HANCOCK JOHN STRATEGIC SERIES, N-30B-2, 1995-07-31

HANCOCK JOHN STRATEGIC SERIES
N-30B-2, 1995-07-31

Previous: PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II, 24F-2NT, 1995-07-31

Next: PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II, 24F-2NT, 1995-07-31

<PAGE> 1
John Hancock Funds

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

Utilities
Fund

ANNUAL REPORT

May 31, 1995

<PAGE> 2

TRUSTEES
Edward J. Boudreau, Jr.
Chairman
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Gail D. Fosler*
Bayard Henry*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee

OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
James K. Ho
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
Frederick L. Cavanaugh, Jr.
Senior Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and Compliance Officer
James J. Stokowski
Vice President and Treasurer

CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02110

TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116

INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109

INDEPENDENT ACCOUNTANTS
Price Waterhouse llp
160 Federal Street
Boston, Massachusetts 02110

CHAIRMAN'S MESSAGE

DEAR FELLOW SHAREHOLDERS:

JOHN HANCOCK U.S. GOVERNMENT CASH RESERVE

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

Educating shareholders has always been one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.

At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential rewards as well as the potential risks of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.

In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the Fund's
current investment strategies; and the outlook for the months ahead.

The ensuing financial statements provide a comprehensive look at the fund's
statistics and holdings.

We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our customer service representatives on our toll-free line
at 1-800-225-5291, from 8:00 a.m. to 8:00 p.m. eastern time, Monday through
Friday.

Sincerely,

/s/ Edward J. Boudreau, Jr.
- ---------------------------

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

2
<PAGE> 3

BY ANDREW F. ST. PIERRE, SENIOR VICE PRESIDENT AND
PORTFOLIO MANAGER

JOHN HANCOCK
UTILITIES FUND

CHANGE FOR THE BETTER IN REGULATORY CLIMATE SPARKS
SECOND-HALF RALLY IN ELECTRIC UTILITIES

Between a hostile regulatory climate and rising interest rates, utility
stocks, especially electric utilities, had a difficult year in 1994. As a
result, the Fund suffered during the first half of its fiscal year. The second
half, however, has been a different story altogether. As regulatory fears
diminished and interest rates began heading back down, investors rushed to own
electric utilities again, igniting a sharp rally this year.

While we participated in the rally, we have been somewhat skeptical about the
market's sudden infatuation with the sector and avoided rushing in as heavily as
some of our competitors. We still believe our caution will be rewarded in the
long run. But for now, we've had to accept below-average returns compared to
other utility funds. For the year ended May 31, 1995, the Fund's total returns
for its Class A and Class B shares were 7.10% and 6.31%, respectively, at net
asset value. During the same period, the average utility fund had a total
return of 9.18%, according to Lipper Analytical Services.1

A 2 1/2" x 2 3/4" photo of Andrew F. St. Pierre at bottom center. Caption reads:
"Andrew F. St. Pierre, Portfolio Manager."

THE INVESTMENT CLIMATE

Above all, two factors influenced the fate of utility stocks during the Fund's
fiscal year. The first was interest rates. When the period began, the economy
was expanding rapidly and the Federal Reserve was raising interest rates, trying
to slow the rate of growth and prevent an outbreak of inflation. All in all,
before the period began and three more during the Fund's fiscal year. As
interest rates rose,

[CAPTION]
"...investors rushed to own electric utilities again, igniting a sharp rally
there have been seven rate increases by the Fed during this latest cycle
- -- four this year."

<PAGE> 4

John Hancock Funds - Utilities Fund

Pie chart with the heading "Portfolio Diversification" at top of left hand
column. The chart is divided into five sections. Going from left to right:
Electric Utilities 54%; Short-Term Investments and Other 17% ; Water Utilities
5%; Natural Gas 14%; and Telephone/Telecommunications 10%. A footnote below
states "As a percentage of net assets on May 31, 1995."

bond prices fell. And because utility stocks tend to track new photo? Treasury
securities, the Fund found itself operating under extremely difficult
conditions. Andrew F. St. Pierre, Portfolio Manager

Interest rates peaked during the fourth quarter of 1994, when the economy
expanded at a robust annual rate of 5.2%. But growth slowed dramatically in the
first quarter of 1995, expanding at an annual rate of 2.8%. By late spring, most
market participants had decided that the Fed was through raising rates, at least
for the foreseeable future. That change in market sentiment propelled bond
prices, and utilities rose with them.

TECHNICAL FACTORS

Around the time that the economic landscape changed for the better, so did the
regulatory outlook. Electric utilities have been under a cloud on and off ever
since passage of the National Energy Policy Act of 1992, which established
guidelines to encourage more competition. In April 1994, California regulators
announced plans to move quickly toward implementing one of the act's central
aims: retail competition among electricity providers. That cast a pall over the
whole industry and sent utility stocks reeling. But here again, there has been a
remarkable turnaround in recent months. After much bickering among lawmakers,
environmentalists, consumers and the utilities themselves, the regulators
adopted a more moderate stance, and investors began snapping up utility stocks
again.

As investor sentiment toward utilities has swung back and forth, we've tried
to keep a level head. We never believed the situation was as dire as most market
participants made it out to be in 1994. By the same token, we've proceeded with
caution so far in 1995. The fact is, competition is coming. Already the smarter
utilities are imposing difficult new conditions on themselves, choosing to take
their own medicine now rather than have it forced down their throats later by
regulatory commissions. In time, rates will fall, margins will be squeezed and
dividends will have to be cut. That's the new reality.

That said, we did allow the Fund's stake in electric utilities to rise
slightly as market conditions improved -- from 47% of net assets six months ago
to more than 54% at the end of May. Among our favorites was New Jersey-based
General Public Utilities, a low-cost provider that is operating in a less
threatening regulatory environment and still has room to

Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investment"; the header for the right column is "Recent
performance ... and what's behind the numbers." The first listing is General
Public Utilities followed by an up arrow and the phrase "Potential for higher
dividend." The second listing is Enron followed by an up arrow and the phrase
"Higher gas prices." The third listing is New England Electric Service followed
by a down arrow and the phrase "Nuclear exposure threatens earnings." Footnote
below reads: "See "Schedule of Investments." Investment holdings are subject to
change."

[CAPTION]
"As investor sentiment toward utilities has swung back and forth, we've tried to
keep a level head."

<PAGE> 5

John Hancock Funds - Utilities Fund

Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended May 31, 1995." The chart is scaled
in increments of 3% from bottom to top, with 12% at the top and 0% at the
bottom. Within the chart, there are three solid bars. The first represents the
7.10% total return for John Hancock Utilities Fund: Class A. The second
represents the 6.31% total return for John Hancock Utilities Fund: Class B. The
third represents the 9.18% total return for the average utility fund. Footnote
below reads: "Total returns for John Hancock Utilities Fund are at net asset
value with all distributions reinvested. The average utility fund is tracked by
Lipper Analytical Services. See following page for historical performance
information."

raise its dividend. The Fund's largest holding at the end of the period was a
high-quality foreign bond issued by Electricity Corp. of New Zealand. The bond
is yielding about 10% to maturity in New Zealand dollars and even more after the
currency conversion. We've been very happy so far with its performance. New
England Electric System, on the other hand, has been a disappointment. New
England Electric System offers higher-than-average yield, has plenty of cash and
operates in a high-rate region of the country. But the stock has lagged lately
because of investor concerns over a potential earnings loss tied to its 20%
stake in Central Maine Power's Maine Yankee plant.

OTHER UTILITIES

Many water utilities continue to provide attractive yields but have suffered
lately by comparison with surging electric utilities. We cut our stake in half
over the past six months, down to around 5% of net assets. Telephones and
telecommunications stayed steady at around 10% of net assets. We've hesitated to
go any higher until the regulatory situation clears up. The best performers in
the telephone sector tended to be foreign stocks, including British
Telecommunications and Telecom of New Zealand, both of which we sold on strength
toward the end of the period. Natural gas stocks have done better lately as they
work out the last pieces of their own regulatory puzzle. Our favorite was Enron,
a vertically-integrated production pipeline company that has profited from
higher gas prices and strong management. Natural gas stocks as a percentage of
the Fund's net assets doubled over the past six months, reaching 14% by the end
of May.

OUTLOOK

We'll be taking a cautious approach in the months ahead. If interest rates
continue to fall, utilities may well outperform the broader market. But our main
concern right now is the fundamental conditions in the electric utility
industry. We think they've deteriorated enough to warrant a somewhat defensive
attitude. That may mean two things in terms of our strategy going forward:
sometimes choosing bonds rather than stocks and exploring opportunities
overseas.

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

[CAPTION]
"We'll be taking a cautious approach in the months ahead."

<PAGE> 6
NOTES TO PERFORMANCE INFORMATION

John Hancock Funds - Utilities Fund

In accordance with the requirements of the Securities and Exchange Commission,
the following data are supplied for the period ended March 31, 1995, with all
distributions reinvested in shares. The average annualized total returns for the
1-year period and since inception on February 1, 1994 for Class A shares were
(2.65%) and (4.84%) respectively, and reflect payment of the maximum sales
charge of 5.00%. The average annualized total returns for the 1-year period and
since inception on February 1, 1994 for Class B shares were (3.31%) and (4.55%)
respectively, and reflect the applicable contingent deferred sales charge
(maximum contingent deferred sales charge is 5.00% and declines to 0% over 6
years). During the period, the Adviser limited the Fund's expenses, including
the management fee (but not including the transfer agent fee and the 12b-1 fee)
to 0.50% of the Fund's average daily net assets. Without the limitation of
expenses, the average annualized total returns for the 1-year period and since
inception on February 1, 1994 for Class A shares would have been (3.51%) and
(8.53%) respectively. The average annualized total returns for the 1-year period
and since inception on February 1, 1994 for Class B shares would have been
(4.17%) and (8.24%) respectively. All performance data shown represent past
performance and should not be considered indicative of future performance.
Returns and principal values of Fund investments will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. See the prospectus for risks associated with industry segment investing.

