93%           2.03%           1.65%(6)
Ratio of Net Investment
Income to Average Net Assets          7.10%           6.78%           6.36%           6.88%           6.74%           5.93%(6,9)
Portfolio Turnover Rate                136%            230%            356%            301%            327%            133%

(1) Based on the average of the shares outstanding at the end of each month.
(2) Less than $0.01 per share.
(3) Total investment return assumes dividend reinvestment.
(4) Total returns would have been lower had certain expenses not been reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods shown.
(8) Adjusted expenses as a percentage of average net assets are expected to decrease as the net assets of the Fund grow.
(9) Had the Fund not amortized premiums on debt securities, the annualized ratio of net investment income to average net assets
    would have been 6.13%.

The Financial Highlights summarizes the impact of the following factors on
a single share for each period indicated: net investment income, gains
(losses), dividends and total investment return of the Fund. It shows how
the Fund'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.








John Hancock Funds -- Institutional Series Trust -- Dividend Performers Fund

Financial Highlights (continued)

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

                                             YEAR ENDED FEBRUARY 28,              YEAR ENDED      YEAR ENDED   SIX MONTHS ENDED
                                    ----------------------------------------    FEBRUARY 29,    FEBRUARY 28,    AUGUST 31, 2001
                                        1997            1998            1999            2000            2001      (UNAUDITED)
                                    --------        --------        --------        --------        --------        --------
                                                                                                  
Per Share Operating Performance
Net Asset Value, Beginning of
Period                                $10.15          $11.91          $14.92          $14.46          $13.51          $11.14
                                    --------        --------        --------        --------        --------        --------
Net Investment Income (1)               0.21            0.18            0.15            0.11            0.10            0.04
Net Realized and Unrealized
Gain (Loss) on Investments              1.92            3.92            1.04            0.60            0.45           (0.78)
                                    --------        --------        --------        --------        --------        --------
Total from Investment
Operations                              2.13            4.10            1.19            0.71            0.55           (0.74)
                                    --------        --------        --------        --------        --------        --------

Less Distributions:
From Net Investment Income             (0.18)          (0.17)          (0.15)          (0.11)          (0.11)          (0.05)
From Net Realized Gain                 (0.19)          (0.92)          (1.50)          (1.55)          (2.81)             --
                                    --------        --------        --------        --------        --------        --------
Total Distributions                    (0.37)          (1.09)          (1.65)          (1.66)          (2.92)          (0.05)
                                    --------        --------        --------        --------        --------        --------
Net Asset Value, End of
Period                                $11.91          $14.92          $14.46          $13.51          $11.14          $10.35
                                    ========        ========        ========        ========        ========        ========
Total Investment Return (2,3)         21.26%          35.55%           7.97%           4.17%           2.94%          (6.65%)(4)

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                        $8,668         $20,884         $17,743         $14,863          $6,202          $5,397
Ratio of Expenses to Average
Net Assets                             0.70%           0.70%           0.70%           0.70%           0.70%           0.70%(5)
Ratio of Adjusted Expenses to
Average Net Assets (6,7)               1.89%           1.02%           0.95%           1.05%           1.08%           1.69%(5)
Ratio of Net Investment
Income to Average Net Assets           1.94%           1.31%           0.95%           0.71%           0.73%           0.80%(5)
Portfolio Turnover Rate                  37%             77%             64%             46%             58%             19%

(1) Based on the average of the shares outstanding at the end of each month.
(2) Total investment return assumes dividend reinvestment.
(3) Total returns would have been lower had certain expenses not been reduced during the periods shown.
(4) Not annualized.
(5) Annualized.
(6) Does not take into consideration expense reductions during the periods shown.
(7) Adjusted expenses as a percentage of average net assets are expected to decrease as the net assets of the Fund grow.

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Medium Capitalization Growth Fund

Financial Highlights (continued)

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

                                             YEAR ENDED FEBRUARY 28,              YEAR ENDED      YEAR ENDED   SIX MONTHS ENDED
                                    ----------------------------------------    FEBRUARY 29,    FEBRUARY 28,    AUGUST 31, 2001
                                        1997            1998            1999            2000            2001      (UNAUDITED)
                                    --------        --------        --------        --------        --------        --------
                                                                                                  
Per Share Operating Performance
Net Asset Value, Beginning of
Period                                $10.69          $12.67          $13.51          $10.99          $21.10          $10.26
                                    --------        --------        --------        --------        --------        --------
Net Investment Income
(Loss)(1)                               0.01              --(2)        (0.02)          (0.05)          (0.07)          (0.03)
Net Realized and Unrealized
Gain (Loss) on Investments              2.02            2.06           (0.68)          10.71           (7.44)          (2.19)
                                    --------        --------        --------        --------        --------        --------
Total from Investment
Operations                              2.03            2.06           (0.70)          10.66           (7.51)          (2.22)
                                    --------        --------        --------        --------        --------        --------

Less Distributions:
From Net Investment Income                --              --(2)           --              --              --              --
From Net Realized Gain                 (0.05)          (1.22)          (1.72)          (0.55)          (3.33)             --
In Excess of Net Realized
Gain                                      --              --           (0.10)             --              --              --
                                    --------        --------        --------        --------        --------        --------
Total Distributions                    (0.05)          (1.22)          (1.82)          (0.55)          (3.33)             --
                                    --------        --------        --------        --------        --------        --------
Net Asset Value, End of
Period                                $12.67          $13.51          $10.99          $21.10          $10.26           $8.04
                                    ========        ========        ========        ========        ========        ========
Total Investment Return (3,4)         19.00%          17.39%          (5.34%)         98.13%         (38.23%)        (21.64%)(5)

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                       $29,085         $40,302         $16,687         $36,893         $11,499          $5,995
Ratio of Expenses to Average
Net Assets                             0.90%           0.90%           0.90%           0.90%           0.90%           0.90%(6)
Ratio of Adjusted Expenses to
Average Net Assets (7,8)               1.42%           1.10%           1.11%           1.28%           1.15%           1.66%(6)
Ratio of Net Investment
Income (Loss) to Average Net
Assets                                 0.06%           0.03%          (0.13%)         (0.37%)         (0.40%)         (0.59%)(6)
Portfolio Turnover Rate                 281%            341%            116%            153%            181%            118%

(1) Based on the average of the shares outstanding at the end of each month.
(2) Less than $0.01 per share.
(3) Total investment return assumes dividend reinvestment.
(4) Total returns would have been lower had certain expenses not been reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods shown.
(8) Adjusted expenses as a percentage of average net assets are expected to decrease as the net assets of the Fund grow.

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Focused Small Cap Growth Fund

Financial Highlights (continued)

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

                                  PERIOD ENDED       YEAR ENDED FEBRUARY 28,      YEAR ENDED      YEAR ENDED   SIX MONTHS ENDED
                                   FEBRUARY 28,     ------------------------    FEBRUARY 29,    FEBRUARY 28,    AUGUST 31, 2001
                                     1997(1)            1998            1999            2000            2001      (UNAUDITED)
                                    --------        --------        --------        --------        --------        --------
                                                                                                  
Per Share Operating Performance
Net Asset Value, Beginning of
Period                                 $8.50           $9.24          $11.74          $11.65          $24.43          $10.49
                                    --------        --------        --------        --------        --------        --------
Net Investment Income
(Loss)(2)                               0.03           (0.03)          (0.07)          (0.09)          (0.10)          (0.03)
Net Realized and Unrealized
Gain (Loss) on Investments              0.73            2.53            0.61           15.13          (11.92)          (1.20)
                                    --------        --------        --------        --------        --------        --------
Total from Investment
Operations                              0.76            2.50            0.54           15.04          (12.02)          (1.23)
                                    --------        --------        --------        --------        --------        --------

Less Distributions:
From Net Investment Income             (0.02)             --(3)           --              --              --              --
From Net Realized Gain                    --              --           (0.63)          (2.26)          (1.92)             --
                                    --------        --------        --------        --------        --------        --------
Total Distributions                    (0.02)             --(3)        (0.63)          (2.26)          (1.92)             --
                                    --------        --------        --------        --------        --------        --------
Net Asset Value, End of
Period                                 $9.24          $11.74          $11.65          $24.43          $10.49           $9.26
                                    ========        ========        ========        ========        ========        ========
Total Investment Return (4,5)          8.89%(6)       27.07%           4.67%         136.18%         (50.27%)        (11.73%)(6)

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                          $999          $3,102          $2,453          $8,908          $5,458          $4,824
Ratio of Expenses to Average
Net Assets                             0.90%(7)        0.90%           0.90%           0.90%           0.90%           0.90%(7)
Ratio of Adjusted Expenses to
Average Net Assets (8,9)              16.24%(7)        4.05%           4.12%           3.19%           2.04%           2.19%(7)
Ratio of Net Investment
Income (Loss) to Average Net
Assets                                 0.35%(7)       (0.25%)         (0.60%)         (0.57%)         (0.56%)         (0.54%)(7)
Portfolio Turnover Rate                  92%            117%            125%            238%            242%             73%

(1) The Fund commenced operations on May 2, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Total investment return assumes dividend reinvestment.
(5) Total returns would have been lower had certain expenses not been reduced during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods shown.
(9) Adjusted expenses as a percentage of average net assets are expected to decrease as the net assets of the Fund grow.

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Small Cap Equity Fund

Financial Highlights (continued)

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

                                             YEAR ENDED FEBRUARY 28,              YEAR ENDED      YEAR ENDED   SIX MONTHS ENDED
                                    ----------------------------------------    FEBRUARY 29,    FEBRUARY 28,    AUGUST 31, 2001
                                        1997            1998            1999            2000            2001      (UNAUDITED)
                                    --------        --------        --------        --------        --------        --------
                                                                                                  
Per Share Operating Performance
Net Asset Value, Beginning of
Period                                 $9.09           $9.38          $11.74           $9.16          $18.09          $12.13
                                    --------        --------        --------        --------        --------        --------
Net Investment Income
(Loss)(1)                               0.14            0.07            0.05            0.05           (0.04)          (0.02)
Net Realized and Unrealized
Gain (Loss) on Investments              1.08            3.65           (1.23)          10.96           (2.18)           0.30
                                    --------        --------        --------        --------        --------        --------
Total from Investment
Operations                              1.22            3.72           (1.18)          11.01           (2.22)           0.28
                                    --------        --------        --------        --------        --------        --------

Less Distributions:
From Net Investment Income             (0.12)          (0.10)          (0.04)          (0.06)          (0.03)             --
From Net Realized Gain                 (0.81)          (1.26)          (1.20)          (2.02)          (3.71)             --
In Excess of Net Realized
Gain                                      --              --           (0.16)             --              --              --
                                    --------        --------        --------        --------        --------        --------
Total Distributions                    (0.93)          (1.36)          (1.40)          (2.08)          (3.74)             --
                                    --------        --------        --------        --------        --------        --------
Net Asset Value, End of
Period                                 $9.38          $11.74           $9.16          $18.09          $12.13          $12.41
                                    ========        ========        ========        ========        ========        ========
Total Investment Return (2,3)         13.78%          41.81%          (9.46%)        124.33%         (10.14%)        2.31%(4)

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                        $6,011          $9,549          $7,418         $24,259         $30,183         $33,087
Ratio of Expenses to Average
Net Assets                             0.80%           0.80%           0.80%           0.80%           0.80%           0.80%(5)
Ratio of Adjusted Expenses to
Average Net Assets (6,7)               1.83%           1.42%           1.46%           1.48%           1.04%           1.04%(5)
Ratio of Net Investment
Income (Loss) to Average Net
Assets                                 1.46%           0.62%           0.45%           0.37%          (0.25%)         (0.36%)(5)
Portfolio Turnover Rate                  96%            216%            126%            104%            109%             34%

(1) Based on the average of the shares outstanding at the end of each month.
(2) Total investment return assumes dividend reinvestment.
(3) Total returns would have been lower had certain expenses not been reduced during the periods shown.
(4) Not annualized.
(5) Annualized.
(6) Does not take into consideration expense reductions during the periods shown.
(7) Adjusted expenses as a percentage of average net assets are expected to decrease as the net assets of the Fund grow.

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- International Equity Fund

Financial Highlights (continued)

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

                                             YEAR ENDED FEBRUARY 28,              YEAR ENDED      YEAR ENDED   SIX MONTHS ENDED
                                    ----------------------------------------    FEBRUARY 29,    FEBRUARY 28,    AUGUST 31, 2001
                                        1997            1998            1999            2000            2001      (UNAUDITED)
                                    --------        --------        --------        --------        --------        --------
                                                                                                  
Per Share Operating Performance
Net Asset Value, Beginning of
Period                                 $9.24           $9.35           $9.63          $10.18          $13.33           $8.23
                                    --------        --------        --------        --------        --------        --------
Net Investment Income (1)               0.12            0.06            0.07            0.07            0.04            0.05
Net Realized and Unrealized
Gain (Loss) on Investments              0.14            0.23            0.59            3.83           (4.63)          (1.30)
                                    --------        --------        --------        --------        --------        --------
Total from Investment
Operations                              0.26            0.29            0.66            3.90           (4.59)          (1.25)
                                    --------        --------        --------        --------        --------        --------

Less Distributions:
From Net Investment Income             (0.10)          (0.01)          (0.07)          (0.07)          (0.04)             --
In Excess of Net Investment
Income                                    --              --           (0.04)          (0.04)             --              --
From Net Realized Gain                 (0.05)             --              --           (0.64)          (0.47)             --
                                    --------        --------        --------        --------        --------        --------
Total Distributions                    (0.15)          (0.01)          (0.11)          (0.75)          (0.51)             --
                                    --------        --------        --------        --------        --------        --------
Net Asset Value, End of
Period                                 $9.35           $9.63          $10.18          $13.33           $8.23           $6.98
                                    ========        ========        ========        ========        ========        ========
Total Investment Return (2,3)          2.79%           3.07%           6.88%          38.84%         (34.85%)        (15.19%)(4)

Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)                        $4,204          $7,983          $7,805         $12,848          $5,859          $4,398
Ratio of Expenses to Average
Net Assets                             1.00%           1.00%           1.00%           1.00%           1.00%           1.00%(5)
Ratio of Adjusted Expenses to
Average Net Assets (6,7)               3.32%           2.02%           2.73%           2.86%           3.46%           4.00%(5)
Ratio of Net Investment
Income to Average Net Assets           1.26%           0.60%           0.69%           0.59%           0.43%           1.23%(5)
Portfolio Turnover Rate                  68%            125%             83%            139%            238%             96%

(1) Based on the average of the shares outstanding at the end of each month.
(2) Total investment return assumes dividend reinvestment.
(3) Total returns would have been lower had certain expenses not been reduced during the periods shown.
(4) Not annualized.
(5) Annualized.
(6) Does not take into consideration expense reductions during the periods shown.
(7) Adjusted expenses as a percentage of average net assets are expected to decrease as the net assets of the Fund grow.

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Active Bond Fund

Schedule of Investments
August 31, 2001 (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the Active Bond Fund on August 31, 2001. It's divided into three main
categories: bonds, preferred stocks and warrants and short-term
investments. The bonds are further broken down by industry group.
Short-term investments, which represent the Fund's "cash" position, are
listed last.

                                                                                           PAR VALUE
                                                               INTEREST      CREDIT          (000s
ISSUER, DESCRIPTION                                              RATE        RATING*        OMITTED)      VALUE
- -------------------                                            --------      ------         -------  --------------
                                                                                         
BONDS
Aerospace (0.69%)
Lockheed Martin Corp.,
Bond 12-01-29                                                   8.500%         BBB-             $25         $29,219
Systems 2001 Asset Trust LLC,
Pass Thru Ctf Ser 2001 Class B
12-15-11 (R)                                                    7.156          A                 30          31,318
                                                                                                     --------------
                                                                                                             60,537
                                                                                                     --------------
Agricultural Operations (0.41%)
Cargill, Inc.,
Note 05-01-06 (R)                                               6.250          A+                35          35,860
                                                                                                     --------------
Automobile/Trucks (2.22%)
DaimlerChrysler NA Holding Corp.
Note 01-18-31                                                   8.500          A-                20          22,282
Delphi Automotive Systems Corp.,
Note 06-15-06                                                   6.550          BBB               70          71,463
ERAC USA Finance Co.,
Note 02-15-05 (R)                                               6.625          BBB+               6           6,063
Note 06-15-08 (R)                                               7.350          BBB+              35          36,050
Note 12-15-09 (R)                                               7.950          BBB+              45          48,139
Ford Motor Co.,
Note 07-16-31                                                   7.450          A                 10           9,905
                                                                                                     --------------
                                                                                                            193,902
                                                                                                     --------------
Banks - Foreign (2.63%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04, (Y)                         8.200          AA-               80          88,174
Barclays Bank Plc,
Perpetual Bond (7.375% to 12-29-11
then variable) (United Kingdom)
06-29-49 (R), (Y)                                               7.375          A+                20          20,800
Royal Bank of Scotland Group Plc,
Bond (United Kingdom) 03-31-49, (Y)                             8.817          A-                10          10,917
Bond (United Kingdom) 08-31-49, (Y)                             7.648          A-                20          20,185
Scotland International Finance No. 2, B.V.,
Gtd Sub Note (United Kingdom)
11-01-06 (R), (Y)                                               8.850          A                 35          39,798
Skandinaviska Enskilda Banken AB,
Perpetual Bond (6.50% to 6-30-03
then variable) (Sweden) 12-29-49
(R), (Y)                                                        6.500          BBB               20          20,298
UBS Preferred Funding Trust I,
Perpetual Bond (8.622% to 10-01-10
then variable) 10-01-49                                         8.622          AA-               25          29,150
                                                                                                     --------------
                                                                                                            229,322
                                                                                                     --------------
Banks - United States (3.00%)
Bank of New York,
Cap Security 12-01-26 (R)                                       7.780          A-                25          26,319
Bank One Corp.,
Sub Note 08-01-10                                               7.875          A-                15          16,614
BNP Paribas Capital Trust,
Perpetual Bond (9.003% to 10-27-10
then variable) 12-27-49 (R)                                     9.003          A                 20          22,717
Capital One Bank,
Sr Note 02-01-06                                                6.875          BBB-              15          15,083
Colonial Bank,
Sub Note 06-01-11                                               9.375          BBB-              30          31,949
RBSG Capital Corp.,
Gtd Cap Note 03-01-04                                          10.125          A                 50          56,248
Wells Fargo Bank NA,
Sub Note 02-01-11                                               6.450          A+                40          40,890
Zions Financial Corp.,
Note (6.95% to 5-15-06 then
variable) 05-15-11 (R)                                          6.950          BBB-              50          51,562
                                                                                                     --------------
                                                                                                            261,382
                                                                                                     --------------
Beverages (0.17%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03                                      8.750          B+                15          15,112
                                                                                                     --------------
Broker Services (1.53%)
Citigroup, Inc.,
Note 01-18-11                                                   6.500          AA-               35          36,161
Goldman Sachs Group, Inc.,
Bond 01-15-11                                                   6.875          A+                45          46,440
Morgan Stanley Dean Witter & Co.,
Bond 04-15-06                                                   6.100          AA-               35          35,802
Salomon Smith Barney Holdings, Inc.,
Note 03-15-06                                                   5.875          A                 15          15,254
                                                                                                     --------------
                                                                                                            133,657
                                                                                                     --------------
Building (0.46%)
Horton (D.R.), Inc.,
Sr Note 08-15-11                                                7.875          BB                10           9,700
Vulcan Materials Co.,
Note 02-01-06                                                   6.400          A+                30          30,863
                                                                                                     --------------
                                                                                                             40,563
                                                                                                     --------------
Business Services - Misc. (0.40%)
Cendant Corp.,
Note 08-15-06 (R)                                               6.875          BBB               35          35,119
                                                                                                     --------------
Chemicals (0.65%)
Akzo Nobel, Inc.,
Bond 11-15-03 (R)                                               6.000          A-                15          15,422
Equistar Chemicals L.P./Equistar Funding Corp.,
Note 02-15-04                                                   8.500          BBB-              15          14,578
Potash Corp. of Saskatchewan, Inc.
Note (Canada) 05-31-11, (Y)                                     7.750          BBB+              25          26,799
                                                                                                     --------------
                                                                                                             56,799
                                                                                                     --------------
Computers (0.30%)
AOL Time Warner, Inc.,
Bond 04-15-31                                                   7.625          BBB+              25          26,174
                                                                                                     --------------
Containers (0.18%)
Stone Container Corp.,
Sr Note 02-01-11                                                9.750          B                 15          15,675
                                                                                                     --------------
Cosmetics & Personal Care (0.59%)
International Flavors & Fragrances, Inc.,
Note 05-15-06 (R)                                               6.450          BBB+              50          51,047
                                                                                                     --------------
Energy (0.52%)
CalEnergy Co., Inc.,
Sr Bond 09-15-28                                                8.480          BBB-              15          16,562
Enron Corp.,
Note 08-15-05 (R)                                               8.000          BBB+              15          15,676
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08                                      9.625          B+                12          12,780
                                                                                                     --------------
                                                                                                             45,018
                                                                                                     --------------
Finance (4.06%)
Bombardier Capital, Inc.,
Note 01-15-02 (R)                                               6.000          A-                20          20,144
Ford Capital B.V.,
Gtd Deb (Netherlands) 05-15-02, (Y)                             9.875          A                 35          36,223
Ford Motor Credit Co.,
Note 01-15-03                                                   7.250          A                 25          25,926
Note 02-01-06                                                   6.875          A                 30          30,969
General Motors Acceptance Corp.,
Note 07-15-05                                                   7.500          A                 35          37,242
Note 03-02-11                                                   7.250          A                 25          26,129
Heller Financial, Inc.,
Note 03-15-06                                                   6.375          A-                15          15,765
Household Finance Corp.,
Note 05-09-05                                                   8.000          A                 25          27,209
Note 07-15-10                                                   8.000          A                 15          16,815
HSBC Holding Plc,
Sub Note (United Kingdom) 07-15-09, (Y)                         7.500          A                 15          16,247
ING Capital Funding Trust III,
Perpetual Bond (8.439% to 12-31-10
then variable) 12-31-49                                         8.439          A                 10          11,015
Standard Chartered Bank,
Sub Note (United Kingdom) 05-30-31
(R), (Y)                                                        8.000          A-                25          26,321
Standard Credit Card Master Trust,
Ser 1995-1 Class A 01-07-07                                     8.250          AAA               40          43,950
U.S. Bank NA,
Note 08-01-11                                                   6.375          A                 20          20,405
                                                                                                     --------------
                                                                                                            354,360
                                                                                                     --------------
Food (0.78%)
Conagra, Inc.,
Sub Note 09-15-04                                               7.400          BBB               20          21,124
Earthgrains Co. (The),
Note 08-01-03                                                   8.375          A+                45          46,971
                                                                                                     --------------
                                                                                                             68,095
                                                                                                     --------------
Government - Foreign (2.02%)
Colombia, Republic of,
Bond (Colombia) 04-09-11, (Y)                                   9.750          BBB               25          26,437
Nova Scotia, Province of,
Deb (Canada) 11-15-19, (Y)                                      8.250          A-                25          29,856
Quebec, Government of,
Deb (Canada) 01-22-11, (Y)                                      6.125          A+                85          86,184
Quebec, Province of,
Deb (Canada) 09-15-29, (Y)                                      7.500          A+                30          33,598
                                                                                                     --------------
                                                                                                            176,075
                                                                                                     --------------
Government - U.S. (15.47%)
United States Treasury,
Bond 08-15-17                                                   8.875          AAA              127         174,227
Bond 02-15-23                                                   7.125          AAA              199         239,733
Bond 05-15-30                                                   6.250          AAA              155         173,163
Inflation Indexed Note 01-15-07                                 3.375          AAA              107         108,059
Note 08-15-03                                                   5.750          AAA               92          95,594
Note 02-15-05                                                   7.500          AAA              164         181,399
Note 07-15-06                                                   7.000          AAA              164         181,963
Note 05-15-08                                                   5.625          AAA               30          31,542
Note 08-15-10                                                   5.750          AAA              155         164,275
                                                                                                     --------------
                                                                                                          1,349,955
                                                                                                     --------------
Government - U.S. Agencies (15.12%)
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf 12-01-14                                    5.500          AAA              130         129,075
15 Yr Pass Thru Ctf 07-01-15                                    7.000          AAA               16          16,986
15 Yr Pass Thru Ctf 02-01-16                                    7.000          AAA               23          23,816
15 Yr Pass Thru Ctf 05-01-16                                    6.000          AAA               20          19,733
15 Yr Pass Thru Ctf 06-01-16                                    6.000          AAA              167         167,845
30 Yr Pass Thru Ctf 06-01-30                                    7.500          AAA              213         219,821
30 Yr Pass Thru Ctf 12-01-30                                    7.000          AAA               19          19,905
30 Yr Pass Thru Ctf 02-01-31                                    7.500          AAA               51          52,602
Note 01-15-30                                                   7.125          AAA               95         107,009
Government National Mortgage Assn.,
30 Yr Pass Thru Ctf 04-15-28 to
05-15-29                                                        6.500          AAA              109         110,780
30 Yr Pass Thru Ctf 04-15-29 to
12-25-31                                                        7.000          AAA              405         415,314
30 Yr Pass Thru Ctf 11-15-24 to
07-15-30                                                        8.000          AAA               35          36,317
                                                                                                     --------------
                                                                                                          1,319,203
                                                                                                     --------------
Insurance (1.83%)
AXA SA,
Sub Note (France) 12-15-30, (Y)                                 8.600          A-                20          23,312
Equitable Life Assurance Society USA,
Surplus Note 12-01-05 (R)                                       6.950          A+                25          26,227
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R)                                       7.625          AA                15          15,818
MONY Group, Inc. (The),
Sr Note 12-15-05                                                7.450          A-                25          26,205
Sun Canada Financial Co.,
Sub Note 12-15-07 (R)                                           6.625          AA-               55          56,788
URC Holdings Corp.,
Sr Note 06-30-06 (R)                                            7.875          AA+               10          11,046
                                                                                                     --------------
                                                                                                            159,396
                                                                                                     --------------
Leisure (0.94%)
Harrah's Operating Co., Inc.,
Note 06-01-07 (R)                                               7.125          BBB-              25          25,344
Sr Sub Note 12-15-05                                            7.875          BB+               10          10,288
HMH Properties, Inc.,
Sr Note Ser A 08-01-05                                          7.875          BB                10          10,000
MGM Mirage, Inc.,
Sr Note 09-15-10                                                8.500          BBB-              10          10,756
Sabre Holdings Corp.,
Note 08-01-11                                                   7.350          BBB+              15          15,220
Station Casinos, Inc.,
Sr Note 02-15-08                                                8.375          BB-                5           5,050
Waterford Gaming LLC,,
Sr Note 03-15-10 (R)                                            9.500          B+                 5           5,012
                                                                                                     --------------
                                                                                                             81,670
                                                                                                     --------------
Media (5.29%)
Adelphia Communications Corp.,
Sr Note 06-15-11                                               10.250          B+                 5           4,900
Sr Note Ser B 10-01-02                                          9.250          B+                15          15,075
Sr Note Ser B 07-15-03                                          8.125          B+                13          12,545
British Sky Broadcasting Group Plc,
Sr Note (United Kingdom) 07-15-09, (Y)                          8.200          BB+               35          36,158
Century Communications Corp.,
Sr Note 03-01-05                                                9.500          B+                10           9,938
Charter Communications Holdings, LLC/
Charter Communications Holdings Capital Corp.,
Sr Note 01-15-11                                               11.125          B+                 5           5,388
Sr Note 05-15-11 (R)                                           10.000          B+                 5           5,050
Clear Channel Communications, Inc.,
Note 06-15-05                                                   7.875          BBB-              50          53,297
Comcast Cable Communications, Inc.,
Sr Note 01-30-11                                                6.750          BBB               15          15,052
Continental Cablevision, Inc.,
Sr Note 05-15-06                                                8.300          A                 25          27,517
CSC Holdings, Inc.,
Sr Note 04-01-11 (R)                                            7.625          BB+               45          44,981
Sr Sub Deb 05-15-16                                            10.500          BB-               10          11,125
EchoStar DBS Corp.,
Sr Note 02-01-09                                                9.375          B+                10          10,300
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11                                            8.625          B+                10           9,400
Jones Intercable, Inc.,
Sr Note 04-15-08                                                7.625          BBB               20          21,018
Lenfest Communications, Inc.,
Sr Note 11-01-05                                                8.375          BBB               10          10,938
Mediacom LLC/Mediacom Capital Corp.,
Sr Note 01-15-13 (R)                                            9.500          B+                 5           5,025
Sr Note Ser B 04-15-08                                          8.500          B+                10           9,750
News America, Inc.,
Gtd Sr Note 04-30-28                                            7.300          BBB-              15          14,005
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18                                             8.250          BBB-              20          20,838
TCI Communications, Inc.,
Sr Deb 02-15-26                                                 7.875          A                 20          20,788
Time Warner, Inc.,
Deb 01-15-13                                                    9.125          BBB+              16          18,911
Univision Communications, Inc.,
Sr Note 07-15-11 (R)                                            7.850          BB+               25          26,175
Viacom, Inc.,
Gtd Note 01-30-06 (R)                                           6.400          A-                15          15,562
Sr Note 01-30-06                                                6.400          A-                10          10,368
Sr Deb 07-30-30                                                 7.875          A-                25          27,571
                                                                                                     --------------
                                                                                                            461,675
                                                                                                     --------------
Medical (1.34%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06, (Y)                                 10.750          B+                13          13,325
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security
02-01-08                                                        7.875          B+                15          14,925
HCA - The Healthcare Co.,
Note 09-01-10                                                   8.750          BB+               25          27,375
Note 06-01-06                                                   7.125          BB+               20          20,340
HEALTHSOUTH Corp.,
Sr Note 02-01-08                                                8.500          BBB-              10          10,450
Quest Diagnostics, Inc.,
Sr Note 07-12-06                                                6.750          BBB-              15          15,322
Tenet Healthcare Corp.,
Sr Note 01-15-05                                                8.000          BB+                5           5,350
Triad Hospitals, Inc.,
Note 05-01-09 (R)                                               8.750          B-                10          10,425
                                                                                                     --------------
                                                                                                            117,512
                                                                                                     --------------
Metal (1.07%)
Newmont Mining Corp.,
Note 05-15-11                                                   8.625          BBB               30          30,956
WMC Finance (USA) Ltd.,
Gtd Note (Australia) 11-15-03, (Y)                              6.500          A                 55          56,660
Yanacocha Receivables Master Trust,
Pass Thru Ctf Ser 1997-A 06-15-04
(R)                                                             8.400          BBB-               6           5,566
                                                                                                     --------------
                                                                                                             93,182
                                                                                                     --------------
Mortgage Banking (6.39%)
Asset Securitization Corp.,
Mtg Pass Thru Ctf Ser 1997-D4 Class
A-1B 04-14-27                                                   7.400          AAA               40          42,375
Commercial Mortgage Acceptance Corp.,
Pass Thru Ctf Ser 1999-C1 Class A-1
06-15-31                                                        6.790          Aaa               26          27,216
Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mtg Pass Thru Ctf Ser
1998-C1 Class A-1A 5-17-40                                      6.260          AAA               26          26,938
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3 Class A-9
02-15-29                                                        6.570          AAA               40          41,300
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1997-C1 Class A-2
07-15-29                                                        6.853          Aaa               20          20,963
Pass Thru Ctf Ser 1998-C1 Class A-1
05-15-30                                                        6.411          Aaa               52          53,360
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-4
03-20-25                                                        6.600          AAA               20          20,312
LB Commercial Mortgage Trust,
Pass Thru Ctf Ser 1999-C1 Class A-1
06-15-31                                                        6.410          Aaa               14          14,092
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D Class AF-7
12-15-38                                                        6.485          AAA               22          22,255
Morgan (J.P.) Commercial Mortgage Finance Corp.,
Pass Thru Ctf Ser 1997-C5 Class A2
09-15-29                                                        7.069          AAA               35          36,794
Morgan Stanley Capital I, Inc.,
Pass Thru Ctf Ser 1997-WF1 Class
A-1 07-15-29 (R)                                                6.830          AAA              101         104,996
Pass Thru Ctf Ser 1999-CAM1 Class
A-3 03-15-32                                                    6.920          AAA               50          52,578
Salomon Brothers Mortgage Securities VII, Inc.,
Mtg Pass Thru Ctf Ser 1997-HUD2
Class A-2 07-25-24                                              6.750          Aaa               10          10,265
Saxon Asset Securities Trust,
Pass Thru Ctf Ser 2000-2 Class AF-2
06-25-15                                                        7.965          AAA               30          30,309
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1 Class A-8
06-15-28                                                        7.220          AAA               24          25,043
Pass Thru Ctf Ser 1997-B Class A-6
10-15-28                                                        6.900          AAA               28          28,741
                                                                                                     --------------
                                                                                                            557,537
                                                                                                     --------------
Oil & Gas (2.65%)
Alberta Energy Co., Ltd.,
Note (Canada) 09-15-30, (Y)                                     8.125          BBB+              10          11,055
Amerada Hess Corp.,
Note 08-15-31                                                   7.300          BBB               25          25,335
Chesapeake Energy Corp.,
Sr Note 04-01-11                                                8.125          B+                10           9,700
Forest Oil Corp.,
Sr Note 06-15-08 (R)                                            8.000          BB                10           9,950
Louis Dreyfus Natural Gas Corp.,
Sr Note 12-01-07                                                6.875          BBB               10          10,189
Nova Chemicals Corp.,
Note (Canada) 05-15-06, (Y)                                     7.000          BBB               15          14,981
Occidental Petroleum Corp.,
Sr Deb 09-15-09                                                10.125          BBB                5           6,127
Ocean Energy, Inc.,
Sr Sub Note Ser B 07-15-07                                      8.875          BB+                5           5,285
Pemex Project Funding Master Trust,
Note 10-13-10 (R)                                               9.125          BB+               35          37,321
Petrobras International Finance Co.,
Sr Note (Cayman Islands) 07-06-11
(R), (Y)                                                        9.750          Baa1              10          10,025
Petroleum Geo-Services ASA,
Sr Note (Norway) 03-30-28, (Y)                                  7.125          BBB-              15          12,770
Snyder Oil Corp.,
Sr Sub Note 06-15-07                                            8.750          BBB+              10          10,544
Tosco Corp.,
Note 02-15-30                                                   8.125          BBB               15          16,947
Transocean Sedco Forex, Inc.
Note 04-15-31                                                   7.500          A-                20          20,335
Union Pacific Resources Group, Inc.,
Deb 05-15-28                                                    7.150          BBB+              20          20,038
Valero Energy Corp.,
Note 06-15-05                                                   8.375          BBB-              10          10,847
                                                                                                     --------------
                                                                                                            231,449
                                                                                                     --------------
Paper & Paper Products (1.57%)
International Paper Co.,
Note 07-08-05                                                   8.125          BBB               45          48,375
Georgia-Pacific Corp.,
Note 05-15-06                                                   7.500          BBB-              15          15,423
Note 05-15-31                                                   8.875          BBB-              20          21,142
Stora Enso Oyj,
Sr Note (Finland) 05-15-11, (Y)                                 7.375          BBB+              25          26,563
Weyerhaeuser Co.,
Note 08-01-06                                                   6.000          A-                25          25,155
                                                                                                     --------------
                                                                                                            136,658
                                                                                                     --------------
Real Estate Investment Trust (1.24%)
American Health Properties, Inc.,
Note 01-15-07                                                   7.500          BBB+              10          10,309
Cabot Industrial Properties, L.P.,
Note 05-01-04                                                   7.125          BBB               15          15,437
Camden Property Trust,
Note 04-15-04                                                   7.000          BBB               10          10,375
Healthcare Realty Trust
Sr Note 05-01-11                                                8.125          BBB-              30          31,200
iStar Financial, Inc.,
Sr Note 08-15-08                                                8.750          BB+                5           5,013
Liberty Property L.P.,
Medium Term Note 06-05-02                                       6.600          BBB               25          25,188
ProLogis Trust,
Note 04-15-04                                                   6.700          BBB+              10          10,296
                                                                                                     --------------
                                                                                                            107,818
                                                                                                     --------------
Real Estate Operations (0.30%)
EOP Operating L.P.,
Note 02-15-05                                                   6.625          BBB+              25          25,910
                                                                                                     --------------
Retail (1.61%)
Delhaize America, Inc.,
Note 04-15-11 (R)                                               8.125          BBB-              40          43,750
Kroger Co.,
Sr Note 04-01-11                                                6.800          BBB-              20          20,624
Sears Roebuck Acceptance Corp.,
Note 08-15-11                                                   6.750          A-                35          34,822
Toys R Us, Inc.,
Note 08-01-11 (R)                                               7.625          BBB+              40          40,924
                                                                                                     --------------
                                                                                                            140,120
                                                                                                     --------------
Telecommunications (5.09%)
AT&T Wireless Group,
Sr Note 03-01-31 (R)                                            8.750          BBB               25          27,775
BellSouth Capital Funding Corp.,
Deb 02-15-30                                                    7.875          A+                25          28,104
Citizens Communications Co.,
Note 05-15-06                                                   8.500          BBB               35          37,367
Deutsche Telekom International Finance B.V.,
Bond (Coupon Rate Step-up/down on
rating) (Netherlands) 06-15-05, (Y)                             7.750          A-                55          58,588
Bond (Coupon Rate Step-up/down on
rating) (Netherlands) 06-15-30, (Y)                             8.250          A-                20          21,633
Dominion Resources, Inc.,
Sr Note Ser A 06-15-10                                          8.125          BBB+              15          16,753
LCI International, Inc.,
Sr Note 06-15-07                                                7.250          BBB+              15          15,445
MetroNet Communications Corp.,
Sr Discount Note, Step Coupon
(10.75%, 11-01-02) (Canada)
11-01-07, (A), (Y)                                               Zero          BBB               15          12,603
Sr Note (Canada) 08-15-07, (Y)                                 12.000          BBB               10          10,900
Qwest Capital Funding, Inc.,
Bond 02-15-31 (R)                                               7.750          NR                30          29,997
Sprint Capital Corp.,
Note 01-30-06                                                   7.125          BBB+              15          15,645
Note 11-15-28                                                   6.875          BBB+              35          31,729
Telefonos de Mexico SA de C.V.,
Sr Note 01-26-06 (R)                                            8.250          BB+               30          31,275
Telus Corp.,
Note (Canada) 06-01-11, (Y)                                     8.000          BBB+              25          26,200
Triton PCS, Inc.,
Sr Sub Note 02-01-11                                            9.375          B-                 5           5,025
Verizon Global Funding Corp.,
Deb 12-01-30 (R)                                                7.750          A+                15          16,490
VoiceStream Wireless Corp.,
Sr Note 09-15-09                                               11.500          A-                 5           5,750
WorldCom, Inc.,
Note 05-15-06                                                   8.000          BBB+              35          37,557
Note 05-15-31                                                   8.250          BBB+              15          15,266
                                                                                                     --------------
                                                                                                            444,102
                                                                                                     --------------
Transportation (2.85%)
America West Airlines,
Pass Thru Ctf Ser 1996-1B 01-02-08                              6.930          A-                 3           3,296
Burlington Northern Santa Fe Corp.,
Deb 08-15-30                                                    7.950          BBB+              30          33,117
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1997-2C 06-30-04                              7.206          BBB               16          16,227
Pass Thru Ctf Ser 1999-1A 02-02-19                              6.545          AA+               19          18,756
Delta Air Lines, Inc.,
Note 12-15-05                                                   7.700          BBB-              15          15,128
Northrop Grumman Systems Corp.,
Note 02-15-11                                                   7.125          BBB-              20          20,620
Northwest Airlines 1996-1 Pass Through Trusts,
Pass Thru Ctf Ser 1996-1D 01-02-15                              8.970          BBB-               4           4,710
Northwest Airlines, Inc.,
Note 03-15-04                                                   8.375          BB                10           9,966
Sr Note 06-01-06                                                8.875          BB                10           9,900
NWA Trust,
Sr Note Ser A 12-21-12                                          9.250          AA                31          34,854
U.S. Airways, Inc.,
Pass Thru Ctf Ser 1990-A1 03-19-05                             11.200          BB-               14          14,379
Union Pacific Corp.,
Deb 02-01-29                                                    6.625          BBB-              25          23,964
United Air Lines, Inc.,
Pass Thru Ctf Ser 2000-1 Class A-1
01-01-14                                                        7.783          AAA               28          29,276
Pass Thru Ctf Ser 2000-2 Class A-1
10-01-10                                                        7.032          AAA               14          14,780
                                                                                                     --------------
                                                                                                            248,973
                                                                                                     --------------
Utilities (10.62%)
AES Corp.,
Sr Note 06-01-09                                                9.500          BB                10          10,400
Sr Note 09-15-10                                                9.375          BB                 5           5,050
Sr Sub Note 07-15-06                                           10.250          B+                12          12,300
AES Eastern Energy L.P.,
Pass Thru Ctf Ser 1999-A 01-02-17                               9.000          BBB-              15          15,791
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-17                                   9.000          BB-                9           9,951
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17                              8.890          BB-                7           7,927
Calpine Canada Energy Finance ULC,
Sr Note (Canada) 05-01-08 (Y)                                   8.500          BB+               15          15,201
Calpine Corp.,
Sr Note 08-15-05                                                8.250          BB+               15          15,415
Sr Note 04-01-08                                                7.875          BB+                5           4,750
Sr Note 02-15-11                                                8.500          BB+               35          35,564
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05                                          9.500          BB+               35          36,050
Sec Note Ser D 11-01-17                                         7.880          BB+               20          21,146
CMS Energy Corp.,
Sr Note 05-15-02                                                8.125          BB                15          15,205
Sr Note 10-15-07                                                9.875          BB                 5           5,350
Sr Note Ser B 01-15-04                                          6.750          BB                15          14,738
EIP Funding-PNM,
Sec Fac Bond 10-01-12                                          10.250          BBB-              22          23,980
Exelon Generation Co LLC,
Sr Note 06-15-11 (R)                                            6.950          A-                60          62,212
GG1B Funding Corp.,
Deb 01-15-11                                                    7.430          BBB-              11          11,632
HQI Transelec Chile SA,
Sr Note (Chile) 04-15-11 (R), (Y)                               7.875          A-                55          56,610
Utilities (continued)
Hydro-Quebec,
Gtd Bond Ser HY (Canada) 01-15-22, (Y)                          8.400          A+                10          12,099
Gtd Deb Ser IF (Canada) 02-01-03, (Y)                           7.375          A+                25          26,179
Iberdrola International B.V.,
Note 10-01-02                                                   7.500          AA-               25          25,885
Note (Spain) 06-01-03 (R), (Y)                                  7.125          AA-               25          26,110
KeySpan Corp.,
Note 11-15-10                                                   7.625          A                 25          27,390
Long Island Lighting Co.,
Deb 03-15-23                                                    8.200          A-                20          20,600
Midland Funding Corp. II,,
Deb Ser A 07-23-05                                             11.750          BB+               50          55,500
Mirant Americas Generation, Inc.,
Sr Note 05-01-11 (R)                                            8.300          BBB-              35          37,169
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18                                           8.770          BBB               25          26,215
Northeast Utilities,
Note Ser A 12-01-06                                             8.580          BBB                3           3,296
NRG Energy, Inc.,
Sr Note 04-01-11                                                7.750          BBB-              25          26,205
Pinnacle Partners,
Sr Note 08-15-04 (R)                                            8.830          BBB-              20          20,260
Pinnacle West Capital Corp.,
Sr Note 04-01-06                                                6.400          BBB               20          20,293
PNPP II Funding Corp.,
Deb 05-30-16                                                    9.120          BB-               15          16,830
PSEG Energy Holdings, Inc.,
Sr Note 02-15-08 (R)                                            8.625          BBB-              15          15,804
PSEG Power LLC,
Sr Note 04-15-31 (R)                                            8.625          BBB               15          17,013
Sierra Pacific Power Co.,
1st Mtg Note 06-01-08 (R)                                       8.000          BBB+              45          46,451
Sierra Pacific Resources,
Note 05-15-05                                                   8.750          BBB-              10          10,402
Tiers Fixed Rate Certificates,
Collateral Trust 06-15-04 (R)                                   7.200          BBB-              30          30,329
TXU Electric Capital V,
Capital Sec 01-30-37                                            8.175          BBB-              10          10,205
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17                              8.090          BBB-              25          25,662
Xcel Energy, Inc.,
Sr Note 12-01-10                                                7.000          BBB+              45          46,950
                                                                                                     --------------
                                                                                                            926,119
                                                                                                     --------------
Waste Disposal Service & Equip (0.35%)
Republic Services, Inc.,
Sr Note 08-15-11                                                6.750          BBB               30          30,305
                                                                                                     --------------
TOTAL BONDS
(Cost $7,997,827)                                                                           (94.34%)      8,230,281
                                                                                     --------------  --------------