Utilities Fund
Class A shares

Line chart with the heading Utilities Fund: Class A, representing the
Utilities 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 Utilities Fund on February 1, 1994, before sales charge,
and is equal to $10,408 as of May 31, 1995. The second line represents the
Utilities Fund after sales charge and is equal to $9,585 as of May 31, 1995.
The third line represents the value of the Dow Jones Utilities Average and is
equal to $9,134* as of May 31, 1995.

Utilities Fund
Class B shares

Line chart with the heading Utilities Fund: Class B, representing the
Utilities 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 Utilities Fund on February 1, 1994, before contingent
deferred sales charge, and is equal to $10,319 as of May 31, 1995. The second
line represents the Utilities Fund after contingent deferred sales charge and
is equal to $9,919 as of May 31, 1995. The third line represents the value of
the Dow Jones Utilities Average and is equal to $9,134* as of May 31, 1995.

*The Dow Jones Utilities Average is an unmanaged index that measures
the performance of the utility industry in the United States. It consists of
15 actively traded stocks representing a cross section of corporations involved
in various phases of the utility industry.

<PAGE> 7

FINANCIAL STATEMENTS

John Hancock Funds - Utilities Fund

<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $33,147,718)................................................................ $35,091,485
Preferred stocks (cost - $7,626,596).............................................................. 7,858,823
Bonds (cost - $4,992,674)......................................................................... 5,259,689
Short-term investments (cost - $2,728,953)........................................................ 2,728,953
----------
50,938,950
Receivable for shares sold.......................................................................... 444,735
Receivable for investments sold..................................................................... 6,310,819
Dividends receivable................................................................................ 281,557
Interest receivable................................................................................. 158,552
Receivable from John Hancock Advisers, Inc. and affiliates - Note B................................. 6,684
Deferred organization expenses - Note A............................................................. 31,186
----------
Total Assets..................................................................... 58,172,483
-----------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased................................................................... 548,550
Accounts payable and accrued expenses............................................................... 51,241
----------
Total Liabilities................................................................ 599,791
-----------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in..................................................................................... 54,731,670
Accumulated net realized loss on investments and foreign currency transactions...................... ( 3,141)
Net unrealized appreciation of investments and foreign currency transactions........................ 2,447,025
Undistributed net investment income................................................................. 397,138
----------
Net Assets....................................................................... $57,572,692
===============================================================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares authorized
with no par value)
Class A - $19,229,055/2,268,646..................................................................... $ 8.48
==================================================================================================================
Class B - $38,343,637/4,537,307..................................................................... $ 8.45
==================================================================================================================
MAXIMUM OFFERING PRICE PER SHARE *
Class A - ($8.48 x 105.26%)......................................................................... $ 8.93
==================================================================================================================

* 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.
<FN>
</TABLE>

THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON MAY 31, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.

SEE NOTES TO FINANCIAL STATEMENTS.

7
<PAGE> 8

FINANCIAL STATEMENTS

John Hancock Funds - Utilities Fund

Interest............................................................................................ 473,616
---------
2,126,675
---------
Expenses:
Investment management fee - Note B................................................................ 233,229
Distribution/service fee - Note B
Class A...................................................................................... 37,214
Class B...................................................................................... 209,138
Registration and filing fees...................................................................... 61,858
Transfer agent fee - Note B
Class A...................................................................................... 29,758
Class B...................................................................................... 44,249
Custodian fee..................................................................................... 40,998
Auditing fee...................................................................................... 19,250
Printing.......................................................................................... 15,425
Organization expense - Note A..................................................................... 7,930
Legal fees........................................................................................ 3,718
Trustees' fees.................................................................................... 3,184
Miscellaneous..................................................................................... 746
---------
Total Expenses................................................................... 706,697
Less Expenses Reimbursable by John Hancock Advisers, Inc. - Note B............... ( 219,747)
-----------------------------------------------------------------------------------------------
Net Expenses..................................................................... 486,950
-----------------------------------------------------------------------------------------------
Net Investment Income............................................................ 1,639,725
-----------------------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments sold............................................................... ( 662)
Net realized gain on foreign currency transactions.................................................. 2,094
Change in net unrealized appreciation/depreciation of investments................................... 2,462,185
Change in net unrealized appreciation/depreciation of foreign currency transactions................. 4,016
---------

Net Realized and Unrealized Gain on Investments and Foreign Currency Transactions 2,467,633
-----------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations............................. $4,107,358
===============================================================================================
</TABLE>

THE 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.

SEE NOTES TO FINANCIAL STATEMENTS.

8
<PAGE> 9
FINANCIAL STATEMENTS

John Hancock Funds - Utilities Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
FEBRUARY 1, 1994
(COMMENCEMENT TO
YEAR ENDED OPERATIONS) TO
MAY 31, 1995 MAY 31, 1994
------------ ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income...................................................... ................ $1,639,725 $ 9,226
Net realized gain (loss) on investments sold and foreign currency transactions.............. 1,432 (2,479)
Change in net unrealized appreciation/depreciation of investments and foreign currency
transactions................................................................................ 2,466,201 (19,176)
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations............................ 4,107,358 (12,429)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.3401 and none per share, respectively)....................................... (493,188) --
Class B - ($0.2988 and none per share, respectively)....................................... (767,459) --
----------- -----------
Total Distributions to Shareholders.......................................................... (1,260,647) --
----------- -----------
FROM FUND SHARE TRANSACTIONS-- NET*........................................................... 53,500,247 738,138
----------- -----------
NET ASSETS:
Initial investment by John Hancock Advisers, Inc............................................. -- 500,025
Beginning of period.......................................................................... 1,225,734 --
----------- -----------
End of period (including undistributed net investment income of $397,138 and $9,226,
respectively).............................................................................. $57,572,692 $ 1,225,734
=========== ===========
<FN>

* ANALYSIS OF FUND SHARE TRANSACTIONS:
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FEBRUARY 1, 1994
YEAR ENDED (COMMENCEMENT OF OPERATIONS)
MAY 31, 1995 TO MAY 31, 1994
------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold.................................................... 3,085,752 $24,890,175 38,746 $ 318,718
Shares issued to shareholders in reinvestment of distributions. 49,990 400,435 -- --
--------- ----------- ------ ----------
3,135,742 25,290,610 38,746 318,718
Less shares repurchased........................................ (961,612) (7,849,867) (3,056) (25,865)
Initial investment by John Hancock Advisers, Inc............... -- -- 58,826 500,025
--------- ----------- ------ ----------
Net increase................................................... 2,174,130 $17,440,743 94,516 $ 792,878
========= =========== ====== ==========

CLASS B
Shares sold.................................................... 4,745,699 $38,182,620 53,975 $ 445,285
Shares issued to shareholders in reinvestment of distributions. 79,202 633,888 -- --
--------- ----------- ------ ----------
4,824,901 38,816,508 53,975 445,285
Less shares repurchased........................................ (341,569) ( 2,757,004) -- --
--------- ----------- ------ ----------
Net increase................................................... 4,483,332 $36,059,504 53,975 $ 445,285
========= =========== ====== ==========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE> 10

FINANCIAL STATEMENTS

John Hancock Funds - Utilities Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are as
follows:
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FEBRUARY 1, 1994
YEAR ENDED (COMMENCEMENT OF OPERATIONS)
MAY 31, 1995 TO MAY 31, 1994
------------ -------------------------------
<S> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................................... $ 8.26 $ 8.50
------- -------
Net Investment Income.......................................................... 0.44(b) 0.12(b)
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Transactions.................................................................. 0.12 (0.36)
------- -------
Total from Investment Operations............................................. 0.56 ( 0.24)
------- -------
Less Distributions:
Dividends from Net Investment Income........................................... (0.34) --
------- -------
Net Asset Value, End of Period................................................. $ 8.48 $ 8.26
======= =======

Total Investment Return at Net Asset Value..................................... 7.10% ( 2.82%)
Total Adjusted Investment Return at Net Asset Value (a)(c)..................... 6.44% (13.89%)

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)...................................... $19,229 $ 781
Ratio of Expenses to Average Net Assets **..................................... 1.04% 1.00%*
Ratio of Adjusted Expenses to Average Net Assets (a)........................... 1.70% 12.07%*
Ratio of Net Investment Income to Average Net Assets........................... 5.39% 4.53%*
Ratio of Adjusted Net Investment Income (Loss) to Average Net Assets (a)....... 4.73% (6.54%)*
Portfolio Turnover Rate........................................................ 98% 6%
** Fee Reduction Per Share..................................................... $ 0.05(b) $ 0.27(b)
</TABLE>

THE FINANCIAL HIGHLIGHTS SUMMARIZE THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIODS INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DISTRIBUTIONS, 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.

<PAGE> 11

FINANCIAL STATEMENTS

John Hancock Funds - Utilities Fund

<S> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................................. $ 8.25 $ 8.50
------- -------

Net Investment Income............................................................ 0.38(b) 0.08(b)

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Transactions 0.12 (0.33)
------- -------
Total from Investment Operations............................................... 0.50 (0.25)
------- -------
Less Distributions:
Dividends from Net Investment Income............................................. (0.30) --
------- -------
Net Asset Value, End of Period................................................... $ 8.45 $ 8.25
======= =======
Total Investment Return at Net Asset Value....................................... 6.31% ( 2.94%)
Total Adjusted Investment Return at Net Asset Value (a)(c)....................... 5.65% (14.01%)

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........................................ $38,344 $ 445
Ratio of Expenses to Average Net Assets **....................................... 1.71% 1.72%*
Ratio of Adjusted Expenses to Average Net Assets (a)............................. 2.37% 12.79%*
Ratio of Net Investment Income to Average Net Assets............................. 4.64% 4.20%*
Ratio of Adjusted Net Investment Income (Loss) to Average Net Assets (a)......... 3.98% ( 6.87%)*
Portfolio Turnover Rate.......................................................... 98% 6%
** Fee Reduction Per Share....................................................... $ 0.05(b) $ 0.27(b)
<FN>
* On an annualized basis.
(a) Net of any fee reductions.
(b) On average month end shares outstanding.
(c) Unaudited.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE> 12
FINANCIAL STATEMENTS

John Hancock Funds - Utilities Fund

THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
UTILITIES FUND ON MAY 31, 1995. IT'S DIVIDED INTO FOUR MAIN CATEGORIES:COMMON
STOCKS, PREFERRED STOCKS, BONDS AND SHORT-TERM INVESTMENTS. SHORT-TERM
INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE LISTED LAST.