                                                                                          NUMBER OF
                                                                                          SHARES OR
                                                                                           WARRANTS
                                                                                     --------------
                                                                                               
PREFERRED STOCKS AND WARRANTS
CSC Holdings, Inc., 11.125%, Ser M,
Preferred Stock                                                                                 125          13,313
CSC Holdings, Inc., 11.750%, Ser H,
Preferred Stock                                                                                 140          15,155
MetroNet Communications Corp.,
Warrant (Canada) (R)**                                                                           10             950
                                                                                                     --------------
                                                                                                             29,418
                                                                                                     --------------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $28,196)                                                                               (0.34%)         29,418
                                                                                     --------------  --------------


                                                                           INTEREST       PAR VALUE
                                                                               RATE   (000s OMITTED)
                                                                           --------    ------------
                                                                                            
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.19%)
Investment in a joint repurchase agreement transaction with
UBS Warburg, Inc. - Dated 08-31-01, due 09-04-01 (Secured by U.S.
Treasury Bond, 8.75% due 05-15-20 and U.S. Treasury Note
4.75% due 11-15-08)                                                          3.640%            $453        $453,000
                                                                                                     --------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $453,000)                                                                              (5.19%)        453,000
                                                                                     --------------  --------------
TOTAL INVESTMENTS                                                                           (99.87%)      8,712,699
                                                                                     --------------  --------------
OTHER ASSETS AND LIABILITIES, NET                                                            (0.13%)         11,360
                                                                                     --------------  --------------
TOTAL NET ASSETS                                                                           (100.00%)     $8,724,059
                                                                                     ==============  ==============

  * Credit ratings are unaudited and rated by Standard & Poor's where
    available, or Moody's Investor Services or John Hancock Advisers, Inc.
    where Standard & Poor's ratings are not available.

 ** Non-income producing security.

(A) Cash interest will be paid on this obligation at the stated rate
    beginning on the stated date.

(R) These securities are exempt from registration under rule 144A of
    the Securities Act of 1933. Such securities may be resold, normally to
    qualified institutional buyers, in transactions exempt from
    registration. Rule 144A securities amounted to $1,421,083 or 16.29% of
    net assets as of August 31, 2001.

(Y) Parenthetical disclosure of a foreign country in the security
    description represents country of a foreign issuer, however, security is
    U.S. dollar denominated.

  + All or a portion of these securities, having an aggregate value of
    $87,179 or 1.00% of the Fund's net assets, have been purchased as
    forward commitments; that is, the Fund has agreed on trade date to take
    delivery of and make payment for such securities on a delayed basis
    subsequent to the date of this schedule. The purchase price and interest
    rate of such securities are fixed at trade date, although the Fund does
    not earn any interest on such securities until settlement date. The Fund
    has instructed its Custodian Bank to segregate assets with a current
    value at least equal to the amount of the forward commitments.
    Accordingly, the market values of $42,164 and $47,797 of United States
    Treasury Bond 7.125%, 02-15-23 and United States Treasury Note 5.75%,
    08-15-03 has been segregated to cover the forward commitments.

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

See notes to financial statements.








Schedule of Investments
August 31, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------

                                                                        NUMBER OF
ISSUER, DESCRIPTION                                                        SHARES           VALUE
- -------------------                                                    ----------  --------------
                                                                                
COMMON STOCKS
Banks - United States (4.04%)
Bank of America Corp.                                                         900         $55,350
PNC Financial Services Group                                                1,230          81,906
Wells Fargo & Co.                                                           1,750          80,518
                                                                                   --------------
                                                                                          217,774
                                                                                   --------------
Beverages (3.74%)
Anheuser-Busch Cos., Inc.                                                   1,420          61,117
PepsiCo, Inc.                                                               3,000         141,000
                                                                                   --------------
                                                                                          202,117
                                                                                   --------------
Chemicals (3.69%)
Air Products & Chemicals, Inc.                                              1,600          67,840
Dow Chemical Co. (The)                                                      1,700          59,602
Rohm & Haas Co.                                                             2,000          71,820
                                                                                   --------------
                                                                                          199,262
                                                                                   --------------
Computers (9.56%)
AOL Time Warner, Inc.*                                                      2,100          78,435
Cisco Systems, Inc.*                                                        5,080          82,956
Compaq Computer Corp.                                                       5,740          70,889
EMC Corp.*                                                                  1,960          30,302
International Business Machines
Corp.                                                                       1,040         104,000
Microsoft Corp.*                                                            1,850         105,543
Oracle Corp.*                                                               3,600          43,956
                                                                                   --------------
                                                                                          516,081
                                                                                   --------------
Cosmetics & Personal Care (1.28%)
Avon Products, Inc.                                                         1,500          69,195
                                                                                   --------------
Diversified Operations (3.18%)
Honeywell International, Inc.                                               2,000          74,520
Tyco International Ltd.                                                     1,870          97,147
                                                                                   --------------
                                                                                          171,667
                                                                                   --------------
Electronics (9.05%)
Analog Devices, Inc.*                                                       1,400          66,892
Emerson Electric Co.                                                        1,000          53,600
General Electric Co.                                                        3,350         137,283
Intel Corp.                                                                 3,400          95,064
Motorola, Inc.                                                              3,260          56,724
Texas Instruments, Inc.                                                     2,380          78,778
                                                                                   --------------
                                                                                          488,341
                                                                                   --------------
Energy (1.12%)
Xcel Energy, Inc.                                                           2,200          60,280
                                                                                   --------------
Finance (6.21%)
Citigroup, Inc.                                                             2,666         121,969
J.P. Morgan Chase & Co.                                                     2,000          78,800
Merrill Lynch & Co., Inc.                                                   1,720          88,752
Morgan Stanley Dean Witter & Co.                                              860          45,881
                                                                                   --------------
                                                                                          335,402
                                                                                   --------------
Food (0.99%)
Kraft Foods, Inc. (Class A)                                                 1,655          53,374
                                                                                   --------------
Insurance (5.27%)
ACE, Ltd.                                                                   1,800          59,706
AFLAC, Inc.                                                                 3,250          89,440
American International Group, Inc.                                          1,020          79,764
Marsh & McLennan Cos., Inc.                                                   600          55,740
                                                                                   --------------
                                                                                          284,650
                                                                                   --------------
Media (3.42%)
McGraw-Hill Cos., Inc. (The)                                                1,900         112,575
Viacom, Inc. (Class B)*                                                     1,700          72,080
                                                                                   --------------
                                                                                          184,655
                                                                                   --------------
Medical (9.64%)
American Home Products Corp.                                                2,240         125,440
Baxter International, Inc.                                                  3,400         175,440
Johnson & Johnson                                                           3,000         158,130
Pfizer, Inc.                                                                1,600          61,296
                                                                                   --------------
                                                                                          520,306
                                                                                   --------------
Mortgage Banking (5.08%)
Fannie Mae                                                                  1,700         129,557
Freddie Mac                                                                 2,300         144,624
                                                                                   --------------
                                                                                          274,181
                                                                                   --------------
Office (1.19%)
Avery Dennison Corp.                                                        1,250          64,262
                                                                                   --------------
Oil & Gas (8.37%)
Anadarko Petroleum Corp.                                                    1,100          56,925
Chevron Corp.                                                               1,140         103,455
Conoco, Inc. (Class A)                                                      3,440         101,996
Exxon Mobil Corp.                                                           3,392         136,189
Halliburton Co.                                                             1,900          52,934
                                                                                   --------------
                                                                                          451,499
                                                                                   --------------
Paper & Paper Products (2.43%)
Kimberly-Clark Corp.                                                        2,110         130,925
                                                                                   --------------
Retail (6.11%)
CVS Corp.                                                                   1,900          68,609
Home Depot, Inc. (The)                                                      2,150          98,792
Lowe's Cos., Inc.                                                           2,500          93,000
Target Corp.                                                                2,000          69,300
                                                                                   --------------
                                                                                          329,701
                                                                                   --------------
Telecommunications (3.56%)
ADC Telecommunications, Inc.*                                               5,100          22,287
Tellabs, Inc.*                                                              4,500          59,940
Verizon Communications, Inc.                                                2,200         110,000
                                                                                   --------------
                                                                                          192,227
                                                                                   --------------
Tobacco (3.16%)
Philip Morris Cos., Inc.                                                    3,600         170,640
                                                                                   --------------
Utilities (3.52%)
Duke Energy Corp.                                                           2,100          82,551
SBC Communications, Inc.                                                    2,630         107,593
                                                                                   --------------
                                                                                          190,144
                                                                                   --------------
TOTAL COMMON STOCKS
(Cost $4,637,595)                                                         (94.62%)      5,106,683
                                                                   --------------  --------------


                                                         INTEREST       PAR VALUE
                                                             RATE   (000s OMITTED)
                                                         --------    ------------
                                                                          
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.43%)
Investment in a joint repurchase
agreement transaction with
UBS Warburg, Inc. - Dated
08-31-01, due 09-04-01
(Secured by U.S. Treasury Bonds,
8.75% due 05-15-20 and
U.S. Treasury Note, 4.75%
due 11-15-08)                                               3.64%            $293        $293,000
                                                                                   --------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $293,000)                                                            (5.43%)        293,000
                                                                   --------------  --------------
TOTAL INVESTMENTS                                                        (100.05%)      5,399,683
                                                                   --------------  --------------
OTHER ASSETS AND LIABILITIES, NET                                          (0.05%)         (2,690)
                                                                   --------------  --------------
TOTAL NET ASSETS                                                         (100.00%)     $5,396,993
                                                                   ==============  ==============

* Non-income producing security.

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

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Medium Capitalization Growth Fund

Schedule of Investments
August 31, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the Medium Capitalization Growth Fund on August 31, 2001. Common stocks
are further broken down by industry group.