<TABLE>
SCHEDULE OF INVESTMENTS
May 31, 1995
- --------------------------------------------------------------------------------------

<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
COMMON STOCKS
DIVERSIFIED OPERATIONS (0.67%)
Tenneco, Inc................................... 8,000* $ 384,000
-----------
FINANCE (1.98%)
Student Loan Marketing Association 24,000* 1,140,000
-----------
OIL & GAS (5.62%)
Enron Corp..................................... 30,000* 1,095,000
Global Marine, Inc.**.......................... 16,000* 86,000
Occidental Petroleum Corp...................... 50,000 1,150,000
Panhandle Eastern Corp......................... 13,500* 339,187
Sonat, Inc..................................... 17,250* 567,094
-----------
3,237,281
-----------
UTILITIES (52.68%)
Baltimore Gas & Electric Co.................... 21,000* 546,000
BCE, Inc. (Canada)............................. 24,600* 771,825
Bell Atlantic Corp............................. 14,750* 822,313
Boston Edison Co............................... 27,500 711,563
California Water Service Co.................... 20,000* 640,000
Carolina Power & Light Co...................... 26,500* 791,687
Central & South West Corp...................... 42,600* 1,096,950
Central Costanera S.A., American
Depositary Receipt ("ADR") (Argentina)....... 37,000* 1,073,200
Central Hudson Gas & Electric.................. 16,500* 447,563
Citizens Utilities Co. (Class B)............... 46,360* 504,166
CMS Energy Corp................................ 45,860 1,106,373
Commonwealth Energy System Cos................. 7,400* 292,300
Connecticut Energy Corp........................ 4,800 94,200
Connecticut Water Service, Inc................. 26,400 646,800
Consumers Water Co............................. 13,000 191,750
Delmarva Power & Light Co...................... 25,000* 503,125
Detroit Edison Co.............................. 28,000 843,500
Dominguez Services Corp........................ 11,000* 189,750
Eastern Utilities Association.................. 42,000* 971,250
Empire District Electric Co.................... 12,300* 209,100
Empresa Nacional De Electricidad,
ADR (Spain).................................. 14,000* 675,500
FPL Group, Inc................................. 13,950 547,537
General Public Utilities Corp.................. 35,875 1,076,250
GTE Corp....................................... 14,700 490,613
Illinova Corp.................................. 13,240 327,690
IPALCO Enterprises, Inc........................ 21,500* 704,125
KU Energy Corp................................. 13,000* 359,125
Middlesex Water Co............................. 15,000* 240,000
National Fuel Gas Co........................... 21,600* 623,700
National Power PLC, ADR (United Kingdom)....... 25,000* 318,750
New England Electric System.................... 31,600* 1,090,200
Ohio Edison Co................................. 35,000* 765,625
PacifCorp...................................... 42,600* 841,350
Peco Energy Co................................. 31,700 891,563
Philadelphia Suburban Corp..................... 15,000* 271,875
Piedmont Natural Gas Co., Inc.................. 5,000* 101,875
Pinnacle West Capital Corp..................... 31,800* 731,400
Portland General Corp.......................... 22,550 513,012
Providence Energy Corp......................... 7,200 117,000
Public Service Co. Of NM**..................... 54,000* 769,500
Public Service Enterprise Group, Inc........... 26,000* 773,500
SBC Communications, Inc.
(formerly Southwestern Bell Corp.)........... 575 25,875
Shandong Huaneng Power Co. Ltd.,
ADR (China).................................. 80,000* 590,000
Southern Co.................................... 40,200 889,425
Telefonica de Argentina S.A., ADR (Argentina).. 3,800* 101,650
Telefonica De Espana, ADR (Spain).............. 3,000* 120,000
Unicom Corp.................................... 5,950 162,137
United Cities Gas Co........................... 22,300 345,650
United Water Resources, Inc.................... 43,200* 572,400
US West, Inc................................... 22,000* 907,500
Western Resources, Inc......................... 36,800* 1,159,200
Wicor, Inc..................................... 15,100 424,687
WPS Resources Corp............................. 11,900* 348,075
-----------
30,330,204
-----------
TOTAL COMMON STOCKS
(Cost $33,147,718) (60.95%) 35,091,485
------ -----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

12
<PAGE> 13

FINANCIAL STATEMENTS

John Hancock Funds - Utilities Fund

<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
PREFERRED STOCKS
OIL & GAS (3.53%)
Enron Capital LLC, 8.00%, Gtd MIPS............ 26,500 $ 642,625
Lasmo PLC, 10.00%, American Depositary
Shares, Ser A (United Kingdom).............. 57,000 1,389,375
----------
2,032,000
----------
UTILITIES (10.12%)
Commonwealth Edison Co., $2.425............... 5,000* 136,875
Commonwealth Edison Co., $8.40, Ser A......... 450 43,425
Commonwealth Edison Co., $8.40, Ser B......... 7,137* 714,592
Commonwealth Energy System Cos.,
4.80%, Ser A................................ 4,700* 368,950
Connecticut Light & Power Capital Corp.,
9.30%, Ser A................................ 20,000* 520,000
GTE Florida, Inc., 8.16%...................... 10,000* 1,027,500
Gulf States Utilities Co., $9.96.............. 2,955* 291,806
Illinios Power Co., 8.00%, Ser J.............. 10,000* 472,500
Indianapolis Power & Light Co., 8.20%......... 8,000* 812,000
Long Island Lighting Co., 7.95%, Ser AA....... 5,000* 120,625
MCN Michigan LTD Partnership, 9.375%,
Ser A....................................... 30,000* 802,500
Northern States Power Co. of MN,
Adjustable Rate Preferred, Ser A............ 200 17,300
Sprint Corp., 8.25%, DECS..................... 15,000* 498,750
----------
5,826,823
----------
TOTAL PREFERRED STOCKS
(Cost $7,626,596) (13.65%) 7,858,823
------ ----------
</TABLE>

<TABLE>
<CAPTION>
S&P
INTEREST RATING PARVALUE
RATE (UNAUDITED) (OOO'S OMITTED)
-------- ----------- ---------------
<S> <C> <C> <C> <C>
BONDS
UTILITIES (9.14%)
Electricity Corp. of
New Zealand,
Deb 06-15-96
(New Zealand)#.......... 10.00% AA- 4,800* 3,232,189
Financiera
Energetica Nacional
S.A., Deb 11-08-99
(Colombia) (Y).......... 9.00 BBB- 2,000* 2,027,500
----------
TOTAL BONDS
(Cost $4,992,674) (9.14%) 5,259,689
------ ----------
</TABLE>

<TABLE>
<CAPTION>
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (OOO'S OMITTED) MARKET VALUE
- ------------------- -------- --------------- ------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (4.65%)
Investment in a joint repurchase
agreement transaction
with BT Securities Corp. -
Dated 05-31-95, Due 06-01-95
(secured by U.S. Treasury Bonds,
13.25% due 05-15-14, 11.25%
due 02-15-15, 9.125%
due 05-15-09, and U.S.
Treasury Note 6.75%
due 05-31-97) - Note A.............. 6.15% $2,678 $ 2,678,000
-----------
CORPORATE SAVINGS ACCOUNT (0.09%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% 50,953
-----------
TOTAL SHORT-TERM INVESTMENTS (4.74%) 2,728,953
------ -----------
TOTAL INVESTMENTS (88.48%) $50,938,950
====== ===========

<FN>
* Securities, other than short-term investments, newly added to the portfolio
during the year ended May 31, 1995.
** Non-income producing security.
# Par value of foreign bonds is expressed in local currency, as shown
parenthetically in security description.
(Y) Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer, however, security is U. S. dollar
denominated.
</TABLE>

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.

<PAGE> 14

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Utilities Fund

NOTE A --
ACCOUNTING POLICIES

John Hancock Strategic Series (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of three series portfolios: John Hancock Utilities Fund (the "Fund"), John
Hancock Strategic Income Fund and John Hancock Independence Diversified Core
Equity Fund.

The Trustees have authorized the issuance of two classes of shares of the
Fund designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemption, 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/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. Significant accounting policies of the Fund are as follows:

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

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

FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. Additionally, net capital losses of $4,131 attributable to security
transactions incurred after October 31, 1994 are treated as arising on the first
day (June 1, 1995) of the Fund's next taxable year.

DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. 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 all 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. Dividends 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 as explained previously.

EXPENSES The majority of the expenses of the Trust 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.

CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated

14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Utilities Funds

daily to each class of shares based on the appropriate net assets of the
respective classes. Distribution/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.

FOREIGN CURRENCY TRANSLATION All assets and 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.

DEFERRED ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to the
Fund's operations ratably over a five-year period that began with the
commencement of investment operations of the Fund.

NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS

Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.70% of the first $250,000,000 of the
Fund's average daily net asset value and (b) 0.65% of the Fund's average daily
net asset value in excess of $250,000,000.

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

Additionally, the Adviser has agreed to limit the Fund's expenses, including
the management fee (but not including the transfer agent fee and the 12b-1 fee)
to 0.50% of the Fund's average daily net assets. Accordingly, for the period
ended May 31, 1995, the reduction in the Fund's expenses collectively with any
additional amounts not borne by the Fund by virtue of the expense limit amounted
to $219,747.

The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. Prior to January 1, 1995, JH
Funds was known as John Hancock Broker Distribution Services. For the year ended
May 31, 1995, JH Funds received net sales charges of $689,761 with regard to
sales of Class A shares. Out of this amount, $103,857 was retained and used for
printing prospectuses, advertising, sales literature and other purposes,
$351,876 was paid as sales commissions and service fees to unrelated
broker-dealers and $234,028 was paid as sales commissions and service fees to
sales personnel of John Hancock Distributors, Inc. ("Distributors"), Tucker
Anthony, Incorporated ("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"), all of
which are broker-dealers. The Adviser's indirect parent, John Hancock Mutual
Life Insurance Company, is the indirect sole shareholder of Distributors and
John Hancock Freedom Securities Corporation and its subsidiaries, which include
Tucker Anthony and Sutro.

<PAGE> 16
NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Utilities Fund

Class B shares redeemed within six years of purchase will be subject to a
contingent deferred sales charge ("CDSC") at declining rates beginning at 5.0%
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 CDSC are
paid to JH Funds and are used in whole or in part to defray its expenses related
to providing distribution related services to the Fund in connection with the
sale of Class B shares. For the year ended May 31, 1995 contingent deferred
sales charges received by JH Funds amounted to $63,972.

In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution Plans with
respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to JH
Funds for distribution and service expenses at an annual rate not to exceed
0.30% of Class A average daily net assets and 1.00% of Class B average daily net
assets to reimburse JH Funds for its distribution/service costs. Up to a maximum
of 0.25% of these payments may be service fees as defined by the amended Rules
of Fair Practice of the National Association of Securities Dealers. Under the
amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.

The Fund has a transfer agent agreement with John Hancock Investor Services
Corp., ("Investor Services"), a wholly-owned subsidiary of the Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Effective January 1, 1995, the Fund pays transfer
agent fees based on transaction volume and the number of shareholder accounts.
Prior to January 1, 1995, the Fund paid Investor Services a monthly transfer
agent fee equivalent, on an annual basis, to 0.20% and 0.22% of the average
daily net asset value, of Class A and Class B shares of the Fund, respectively,
plus out of pocket expenses incurred by Investor Services on behalf of the Fund
for proxy mailings.

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

NOTE C --
INVESTMENT TRANSACTIONS

Purchases and proceeds from sales of securities, other than short-term
securities, during the year ended May 31, 1995 aggregated $73,707,288 and
$28,997,280, respectively.

The cost of investments owned at May 31, 1995 (including the short-term
investments) for Federal Income Tax purposes was $48,501,310. Gross unrealized
appreciation and depreciation of investments aggregated $3,021,767, and
$584,127, respectively, resulting in net unrealized appreciation of $2,437,640.

NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS

During the year ended May 31, 1995, the Fund has reclassified amounts to reflect
a decrease in capital paid-in of $6,740, an increase in accumulated net
investment loss of $2,094 and an increase in accumulated net investment income
of $8,834. This represents the cumulative amount necessary to report these
balances on a tax basis, excluding certain temporary differences, as of May 31,
1995. 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 certain differences in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles.

<PAGE> 17

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Utilities Fund

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders of John Hancock Utilities Fund and the

Trustees of John Hancock Strategic Series

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments (except for Standard and Poors ratings), 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
John Hancock Utilities Fund (the "Fund") (a portfolio of John Hancock Strategic
Series) at May 31, 1995, the results of its operations for the year then ended,
and the changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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 at May 31,
1995 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.

Price Waterhouse LLP

Boston, Massachusetts

July 17, 1995

TAX INFORMATION NOTICE (UNAUDITED)

For Federal Income Tax purposes, the following information is furnished with
respect to the distributions of the Fund for its fiscal year ended May 31, 1995.

Shareholders will receive a 1995 U.S. Treasury Department Form 1099-DIV in
January of 1996. This will reflect the total of all distributions which are
taxable for the calendar year 1995.

For the fiscal year ending May 31, 1995, 89% of the ordinary income
distributions qualify for the dividends received deduction.

<PAGE> 18

NOTES

John Hancock Funds - Utilities Fund

<PAGE> 19

NOTES

John Hancock Funds - Utilities Fund

<PAGE> 20

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

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

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

[A recycled logo in lower left hand corner with the caption " Printed on
Recycled Paper."]

SHD4100A 5/95
<PAGE> 21
John Hancock Funds

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

Independence
Diversified Core Equity Fund

ANNUAL REPORT

May 31, 1995

<PAGE> 22

TRUSTEES

Edward J. Boudreau, Jr.
Chairman
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Gail D. Fosler*
Bayard Henry*
Richard S. Scipione
Edward J. Spellman*
*Members of the Audit Committee

OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
James K. Ho
Senior Vice President
Frederick L. Cavanaugh, Jr.
Senior Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary
and Compliance Officer
James J. Stokowski
Vice President and Treasurer

CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02110

TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116

INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
INVESTMENT SUB-ADVISER
Independence Investment Associates, Inc.
53 State Street
Boston, Massachusetts 02109

PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109

INDEPENDENT ACCOUNTANTS
Price Waterhouse llp
160 Federal Street
Boston, Massachusetts 02110

Chairman's Message

DEAR FELLOW SHAREHOLDERS:

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

In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.

Sincerely,

/s/ Edward J. Boudreau
- ----------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER

2
<PAGE> 23

By Paul McManus for the Portfolio Management Team

John Hancock
Independence Diversified
Core Equity Fund

Declining interest rates drive stock market to new heights;
Fund outperforms peers with consistent style

A steady decline in interest rates and hopes for a "soft landing" -- that is,
slow growth and low inflation -- ignited the stock market during the first five
months 1995. The Standard & Poor's 500-Stock Index, the most common measure of
the stock market's performance, soared nearly 17.5% year-to-date through May 31,
1995. That's a big switch after last year's meager 1.3% return.

Despite the good news for stocks, however, recent signs suggest that the
economy's landing may not be as soft as many economists had expected. In May,
the index of leading economic indicators, which forecasts economic conditions
for the next six to nine months, fell for the third month in a row. On top of
that, the economy lost 101,000 jobs and durable goods orders dropped roughly 4%.
Many on Wall Street are beginning to wonder whether the slowdown could turn into
a recession.

[A 2 1/2" x 2 1/4" photo of Paul McManus at bottom center. Caption reads: "Paul
McManus, Co-Portfolio Manager."]

A LOOK AT PERFORMANCE

Soft landing or not, we stuck to our disciplined investment style during the
last 12 months. Although we were not immediately rewarded during the first half
of the period, our consistency appears to be paying off. John Hancock
Independence Diversified Core Equity Fund finished the period ahead of its
peers. For the year ended May 31, 1995, the Fund had a total return of 16.98% at
net asset

[CAPTION]
"A steady decline in interest rates and hopes for a "soft landing"... ignited
the stock market..."

3
<PAGE> 24

John Hancock Funds - Independence Diversified Core Equity Fund

[Chart with heading "Top Five Common Stock Holdings" at top of left hand column.
The chart lists five holdings: 1) General Electric 4.3% 2) AT&T 3.1% 3) DuPont
3.0% 4) IBM 2.8% 5) Philip Morris 2.6%. A footnote below reads: "As a percentage
of net assets on May 31, 1995."]

value. By comparison, the average growth and income fund had a return of 14.47%,
according to Lipper Analytical Services.1

The latest upswing in the stock market certainly had a positive impact on the
Fund's performance. However, we don't focus our attention on short-term market
trends. Our experience tells us that whenever market momentum builds at a
feverish pace, there's always a point when it becomes unsustainable. Our
approach is to remain consistent by investing in reasonably priced stocks with
strong earnings potential. By sticking with this disciplined approach, we avoid
getting caught up in short-term market swings and stay focused on the long-term
picture. That, we believe, is the best way to achieve solid results in any
market environment.

That said, we've made few changes to the Fund's holdings since our last
report in November. Bank stocks, which remain at 6% of the Fund's total net
assets, were among our top performers during the last six months. The decline in
interest rates boosted our bank stocks such as Citicorp and Chemical Bank.
That's because as rates fell, credit spreads -- the difference between the rates
banks pay depositors and charge borrowers -- started to improve. And that
improvement goes right to the bottom line.

Our technology stocks also performed quite well, thanks to positive earnings
reports. In particular, IBM and Hewlett Packard continued to reap the fruits of
their restructuring and cost-cutting efforts. After the period closed, IBM
launched a hostile takeover of Lotus Development Corp., which would be the
largest buyout of a domestic software developer. In the electronics area, where
we doubled our investment to slightly more than 6%, Intel was a top gainer. The
company has benefited from the enormous success of its new Pentium chip, which
has increased the speed and power of personal computers.

The one change we did make was to cut back some of our cyclical holdings --
those stocks which rise and fall with the economy. Because of slower sales and
weaker earnings forecasts, we reduced our stake in automobile makers to 1.3% of
the Fund's net assets. In fact, we sold our entire positions in General Motors,
Ford and Chrysler. One gift the Fund received was the significant run-up in
Chrysler after it was targeted for acquisition in April. In all the excitement,
the market ignored the automaker's deteriorating fundamentals and we were able
sell at a healthy profit.

[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers." The first listing is Philip
Morris Cos. followed by an up arrow and the phrase "Rebounding earnings." The
second listing is United Airlines followed by an up arrow and the phrase
"Increased air travel." The third listing is Louisiana Pacific followed by a
down arrow and the phrase "Construction slowdown." Footnote below reads: "See
"Schedule of Investments." Investment holdings are subject to change."]

[CAPTION]
"Bank stocks... were among our top performers..."

<PAGE> 25

John Hancock Funds - Independence Diversified Core Equity Fund

[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended May 31, 1995." The chart is scaled
in increments of 5% from bottom to top, with 20% at the top and 0% at the
bottom. Within the chart, there are two solid bars. The first represents the
16.98% total return for John Hancock Independence Diversified Core Equity Fund.
The second represents the 14.47% total return for the average growth and income
fund. Footnote below reads: "The total return for John Hancock Independence
Diversified Core Equity Fund is at net asset value with all distributions
reinvested. The average growth and income fund is tracked by Lipper Analytical
Services. See following page for historical performance information."]

FOCUS ON FUNDAMENTALS

Our decision to unload Chrysler is a good example of our fundamental strategy:
to own companies with lower price-to-earnings ratios and higher projected growth
rates than the market. Despite the talk on Wall Street, we decided that Chrysler
no longer met our criteria. We were rewarded for maintaining our strong sell
discipline.

To help us find attractive stocks -- and monitor those already in the Fund --
we have a team of 12 analysts, who are constantly on the road visiting with
managements. They also compile the earnings estimates that drive our valuation
system, which combines fundamental analysis and computer valuation models. We
look for companies with dominant positions in their respective industries,
strong financial fundamentals and keen management. We also like companies that
reward shareholder loyalty through increased dividends and stock repurchases.