                                                                        NUMBER OF
ISSUER, DESCRIPTION                                                        SHARES           VALUE
- -------------------                                                    ----------  --------------
                                                                                
COMMON STOCKS
Advertising (2.22%)
Lamar Advertising Co.*                                                      1,850         $59,385
TMP Worldwide, Inc.*                                                        1,650          74,003
                                                                                   --------------
                                                                                          133,388
                                                                                   --------------
Banks - United States (1.80%)
Commerce Bancorp, Inc.                                                        495          33,437
Zions BanCorp.                                                              1,300          74,438
                                                                                   --------------
                                                                                          107,875
                                                                                   --------------
Broker Services (3.09%)
Legg Mason, Inc.                                                            3,388         151,477
Lehman Brothers Holdings, Inc.                                                510          33,481
                                                                                   --------------
                                                                                          184,958
                                                                                   --------------
Business Services - Misc. (2.14%)
Corporate Executive Board Co.
(The)*                                                                      1,200          41,700
Robert Half International, Inc.                                             3,486          86,767
                                                                                   --------------
                                                                                          128,467
                                                                                   --------------
Computers (5.97%)
Brocade Communications Systems,
Inc.*                                                                       2,485          59,764
Citrix Systems, Inc.*                                                       2,400          79,080
DST Systems, Inc.*                                                          1,722          82,398
EarthLink, Inc.*                                                              650           8,782
Peregrine Systems, Inc. *                                                   2,850          74,613
SunGard Data Systems, Inc.*                                                 2,259          53,425
                                                                                   --------------
                                                                                          358,062
                                                                                   --------------
Electronics (16.03%)
Cree, Inc.*                                                                 3,450          72,346
Garmin Ltd.*                                                                4,000          79,400
International Rectifier Corp.*                                              2,037          75,328
KLA-Tencor Corp.*                                                           2,100         103,194
Lam Research Corp.*                                                         3,300          93,423
Micrel, Inc.*                                                               3,250         100,295
National Semiconductor Corp.*                                               4,587         151,600
Novellus Systems, Inc.*                                                     2,500         110,775
Semtech Corp.*                                                              2,550          95,192
TriQuint Semiconductor, Inc.*                                               3,750          79,500
                                                                                   --------------
                                                                                          961,053
                                                                                   --------------
Energy (1.38%)
Calpine Corp.*                                                              2,500          82,550
                                                                                   --------------

Finance (7.61%)
Affiliated Managers Group, Inc.*                                            1,443         102,309
Concord EFS, Inc.*                                                          2,672         140,200
SEI Investments Co.                                                         1,500          61,560
USA Education, Inc.                                                         1,920         152,083
                                                                                   --------------
                                                                                          456,152
                                                                                   --------------
Household (0.70%)
Mohawk Industries, Inc.*                                                      939          41,879
                                                                                   --------------
Instruments - Scientific (2.54%)
Waters Corp.*                                                               4,603         152,497
                                                                                   --------------
Insurance (6.66%)
ACE, Ltd. (Bermuda)                                                         3,225         106,973
Ambac Financial Group, Inc.                                                 1,658          98,154
Everest Re Group, Ltd. (Bermuda)                                            1,505          97,675
MGIC Investment Corp.                                                       1,383          96,672
                                                                                   --------------
                                                                                          399,474
                                                                                   --------------
Manufacturing (2.83%)
Danaher Corp.                                                               3,052         169,600
                                                                                   --------------
Media (8.17%)
Emmis Communications Corp. (Class A)*                                       3,250          77,935
McGraw-Hill Cos., Inc. (The)                                                1,860         110,205
Univision Communications, Inc.
(Class A)*                                                                  2,190          65,328
USA Networks, Inc.*                                                         5,000         115,800
Westwood One, Inc.                                                          4,225         120,413
                                                                                   --------------
                                                                                          489,681
                                                                                   --------------
Medical (23.98%)
Allergan, Inc.                                                              1,257          90,818
AmerisourceBergen Corp.*                                                    1,915         123,403
Express Scripts, Inc.*                                                      2,550         136,476
Genzyme Corp.*                                                              1,600          90,624
ICOS Corp.*                                                                 1,200          69,960
IDEC Pharmaceuticals Corp.*                                                 2,430         144,026
Laboratory Corp. of America
Holdings*                                                                   1,157          90,130
MedImmune, Inc.*                                                            2,650         106,398
Smith & Nephew Plc, (United
Kingdom)                                                                      150             783
Tenet Healthcare Corp.*                                                     1,283          71,104
Trigon Healthcare, Inc.*                                                      871          56,397
Universal Health Services, Inc.
(Class B)                                                                   2,815         133,150
Varian Medical Systems, Inc.                                                1,400          92,400
Wellpoint Health Networks, Inc.*                                            1,438         153,118
Zimmer Holdings, Inc.*                                                      2,900          78,880
                                                                                   --------------
                                                                                        1,437,667
                                                                                   --------------
Medical - Drugs (4.25%)
Forest Laboratories, Inc.*                                                    491          35,848
Shire Pharmaceuticals Group Plc,*
American Depositry Receipt (ADR)
(United Kingdom)                                                            1,961          85,147
Teva Pharmaceutical Industries, Ltd.,
(ADR) (Israel)                                                              1,879         133,597
                                                                                   --------------
                                                                                          254,592
                                                                                   --------------
Oil & Gas (1.47%)
Santa Fe International Corp.                                                1,878          47,513
Weatherford International, Inc.*                                            1,217          40,490
                                                                                   --------------
                                                                                           88,003
                                                                                   --------------
Real Estate Operations (1.52%)
Lennar Corp.                                                                2,051          91,372
                                                                                   --------------
Retail (8.31%)
Abercrombie & Fitch Co. (Class A)*                                          1,984          60,195
Darden Restaurants, Inc.                                                    2,912          83,341
Family Dollar Stores, Inc.                                                  2,711          81,330
Intimate Brands, Inc.                                                       4,532          62,360
Talbots, Inc.                                                               2,442          90,647
TJX Cos., Inc.                                                              3,423         120,147
                                                                                   --------------
                                                                                          498,020
                                                                                   --------------
Telecommunications (2.57%)
Dobson Communications Corp. (Class A)*                                     10,450         154,137
                                                                                   --------------
Waste Disposal Service & Equip (0.93%)
Republic Services, Inc.*                                                    2,800          55,580
                                                                                   --------------
TOTAL COMMON STOCKS
(Cost $6,288,327)                                                        (104.17%)      6,245,007
                                                                   --------------  --------------
TOTAL INVESTMENTS                                                        (104.17%)      6,245,007
                                                                   --------------  --------------
OTHER ASSETS AND LIABILITIES, NET                                          (4.17%)       (249,921)
                                                                   --------------  --------------
TOTAL NET ASSETS                                                         (100.00%)     $5,995,086
                                                                   --------------  --------------

* Non-income producing security.

Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.

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

See notes to financial statements.





Portfolio Concentration (Unaudited)
- ------------------------------------------------------------------------
The Medium Capitalization Growth Fund invests primarily in common stocks
of U.S. and foreign issuers. The performance of the Fund is closely tied
to the economic and financial conditions within the countries in which it
invests. The concentration of investments by industry category for
individual securities held by the Fund is shown in the schedule of
investments. In addition, concentration of investments can be aggregated
by various countries. The table below shows the percentages of the Fund's
investments at August 31, 2001, assigned to country categories.

                                     VALUE AS A
                                   PERCENTAGE OF
COUNTRY DIVERSIFICATION          FUND'S NET ASSETS
- -----------------------          -----------------
Bermuda                                  3.41%
Israel                                   2.23
United Kingdom                           1.43
United States                           97.10
                                 -----------------
TOTAL INVESTMENTS                      104.17%
                                 =================

See notes to financial statements.






John Hancock Funds -- Institutional Series Trust -- Focused Small Cap Growth Fund

Schedule of Investments
August 31, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the Focused Small Cap Growth Fund on August 31, 2001. It's divided into
two main categories: common stocks and short-term investments. Common
stocks are further broken down by industry group. Short-term investments,
which represent the Fund's "cash" position, are listed last.

                                                                        NUMBER OF
ISSUER, DESCRIPTION                                                        SHARES           VALUE
- -------------------                                                    ----------  --------------
                                                                                
COMMON STOCKS
Advertising (0.67%)
Getty Images, Inc.*                                                         2,020         $32,360
                                                                                   --------------
Business Services - Misc. (2.88%)
Corporate Executive Board Co.
(The)*                                                                      4,000         139,000
                                                                                   --------------
Computers (9.03%)
Advent Software, Inc.*                                                      1,690          89,756
Cerner Corp.*                                                               1,900          92,131
eFUNDS Corp.*                                                                 550           9,504
Macromedia, Inc.*                                                           4,000          55,720
Manugistics Group, Inc.*                                                    2,000          23,420
Netegrity, Inc.*                                                            3,950          69,915
Numerical Technologies, Inc.*                                               1,500          42,675
Stellant, Inc. *                                                            2,400          52,320
                                                                                   --------------
                                                                                          435,441
                                                                                   --------------
Electronics (17.93%)
Alpha Industries, Inc.*                                                     3,100          98,456
Brooks Automation, Inc.*                                                    1,800          78,030
Cree, Inc.*                                                                 3,300          69,201
DDi Corp.*                                                                  3,300          46,233
DuPont Photomasks, Inc.*                                                    1,050          36,750
LTX Corp.*                                                                  3,650          65,372
Micrel, Inc.*                                                               2,490          76,841
Microsemi Corp.*                                                            3,000          85,500
Nanometrics, Inc.*                                                          2,150          60,759
Powerwave Technologies, Inc.*                                               3,900          56,940
Rudolph Technologies, Inc.*                                                 3,300         118,800
Semtech Corp.*                                                              1,930          72,047
                                                                                   --------------
                                                                                          864,929
                                                                                   --------------
Finance (4.01%)
Affiliated Managers Group, Inc.*                                            1,750         124,075
AmeriCredit Corp.*                                                          1,500          69,240
                                                                                   --------------
                                                                                          193,315
                                                                                   --------------
Insurance (1.43%)
StanCorp Financial Group, Inc.                                              1,500          69,000
                                                                                   --------------
Leisure (0.93%)
Expedia, Inc. (Class A)*                                                    1,200          44,832
                                                                                   --------------

Machinery (2.39%)
Hydril Co.*                                                                 3,550          69,331
SureBeam Corp. (Class A)*                                                   4,400          45,848
                                                                                   --------------
                                                                                          115,179
                                                                                   --------------
Media (3.76%)
Entercom Communications Corp.*                                              2,200          92,026
Insight Communications Co., Inc.*                                           1,900          43,301
Radio One, Inc. (Class A)*                                                  3,000          45,990
                                                                                   --------------
                                                                                          181,317
                                                                                   --------------
Medical (23.40%)
Accredo Health, Inc.*                                                       3,500         128,975
Alkermes, Inc.*                                                             2,900          74,240
AmeriSourceBergen Corp.                                                     1,150          74,106
Charles River Laboratories International,
Inc.*                                                                       1,600          57,120
CV Therapeutics, Inc.*                                                      1,100          54,747
Cytyc Corp.*                                                                4,500         109,035
DaVita, Inc.*                                                               3,700          76,405
Gene Logic, Inc.*                                                             500           8,725
Lincare Holdings, Inc.*                                                     4,000         113,640
Regeneron Pharmaceuticals, Inc.*                                            1,500          45,180
Renal Care Group, Inc.*                                                     3,050          99,918
Rightchoice Managed Care, Inc. *                                            2,700         124,713
Wilson Greatbatch Technologies,
Inc.*                                                                       6,260         162,134
                                                                                   --------------
                                                                                        1,128,938
                                                                                   --------------
Medical - Drugs (8.03%)
CIMA Labs, Inc.*                                                              800          42,824
Inhale Therapeutic Systems, Inc.*                                           5,200          75,556
Noven Pharmaceuticals, Inc.*                                                2,100          46,557
NPS Pharmaceuticals, Inc.*                                                  3,400         114,308
Pharmaceutical Product Development,
Inc.*                                                                       2,300          69,368
Salix Pharmaceuticals, Ltd.*                                                2,600          38,480
                                                                                   --------------
                                                                                          387,093
                                                                                   --------------
Oil & Gas (2.37%)
Evergreen Resources, Inc.*                                                  1,600          60,560
Universal Compression Holdings,
Inc.*                                                                       2,000          53,600
                                                                                   --------------
                                                                                          114,160
                                                                                   --------------
Retail (12.61%)
Buca, Inc.*                                                                 2,450          37,461
Columbia Sportswear Co.*                                                    2,400          78,384
Duane Reade, Inc.*                                                          1,500          53,100
GoTo.com, Inc.*                                                             4,150          81,962
Hot Topic, Inc.*                                                            1,500          49,875
Krispy Kreme Doughnuts, Inc.*                                               1,600          49,360
O'Reilly Automotive, Inc.*                                                  2,150          67,080
P.F. Chang's China Bistro, Inc.*                                            1,450          64,525
Whole Foods Market, Inc.*                                                   3,600         126,684
                                                                                   --------------
                                                                                          608,431
                                                                                   --------------
Schools / Education (2.61%)
Strayer Education, Inc.                                                     2,600         126,100
                                                                                   --------------
Shoes & Related Apparel (1.21%)
Skechers U.S.A., Inc. (Class A)*                                            2,800          58,660
                                                                                   --------------
Telecommunications (4.20%)
AirGate PCS, Inc.*                                                          2,450         144,403
Metro One Telecommunications, Inc.*                                           725          22,990
SBA Communications Corp.*                                                   2,630          35,032
                                                                                   --------------
                                                                                          202,425
                                                                                   --------------
Waste Disposal Service & Equipment (1.60%)
Waste Connections, Inc.*                                                    2,400          77,472
                                                                                   --------------
TOTAL COMMON STOCKS
(Cost $4,704,687)                                                         (99.06%)      4,778,652
                                                                     ------------  --------------


                                                         INTEREST       PAR VALUE
                                                             RATE   (000s OMITTED)
                                                         --------    ------------
                                                                          
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.53%)
Investment in a joint repurchase
agreement transaction with
UBS Warburg, Inc. - Dated
08-31-01, due 09-04-01
(Secured by U.S. Treasury Bond,
8.75% due 05-15-20 and
U.S. Treasury Note, 4.75%
due 11-15-08)                                               3.64%             $74         $74,000
                                                                                   --------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $74,000)                                                             (1.53%)         74,000
                                                                     ------------  --------------
TOTAL INVESTMENTS                                                        (100.59%)      4,852,652
                                                                     ------------  --------------
OTHER ASSETS AND LIABILITIES, NET                                          (0.59%)        (28,534)
                                                                     ------------  --------------
TOTAL NET ASSETS                                                         (100.00%)     $4,824,118
                                                                     ============  ==============

* Non-income producing security.

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

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- Small Cap Equity Fund

Schedule of Investments
August 31, 2001 (Unaudited)
- ---------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the Small Cap Equity Fund on August 31, 2001. Common stocks are further
broken down by industry group.

                                                                        NUMBER OF
ISSUER, DESCRIPTION                                                        SHARES           VALUE
- -------------------                                                    ----------  --------------
                                                                                
COMMON STOCKS
Advertising (0.23%)
Penton Media, Inc.                                                          6,000         $75,600
                                                                                   --------------
Broker Services (1.22%)
Jefferies Group, Inc.                                                      12,100         402,930
                                                                                   --------------
Computers (11.89%)
Aspen Technology, Inc.*                                                    46,000         757,620
Electronics for Imaging, Inc.*                                             18,000         368,280
Hyperion Solutions Corp.*                                                  23,250         361,538
Parametric Technology Corp.*                                               23,200         169,128
ProQuest Co.*                                                              10,450         368,885
Student Advantage, Inc.*                                                   54,950         106,054
UNOVA, Inc. *                                                             141,250         889,875
Wind River Systems, Inc.*                                                  60,000         912,000
                                                                                   --------------
                                                                        3,933,380
                                                                                   --------------
Electronics (13.34%)
Alpha Industries, Inc.*                                                    32,050       1,017,908
Axcelis Technologies, Inc.*                                                29,000         404,550
MKS Instruments, Inc.*                                                     35,652         796,822
Three-Five Systems, Inc. *                                                 53,730       1,020,870
Vicor Corp.*                                                               57,650       1,173,754
                                                                                   --------------
                                                                        4,413,904
                                                                                   --------------
Finance (2.18%)
Sovereign Bancorp., Inc.                                                   65,000         720,200
                                                                                   --------------
Food (6.38%)
Galaxy Nutritional Foods, Inc.*                                            75,000         506,250
Hain Celestial Group, Inc.*                                                71,500       1,605,890
                                                                                   --------------
                                                                                        2,112,140
                                                                                   --------------
Insurance (0.63%)
StanCorp Financial Group, Inc.*                                             4,500         207,000
                                                                                   --------------
Leisure (1.71%)
Six Flags, Inc.*                                                           34,100         567,083
                                                                                   --------------
Media (11.48%)
Cumulus Media, Inc. (Class A)*                                             91,300       1,154,945
Pegasus Communications Corp.*                                             141,700       1,629,550
Radio One, Inc. (Class D)*                                                 35,300         540,443
Regent Communications, Inc.*                                               60,500         474,925
                                                                                   --------------
                                                                                        3,799,863
                                                                                   --------------
Medical (10.83%)
Alpharma, Inc. (Class A)                                                   47,500       1,491,500
Covance, Inc.*                                                             55,000       1,057,100
Cyberonics, Inc.*                                                          25,000         437,500
I-STAT Corp.*                                                              85,300         597,100
                                                                                   --------------
                                                                                        3,583,200
                                                                                   --------------
Oil & Gas (3.68%)
Chesapeake Energy Corp.*                                                   40,000         238,400
Marine Drilling Cos., Inc.*                                                22,500         290,250
Petroleum Geo-Services ASA, American
Depositary Receipts. (ADR)
(Norway)*                                                                  15,000         149,400
Precision Drilling Corp. (Canada)*                                         22,000         539,000
                                                                                   --------------
                                                                                        1,217,050
                                                                                   --------------
Protection - Safety Equip & Svc. (2.56%)
Pittston Brink's Group                                                     38,400         847,104
                                                                                   --------------
Real Estate Investment Trust (0.23%)
Pinnacle Holdings, Inc.*                                                  114,000          75,240
                                                                                   --------------
Retail (6.58%)
Pathmark Stores, Inc.*                                                     53,000       1,285,250
Rite Aid Corp. *                                                           45,000         357,300
Wild Oats Markets, Inc.*                                                   60,000         535,200
                                                                                   --------------
                                                                                        2,177,750
                                                                                   --------------
Telecommunications (18.17%)
AirGate PCS, Inc.*                                                          5,000         294,700
Alaska Communications Systems
Holdings, Inc.*                                                            41,700         353,616
Arris Group, Inc.*                                                         60,750         439,830
Aware, Inc.                                                                38,000         209,380
CT Communications, Inc.                                                    17,000         296,820
CTC Communications Group, Inc.*                                           112,150         790,658
Lightbridge, Inc.*                                                         47,000         549,900
LCC International, Inc. (Class A)*                                         40,000         206,400
Motient Corp.                                                              95,000          32,281
NTELOS, Inc.*                                                              61,000       1,013,820
SBA Communications Corp.*                                                  27,400         364,966
XM Satellite Radio Holdings, Inc.
(Class A)*                                                                145,350       1,460,768
                                                                                   --------------
                                                                                        6,013,139
                                                                                   --------------
Transportation (3.66%)
RailAmerica, Inc.*                                                         95,000       1,211,250
                                                                                   --------------
Waste Disposal Service & Equip (3.43%)
Casella Waste Systems, Inc. (Class A)*                                     97,450       1,134,318
                                                                   --------------  --------------
TOTAL COMMON STOCKS
(Cost $35,596,383)                                                        (98.20%)     32,491,151
                                                                   --------------  --------------
TOTAL INVESTMENTS                                                         (98.20%)     32,491,151
                                                                   --------------  --------------
OTHER ASSETS AND LIABILITIES, NET                                          (1.80%)        596,157
                                                                   --------------  --------------
TOTAL NET ASSETS                                                         (100.00%)    $33,087,308
                                                                   ==============  ==============

* Non-income producing security.

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

Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.

See notes to financial statements.








John Hancock Funds -- Institutional Series Trust -- International Equity Fund

Schedule of Investments
August 31, 2001 (Unaudited)
- ---------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the International Equity Fund on August 31, 2001. It's divided into three
main categories: common stocks, warrants and short-term investments.
Common stocks and warrants are further broken down by country. Short-term
investments, which represent the Fund's "cash" position, are listed last.