We try to minimize risk by investing in a range of stocks, including growth
companies, value companies, large companies and small companies. By staying
highly diversified and strongly focused on fundamentals, we believe the Fund
will outperform the stock market over the long term.

LOOKING AHEAD

For the near term, we expect technology and financial stocks to do well for the
reasons mentioned earlier. Also, more signals of an economic slowdown could hurt
the prospects of cyclical stocks such as retailers, automakers and forest
product companies. So for now, we'll remain cautious in these areas.

We will continue to keep an eye on interest rates and other economic
indicators. However, we won't try to make predictions. We don't believe in that.
No one really knows where the economy or stock market is headed, and it's
foolish to guess. Instead, our strategy could be described as a series of
blocking and tackling moves that should help the Fund perform well no matter
what the market does. We can say with certainty that we will stick with our
disciplined investment style of selecting "cheap" stocks with improving
fundamentals. We're gratified to report that our patience has so far been
rewarded.

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

[CAPTION]
"...we expect technology and financial stocks to do well..."

<PAGE> 26

Notes to Performance Information

John Hancock Funds - Independence Diversified Core Equity Fund

In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995,
with all distributions reinvested in shares, and reflects total return at net
asset value. For the 1-year period and since inception on June 10, 1991, the
average annualized total returns were 11.20% and 10.61%, respectively. Effective
August 1, 1992, the Adviser has undertaken voluntarily to limit the Fund's
expenses to the extent required to prevent expenses from exceeding 0.70% of the
Fund's daily net asset value. Without the limitation of expenses, the average
annualized total returns would have been 10.75% and 9.14% for the one-year
period and since inception, respectively. All performance data shown represent
past performance and should not be considered indicative of future performance.
Returns and principal values of Fund investments will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.

[Line chart with the heading John Hancock Diversified Core 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 Independence Diversified Core Equity Fund on June 10, 1991
and is equal to $15,715 as of May 31, 1995. The second line represents Standard
& Poor's 500 Stock Index and is equal to $15,353 as of May 31, 1995.]

* The Standard & Poor's stock Index is an unmanaged index that includes 500
widely traded common stock and is a commonly used measure of stock market
performance.

6
<PAGE> 27

FINANCIAL STATEMENTS

John Hancock Funds - Independence Diversified Core Equity Fund

Statement of Assets and Liabilities
Year ended May 31, 1995

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

THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON MAY 31, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AS OF THAT DATE.

<TABLE>
Statement of Operations
Year ended May 31, 1995

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

<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $88,325,775)......................... $100,129,227
Joint repurchase agreement (cost - $966,000)............... 966,000
Corporate savings account.................................. 861
------------
101,096,088
Receivable for shares sold................................... 128,127
Dividends receivable......................................... 377,702
Interest receivable.......................................... 375
Deferred organization expenses - Note A...................... 3,316
------------
Total Assets......................... 101,605,608
-------------------------------------------------------
LIABILITIES:
Payable for shares repurchased............................... 29,445
Payable to John Hancock Advisers, Inc.
and affiliates - Note B.................................... 109,690
Accounts payable and accrued expenses........................ 48,182
------------
Total Liabilities.................... 187,317
-------------------------------------------------------
NET ASSETS:
Capital paid-in.............................................. 87,156,203
Accumulated net realized gain on investments 2,036,220
Net unrealized appreciation of investments 11,803,452
Undistributed net investment income.......................... 422,416
------------
Net Assets........................... $101,418,291
=======================================================
NET ASSET VALUE PER SHARE:
(based on 7,037,190 shares of
beneficial interest outstanding -
unlimited number of shares
authorized with no par value)........ $ 14.41
=======================================================
</TABLE>

THE 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.

<TABLE>
Statement of Operations
Year ended May 31, 1995

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

<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $10,824) $ 2,730,474
Interest...................................................... 132,509
-----------
2,862,983
-----------
Expenses:
Investment management fee - Note B.......................... 457,613
Transfer agent fee - Note B................................. 91,521
Custodian fee............................................... 43,897
Registration and filing fees................................ 36,626
Auditing fee................................................ 18,376
Trustees' fees.............................................. 9,913
Printing.................................................... 6,041
Legal fees.................................................. 5,782
Organization expense - Note A............................... 3,231
Miscellaneous............................................... 1,956
-----------
Total Expenses......................... 674,956
Less expenses reimbursable by
John Hancock Advisers, Inc.-
Note B................................. ( 34,298)
--------------------------------------------------------
Net Expenses........................... 640,658
--------------------------------------------------------
Net Investment Income.................. 2,222,325
--------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold......................... 2,252,968
Change in net unrealized appreciation/depreciation
of investments.............................................. 12,046,702
-----------
Net Realized and Unrealized
Gain on Investments.................... 14,299,670
--------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations.............. $16,521,995
========================================================
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

7
<PAGE> 28

FINANCIAL STATEMENTS

John Hancock Funds - Independence Diversified Core Equity Fund

<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------

<CAPTION>
YEAR ENDED MAY 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.................................................................. $ 2,222,325 $ 718,061
Net realized gain on investments sold.................................................. 2,252,968 436,390
Change in net unrealized appreciation/depreciation of investments...................... 12,046,702 (711,982)
------------ ------------
Net Increase in Net Assets Resulting from Operations................................. 16,521,995 442,469
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income - ($0.2834 and $0.2315 per share, respectively)... (2,008,180) (540,372)
Distributions from net realized gain on investments sold - ($0.0849 and $0.0497
per share, respectively) (608,472) (120,219)
------------ -----------
Total Distributions to Shareholders.................................................. (2,616,652) (660,591)
------------ -----------

FROM FUND SHARE TRANSACTIONS-- NET*..................................................... 20,901,056 54,342,092
------------ -----------

NET ASSETS:
Beginning of period.................................................................... 66,611,892 12,487,922
------------ -----------
End of period (including undistributed net investment income of $422,416 and
$208,271, respectively)............................................................... $101,418,291 $66,611,892
============ ===========
</TABLE>

* ANALYSIS OF FUND SHARE TRANSACTIONS:

<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-----------------------------------------------------------
1995 1994
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold.................................................... 3,969,193 $50,176,705 4,325,185 $55,641,514
Shares issued to shareholders in reinvestment of distributions. 205,957 2,611,824 51,749 654,541
---------- ----------- --------- -----------
4,175,150 52,788,529 4,376,934 56,296,055
Less shares repurchased........................................ (2,389,312) (31,887,473) (152,260) (1,953,963)
---------- ----------- --------- -----------
Net increase................................................... 1,785,838 $20,901,056 4,224,674 $54,342,092
========== =========== ========= ===========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE> 29

FINANCIAL STATEMENTS

John Hancock Funds - Independence Diversified Core Equity Fund

<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios, and supplemental data are as
follows:
- ----------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
FOR THE PERIOD
JUNE 10, 1991
(COMMENCEMENT OF
YEAR ENDED MAY 31, OPERATIONS) TO
--------------------------------
1995 1994 1993 MAY 31, 1992
-------- ------- ------- ----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.................................... $ 12.68 $ 12.16 $ 10.98 $ 10.00
-------- ------- ------- -------
Net Investment Income................................................... 0.32(b) 0.28(b) 0.22 0.15
Net Realized and Unrealized Gain (Loss) on Investments.................. 1.77 0.52 1.25 0.94
-------- ------- ------- -------
Total from Investment Operations.................................... 2.09 0.80 1.47 1.09
-------- ------- ------- -------

Less Distributions:
Dividends from Net Investment Income.................................. (0.28) (0.23) (0.23) (0.11)
Distributions from Net Realized Gain on Investments Sold.............. (0.08) (0.05) (0.06) --
-------- ------- ------- -------
Total Distributions................................................. (0.36) (0.28) (0.29) (0.11)
-------- ------- ------- -------
Net Asset Value, End of Period.......................................... $ 14.41 $ 12.68 $ 12.16 $ 10.98
======== ======= ======= =======
Total Investment Return at Net Asset Value.............................. 16.98% 6.60% 13.58% 10.95%
Total Adjusted Investment Return at Net Asset Value (a)(c).............. 16.94% 6.15% 11.40% 9.23%

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)............................... $101,418 $66,612 $12,488 $ 2,622
Ratio of Expenses to Average Net Assets................................. 0.70% 0.70% 0.76% 1.66%*
Ratio of Adjusted Expenses to Average Net Assets (a).................... 0.74% 1.15% 2.94% 3.38%*
Ratio of Net Investment Income to Average Net Assets.................... 2.43% 2.20% 2.36% 1.77%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a)....... 2.39% 1.75% 0.18% 0.05%*
Portfolio Turnover Rate................................................. 71% 43% 53% 53%
** Fee Reduction Per Share.............................................. $ 0.005(b) $ 0.06(b) $ 0.20 $ 0.15

<FN>
* On an annualized basis.
(a) Net of any fee reductions.
(b) On average month end shares outstanding.
(c) Unaudited.
</TABLE>

THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE 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.

9
<PAGE> 30

FINANCIAL STATEMENTS

John Hancock Funds - Independence Diversified Core Equity Fund

The Schedule of Investments is a complete list of all securities owned by the
Independence Diversified Core Equity Fund on May 31, 1995. It's divided into two
main categories:common stocks and short-term investments. Common stocks are
further broken down by industry group. Under each industry group is a list of
the securities owned by the Fund. Short-term investments, which represent the
Fund's "cash" position, are listed last.