                                                                        NUMBER OF
ISSUER, DESCRIPTION                                                        SHARES           VALUE
- -------------------                                                    ----------  --------------
                                                                                
COMMON STOCKS
Australia (0.27%)
Woolworths Ltd. (Retail)                                                    2,100         $11,877
                                                                                   --------------
Belgium (0.29%)
UCB SA (Medical)                                                              300          12,736
                                                                                   --------------
Bermuda (1.13%)
XL Capital Ltd. (Class A)
(Insurance)                                                                   600          49,800
                                                                                   --------------
Canada (6.96%)
Anderson Exploration Ltd.* (Oil &
Gas)                                                                        2,500          42,638
Biovail Corp.* (Medical)                                                      500          23,050
Loblaw Cos. Ltd. (Retail)                                                     800          27,082
Magna International, Inc. (Class A)
(Automobile/Trucks)                                                           603          37,028
Manulife Financial Corp.
(Insurance)                                                                 1,900          55,765
Precision Drilling Corp.* (Oil &
Gas)                                                                        1,500          36,750
Suncor Energy, Inc. (Oil & Gas)                                             1,500          41,582
Talisman Energy, Inc. (Oil & Gas)                                           1,100          42,163
                                                                                   --------------
                                                                                          306,058
                                                                                   --------------
Denmark (1.59%)
Novo Nordisk AS (Medical)                                                   1,100          45,928
Vestas Wind Systems AS (Utilities)                                            800          24,124
                                                                                   --------------
                                                                                           70,052
                                                                                   --------------
Finland (0.61%)
Stora Enso Oyj (Paper & Paper
Products)                                                                   2,300          26,868
                                                                                   --------------
France (13.05%)
Alstom SA (Machinery)                                                       1,600          43,550
Assurances Generales de France SA
(Insurance)                                                                   700          38,119
Aventis SA (Medical)                                                          600          43,910
BNP Paribas SA (Banks - Foreign)                                              400          36,728
Castorama Dubois Investissement SA
(Retail)                                                                      600          33,546
Lafarge SA (Building)                                                         300          27,232
PSA Peugeot Citroen SA
(Automobile/Trucks)                                                           700          33,378
Sanofi-Synthelabo SA (Medical)                                                700          45,850
Schneider Electric SA (Machinery)                                             620          34,382
STMicroelectronics NV (Electronics)                                           500          15,227
Television Francaise 1 SA (Media)                                           1,600          46,531
TotalFinaElf SA (Oil & Gas)                                                   489          72,328
Vivendi Environnement SA
(Utilities)                                                                 1,400          59,526
Vivendi Universal SA
(Diversified Operations)                                                      800          43,782
                                                                                   --------------
                                                                                          574,089
                                                                                   --------------
Germany (6.21%)
BASF AG (Chemicals)                                                         1,200          49,091
Bayerische Motoren Werke AG
(Automobile/Trucks)                                                         1,300          41,778
Deutsche Bank AG (Banks - Foreign)                                            400          27,600
E.On AG (Diversified Operations)                                            1,000          54,591
Fresenius Medical Care AG (Medical)                                           200          15,891
Infineon Technologies AG
(Electronics)                                                                 500          11,700
Muenchener Rueckversicherungs-
Gesellschaft AG (Insurance)                                                   158          45,332
SAP AG (Computers)                                                            200          27,106
                                                                                   --------------
                                                                                          273,089
                                                                                   --------------
Hong Kong (0.92%)
China Mobile Ltd.*
(Telecommunications)                                                        6,500          20,292
Johnson Electric Holdings Ltd.
(Electronics)                                                              17,000          20,270
                                                                                   --------------
                                                                                           40,562
                                                                                   --------------
Ireland (3.41%)
Allied Irish Banks Plc (Banks -
Foreign)                                                                    3,300          37,200
Bank of Ireland (Banks - Foreign)                                           2,700          25,650
Bank of Ireland (Banks - Foreign)                                           1,800          17,166
CRH Plc (Building)                                                          2,000          33,637
Elan Corp. Plc* American Depositary
Receipts (ADR) (Medical)                                                      700          36,365
                                                                                   --------------
                                                                                          150,018
                                                                                   --------------
Israel (0.97%)
Teva Pharmaceutical Industries Ltd. (ADR)
(Medical)                                                                     600          42,660
                                                                                   --------------
Italy (3.81%)
Autostrade SpA (Transport)                                                  8,500          59,501
ENI SpA (Oil & Gas)                                                         2,800          37,164
Riunione Adriatica di Sicurta SpA
(Insurance)                                                                 3,816          51,690
Telecom Italia SpA
(Telecommunications)                                                        2,300          19,048
                                                                                   --------------
                                                                                          167,403
                                                                                   --------------
Japan (14.76%)
Ajinomoto Co., Inc. (Food)                                                  3,000          32,493
All Nippon Airways Co., Ltd.*
(Transport)                                                                 1,000           3,184
Daikin Industries, Ltd. (Building)                                          2,000          32,206
Eisai Co., Ltd. (Beverages)                                                 1,000          24,719
Fast Retailing Co., Ltd. (Retail)                                             200          25,266
Fuji Photo Film Co., Ltd. (Leisure)                                         1,000          37,226
Fujisawa Pharmaceutical Co., Ltd.
(Medical)                                                                   1,000          19,413
Furukawa Electric Co., Ltd.
(Wire & Cable Products)                                                     1,000           7,546
Honda Motor Co., Ltd.
(Automobile/Trucks)                                                           500          18,065
Marui Co., Ltd. (Retail)                                                    2,000          25,098
Nintendo Co., Ltd. (Leisure)                                                  100          15,960
Nippon Telegraph & Telephone Corp.
(Telecommunications)                                                            3          13,644
Nissan Motor Co., Ltd.
(Automobile/Trucks)                                                        11,000          64,294
Nomura Securities Co., Ltd.
(Broker Services)                                                           2,000          34,025
NTT DoCoMo, Inc.
(Telecommunications)                                                            1          12,296
Oriental Land Co., Ltd. (Leisure)                                             400          28,635
Orix Corp. (Leasing Companies)                                                200          19,927
Seven-Eleven Japan Co., Ltd.
(Retail)                                                                    1,000          33,183
Shionogi & Co., Ltd. (Medical)                                              1,000          17,939
Sumitomo Mitsui Banking Corp.
(Banks - Foreign)                                                           8,000          65,356
Takeda Chemical Industries, Ltd.
(Medical)                                                                   1,000          41,184
Tokyo Electric Power Co., Inc.
(Utilities)                                                                   900          23,270
Tokyo Electron Ltd. (Electronics)                                             500          27,456
Toray Industries, Inc. (Textile)                                            8,000          26,479
                                                                                   --------------
                                                                                          648,864
                                                                                   --------------
Mexico (0.61%)
America Movil SA de CV (ADR)
(Telecommunications)                                                        1,600          26,944
                                                                                   --------------
Netherlands (6.07%)
Aegon NV (Insurance)                                                        1,100          33,190
Akzo Nobel NV (Chemicals)                                                     880          38,960
Fortis (NL) NV (Insurance)                                                  1,300          36,578
Heineken NV (Beverages)                                                     1,075          45,102
ING Groep NV (Insurance)                                                    1,354          42,787
Koninklijke Ahold NV (Retail)                                                 731          21,837
Unilever Plc (Food)                                                         5,700          48,662
                                                                                   --------------
                                                                                          267,116
                                                                                   --------------
Portugal (0.36%)
Portugal Telecom SGPS SA*
(Telecommunications)                                                        2,500          15,955
                                                                                   --------------
Singapore (1.21%)
Singapore Telecommunications Ltd.
(Telecommunications)                                                       46,000          53,372
                                                                                   --------------
South Africa (0.34%)
South African Breweries Ltd.
(Beverages)                                                                 2,000          14,801
                                                                                   --------------
South Korea (0.66%)
Korea Telecom Corp. (ADR)
(Telecommunications)                                                        1,400          29,106
                                                                                   --------------
Spain (2.11%)
Banco Popular Espanol SA
(Banks - Foreign)                                                             900          33,022
Sogecable SA* (Media)                                                       2,000          44,110
Telefonica SA*
(Telecommunications)                                                        1,342          15,592
                                                                                   --------------
                                                                                           92,724
                                                                                   --------------
Sweden (1.59%)
Securitas AB
(Protection - Safety Equip &
Services)                                                                   1,600          25,243
Svenska Handelsbanken AB
(Banks - Foreign)                                                           3,100          44,448
                                                                                   --------------
                                                                                           69,691
                                                                                   --------------
Switzerland (3.31%)
Nestle SA (Food)                                                              300          63,287
Novartis AG (Medical)                                                       1,359          49,560
Serona SA (ADR) (Medical)                                                   1,400          32,480
                                                                                   --------------
                                                                                          145,327
                                                                                   --------------
United Kingdom (21.48%)
Abbey National Plc (Banks -
Foreign)                                                                    3,200          52,036
AstraZeneca Plc (Medical)                                                     700          33,813
Barclays Plc (Banks - Foreign)                                              1,800          54,620
BG Group Plc (Oil & Gas)                                                    8,200          34,050
BP Plc (Oil & Gas)                                                          6,500          55,161
British Airways Plc (Transport)                                             5,200          23,103
British American Tobacco Plc
(Tobacco)                                                                   5,700          48,745
British Sky Broadcasting Group Plc*
(Media)                                                                     3,700          41,821
Centrica Plc (Utilities)                                                   16,410          53,846
Compass Group Plc (Food)                                                    5,300          40,399
Diageo Plc (Beverages)                                                      5,900          59,535
Friends Provident Plc* (Insurance)                                          9,400          34,768
GlaxoSmithKline Plc (Medical)                                               2,000          53,081
Reckitt Benckiser Plc
(Soap & Cleaning Preparations)                                              3,500          53,256
Royal Bank of Scotland Group Plc
(Banks - Foreign)                                                           2,300          57,437
Scottish Power Plc (Utilities)                                              6,300          44,820
Shire Pharmaceuticals Group Plc*
(Medical)                                                                   2,600          37,787
South African Breweries Plc
(Beverages)                                                                 2,700          20,032
Standard Chartered Plc
(Banks - Foreign)                                                           2,300          27,951
Tesco Plc (Retail)                                                         11,600          43,873
Vodafone Group Plc
(Telecommunications)                                                       37,440          74,744
                                                                                   --------------
                                                                                          944,878
                                                                                   --------------
United States (2.59%)
Santa Fe International Corp. (Oil &
Gas)                                                                        1,700          43,010
Schlumberger Ltd. (Oil & Gas)                                                 800          39,200
Transocean Sedco Forex, Inc. (Oil &
Gas)                                                                        1,100          31,790
                                                                                   --------------
                                                                                          114,000
                                                                                   --------------
TOTAL COMMON STOCKS
(Cost $4,360,979)                                                         (94.31%)      4,147,990
                                                                   --------------  --------------

WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs-
Gesellschaft AG* (Insurance)                                                    2             140
                                                                                   --------------
TOTAL WARRANTS
(Cost $90)                                                                 (0.00%)            140
                                                                   --------------  --------------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $4,361,069)                                                         (94.31%)      4,148,130
                                                                   --------------  --------------



                                                         INTEREST       PAR VALUE
                                                             RATE   (000s OMITTED)
                                                         --------    ------------
                                                                          
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.85%)
Investment in a joint repurchase
agreement transaction with
UBS Warburg, Inc. - Dated
08-31-01, due 09-04-01
(Secured by U.S. Treasury Bond,
5.25% due 11-15-28 and
U.S. Treasury Note, 4.75%
due 11-15-08)                                               3.64%            $169        $169,000

                                                                 NUMBER OF SHARES
Cash Equivalents (13.32%)                                        ----------------
Navigator Securities Lending
Prime Portfolio**                                                         585,960         585,960
                                                                   --------------  --------------
TOTAL SHORT-TERM INVESTMENTS                                              (17.17%)        754,960
                                                                   --------------  --------------
TOTAL INVESTMENTS                                                        (111.48%)      4,903,090
                                                                   --------------  --------------
OTHER ASSETS AND LIABILITIES, NET                                         (11.48%)       (504,801)
                                                                   --------------  --------------
TOTAL NET ASSETS                                                         (100.00%)     $4,398,289
                                                                   ==============  ==============

 * Non-Income producing security.

** Represents investment of security lending collateral.

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

See notes to financial statements.





Portfolio Concentration (Unaudited)
- ----------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other
countries. The performance of the Fund is closely tied to the economic
conditions within the countries in which it invests. The concentration of
investments by country for individual securities held by the Fund is shown
in the schedule of investments. In addition, the concentration of
investments can be aggregated by various industry groups. The table below
shows the percentages of the Fund's investments at August 31, 2001,
assigned to the various investment categories.

                                            MARKET VALUE OF SECURITIES
INVESTMENT CATEGORIES                          AS A % OF NET ASSETS
- ---------------------                          --------------------
Automobile/Trucks                                       4.42%
Banks - Foreign                                        10.90
Beverages                                               3.73
Broker Services                                         0.77
Building                                                2.12
Chemicals                                               2.00
Computers                                               0.62
Diversified Operations                                  2.24
Electronics                                             1.70
Food                                                    4.20
Insurance                                               8.83
Leasing Companies                                       0.45
Leisure                                                 1.86
Machinery                                               1.77
Media                                                   3.01
Medical                                                12.55
Oil & Gas                                              10.82
Paper & Paper Products                                  0.61
Protection - Safety Equipment & Services                0.57
Retail                                                  5.04
Soap & Cleaning Preparations                            1.21
Textile                                                 0.60
Tobacco                                                 1.11
Telecommunications                                      6.39
Transport                                               1.95
Utilities                                               4.67
Wire & Cable Products                                   0.17
Short-Term Investments                                 17.17
                                                     -------
TOTAL INVESTMENTS                                     111.48%
                                                     =======

See notes to financial statements.



NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust

(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES

John Hancock Active Bond Fund ("Active Bond Fund"), John Hancock Dividend
Performers Fund ("Dividend Performers Fund"), John Hancock Medium
Capitalization Growth Fund ("Medium Capitalization Growth Fund"), John
Hancock Focused Small Cap Growth Fund, (formerly John Hancock Small
Capitalization Growth Fund) ("Focused Small Cap Growth Fund"), John
Hancock Small Cap Equity Fund, (formerly John Hancock Small Capitalization
Value Fund) ("Small Cap Equity Fund") and John Hancock International
Equity Fund ("International Equity Fund") are separate portfolios of John
Hancock Institutional Series Trust the ("Trust"), an open-end investment
management company registered under the Investment Company Act of 1940,
organized as a Massachusetts business trust in 1994. Each Fund's class of
shares has equal rights as to voting, redemption, dividends and
liquidation within their respective Fund. Effective November 15, 2000, the
board of Trustees designated the existing shares of Focused Small Cap
Growth Fund as Class I shares and authorized the issuance of Class A,
Class B and Class C shares of the Fund, which will become available for
sale to individuals at a later time. The Trustees may authorize the
creation of additional portfolios from time to time to satisfy various
investment objectives.

The investment objective of the Active Bond Fund is a high rate of total
return, consistent with prudent investment risk. The investment objective
of the Dividend Performers Fund is long-term growth of capital, with
income as a secondary objective. The investment objective of the Medium
Capitalization Growth Fund is long-term capital appreciation. The
investment objective of the Focused Small Cap Growth Fund is long-term
growth of capital. The investment objective of the Small Cap Equity Fund
is capital appreciation. The investment objective of the International
Equity Fund is long-term growth of capital.

Significant accounting policies of the Funds are as follows:

VALUATION OF INVESTMENTS Securities in the Funds' portfolios are valued on
the basis of market quotations, valuations provided by independent pricing
services or, if quotations are not readily available or the value has been
materially affected by events occurring after the closing of a foreign
market, 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. All portfolio transactions initially expressed in terms of foreign
currencies have been translated into U.S. dollars as described in "Foreign
Currency Translation" below.

JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, 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, Inc., may participate in a joint repurchase agreement
transaction. Aggregate cash balances are invested in one or more large
repurchase agreements, whose underlying securities are obligations of the
U.S. government and/or its agencies. The Funds' custodian bank receives
delivery of the underlying securities for the joint account on the Funds'
behalf. The Adviser is responsible for ensuring that the agreement is
fully collateralized at all times.

FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed
in terms of foreign currencies are translated into U.S. dollars based on
London currency exchange quotations as of 5:00 p.m., London time, on the
date of any determination of the net asset value of the Funds.
Transactions affecting statement of operations accounts and net realized
gain (loss) on investments are translated at the rates prevailing at the
dates of the transactions.

The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on
the Funds' books and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities, other than
investments in securities, resulting from changes in the exchange rate.

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. Capital gains
realized on some foreign securities are subject to foreign taxes, which
are accrued as applicable. Some securities may be purchased on a
"when-issued" or "forward delivery" basis, which means that the securities
will be delivered to the Funds at a future date, usually beyond customary
settlement date.

DISCOUNT AND PREMIUM ON SECURITIES The Funds accrete discount and amortize
premium from par value on securities from either the date of issue or the
date of purchase over the life of the security.

EXPENSES The majority of the expenses are directly identifiable to an
individual fund. Expenses that are not readily identifiable to a specific
fund will be 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 funds.

ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Funds have been capitalized and are being charged to
the Funds' operations ratably over a five year period that began with the
commencement of the investment operations of the Funds.

BANK BORROWINGS The Funds are permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Funds have entered into a syndicated line of credit
agreement with various banks. This agreement enables the Funds to
participate with other funds managed by the Adviser in an unsecured line
of credit with banks, which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowing. In
addition, a commitment fee is charged to each fund based on the average
daily unused portion of the line of credit and is allocated among the
participating funds. The Funds had no outstanding borrowings activity
under the line of credit during the six months ended August 31, 2001.

SECURITIES LENDING The Funds may lend securities to certain qualified
brokers who pay the Fund negotiated lender fees. These fees are included
in interest income. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. As with other extensions of credit, the Funds may bear
the risk of delay of the loaned securities in recovery or even loss of
rights in the collateral, should the borrower of the securities fail
financially. At August 31, 2001, Focused Small Cap Growth Fund loaned
securities having a market value of $43,086 collateralized by securities
in the amount of $46,374, Small Cap Equity Fund loaned securities having a
market value of $4,218,150 collateralized by securities in the amount of
$4,220,152 and International Equity Fund loaned securities having a market
value of $555,000 collateralized by cash in the amount of $585,960. The
cash collateral was invested in a short-term instrument.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Funds may enter into
forward foreign currency exchange contracts as a hedge against the effect
of fluctuations in currency exchange rates. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date at a set price. The aggregate principal amounts
of the contracts are marked to market daily at the applicable foreign
currency exchange rates. Any resulting unrealized gains and losses are
included in the determination of the Funds' daily net assets. The Funds
record realized gains and losses at the time the forward foreign currency
exchange contract is closed out or offset by a matching contract. Risks
may arise upon entering these contracts from the potential inability of
counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.

These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Funds' Statement of Assets and Liabilities.
The Funds may also purchase and sell forward contracts to facilitate the
settlement of foreign currency denominated portfolio transactions, under
which they intend to take delivery of the foreign currency. Such contracts
normally involve no market risk if they are offset by the currency amount
of the underlying transaction.

The following Fund had open forward foreign currency exchange contracts at
August 31, 2001:

                                                                UNREALIZED
                             PRINCIPAL AMOUNT   EXPIRATION    APPRECIATION
CURRENCY                  COVERED BY CONTRACT        MONTH   (DEPRECIATION)
- --------                  -------------------   ----------    ------------
INTERNATIONAL EQUITY FUND
Buys
South African Rand                    12,733   September '01          ($10)
                                                              ============
Sells
Euro                                   4,608   September '01           $41
Japanese Yen                      38,189,551   September '01        (9,449)
                                                              ------------
                                                                   ($9,408)
                                                              ============

FEDERAL INCOME TAXES Each Fund qualifies as a "regulated investment
company" by complying with the applicable provisions of the Internal
Revenue Code and will not be subject to federal income tax on taxable
income which is distributed to shareholders. Therefore, no federal income
tax provision is required.

For federal income tax purposes, the following Funds had capital loss
carryforwards available to the extent provided by regulations to offset
future net realized capital gains. To the extent such carryforwards are
used by the Funds, no capital gain distributions will be made.

                             CAPITAL LOSS    CAPITAL LOSS
                             CARRYFORWARD    CARRYFORWARD
                                 EXPIRING        EXPIRING
FUND                              2/29/08         2/28/09
- ----                              -------         -------
Active Bond                       $49,819         $79,391
Focused Small  Cap Growth              --         332,423
International Equity                   --         636,448

Expired capital loss carryforwards are reclassified to capital paid-in, in
the year of expiration.

DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Funds identify the
dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding taxes,
which are accrued as applicable.

The Funds record distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ
from accounting principles generally accepted in the United States of
America.

USE OF ESTIMATES The preparation of these financial statements, in
accordance with accounting principles generally accepted in the United
States of America, incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Fund. Actual results could differ from these estimates.

NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES AND OTHERS

The Funds have an investment management contract with the Adviser. Under
the investment management contract, the Funds pay a monthly management fee
to the Adviser equivalent, on an annual basis, to the following:



FUND                             RATE
- ----                             ----
                              
Active Bond                      0.50% of average daily net assets up to $1.5 billion
                                 0.45% of such assets in excess of $1.5 billion

Dividend Performers              0.60% of average daily net assets up to $500 million
                                 0.55% of such assets in excess of $500 million

Medium Capitalization Growth     0.80% of average daily net assets up to $500 million
                                 0.75% of such assets in excess of $500 million

Focused Small Cap Growth         0.80% of average daily net assets

Small Cap Equity                 0.70% of average daily net assets up to $500 million
                                 0.65% of such assets in excess of $500 million

International Equity             0.90% of average daily net assets up to $500 million
                                 0.65% of such assets in excess of $500 million


International Equity Fund and the Adviser have a subadvisory contract with
Nicholas-Applegate Capital Management LP. The Fund is not responsible for
payment of the subadvisory fees.

The Adviser has agreed to limit each Fund's expenses to the following:
0.60% of Active Bond Fund's average daily net assets, 0.70% of Dividend
Performers Fund's average daily net assets, 0.90% of Medium Capitalization
Growth Fund's average daily net assets, 0.85% (excluding any 12b-1 and
transfer agent fees) of Focused Small Cap Growth Fund's average daily net
assets, 0.80% of Small Cap Equity Fund's average daily net assets and
1.00% of International Equity Fund's average daily net assets at least
until June 30, 2002. Accordingly, for the period ended August 31, 2001,
the reduction in the Funds' expenses amounted to as follows: $42,280 for
the Active Bond Fund, $28,825 for the Dividend Performers Fund, $34,873
for the Medium Capitalization Growth Fund, $33,256 for the Focused Small
Cap Growth Fund, $39,020 for the Small Cap Equity Fund and $84,411 for the
International Equity Fund. The Adviser has the right to terminate this
limitation in the future.

The Funds have a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended
August 31, 2001, all sales of shares of beneficial interest were sold at
net asset value. JH Funds pays all expenses of printing prospectuses and
other sales literature, all fees and expenses in connection with
qualification as a dealer in various states, and all other expenses in
connection with the sale and offering for sale of the shares of the Funds
which have not been herein specifically allocated to the Trust.

The Funds have a transfer agent agreement with John Hancock Signature
Services, Inc., an indirect wholly owned subsidiary of John Hancock Life
Insurance Company. Each Fund pays monthly transfer agent fees at an annual
rate of 0.05% of its average daily net assets, plus certain out-of-pocket
expenses.

The Funds have an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Funds. The compensation for the
period was at an annual rate of 0.02% of the average net assets of each
Fund.

Ms. Maureen R. Ford and Mr. John M. DeCiccio are directors and/or officers
of the Adviser and/or its affiliates, as well as Trustees of the Funds.
The compensation of unaffiliated Trustees is borne by the Fund. 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. The Funds make investments into other John Hancock
funds, as applicable, to cover their liability for the deferred
compensation. Investments to cover the Funds' deferred compensation
liability are recorded on the Funds' books as an other asset. The deferred
compensation liability and the related other assets are always equal and
are marked to market on a quarterly basis to reflect any income earned by
the investments as well as any unrealized gains or losses. The Deferred
Compensation Plan investments had no impact on the operations of the
Funds.

NOTE C --
INVESTMENT TRANSACTIONS

Purchases and proceeds from sales of securities for the Funds, other than
short-term securities and obligations of the U.S. government, during the
six months ended August 31, 2001, were as follows:

                                   PURCHASES        SALES
                                  ----------     -----------
Active Bond                       $9,955,086      $7,643,738
Dividend Performers                1,367,028       1,975,149
Medium Capitalization Growth      10,458,247      13,419,960
Focused Small Cap Growth           3,929,228       3,694,119
Small Cap Equity                  13,540,663      12,310,143
International Equity               5,483,205       5,542,350

The cost of investments owned on August 31, 2001, (including short-term
investments) and gross unrealized appreciation and depreciation in value
of investments owned by the Funds, for federal income tax purposes, were
as follows:



                                                   GROSS          GROSS  NET UNREALIZED
                                               UNREALIZED    UNREALIZED    APPRECIATION
                                    COST     APPRECIATION  DEPRECIATION   (DEPRECIATION)
                                 ----------  ------------  ------------    ------------
                                                               
Active Bond                      $8,532,191      $204,603      ($24,095)       $180,508
Dividend Performers               4,941,208       936,324      (477,849)        458,475
Medium Capitalization Growth      6,303,601       428,552      (487,146)        (58,594)
Focused Small Cap Growth          4,781,686       640,526      (569,560)         70,966
Small Cap Equity                 35,596,383     4,898,886    (8,004,118)     (3,105,232)
International Equity              5,136,785       171,875      (405,570)       (233,695)


NOTE D --
CHANGE IN ACCOUNTING PRINCIPLE

Effective March 1, 2001, the Funds adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies, as revised, and began
amortizing premiums on debt securities. Prior to this date, the Funds did
not amortize premiums on debt securities. The cumulative effect of this
accounting change had no impact on the total net assets of the Funds, but
for the Active Bond Fund resulted in a $16,519 reduction in the cost of
the investments and a corresponding increase in unrealized appreciation on
investments, based on securities held as of February 28, 2001. For the
Active Bond Fund the effect of this change in the period ended August 31,
2001 was to decrease net investment income by $8,052, increase unrealized
appreciation on investments by $2,776 and increase net realized gain on
investments by $5,276. The effect of this change on the per share
operating performance and the annualized ratio of net investment income to
average net assets for the period ended August 31, 2001 was as follows:
decrease in the net investment income by $0.01 per share, increase in net
realized and unrealized gain on investments by $0.01 per share and
decrease in the ratio of net investment income to average net assets by
0.20%. The Statements of Changes in Net Assets and the Financial
Highlights for prior periods have not been restated to reflect this change
in presentation.

NOTE E --
SHAREHOLDER MEETING

On April 25, 2001, shareholders of International Equity Fund approved a
new subadvisory management contract among the International Equity Fund,
the Adviser and Nicholas-Applegate Capital Management LP (487,052 FOR; 0
AGAINST; and 0 ABSTAINING).



NOTES

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NOTES

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[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]

John Hancock Funds, Inc.
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603

1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line

www.jhfunds.com

This report is for the information of shareholders of the John Hancock
Institutional Series Trust.

[A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."]

KB0SA  8/01
      10/01




John Hancock International Fund
Combined Schedule of Investments
October 31, 2001



                                                                                        Institutional
                                                                John Hancock             Series Trust               Combined
                                                             International Fund    International Equity Fund

                                                           NUMBER OF                 NUMBER OF               NUMBER OF
ISSUER, DESCRIPTION                                          SHARES  MARKET VALUE      SHARES  MARKET VALUE    SHARES   MARKET VALUE
- -------------------                                          ------  ------------      ------  ------------    ------   ------------
                                                                                                       
COMMON STOCKS
Australia (1.08%)
News Corp., Ltd. (The) (Media)                               11,300       77,740        3,000       20,639      14,300      98,379
Woolworths, Ltd (Retail)                                     15,100       86,114        3,900       22,241      19,000     108,355
                                                                      ----------                ----------              ----------
                                                                         163,854                    42,880                 206,734
                                                                      ----------                ----------              ----------
Belgium (0.36%)
UCB SA (Medical)                                              1,400       53,291          400       15,226       1,800      68,517
                                                                      ----------                ----------              ----------
Canada (7.12%)
Barrick Gold Corp. (Metal)                                    4,600       71,714        1,200       18,708       5,800      90,422
Biovail Corp.* (Medical)                                      2,800      132,328          800       37,808       3,600     170,136
Bombardier, Inc. (Diversified Operations)                    11,800       76,594
Loblaw Co., Ltd. (Retail)                                     4,300      133,054        1,100       34,037       5,400     167,091
Manulife Financial Corp. (Insurance)                          7,500      185,100        1,900       46,892       9,400     231,992
PanCanadian Energy Corp. (Oil & Gas)                          3,100       86,350          800       22,284       3,900     108,634
Placer Dome, Inc. (Metal)                                     7,300       83,293        2,000       22,820       9,300     106,113
Suncor Energy, Inc. (Oil & Gas)                               6,400      195,210        1,500       45,752       7,900     240,962
Talisman Energy, Inc. (Oil & Gas)                             3,700      129,907        1,100       38,621       4,800     168,528
                                                                      ----------                ----------              ----------
                                                                       1,093,550                   266,922               1,360,472
                                                                      ----------                ----------              ----------
Denmark (1.15%)
Novo Nordisk A/S (Class B) (Medical)                          3,800      153,985        1,000       40,522       4,800     194,507
Vestas Wind Systems AS (Utilities)                                                        800       25,123         800      25,123
                                                                      ----------                ----------              ----------
                                                                         153,985                    65,645                 219,630
                                                                      ----------                ----------              ----------
Finland (1.15%)
Stora Enso Oyj (Paper & Paper Products)                      14,200      172,424        3,800       46,142      18,000     218,566
                                                                      ----------                ----------              ----------
France (12.88%)
Alstom (Machinery)                                            4,600       70,254        1,200       18,327       5,800      88,581
Aventis SA (Medical)                                          2,100      154,413          600       44,118       2,700     198,531
BNP Paribas SA (Banks - Foreign)                              2,300      191,151          600       49,866       2,900     241,017
Castorama Dubois Investissement SA (Retail)                   3,100      147,501          900       42,823       4,000     190,324
Lafarge SA (Building)                                         1,700      150,919          300       26,633       2,000     177,552
L'Oreal SA (Cosmetics & Personal Care)                        1,100       75,887          300       20,696       1,400      96,583
Orange SA* (Telecommunications)                              19,100      154,615        5,200       42,094      24,300     196,709
PSA Peugeot Citroen SA (Automobile / Trucks)                  2,000       81,220          500       20,305       2,500     101,525
Sanofi-Synthelabo SA (Medical)                                1,700      112,004          400       26,354       2,100     138,358
STMicroelectronics NV (Electronics)                           4,100      115,795        1,100       31,067       5,200     146,862
Suez SA (Water)                                               3,800      119,388        1,000       31,418       4,800     150,806
Total Fina Elf SA (Oil & Gas)                                 1,700      238,534          489       68,614       2,189     307,148
Usinor SA (Steel)                                            10,900      114,707        3,000       31,571      13,900     146,278
Vivendi Environnement (Utilities)                             3,600      138,296        1,000       38,416       4,600     176,712
Vivendi Universal SA (Media)                                  1,700       79,358          500       23,341       2,200     102,699
                                                                      ----------                ----------              ----------
                                                                       1,944,042                   515,643               2,459,685
                                                                      ----------                ----------              ----------
Germany (5.07%)
BASF AG (Chemicals)                                           3,300      111,604          900       30,437       4,200     142,041
Bayerische Motoren Werke AG (Automobile / Trucks)             2,500       74,295          700       20,803       3,200      95,098
Deutsche Bank AG (Banks - Foreign)                            2,400      133,385          600       33,346       3,000     166,731
E.On AG (Utilities)                                           3,800      197,897        1,000       52,078       4,800     249,975
Fresenius Medical Care AG (Medical)                           1,400       86,723          400       24,778       1,800     111,501
Muenchener Rueckversicherungs-Gesellschaft
  AG (Insurance)                                                612      161,561          158       41,710         770     203,271
                                                                      ----------                ----------              ----------
                                                                         765,465                   203,152                 968,617
                                                                      ----------                ----------              ----------
Greece (0.65%)
Hellenic Telecommunications Organization
  SA (Telecommunications)                                     6,100       98,760        1,600       25,904       7,700     124,664
                                                                      ----------                ----------              ----------





                                                                                        Institutional
                                                                John Hancock             Series Trust               Combined
                                                             International Fund    International Equity Fund

                                                           NUMBER OF                 NUMBER OF               NUMBER OF
ISSUER, DESCRIPTION                                          SHARES  MARKET VALUE      SHARES  MARKET VALUE    SHARES   MARKET VALUE
- -------------------                                          ------  ------------      ------  ------------    ------   ------------
                                                                                                       
Ireland (1.86%)
Allied Irish Banks Plc (Banks - Foreign)                     11,600      112,683        3,300       32,056      14,900     144,739
Bank of Ireland (Banks - Foreign)                             6,200       55,376        1,800       16,077       8,000      71,453
Bank of Ireland (Banks - Foreign)                            12,500      110,745        3,200       28,351      15,700     139,096
                                                                      ----------                ----------              ----------
                                                                         278,804                    76,484                 355,288
                                                                      ----------                ----------              ----------
Israel (0.97%)
Teva Pharmaceutical Industries, Ltd. American
  Depositary Receipt (ADR) (Medical)                          2,400      148,320          600       37,080       3,000     185,400
                                                                      ----------                ----------              ----------
Italy (3.36%)
Autostrade SpA (Transport)                                   17,700      111,123        4,800       30,135      22,500     141,258
ENI SpA (Oil & Gas)                                          10,700      133,968        2,800       35,057      13,500     169,025
Riunione Adriatica di Sicurta SpA (Insurance)                14,800      177,447        3,816       45,753      18,616     223,200
Telecom Italia Mobile SpA (Telecommunications)               15,700       85,434        4,300       23,399      20,000     108,833
                                                                      ----------                ----------              ----------
                                                                         507,972                   134,344                 642,316
                                                                      ----------                ----------              ----------
Japan (14.93%)
Ajinomoto Co., Inc. (Diversified Operations)                  7,000       75,686        2,000       21,625       9,000      97,311
Bridgestone Corp (Rubber - Tires & Misc)                     10,000       94,169        3,000       28,251      13,000     122,420
Bridgestone Corp. (ADR) (Rubber - Tires & Misc)                 100        9,700                                   100       9,700
Dai Nippon Printing Co., Ltd. (Printing - Commercial)         7,000       74,487        2,000       21,282       9,000      95,769
East Japan Railway Co. (Transport)                               13       75,638            3       17,455          16      93,093
Eisai Co., Ltd. (Medical)                                     5,000      127,708        1,000       25,542       6,000     153,250
Fanuc, Ltd. (Electronics)                                                                 600       24,970         600      24,970
Fuji Photo Film Co., Ltd. (Leisure)                           2,000       65,935                                 2,000      65,935
Fujisawa Pharmaceutical Co., Ltd (Medical)                    4,000       95,965        1,000       23,991       5,000     119,956
Furukawa Electric Co., Ltd. (Wire & Cable Products)          12,000       69,134        3,000       17,283      15,000      86,417
Honda Motor Co., Ltd. (Automobile / Trucks)                   2,100       75,230          600       21,494       2,700      96,724
Ito-Yokado Co., Ltd. (Retail)                                 2,000       88,131        1,000       44,065       3,000     132,196
Japan Tobacco, Inc. (Tobacco)                                     4       26,113            2       13,056           6      39,169
Marui Co., Ltd. (Retail)                                      6,000       81,129        1,000       13,522       7,000      94,651
Mitsui Fudosan Co., Ltd. (Real Estate Operations)             7,000       71,002        2,000       20,286       9,000      91,288
Murata Manufacturing Co., Ltd. (Electronics)                  1,500       94,006          400       25,068       1,900     119,074
Nintendo Co., Ltd. (Leisure)                                  1,200      184,879          300       46,220       1,500     231,099
Nippon Steel Corp. (Steel)                                   55,000       73,606       11,000       14,721      66,000      88,327
Nomura Securities Co., Ltd. (Broker Services)                 7,000       91,966        2,000       26,276       9,000     118,242
NTT DoCoMo, Inc. (Telecommunications)                            10      135,460            3       40,638          13     176,098
OJI Paper Co., Ltd. (Paper & Paper Products)                 12,000       58,558        4,000       19,519      16,000      78,077
ORIX Corp. (Leasing Companies)                                  800       69,917          200       17,479       1,000      87,396
Seven-Eleven Japan Co., Ltd. (Retail)                         2,000       86,988        1,000       43,494       3,000     130,482
Shin-Etsu Chemical Co., Ltd. (Chemicals)                      2,500       82,215        1,200       39,463       3,700     121,678
Sumitomo Mitsu Banking Corp. (Banks - Foreign)               16,000       98,837        4,000       24,709      20,000     123,546
Takeda Chemical Industries, Ltd. (Medical)                    2,000       96,781        1,000       48,390       3,000     145,171
Tokyo Electric Power Co., Inc. (Utilities)                    3,500       86,825          900       22,327       4,400     109,152
                                                                      ----------                ----------              ----------
                                                                       2,190,065                   661,126               2,851,191
                                                                      ----------                ----------              ----------
Mexico (0.61%)
America Movil SA de CV (ADR) (Telecommunications)             6,100       91,500        1,600       24,000       7,700     115,500
                                                                      ----------                ----------              ----------
Netherlands (5.29%)
Aegon NV (Insurance)                                          6,700      168,134        1,800       45,170       8,500     213,304
Akzo Nobel NV (Chemicals)                                     3,160      129,465          880       36,054       4,040     165,519
DSM NV (Chemicals)                                            4,000      130,060          900       29,264       4,900     159,324
Fortis (NL) NV (Insurance)                                    6,900      163,223        1,700       40,214       8,600     203,437
Heineken NV (Beverages)                                       2,975      109,309          775       28,475       3,750     137,784
Koninklijke Ahold NV (Retail)                                 3,600      101,220        1,031       28,988       4,631     130,208
                                                                      ----------                ----------              ----------
                                                                         801,411                   208,165               1,009,576
                                                                      ----------                ----------              ----------
Portugal (0.58%)
Portugal Telecom SA (Telecommunications)                     11,600       91,816        2,500       19,788      14,100     111,604
                                                                      ----------                ----------              ----------
Singapore (0.52%)
Singapore Telecommunications, Ltd. (Telecommunications)      83,000       78,764       21,000       19,928     104,000      98,692
                                                                      ----------                ----------              ----------