<TABLE>
SCHEDULE OF INVESTMENTS
May 31, 1995
- ---------------------------------------------------------------------------

<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
COMMON STOCKS
AEROSPACE (0.42%)
Lockheed Martin Corp.................. 7,172 $ 426,734
-----------
AUTOMOBILE/TRUCK (1.26%)
Dana Corp............................. 23,600 666,700
Eaton Corp............................ 10,000 611,250
-----------
1,277,950
-----------
BANKS (5.90%)
Barnett Banks, Inc.................... 8,200 406,925
Chemical Banking Corp................. 18,900 871,762
Citicorp.............................. 29,300 1,567,580
First Interstate Bancorp.............. 10,100 848,400
First Union Corp...................... 8,300 406,700
Fleet Financial Group, Inc............ 11,000 383,625
NationsBank Corp...................... 26,500 1,500,562
-----------
5,985,554
-----------
BEVERAGES (3.33%)
Anheuser-Busch Cos., Inc.............. 5,200 307,450
Coca-Cola Co. (The)................... 16,800 1,039,500
PepsiCo, Inc.......................... 41,400 2,028,600
-----------
3,375,550
-----------
BIOMEDICS/GENETICS (0.61%)
Amgen, Inc.**......................... 8,500 616,250
-----------
BROADCASTING (1.34%)
Walt Disney Co., (The)................ 24,400* 1,357,250
-----------
BUILDING PRODUCTS (2.40%)
Home Depot, Inc. (The)................ 26,500 1,103,062
Weyerhauser Co........................ 30,300 1,329,413
-----------
2,432,475
-----------
CHEMICALS (3.41%)
Eastman Chemical Co................... 7,100* 426,000
Hercules, Inc......................... 15,800 829,500
Monsanto Co........................... 4,500 374,625
Morton International, Inc............. 25,600 812,800
PPG Industries, Inc................... 24,500* 1,019,813
-----------
3,462,738
-----------
COMPUTERS (3.74%)
Ceridian Corp. **..................... 11,600 374,100
International Business Machines Corp.. 30,700 2,862,775
Microsoft Corp.**..................... 6,600* 558,937
-----------
3,795,812
-----------
COSMETICS & TOILETRIES (0.29%)
Avon Products, Inc.................... 4,400 $ 296,450
-----------
DIVERSIFIED OPERATIONS (11.06%)
Dial Corp............................. 10,000 245,000
Du Pont (E.I.) De Nemours & Co........ 45,200 3,067,950
General Electric Co................... 74,400 4,315,200
Raytheon Co........................... 9,800 759,500
Tenneco Inc........................... 35,000 1,680,000
Textron Inc........................... 9,300 566,138
Whitman Corp.......................... 32,200 583,625
-----------
11,217,413
-----------
DRUGS (4.12%)
Bristol-Myers Squibb Co............... 33,100* 2,197,012
Merck & Co., Inc...................... 28,600 1,347,775
Schering-Plough Corp.................. 6,400 504,000
Warner-Lambert Co..................... 1,600* 132,600
-----------
4,181,387
-----------
ELECTRONICS (6.46%)
Hewlett-Packard Co.................... 12,100 800,112
Intel Corp............................ 20,200 2,267,450
Lam Research Corp.**.................. 12,400 709,900
Parker-Hannifin Corp.................. 35,700* 2,039,363
Teradyne, Inc.**...................... 9,300* 503,363
Texas Instruments, Inc................ 2,000 231,250
-----------
6,551,438
-----------
FINANCE (3.50%)
American Express Co................... 48,100 1,713,562
Dean Witter Discover & Co............. 30,400 1,447,800
Equifax, Inc.......................... 3,800 119,225
Ryder System, Inc..................... 10,700 271,513
-----------
3,552,100
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

10
<PAGE> 31

FINANCIAL STATEMENTS

John Hancock Funds - Independence Diversified Core Equity Fund

<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
FOODS (2.50%)
Archer Daniels Midland Co....... 34,600* $ 640,100
Sara Lee Corp................... 29,900 833,463
Unilever N.V.................... 8,300 1,056,175
------------
2,529,738
------------
HEALTHCARE (1.01%)
Columbia/HCA Healthcare Corp.... 18,800 768,450
Health Management Associates, Inc.
(Class A)**................... 9,337 255,600
------------
1,024,050
------------
INSURANCE (3.86%)
Allstate Corp................... 29,500* 888,687
Cigna Corp...................... 11,600* 867,100
Lincoln National Corp........... 34,000 1,538,500
Marsh & McLennan Cos., Inc...... 4,700 374,237
St. Paul Cos., Inc.............. 4,800* 244,200
------------
3,912,724
------------
MACHINERY (0.77%)
Millipore Corp.................. 11,800 774,375
------------
MEDICAL/DENTAL (3.99%)
Baxter International, Inc....... 20,100 700,987
Johnson & Johnson............... 29,600 1,961,000
Medtronic Inc................... 8,900 669,725
Pfizer, Inc..................... 8,100 713,813
------------
4,045,525
------------
METALS (1.56%)
Phelps Dodge Corp............... 28,700 1,582,088
------------
OFFICE EQUIPMENT & SUPPLIES (1.53%)
Xerox Corp...................... 13,700 1,553,238
------------
OIL & GAS (9.67%)
Amoco Corp...................... 28,700* 1,962,362
Anadarko Petroleum Corp......... 16,800 728,700
Chevron Corp.................... 15,200 746,700
Exxon Corp...................... 12,200* 870,775
Imperial Oil Ltd................ 22,400* 870,800
Mobil Corp...................... 22,300 2,238,363
Panhandle Eastern Corp.......... 25,500 640,688
Phillips Petroleum Co........... 48,100 1,743,625
------------
9,802,013
------------
PAPER (2.59%)
Georgia Pacific Corp............ 6,200* 482,050
Mead Corp....................... 25,700 1,384,587
Willamette Industries, Inc...... 15,100* 758,775
------------
2,625,412
------------
PHOTO EQUIPMENT (0.83%)
Eastman Kodak Co................ 14,000 845,250
------------
RETAIL (4.99%)
Albertson's Inc................. 32,400 907,200
Gap, Inc. (The)................. 7,800 268,125
Price/Costco Inc.**............. 44,000 621,500
Sears, Roebuck & Co............. 40,900* 2,305,738
Wal-Mart Stores, Inc............ 38,100 952,500
------------
5,055,063
------------
RUBBER (0.88%)
Goodyear Tire & Rubber Co....... 21,200 895,700
------------
SOAP & CLEANING PREPARATIONS (0.35%)
Proctor & Gamble Co. (The)...... 4,900 352,188
------------
STEEL (0.51%)
British Steel, PLC, American Depositary
Receipt....................... 18,500* 520,312
------------
TELECOMMUNICATIONS (4.13%)
AT & T Corp..................... 62,300 3,161,725
SBC Communications, Inc......... 22,900* 1,030,500
------------
4,192,225
------------
TOBACCO (3.56%)
Philip Morris Cos., Inc......... 36,100 2,630,788
UST, Inc........................ 32,900 982,888
------------
3,613,676
------------
TRANSPORTATION (0.68%)
Conrail, Inc.................... 4,000* 216,000
UAL Corp.**..................... 4,100 471,500
------------
687,500
------------
UTILITIES (7.48%)
Ameritech Corp.................. 19,000* 843,125
GTE Corp........................ 63,900 2,132,662
Pacific Gas & Electric Co....... 90,500 2,624,500
Peco Energy Co.................. 11,900 334,687
Unicom Corp..................... 60,700* 1,654,075
------------
7,589,049
------------
TOTAL COMMON STOCKS
(Cost $88,325,775) (98.73%) 100,129,227
------ ------------

</TABLE>

See notes to financial statements.

<PAGE> 32

FINANCIAL STATEMENTS

John Hancock Funds - Independence Diversified Core Equity Fund

<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- -------- --------------- ------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.95%)
Investment in a joint repurchase
agreement transaction with
BT Securites Corp.,
Dated 05-31-95, Due 06-01-95
(secured by U.S. Treasury Bonds,
9.125% Due 05-15-09, 13.250%
Due 05-15-14, 11.250%
Due 02-15-15, and U.S.
Treasury Note, 6.75 %
Due 05-31-97)........... 6.15% $ 966 $ 966,000
------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%...... 861
------------
TOTAL SHORT-TERM INVESTMENTS (0.95%) 966,861
------- ------------
TOTAL INVESTMENTS (99.68%) $101,096,088
======= ============

<FN>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended May 31, 1995.

** Non-income producing security.
</TABLE>

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.

12
<PAGE> 33

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Independence Diversified Core Equity Fund

NOTE A --
ACCOUNTING POLICIES

John Hancock Strategic Series (the "Trust"), is an open-end management
investment company, registered under the Investment Company Act of 1940. The
Trust consists of three series portfolios: John Hancock Independence Diversified
Core Equity Fund (the "Fund"), John Hancock Utilities Fund and John Hancock
Strategic Income Fund. Significant accounting policies of the Fund are as
follows:

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

DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.

DEFERRED ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to the
Fund's operations ratably over a five-year period that commenced with the
investment operations of the Fund.

DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.

NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS

Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to 0.50% of the Fund's average daily net asset value.

The Fund and the Adviser have a sub-investment management contract with
Independence Investment Associates, Inc. (the "Sub-Adviser"), a wholly-owned
subsidiary of John Hancock Asset Management, under which the Sub-Adviser
provides the Fund with investment research and portfolio management services.
The Adviser pays the Sub-Adviser a monthly management fee equivalent, on an
annual basis, to the sum of (a) 0.00% of the first $10,000,000 of the Fund's
average daily net asset value, (b) 0.15% of the next $10,000,000, and (c) 0.225%
of the next $10,000,000. While the Fund's average daily net assets exceed $30
million, the fee will be 0.30% of the average daily net assets up to
$50,000,000, plus 0.35%

13
<PAGE> 34

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Independence Diversified Core Equity Fund

of the next $50,000,000, plus 0.40% of the Fund's average daily net asset value
in excess of $100,000,000.

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

In addition to the foregoing, effective August 1, 1992, the Adviser has
undertaken to limit the Fund's expenses further to the extent required to
prevent expenses from exceeding 0.70% of the Fund's average daily net asset
value. Accordingly, for the period ended May 31, 1995, the reduction in the
Adviser's fee collectively with any additional amounts not borne by the Fund by
virtue of the expense limit amounted to $34,298.