                                                                                        Institutional
                                                                John Hancock             Series Trust               Combined
                                                             International Fund    International Equity Fund

                                                           NUMBER OF                 NUMBER OF               NUMBER OF
ISSUER, DESCRIPTION                                          SHARES  MARKET VALUE      SHARES  MARKET VALUE    SHARES   MARKET VALUE
- -------------------                                          ------  ------------      ------  ------------    ------   ------------
                                                                                                      
South Korea (2.18%)
Korea Telecom Corp. (ADR) (Telecommunications)                5,400      112,536        1,400       29,176       6,800     141,712
Samsung Electronics Co., Ltd. (Electronics)                   1,600      120,560          400       30,140       2,000     150,700
SK Telecom Co., Ltd. (Telecommunications)                       520       98,885          130       24,721         650     123,606
                                                                      ----------                ----------              ----------
                                                                         331,981                    84,037                 416,018
                                                                      ----------                ----------              ----------
Spain (3.88%)
Banco Popular Espanol SA (Banks - Foreign)                    4,000      134,198        1,100       36,904       5,100     171,102
Iberdrola SA (Utilities)                                     12,000      164,815        3,200       43,951      15,200     208,766
Inditex SA* (Retail)                                         11,700      217,838        1,400       26,066      13,100     243,904
Repsol YPF, SA (Oil & Gas)                                    5,000       72,406                                 5,000      72,406
Sogecable SA* (Media)                                                                   2,000       44,973       2,000      44,973
                                                                      ----------                ----------              ----------
                                                                         589,257                   151,894                 741,151
                                                                      ----------                ----------              ----------
Sweden (1.17%)
Ericsson (L.M.) Telephone Co. (Class B) (ADR)
  (Telecommunications)                                        9,200       39,284        2,500       10,675      11,700      49,959
Svenska Handelsbanken AB (Banks - Foreign)                   11,000      135,606        3,100       38,216      14,100     173,822
                                                                      ----------                ----------              ----------
                                                                         174,890                    48,891                 223,781
                                                                      ----------                ----------              ----------
Switzerland (5.95%)
Nestle SA (Food)                                                800      165,841          200       41,460       1,000     207,301
Novartis AG (Medical)                                         3,563      133,234          917       34,290       4,480     167,524
Roche Holdings AG (Medical)                                   1,082       74,932          294       20,361       1,376      95,293
Serona SA* (ADR) (Medical)                                    4,800       91,872        1,400       26,796       6,200     118,668
Swiss Reinsurance Co. (Insurance)                             1,800      184,920          500       51,367       2,300     236,287
Swisscom AG* (Telecommunications)                               300       83,196          100       27,732         400     110,928
UBS AG* (Banks - Foreign)                                     3,400      157,910          900       41,800       4,300     199,710
                                                                      ----------                ----------              ----------
                                                                         891,905                   243,806               1,135,711
                                                                      ----------                ----------              ----------
Taiwan (0.55%)
Taiwan Semiconductor Manufacturing Co., Ltd.* (ADR)
  (Electronics)                                               6,400       82,624        1,700       21,947       8,100     104,571
                                                                      ----------                ----------              ----------
United Kingdom (22.67%)
Abbey National Plc (Banks - Foreign)                          5,200       77,278        1,600       23,778       6,800     101,056
Allied Domecq Plc (Beverages)                                16,700       84,910        6,500       33,049      23,200     117,959
ARM Holdings Plc* (Electronics)                              15,000       75,831        4,100       20,727      19,100      96,558
Barclays Plc (Banks - Foreign)                                5,800      174,411        1,800       54,128       7,600     228,539
BG Group Plc (Oil & Gas)                                     35,400      133,835        8,200       31,001      43,600     164,836
BP Plc (Oil & Gas)                                           18,500      149,156        4,900       39,506      23,400     188,662
BAE Systems Plc (Aerospace)                                  36,700      178,069        9,800       47,550      46,500     225,619
British American Tobacco Plc (Tobacco)                       20,600      179,554        5,500       47,939      26,100     227,493
British Sky Broadcasting Group Plc* (Media)                  14,200      158,838        3,700       41,387      17,900     200,225
British Telecommunications Plc (Telecommunications)          31,700      160,256        8,500       42,971      40,200     203,227
Centrica Plc (Utilities)                                     47,470      151,022       12,910       41,072      60,380     192,094
Compass Group Plc* (Food)                                    20,100      146,434        5,300       38,612      25,400     185,046
Diageo Plc (Beverages)                                       15,600      155,576        4,200       41,886      19,800     197,462
GlaxoSmithKline Plc (Medical)                                 7,000      188,125        1,900       51,062       8,900     239,187
Lloyds TSB Group Plc (Banks - Foreign)                       15,800      159,292        4,200       42,343      20,000     201,635
Marks & Spencer Plc (Retail)                                 16,200       67,542        3,600       15,009      19,800      82,551
Powergen Plc (Utilities)                                     13,800      149,452        3,700       40,071      17,500     189,523
Reckitt Benckiser Plc (Grocery Products)                     11,100      154,800        3,000       41,838      14,100     196,638
Rentokil Initial Plc (Diversified Operations)                31,900      114,694        8,600       30,921      40,500     145,615
Royal Bank of Scotland Group Plc (Banks - Foreign)            7,600      181,617        2,300       54,963       9,900     236,580
Scottish Power Plc (Utilities)                               13,800       79,187        3,700       21,231      17,500     100,418
Shire Pharmaceuticals Group Plc* (Medical)                    9,000      130,743        2,600       37,770      11,600     168,513
South African Breweries Plc (Beverages)                       6,500       40,500        2,000       12,462       8,500      52,962
South African Breweries Plc (Beverages)                       9,100       56,315        2,700       16,709      11,800      73,024
Tesco Plc (Retail)                                           26,200       92,297        7,100       25,012      33,300     117,309
Vodafone AirTouch Plc (Telecommunications)                   67,300      155,449       18,040       41,669      85,340     197,118
                                                                      ----------                ----------              ----------
                                                                       3,395,183                   934,666               4,329,849
                                                                      ----------                ----------              ----------
United States (3.41%)
Amdocs, Ltd.* (Telecommunications)                            4,300      112,273        1,100       28,721       5,400     140,994
Santa Fe International Corp. (Oil & Gas)                      5,800      141,172        1,700       41,378       7,500     182,550
Schlumberger, Ltd. (Oil & Gas)                                2,900      140,418          800       38,736       3,700     179,154
Transocean Sedco Forex, Inc. (Oil & Gas)                      3,800      114,570        1,100       33,165       4,900     147,735
                                                                      ----------                ----------              ----------
                                                                         508,433                   142,000                 650,433
                                                                      ----------                ----------              ----------

               TOTAL COMMON STOCKS (97.39%)                           14,608,296                 3,989,670              18,597,966
                                                                      ----------                ----------              ----------





                                                                                        Institutional
                                                                John Hancock             Series Trust               Combined
                                                             International Fund    International Equity Fund

                                                           NUMBER OF                 NUMBER OF               NUMBER OF
ISSUER, DESCRIPTION                                          SHARES  MARKET VALUE      SHARES  MARKET VALUE    SHARES   MARKET VALUE
- -------------------                                          ------  ------------      ------  ------------    ------   ------------
                                                                                                      
RIGHTS
Switzerland (0.00%)
Swiss Reinsurance Co. (Insurance)                             1,800            0          500            0       2,300           0
                                                                      ----------                ----------              ----------

                       TOTAL RIGHTS (0.00%)                                    0                         0                       0
                                                                      ----------                ----------              ----------
WARRANTS
Germany (0.00%)
Muenchener Rueckversicherungs-Gesellschaft
  AG* (Insurance)                                                 5          297            2          119           7         416
                                                                      ----------                ----------              ----------
United Kingdom (0.90%)
Infosys Technology, Ltd.* (Computers)                         2,200      133,606          600       36,438       2,800     170,044
                                                                      ----------                ----------              ----------

                     TOTAL WARRANTS (0.90%)                              133,903                    36,557                 170,460
                                                                      ----------                ----------              ----------

               TOTAL COMMON STOCKS, RIGHTS,
                      AND WARRANTS (98.29%)                           14,742,199                 4,026,227              18,768,426
                                                                      ----------                ----------              ----------


                                                 INTEREST
                                                   RATE
                                                   ----
                                                                                                   
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.51%)
Investment in a joint repurchase agreement
transaction with Barclays Capital, Inc. -
Dated 10-31-01, due 11-01-01 (Secured by
U.S. Treasury Bond, 6.375% due 08-15-27 and
U.S. Treasury Note, 3.625% due 01-15-08)           2.58%        195      195,000           94       94,000         289     289,000
                                                                      ----------                ----------              ----------

Cash Equivalents (2.09%)
Navigator Securities Lending
Prime Portfolio**                                           266,400      266,400      132,600      132,600     399,000     399,000
                                                                      ----------                ----------              ----------
       TOTAL SHORT-TERM INVESTMENTS (3.60%)                              461,400                   226,600                 688,000
                                                                      ----------                ----------              ----------
                TOTAL INVESTMENTS (101.89%)                           15,203,599                 4,252,827              19,456,426
                                                                      ----------                ----------              ----------
  OTHER ASSETS AND LIABILITIES, NET (1.89%)                             (224,922)                 (135,776)               (360,698)
                                                                      ----------                ----------              ----------
                 TOTAL NET ASSETS (100.00%)                           14,978,677                 4,117,051              19,095,728
                                                                      ----------                ----------              ----------


* Non-Income producing security.

** Represents investment of security lending collateral.

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



John Hancock International Fund
Notes to Pro Forma Combined Financial Statements
31-Oct-01


Pro forma information is intended to provide shareholders of the John Hancock
International Fund and John Hancock International Equity Fund with information
about the impact of the proposed merger.

The pro forma unaudited combining statements of assets and liabilities and
portfolio of investments reflect the financial position of the John Hancock
International Fund and John Hancock International Equity Fund, as though the
reorganization occurred as of October 31, 2001. The pro forma unaudited
statement of operations reflects the results of operations of each of the merged
funds for the year ended October 31, 2001 as though the reorganization occurred
as of the beginning of the year.

    (A) Acquisition by John Hancock International Fund of all assets of John
        Hancock International Equity Fund and issuance of John Hancock
        International Fund Class I shares in exchange for all outstanding
        shares, respectively of John Hancock International Equity Fund.

    (B) The investment advisory fee was adjusted to reflect the
        application of the fee structure which will be in effect for John
        Hancock International Fund: 1.00% of the first $250,000,000 of the
        Fund's average daily net asset value: 0.80% of the next
        $250,000,000; 0.75% of the next $250,000,000 and 0.625% of the
        Fund's average daily net assets value in excess of $750,000,000.

    (C) The actual expenses incurred by the John Hancock International
        Fund and John Hancock International Equity Fund for various
        expenses included on a pro forma basis were reduced to reflect the
        estimated savings arising from the merger.



John Hancock International Fund
Proforma combined statement of operations
For the 12 months ended October 31, 2001



                                                               John Hancock       John Hancock
                                                              International   International Equity
                                                                   Fund               Fund
                                                                Year Ended      12 Months Ended                          Pro Forma
                                                                 10/31/01           10/31/01         Adjustments         Combined
                                                              -------------   --------------------   -----------         ---------
                                                                                                             
Investment Income
   Dividends (net of foreign withholding taxes of $34,551)      $ 246,350          $  78,241          $      --          $ 324,591
   Interest                                                        54,788             23,174                                77,962
   Securities lending income                                       27,813              8,483                                36,296
                                                                ---------          ---------          ---------          ---------
     Total Income                                                 328,951            109,898                 --            438,849

Expenses
   Investment management fee                                      208,015             54,253              6,029(B)         268,297
   Class A distribution and service fee                            33,461                 --                 --             33,461
   Class B distribution and service fee                            87,402                 --                 --             87,402
   Class C distribution and service fee                             9,077                 --                 --              9,077
   Transfer agent fee                                             213,668              3,014                 --            216,682
   Custodian fee                                                  204,842            139,221           (104,416)(C)        239,647
   Registration and filing fee                                     48,447             19,517             (9,758)(C)         58,206
   Auditing fee                                                    37,900             19,052            (19,052)(C)         37,900
   Printing                                                        11,285             11,113             (5,556)(C)         16,842
   Accounting and legal services fee                                4,160              1,205                 --              5,365
   Miscellaneous                                                    1,992              3,941                 --              5,933
   Trustee's fee                                                    1,383                478                 --              1,861
   Legal fee                                                        1,912                321                 --              2,233
                                                                ---------          ---------          ---------          ---------

     Total Expenses                                               863,544            252,115           (132,753)           982,906
                                                                ---------          ---------          ---------          ---------
     Less expense reductions                                     (332,651)          (191,832)           129,666           (394,817)
                                                                ---------          ---------          ---------          ---------

     Net Expense                                                  530,893             60,283             (3,087)           588,089
                                                                ---------          ---------          ---------          ---------

     Net Investment Income / (Loss)                              (201,942)            49,615              3,087           (149,240)

     (Decrease) / Increase in net assets from operations         (201,942)            49,615              3,087           (149,240)



John Hancock International Fund
Proforma combined statement of assets and liabilities
10/31/2001



                                                       John Hancock       John Hancock                            Pro
                                                       International     International                           Forma
                                                           Fund           Equity Fund       Adjustments         Combined
                                                                                                  
Assets
Investments at value                                    $15,203,599       $ 4,252,827                         $19,456,426
Cash                                                         39,879             8,082                              47,961
Receivable for investments sold                             412,980            83,318                             496,298
Receivable for shares sold                                      252                                                   252
Receivable for forward currency exchange contracts           50,215           567,833                             618,048
Dividends and interest receivable                            26,292            10,805                              37,097
Other assets                                                  1,016             1,187                               2,203
                                                        -----------------------------------------------------------------
    Total Assets                                         15,734,233         4,924,052                          20,658,285
                                                        =================================================================

Liabilities
Due to custodian                                              9,573                                                 9,573
Payable for investments purchased                           354,528            69,705                             424,233
Payable for shares repurchased                                3,406             1,470                               4,876
Payable for forward currency exchange contracts              14,651           561,153                             575,804
Payable for securities on loan                              266,400           132,600                             399,000
Payable to affiliates                                         4,157                                                 4,157
Other payables and accrued expenses                         102,841            42,074                             144,915
                                                        -----------------------------------------------------------------
    Total Liabilities                                       755,556           807,002                           1,562,558
                                                        =================================================================

Capital paid - in                                        24,570,450         6,785,310                          31,355,760
Accumulated net realized loss on investments and
   foreign currency transactions                         (8,878,842)       (2,465,615)                        (11,344,457)
Net unrealized depreciation of investments and
   translation of assets and liabilities in
   foreign currencies                                      (676,990)         (197,936)                           (874,926)
Accumulated net investment loss                             (35,941)           (4,709)                            (40,650)
                                                        -----------------------------------------------------------------
    Net Assets                                          $14,978,677       $ 4,117,050                          19,095,727
                                                        =================================================================

Net Assets:
International Fund
  Class A                                               $ 7,762,153       $        --       $        --       $ 7,762,153
  Class B                                                 6,398,633                                             6,398,633
  Class C                                                   817,891                                               817,891
  Class I                                                                                     4,117,050 A       4,117,050
International Equity Fund                                                                                              --
  Class I                                                                   4,117,050        (4,117,050) A             --
                                                        -----------------------------------------------------------------
                                                        $14,978,677       $ 4,117,050       $        --       $19,095,727
                                                        =================================================================

Shares outstanding:
International Fund
  Class A                                                 1,257,004                                             1,257,004
  Class B                                                 1,091,742                                             1,091,742
  Class C                                                   139,433                                               139,433
  Class I                                                                                       666,715 A         666,715
International Equity Fund
  Class I                                                                     641,104          (641,104) A              0
                                                        -----------------------------------------------------------------

Net asset value per share:
International Fund
  Class A                                               $      6.18                                           $      6.18
  Class B                                               $      5.86                                           $      5.86
  Class C                                               $      5.87                                           $      5.87
  Class I                                                                                                     $      6.18
International Equity Fund
  Class I                                                                 $      6.42       $     (6.42)      $        --
                                                        =================================================================





                                     PART C

                                OTHER INFORMATION

ITEM 15. INDEMNIFICATION

No change from the information set forth in Item 27 of the Registration
Statement of John Hancock Investment Trust III (the "Registrant") on Form N-1A
under the Securities Act of 1933 and the Investment company Act of 1940 (File
Nos. 33-4559 and 811-4630), which information is incorporated herein by
reference.

ITEM 16. EXHIBITS:


                                          
1       Registrant's Amended and Restated       Filed herewith as Exhibit 1
        Declaration of Trust

2       Amended and Restated By-Laws of         Filed as Exhibit 99.b to Registrant's
        Registrant                              Registration Statement on Form N-1A and
                                                incorporated herein by reference to
                                                post-effective amendment no. 34 (file
                                                nos. 811-4630 and 33-4559 on February 27,
                                                1998, accession
                                                no. 0001010521-98-000202) ("PEA 34 ")

2.1     Amendment to Amended and Restated       Filed herewith as Exhibit 2
        By-Laws of Registrant

3       Not applicable

4       Form of Agreement and Plan of           Filed herewith as Exhibit A to the Proxy
        reorganization                          Statement and Prospectus included as Part
                                                A of this Registration Statement

5       Not applicable

6       Investment Management Contracts         Filed as Exhibit 99.d to Registrant's
        between John Hancock International      Registration Statement on Form N-1A and
        Fund and John Hancock Advisers, LLC     incorporated herein by reference to
                                                post-effective amendment no. 28 (file
                                                nos. 811-4630 and 33-4559 on February 27,
                                                1995, accession
                                                no. 0000950146-95-000057) ("PEA 28 ")




                                          
6.1     Investment Management Contract          Filed as Exhibit 99.d.1 to Registrant's
        between John Hancock Growth Fund and    Registration Statement on Form N-1A and
        John Hancock Advisers, LLC              incorporated herein by reference to
                                                post-effective amendment no. 32 (file
                                                nos. 811-4630 and 33-4559 on August 30,
                                                1996, accession
                                                no. 0001010521-96-000151) ("PEA 32 ")

6.2     Investment Management Contract          Filed as Exhibit 99.d.2 to PEA 32 and
        between John Hancock International      incorporated herein by reference
        Fund and John Hancock Advisers, LLC

6.3     Investment Management Contract          Filed as Exhibit 99.d.3 to PEA 32
        between John Hancock Global Fund        and incorporated herein by reference.
        and John Hancock Advisers, LLC

6.4     Sub-Advisory Agreement among            Filed as Exhibit 99.d.4 to Registrant's
        International Fund, Indocam             Registration Statement on Form N-1A and
        International Investment Services and   incorporated herein by reference to
        John Hancock Adviser, LLC               post-effective amendment no. 39 (file
                                                nos. 811-4630 and 33-4559 on December 23,
                                                1999, accession
                                                no. 0001010521-99-000389) ("PEA 39 ")

6.5     Sub-Advisory Agreement among Global     Filed as Exhibit 99.d.5 to PEA 39 and
        Fund, Indocam International             incorporated herein by reference
        Investment Services and John Hancock
        Adviser, LLC

6.6     Investment Management Contract          Filed as Exhibit 99.d.6 to Registrant's
        between John Hancock U.S. Global        Registration Statement on Form N-1A and
        Leaders Fund and John Hancock           incorporated herein by reference to
        Advisers, LLC                           post-effective amendment no. 42 (file
                                                nos. 811-4630 and 33-4559 on February 9,
                                                2001, accession
                                                no. 0001010521-01-000106) ("PEA 42 ")




                                          
6.7     Interim Sub-Advisory Agreement among    Filed as Exhibit 99.d.7 to PEA 42 and
        John Hancock International Fund,        incorporated herein by reference
        Nicholas Applegate and John Hancock
        Advisers, LLC

6.8     Interim Sub-Advisory Agreement among    Filed as Exhibit 99.d.8 to PEA 42 and
        John Hancock Global Fund, Nicholas      incorporated herein by reference.
        Applegate and John Hancock Adviser,
        LLC

6.9     Second Interim sub-Advisory Agreement   Filed as Exhibit 99.d.9 to PEA 42 and
        among John Hancock International        incorporated herein by reference
        Fund, Nicholas Applegate and John
        Hancock Advisers, LLC

6.10    Second Interim sub-Advisory Agreement   Filed as Exhibit 99.d.10 to PEA 42 and
        among John Hancock Global Fund,         incorporated herein by reference.
        Nicholas Applegate and John Hancock
        Advisers, LLC

6.11    Sub-Advisory Agreement among John       Filed as Exhibit 99.d.11 to Registrant's
        Hancock Global Fund, Nicholas           Registration Statement on Form N-1A and
        Applegate and John Hancock Advisers,    incorporated herein by reference to
        LLC                                     post-effective amendment no. 43 (file
                                                nos. 811-4630 and 33-4559 on June 25,
                                                2001, accession
                                                no. 0001010521-01-500062) ("PEA 43 ")

6.12    Sub-Advisory Agreement among John       Filed as Exhibit 99.d.12 to PEA 43 and
        Hancock International Fund, Nicholas    incorporated herein by reference
        Applegate and John Hancock Advisers,
        LLC

7       Distribution Agreement between          Filed as Exhibit 99.e to Registrant's
        Registrant and John Hancock Funds,      Registration Statement on Form N-1A and
        LLC                                     incorporated herein by reference to
                                                post-effective amendment no. 33 (file
                                                nos. 811-4630 and 33-4559 on February 27,
                                                1997, accession
                                                no. 0001010521-97-000227) ("PEA 33 ")




                                          
7.1     Form of Soliciting Dealer Agreement     Filed as Exhibit 99.e.1 to Registrant's
        between John Hancock Funds, LLC and     Registration Statement on Form N-1A and
        Selected Dealers                        incorporated herein by reference to
                                                post-effective amendment no. 37 (file
                                                nos. 811-4630 and 33-4559 on February 25,
                                                1999, accession
                                                no. 0001010521-99-000143) ("PEA 37 ")

7.2     Form of Financial Institution Sales     Filed as Exhibit 99.e.2 to PEA 28 and
        and Service agreement between John      incorporated herein by reference
        Hancock Funds, LLC and John Hancock
        funds

7.3     Amendment to Distribution Agreement     Filed as Exhibit 99.e.3 to PEA 32 and
                                                incorporated herein by reference

        Amendment to Distribution Agreement     Filed as Exhibit 99.e.4 to PEA 42 and
                                                incorporated herein by reference

8       Not applicable

9       Master Custodian Agreement between      Filed as Exhibit 99.g to Registrant's
        John Hancock Mutual Funds (including    Registration Statement on Form N-1A and
        Registrant) and The Bank of New York    incorporated herein by reference to
                                                post-effective amendment no. 44 (file
                                                nos. 811-4630 and 33-4559 on December 27,
                                                2001, accession
                                                no. 0001010521-01-500306) ("PEA 44 ")

10      Amended & Restate Master Transfer       Filed as Exhibit 99.h. to Registrant's
        Agent Service Agreement between John    Registration Statement on Form N-1A and
        Hancock Mutual Funds (including         incorporated herein by reference to
        Registrant) and John Hancock Funds,     post-effective amendment no. 36 (file
        LLC                                     nos. 811-4630 and 33-4559 on December 21,
                                                1998, accession
                                                no. 0001010521-98-000397) ("PEA 36 ")




                                          
10.1    Amendment to the Amended & Restate      Filed as Exhibit 99.h.1 to PEA 42 and
        Master Transfer Agent Service           incorporated herein by reference.
        Agreement between John Hancock Mutual
        Funds (including Registrant) and John
        Hancock Funds, LLC

10.2    Accounting and Legal Services           Filed as Exhibit 99.h.2 to PEA 28 and
        Agreement                               incorporated herein by reference

11      Class A Distribution Plans between      Filed as Exhibit 99.m to PEA 36 and
        Growth Fund and John Hancock Funds,     incorporated herein by reference
        LLC

11.1    Class B Distribution Plans between      Filed as Exhibit 99.m.1 to PEA 36 and
        Growth Fund and John Hancock Funds,     incorporated herein by reference
        LLC

11.2    Class A Distribution Plans between      Filed as Exhibit 99.m.2 to Registrant's
        Global Fund, International Fund, Mid    Registration Statement on Form N-1A and
        Cap Growth Fund and John Hancock        incorporated herein by reference to
        Funds, LLC                              post-effective amendment no. 34 (file
                                                nos. 811-4630 and 33-4559 on February 27,
                                                1998, accession
                                                no. 0001010521-98-000202) ("PEA 34 ")

11.3    Class B Distribution Plans between      Filed as Exhibit 99.m.3 to PEA 34 and
        Global Fund, International Fund, Mid    incorporated herein by reference
        Cap Growth Fund and John Hancock
        Funds, LLC

11.4    Class C Distribution Plans between      Filed as Exhibit 99.m.4 to PEA 36 and
        Growth Fund, International Fund, Mid    incorporated herein by reference
        Cap Growth Fund and John Hancock
        Funds, LLC




                                          
11.5    Class C Distribution Plans between      Filed as Exhibit 99.m.5 to PEA 39 and
        Global Fund and John Hancock Funds,     incorporated herein by reference
        LLC

11.6    Class A, Class B and Class C            Filed as Exhibit 99.m.6 to PEA 42 and
        Distribution Plans between U.S Global   incorporated herein by reference
        Leaders Fund and John Hancock Funds,
        LLC

12      John Hancock Funds Class A, Class B     Filed as Exhibit 99.o to PEA 36 and
        and Class C Amended and restated        incorporated herein by reference
        Multiple Class Plan pursuant to Rule
        18f-3

12.1    John Hancock Funds Class A, Class B,    Filed as Exhibit 99.o.1 to Registrant's
        Class C and Class I Amended and         Registration Statement on Form N-1A and
        restated Multiple Class Plan pursuant   incorporated herein by reference to
        to                                      post-effective amendment no. 45 (file
        Rule 18f-3                              nos. 811-4630 and 33-4559 on February 27,
                                                2002, accession
                                                no. 0001010521-02-000110) ("PEA 45 ")

13      Code of Ethics- John Hancock Funds,     Filed as Exhibit 99.p to Registrant's
        LLC                                     Registration Statement on Form N-1A and
                                                incorporated herein by reference to
                                                post-effective amendment no. 41 (file
                                                nos. 811-4630 and 33-4559 on December 13,
                                                2000, accession
                                                no. 0001010521-00-000482) ("PEA 41 ")

13.1    Code of Ethics - Indocam                Filed as Exhibit 99.p.1 to PEA 41 and
        International Investment Services       incorporated herein by reference



13.2    Code of Ethics -Nicholas-Applegate      Filed as Exhibit 99.p.1 to PEA 42 and
                                                incorporated herein by reference
14      Opinion as to legality of shares and    Filed herewith as Exhibit 14
        consent

15      Form of opinion as to tax matters and   Filed herewith as Exhibit 15
        consent

16      Not applicable

17      Consents of PricewaterhouseCoopers      Filed herewith as Exhibit 17
        LLP regarding the audited financial
        statements of John Hancock
        International Fund and John Hancock
        Mid Cap Growth Fund and Consents of
        Deloitte & Touche LLP regarding the
        audited financial statements of John
        Hancock John Hancock International
        Equity Fund and Medium Capitalization
        Growth Fund

18      Not applicable

19      Powers of Attorney                      Filed as addendum to signature pages and
                                                incorporated herein by reference

20      Prospectuses of John Hancock            Filed herewith as Exhibit B to Part B of
        International Fund-Class I and John     this Registration Statement.
        Hancock Mid Cap Growth Fund-Class I,
        dated March 1, 2002

20.1    Prospectus of John Hancock              Filed herewith as Exhibit B to Part B of
        International Equity Fund and           this Registration Statement
        John Hancock Mid Cap Growth
        Fund, dated July 2, 2001

21      Statement of Additional Information     Filed herewith as Exhibit A and B to Part
        of John Hancock John Hancock            B of this Registration Statement
        International Equity Fund and
        John Hancock Mid Cap Growth Fund,
        dated July 1, 2001

21.1    Statements of Additional Information    Filed herewith as Exhibit A and B to Part
        of John Hancock International Fund      B of this Registration Statement
        and John Hancock Mid Cap Growth Fund
        dated March 1, 2002

ITEM 17. UNDERTAKINGS.

(1) The undersigned Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is part of this
registration statement by any person or party which is deemed to be an
underwriter within the meaning of Rule 145(c) under the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.

(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.



                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has caused this Registration Statement on Form N-14 to be signed
on its behalf by the undersigned, duly authorized, in the City of Boston, and
The Commonwealth of Massachusetts on the 8th day of March, 2002.

                        JOHN HANCOCK INVESTMENT TRUST III


                   By:            *
                      -------------------------------------
                      Maureen R. Ford
                      Chairman, President and Chief Executive Officer

         Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.




        Signature                        Title                               Date
        ---------                        -----                               ----
                                                                       

         *
- -----------------------             Trustee, Chairman, President and       March 8, 2002
Maureen R. Ford                     Chief Executive Officer

         *
- -----------------------             Senior Vice President and
Richard A. Brown                    Chief Financial Officer

/s/William H. King                  Vice President, Treasurer
- -----------------------             (Chief Accounting Officer)
William H. King

          *                         Trustee
- ------------------------
Dennis S. Aronowitz

          *                         Trustee
- ------------------------
Richard P. Chapman, Jr.

          *                         Trustee
- ------------------------
William J. Cosgrove

          *                         Trustee
- ------------------------
John M. DeCiccio






        Signature                   Title                      Date
        ---------                   -----                      ----


           *                        Trustee
- ------------------------
Richard A. Farrell

          *                         Trustee
- ------------------------
Gail D. Fosler

          *                         Trustee
- ------------------------
William F. Glavin

          *                         Trustee
- ------------------------
John A. Moore

          *                         Trustee
- ------------------------
Patti McGill Peterson

          *                         Trustee
- ------------------------
John W. Pratt




*By:     /s/Susan S. Newton
         ------------------                                   March 8, 2002
         Susan S. Newton
         Attorney-in-Fact.
         Power of Attorney dated
         June 23, 2001 and September 12, 2001.





                                                                             

Panel A
- -------
John Hancock Capital Series                                      John Hancock Strategic Series
John Hancock Declaration Trust                                   John Hancock Tax-Exempt Series Fund
John Hancock Income Securities Trust                             John Hancock World Fund
John Hancock Investors Trust                                     John Hancock Investment Trust II
John Hancock Equity Trust                                        John Hancock Investment Trust III
John Hancock Sovereign Bond Fund


Panel B
- -------
John Hancock Bank and Thrift Opportunity Fund                    John Hancock Patriot Global Dividend Fund
John Hancock Bond Trust                                          John Hancock Patriot Preferred Dividend Fund
John Hancock California Tax-Free Income Fund                     John Hancock Patriot Premium Dividend Fund I
John Hancock Current Interest                                    John Hancock Patriot Premium Dividend Fund II
John Hancock Institutional Series Trust                          John Hancock Patriot Select Dividend Trust
John Hancock Investment Trust                                    John Hancock Series Trust
John Hancock Cash Reserve, Inc.                                  John Hancock Tax-Free Bond Trust



                                POWER OF ATTORNEY
                                -----------------

         The undersigned Officer of each of the above listed Trusts, each a
Massachusetts business trust, or Maryland Corporation, does hereby severally
constitute and appoint SUSAN S. NEWTON, WILLIAM H. KING, AND AVERY P. MAHER, and
each acting singly, to be my true, sufficient and lawful attorneys, with full
power to each of them, and each acting singly, to sign for me, in my name and in
the capacity indicated below, any Registration Statement on Form N-1A and any
Registration Statement on Form N-14 to be filed by the Trust under the
Investment Company Act of 1940, as amended (the "1940 Act"), and under the
Securities Act of 1933, as amended (the "1933 Act"), and any and all amendments
to said Registration Statements, with respect to the offering of shares and any
and all other documents and papers relating thereto, and generally to do all
such things in my name and on my behalf in the capacity indicated to enable the
Trust to comply with the 1940 Act and the 1933 Act, and all requirements of the
Securities and Exchange Commission thereunder, hereby ratifying and confirming
my signature as it may be signed by said attorneys or each of them to any such
Registration Statements and any and all amendments thereto.

         IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as
of the 23rd day of June, 2001.


                                               /s/Richard A. Brown
                                               -------------------
                                               Richard A. Brown
                                               Chief Financial Officer



Commonwealth of Massachusetts                             )ss
- ----------------------------------------------------------
COUNTY OF Suffolk                                         )
          ------------------------------------------------

         Then personally appeared the above-named Richard A. Brown, who
acknowledged the foregoing instrument to be his free act and deed, before me,
this 23rd day of June, 2001.

                                 /s/Erika L. Nager
                                 -----------------
                                 Notary Public

                                 My Commission Expires:  June 14, 2007
                                                         -------------


s:\general\prwattn\01June23.doc






                                                                             

John Hancock Capital Series                                      John Hancock Strategic Series
John Hancock Declaration Trust                                   John Hancock Tax-Exempt Series Fund
John Hancock Income Securities Trust                             John Hancock World Fund
John Hancock Investors Trust                                     John Hancock Investment Trust II
John Hancock Equity Trust                                        John Hancock Investment Trust III
John Hancock Sovereign Bond Fund


                                POWER OF ATTORNEY

         The undersigned Trustee/Officer of each of the above listed Trusts,
each a Massachusetts business trust or Maryland corporation, does hereby
severally constitute and appoint Susan S. Newton, WILLIAM h. KING, and AVERY P.
MAHER, and each acting singly, to be my true, sufficient and lawful attorneys,
with full power to each of them, and each acting singly, to sign for me, in my
name and in the capacity indicated below, any Registration Statement on Form
N-1A and any Registration Statement on Form N-14 to be filed by the Trust under
the Investment Company Act of 1940, as amended (the "1940 Act"), and under the
Securities Act of 1933, as amended (the "1933 Act"), and any and all amendments
to said Registration Statements, with respect to the offering of shares and any
and all other documents and papers relating thereto, and generally to do all
such things in my name and on my behalf in the capacity indicated to enable the
Trust to comply with the 1940 Act and the 1933 Act, and all requirements of the
Securities and Exchange Commission thereunder, hereby ratifying and confirming
my signature as it may be signed by said attorneys or each of them to any such
Registration Statements and any and all amendments thereto.

         IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as
of the 12th day of September, 2001.



/s/ Maureen R. Ford                                  /s/Gail D. Fosler
- -------------------                                  -----------------
Maureen R. Ford, as Chairman and Chief               Gail D. Fosler
Exective Officer

/s/John M. DeCiccio                                  /s/William F. Glavin
- -------------------                                  --------------------
John M. DeCiccio, as Trustee                         William F. Glavin

/s/Dennis S. Aronowitz                               /s/John A. Moore
- ----------------------                               ----------------
Dennis S. Aronowitz                                  John A. Moore

/s/Richard P. Champman, Jr.                          /s/Patti McGill Peterson
- ---------------------------                          ------------------------
Richard P. Chapman, Jr.                              Patti McGill Peterson

/s/William J. Cosgrove                               /s/John W. Pratt
- ----------------------                               ----------------
William J. Cosgrove                                  John W. Pratt

/s/Richard A. Farell
- --------------------
Richard A. Farrell








COMMONWEALTH OF MASSACHIUSETTS)
- ------------------------------
                              )ss
COUNTY OF SUFFOLK             )
- -----------------

         Then personally appeared the above-named Richard A. Brown, who
acknowledged the foregoing instrument to be his free act and deed, before me,
this 23rd day of June, 2001.

                                 /s/Erika Nager
                                 --------------
                                 Notary Public

                                 My Commission Expires:  June 14, 2007
                                                         -------------


s:\general\prwattn\01Sept12.doc






                                  EXHIBIT INDEX

The following exhibits are filed as part of this Registration Statement:

Exhibit No.                Description

1     Amended and Restated Declaration of Trust of John Hancock Investment Trust
      III, dated March 1, 2002.

2     Amendment to Amended and Restated By-Laws of Registrant

4     Agreement and Plan of Reorganization between John Hancock International
      Fund (the "Acquiring Fund") and John Hancock International Equity Fund
      (the "Acquired Fund") (filed as EXHIBIT A to Part A of this Registration
      Statement).

4.1   Agreement and Plan of Reorganization between John Hancock Medium Cap
      Growth Fund (the Acquiring Fund") and John Hancock Medium Capitalization
      Fund (the "Acquired Fund") (filed as EXHIBIT A to Part A of this
      Registration Statement).

14    Opinion as to legality of shares and consent.

15    Form of opinion as to tax matters and consent.

17    Consent of PricewaterhouseCoopers LLP regarding the audited financial
      statements and highlights of the Registrant. Consent of Deloitte & Touche
      LLP regarding the audited financial statements and highlights of the John
      Hancock International Equity Fund and Medium Capitalization Growth Fund.