The Fund has a distribution agreement with John Hancock Funds, Inc., ("JH
Funds"), a wholly owned subsidiary of the Adviser. Prior to January 1, 1995, JH
Funds was known as John Hancock Broker Distribution Services, Inc. For the
period ended May 31, 1995 all sales of shares of beneficial interest were sold
at net asset value. In addition, to compensate JH Funds for the service it
provides as distributor of shares of the Fund, the Trust has adopted a
Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under the terms of the Distribution Plan, the Fund will make payments to
JH Funds for distribution expenses at an annual rate not to exceed 0.50% of the
Fund's average daily net asset value to reimburse JH Funds for their
distribution/costs. Up to a maximum of 0.25% of these payments may be service
fees as defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers. Under the amended Rules of Fair Practice,
curtailment of a portion of the Fund's 12b-1 fees could occur under certain
circumstances. There were no payments under the Distribution Plan for the period
ended May 31, 1995. Payment of fees under the Distribution Plan has been
suspended until further notice is given to the shareholders.

The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. The Fund pays Investor Services a monthly transfer
agent fee equivalent, on an annual basis, to 0.10% of the Fund's average daily
net asset value plus out of pocket expenses incurred by Investor Services on
behalf of the Fund for proxy mailings.

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

NOTE C --
INVESTMENT TRANSACTIONS

Purchases and proceeds from sales of securities during the period ended
May 31, 1995 aggregated $83,606,262 and $63,379,158 respectively.

The cost of investments owned at May 31, 1995 (excluding the corporate
savings account), for Federal income tax purposes was $89,300,927. Gross
unrealized appreciation and depreciation of investments aggregated $12,727,947
and $933,647, respectively, resulting in net unrealized appreciation of
$11,794,300.

14
<PAGE> 35

John Hancock Funds - Independence Diversified Core Equity Fund

REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Independence
Diversified Core Equity Fund and the
Trustees of John Hancock Strategic Series

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 John Hancock Independence
Diversified Core Equity Fund (the "Fund") (a portfolio of John Hancock Strategic
Series) at May 31, 1995, the results of its operations for the year then ended,
and the changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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 at May 31,
1995 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.

Price Waterhouse LLP
Boston, Massachusetts
July 17, 1995

TAX INFORMATION NOTICE (UNAUDITED)

For Federal Income Tax purposes, the following information is furnished with
respect to the distributions of the Fund for its fiscal year ended May 31, 1995.

The Fund distributed to shareholders of record December 23, 1994 and payable
December 29, 1994 a long-term capital gains dividend of $342,824. This amount
was reported on the 1994 U.S. Treasury Department Form 1099-DIV. With respect to
the Fund's ordinary taxable income for the fiscal year ended May 31, 1995,
74.00% qualified for the dividends received deduction available to corporations.

Shareholders will receive a 1995 U.S. Treasury Department Form 1099-DIV in
January of 1996. This will reflect the total of all distributions which are
taxable for the calendar year 1995.

15
<PAGE> 36

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

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

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

[A recycled logo in lower left hand corner with the caption " Printed on
Recycled Paper."]

JHD 2500A 5/95
<PAGE> 37
John Hancock Funds

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

STRATEGIC
INCOME
FUND

ANNUAL REPORT

May 31, 1995

<PAGE> 38

OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice-Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Frederick L. Cavanaugh, Jr.
Senior Vice President
Lawrence J.Daly
Senior Vice President
Michael P. DiCarlo
Senior Vice President
Anthony A. Goodchild
Senior Vice President
James K. Ho
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and Compliance Officer
James J. Stokowski
Vice President and Treasurer

CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02110

TRANSFER AGENT
John Hancock Investor Services Corp.
P.O. Box 9116
Boston, Massachusetts 02205-9116

INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109

INDEPENDENT ACCOUNTANTS
Price Waterhouse llp
160 Federal Street
Boston, Massachusetts 02110

CHAIRMAN'S MESSAGE

DEAR FELLOW SHAREHOLDERS:

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

At John Hancock Funds, we strive to educate you about all aspects of
your fund: the performance, the strategies and the holdings. We want you to
fully understand what you own. We want you to have realistic expectations of the
potential rewards as well as the potential risks of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.

In the message that follows, the portfolio manager gives a candid
commentary on the market environment; the factors that affected performance; the
fund's current investment strategies; and the outlook for the months ahead. The
ensuing financial statements provide a comprehensive look at the fund's
statistics and holdings. We've included explanations of what each financial
statement shows and how it is used.

We hope you find these shareholder reports a useful tool in evaluating
your investments. Of course, if you have any questions or need more information,
feel free to call one of our customer service representatives on our toll-free
line at 1-800-225-5291, from 8:00 a.m. to 8:00 p.m. eastern time, Monday through
Friday.

Sincerely,

/s/ Edward J. Boudreau, Jr.
- ---------------------------

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

2
<PAGE> 39

BY FREDERICK CAVANAUGH, SENIOR VICE PRESIDENT AND
PORTFOLIO MANAGER

JOHN HANCOCK
STRATEGIC INCOME FUND

U.S. BONDS MAKE COMEBACK IN 1995;
FOREIGN BONDS PROFIT FROM WEAK DOLLAR

Volatile interest rates, a weak dollar and turmoil in emerging markets shaped
bond returns during the past year. Interest rates, which rose sharply from June
to November 1994, have headed down so far this year. In the U.S., all sectors of
the bond market benefited, especially government securities, which are most
sensitive to interest-rate changes. In foreign markets, the plunge in the dollar
helped boost returns. However, many emerging markets, especially in Latin
America, suffered significant losses following the Mexican peso's devaluation.

For the year ended May 31, 1995, John Hancock Strategic Income Fund's
Class A and B shares returned 9.33% and 8.58%, respectively, at net asset value.
Happily, both classes outpaced the average general bond fund's return of 8.39%,
according to Lipper Analytical Services.1 In addition, the Fund's trailing
30-day yield was 8.22% for A shares and 7.92% for B shares versus an average of
7.37%.

[A 2 1/4" x 2 3/4" photo of Frederick Cavanaugh at bottom center. Caption
reads: "Frederick Cavanaugh, Portfolio Manager."]

HIGH-YIELD SECTOR TAKES THE LEAD
Throughout the year, we gradually increased out stake in high-yield bonds to
50%, from 43% six months ago. Finding bonds that met both our credit quality
standards and income targets became increasingly challenging. That's because
demand soared and supply tightened this year, pushing prices way up. The result:
high-yield bonds edged out 10-year Treasuries for the year ended May 31, 1995.

In 1994, we focused on cyclical industries -- like airlines and steel --
that benefit from a

[CAPTION]
"VOLATILE INTEREST RATES, A WEAK DOLLAR AND TURMOIL IN EMERGING MARKETS SHAPED
BOND RETURNS..."

3
<PAGE> 40
John Hancock Funds - Strategic Income Fund

[Pie chart with the heading "Portfolio Diversification" at top of left hand
column. The chart is divided into four sections. Going from left to right:
Foreign Bonds 29%; U.S. Treasury and Government Agency Bonds 11% ; High-Yield
U.S. Corporate Bonds 50%; and Short-Term Investments & Other 10%. A footnote
below states "As a percentage of net assets on May 31, 1995."]

stronger economy. Many of these holdings were top performers. Our USAir bonds,
for example, appreciated 57% between January and May 1995. The airline benefited
as a major competitor on the East Coast dropped out, cutting capacity and
allowing the remaining players to raise fares. The airline also made significant
headway toward reaching an agreement with its labor union. In addition, our
Northwest Airlines bonds continued to do well as the airline prospered from
refocusing its domestic routes.

As supply tightened in 1995, however, we broadened our focus, looking
for situations in any industry that offered good value for the risk we were
taking. We bought more so-called "special situations" -- that is, bonds with the
potential to appreciate as their credit quality improves. For example, we
purchased Computervision bonds soon after the company successfully launched new
software for industrial applications. As Computervision's prospects have
brightened, so have the bonds. More recently, we've become more cautious about
the high-yield sector's outlook. We believe a slowing economy could give
investors an excuse to pull back. To protect the Fund, we've begun to focus on
bonds with shorter maturities and higher coupons.

FOREIGN MARKETS SPURRED BY CURRENCY VOLATILTY
At the end of May, foreign bonds stood at 29% of the Fund. Fortunately, we had
only 3.5% in emerging markets when the Mexican peso crisis hit in December.
Within days, we sold our Latin American investments. But in mid-February, as
some stability returned to the region, we began cautiously moving back in. Latin
American bonds, in particular, had taken such a beating that by then they were
well worth the risk. By the end of May, we had a 5% stake in emerging markets,
including Mexico, Brazil and Indonesia.

The bulk of our foreign investments were in high-quality bonds from
established markets like Canada, Denmark, England, Australia and New Zealand.
Most foreign bonds did much better than domestic bonds, rising largely on the
dollar's weakness. (A weaker dollar means the foreign bonds are worth more when
translated back into U.S. dollars.) In addition, there were some price gains in
certain European markets.

To minimize currency volatility, we cut back on foreign-denominated
bonds from Italy, Spain, and Canada where debt levels were high compared to
gross domestic product (GDP). In

[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investment"; the header for the right column is "Recent
performance ... and what's behind the numbers." The first listing is USAir
followed by an up arrow and the phrase "Shrinking capacity/rising fares." The
second listing is Computervision followed by an up arrow and the phrase "New
software revitalizes company." The third listing is Latin American bonds
followed by a down arrow and the phrase "Mexican peso crisis hurts bonds."
Footnote below reads: "See "Schedule of Investments." Investment holdings are
subject to change."]

[CAPTION]
"...WE GRADUALLY INCREASED OUR STAKE IN HIGH-YIELD BONDS..."

4
<PAGE> 41
John Hancock Funds - Strategic Income Fund

[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended May 31, 1995." The chart is scaled
in increments of 2% from bottom to top, with 10% at the top and 0% at the
bottom. Within the chart, there are three solid bars. The first represents the
9.33% total return for John Hancock Strategic Income Fund: Class A. The second
represents the 8.58% total return for John Hancock Strategic Income Fund: Class
B. The third represents the 8.39% total return for the average general bond
fund. Footnote below reads: "Total returns for John Hancock Strategic Income
Fund are at net asset value with all distributions reinvested. The average
general bond fund is tracked by Lipper Analytical Services. See following page
for historical performance information."]

their place, we bought foreign bonds denominated in U.S. dollars as well as
bonds from Australia and New Zealand, whose currencies are tied to the U.S
dollar. We hedged our remaining foreign-denominated bonds against currency
fluctations. That's because we believed the dollar had bottomed out and was
about to head back up. (A rising dollar would have eroded the value of our
foreign holdings, hence the hedge.) We hedged to varying degrees until March
when the dollar fell dramatically. If we'd taken our hedges off even sooner, the
Fund would have enjoyed more gains from the weakening dollar. But our goal is to
add value from the bond side, not shoot for gains tied to currency swings. Once
it appeared the dollar had stabilized in mid-May, we started hedging again.

U.S. TREASURIES RALLY AS RATES FALL
Since January, U.S. Treasuries have rallied, fueled by slower economic growth
and the belief that inflation is under control. In late April and May, the
prospect of the Federal Reserve easing interest rates further propelled the
bonds. In retrospect, I wish we had owned more Treasuries. Our stake was never
higher than 14% during the period; it ended May at 10%. We kept a relatively
small weighting because we never expected rates to fall as quickly as they did.
We also believed that increasing our government stake would hurt the Fund's
yield.

CAUTION AT HOME POINTS TO OPPORTUNITY ABROAD
We believe the U.S. economy continues to grow, but more slowly than last year's
robust pace. Nevertheless, we're likely to see an uptick in inflation, mainly
because of past economic growth, a weak dollar and a possible jump in oil
prices. If inflation does increase, domestic interest rates would probably rise
as well, bringing some stability to the U.S. dollar. That would most likely make
foreign-denominated bonds more attractive than they've been. If that's the case,
we'll probably trim our high-yield weighting, put the proceeds to work in
foreign bonds and leave our Treasury allocation unchanged.

[CAPTION]
"...THE U.S. ECONOMY CONTINUES TO GROW, BUT MORE SLOWLY..."

5
<PAGE> 42
NOTES TO PERFORMANCE INFORMATION

John Hancock Funds - Strategic Income Fund

In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995,
with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year and 5-year periods and since the
Fund's inception in 1986 were (1.13%), 8.62% and 6.40%, respectively and reflect
payment of the maximum sales charge of 4.50%. The average annualized total
returns for Class B shares for the 1-year period and since inception on October
4, 1993 were (2.00%) and 0.34%, respectively and reflect applicable contingent
deferred sales charge (maximum contingent deferred sales charge of 5% and
declines to 0% over six years). The standard SEC yield for the 30-day period
ended May 31, 1995, for Class A and Class B shares was 8.22% and 7.92%,
respectively. All performance data shown represent past performance and should
not be considered indicative of future performance. Returns and principal values
of Fund investments will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Different sales charge
schedules for Class A shares were in effect prior to September 28, 1989 (maximum
sales charge of 8.5%) and are not reflected in the above performance
information. See the prospectus for a discussion of risks associated with
international investing.

HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND

[John Hancock Strategic Income Fund
Class A Shares

Line chart with the heading John Hancock Strategic Income Fund: Class A,
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 Lehman Government/Corporate Bond
Index and is equal to $21,109* as of May 31, 1995. The second line represents
the value of the hypothetical $10,000 investment made in the John Hancock
Strategic Income Fund on August 19, 1986, before sales charge, and is equal to
$18,725 as of May 31, 1995. The third line represents the John Hancock
Strategic Income Fund after sales charge and is equal to $17,884 as of May 31,
1995.

John Hancock Strategic Income Fund
Class B Shares

Line chart with the heading John Hancock Strategic Income Fund: Class B,
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 in
the John Hancock Strategic Income Fund: Class B on October 4, 1993, before
contingent deferred sales charge, and is equal to $10,836. The second line
represents the value of the Lehman Government/Corporate Bond Index and is equal
to $10,670* as of May 31, 1995. The third line represents the John Hancock
Strategic Income Fund after contingent deferred sales charge and is equal to
$10,536 as of May 31, 1995.

*The Lehman Government/Corporate Bond Index is an unmanaged index that measures
the performance of U.S. government bonds, U.S. corporate bonds, and Yankee
bonds.]

6
<PAGE> 43
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Bonds (cost - $409,334,970)...................................................................... $416,704,662
Common and preferred stocks and warrants (cost - $29,865,995).................................... 31,994,989
Short-term investments (cost - $5,677,280)....................................................... 5,677,280
------------
454,376,931
Receivable for shares sold......................................................................... 674,353
Receivable for investments sold.................................................................... 3,776,818
Interest receivable................................................................................ 10,648,047
Dividends receivable............................................................................... 105,153
Foreign tax receivable............................................................................. 199,599
------------
Total Assets.................................................................... 469,780,901
----------------------------------------------------------------------------------------------
LIABILITIES:
Payable for shares repurchased..................................................................... 310,748
Payable for foreign exchange contracts closed...................................................... 147,222
Payable for forward foreign currency exchange contracts sold - Note A.............................. 1,195,980
Payable for investments purchased.................................................................. 2,984,229
Dividend payable................................................................................... 2,325,850
Payable to John Hancock Advisers, Inc. and affiliates - Note B..................................... 275,693
Accounts payable and accrued expenses.............................................................. 138,493
------------
Total Liabilities............................................................... 7,378,215
----------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in.................................................................................... 497,909,836
Accumulated net realized loss on investments, foreign currency transactions and financial
futures contracts................................................................................ (40,085,425)
Net unrealized appreciation of investments and foreign currency transactions....................... 8,413,497
Distributions in excess of net investment income................................................... (3,835,222)
------------
Net Assets...................................................................... $462,402,686
==============================================================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial interest outstanding -
unlimited number of shares authorized with no par value, respectively)
Class A - $327,875,996/45,879,631............................................... $ 7.15
==============================================================================================
Class B - $134,526,690/18,825,999............................................... $ 7.15
==============================================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($7.15 x 104.71%)..................................................... $ 7.49
==============================================================================================
<FN>
* On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price
is reduced.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

7
<PAGE> 44
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

<TABLE>
STATEMENT OF OPERATIONS
Year ended May 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $185,645)............................................ $42,679,585
Dividends (net of foreign withholding taxes of $8,578)............................................. 2,043,068
----------
44,722,653
----------
Expenses:
Investment management fee - Note B............................................................... 2,007,777
Distribution/service fee - Note B
Class A......................................................................................... 978,334
Class B......................................................................................... 1,068,375
Transfer agent fee - Note B
Class A......................................................................................... 694,814
Class B......................................................................................... 203,289
Custodian fee.................................................................................... 188,019
Registration and filing fees..................................................................... 114,884
Trustees' fees................................................................................... 54,225
Auditing fee..................................................................................... 42,750
Printing......................................................................................... 39,296
Miscellaneous.................................................................................... 31,904
Legal fees....................................................................................... 16,902
----------
Total Expenses.................................................................. 5,440,569
----------------------------------------------------------------------------------------------
Net Investment Income........................................................... 39,282,084
----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY TRANSACTIONS AND FINANCIAL
FUTURES CONTRACTS
Net realized loss on investments sold.............................................................. (15,487,029)
Net realized gain on financial futures contracts................................................... 205,575
Net realized loss on foreign currency transactions................................................. (13,158,431)
Change in net unrealized appreciation/depreciation of investments.................................. 26,884,608
Change in net unrealized appreciation/depreciation of financial futures contracts.................. 9,375
Change in net unrealized appreciation/depreciation of foreign currency transactions................ 1,025,139
----------
Net Realized and Unrealized Loss on Investments, Foreign Currency Transactions
and Financial Futures Contracts................................................. (520,763)
----------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations............................ $38,761,321
==============================================================================================
</TABLE>

THE 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.

SEE NOTES TO FINANCIAL STATEMENTS.

8
<PAGE> 45
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MAY 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................................................. $ 39,282,084 $ 29,950,911
Net realized loss on investments sold, foreign currency transactions and financial
futures contracts .................................................................. (28,439,885) (7,635,281)
Change in net unrealized appreciation/depreciation of investments, foreign currency
transactions and financial futures contracts........................................ 27,919,122 (12,669,935)
------------ ------------
Net Increase in Net Assets Resulting from Operations................................ 38,761,321 9,645,695
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.5563 and $0.5847 per share, respectively)............................. (26,071,776) (24,525,225)
Class B** - ($0.5151 and $0.3235 per share, respectively)........................... (7,895,442) (1,640,903)
Distributions in excess of net investment income
Class A - (none and $0.0451 per share, respectively)................................ -- (1,891,896)
Class B** - (none and $0.0250 per share, respectively).............................. -- (126,581)
Distributions from capital paid-in
Class A - ($0.0870 and $0.0967 per share, respectively)............................. (4,079,463) (4,057,515)
Class B** - ($0.0806 and $0.0535 per share, respectively)........................... (1,235,403) (271,475)
------------ ------------
Total Distributions to Shareholders................................................ (39,282,084) (32,513,595)
------------ ------------
FROM FUND SHARE TRANSACTIONS-- NET*.................................................... 49,971,675 173,682,461
------------ ------------

NET ASSETS:
Beginning of period................................................................... 412,951,774 262,137,213
------------ ------------
End of period (including distributions in excess of net investment income of
$3,835,222 and $54,719, respectively)............................................... $462,402,686 $412,951,774
============ ============
</TABLE>

<TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<CAPTION>
YEAR ENDED MAY 31,
-------------------------------------------------------
1995 1994
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold...................................................... 8,980,711 $62,660,103 20,643,480 $156,715,885
Shares issued to shareholders in reinvestment of distributions .. 2,633,453 18,333,201 2,312,786 17,468,966
----------- ----------- ---------- ------------
11,614,164 80,993,304 22,956,266 174,184,851
Less shares repurchased.......................................... (12,502,115) (86,921,900) (10,904,772) (82,506,916)
----------- ----------- ---------- ------------
Net increase (decrease).......................................... (887,951) ($ 5,928,596) 12,051,494 $ 91,677,935
=========== =========== ========== ============

CLASS B**
Shares sold...................................................... 9,883,638 $69,070,960 11,217,497 $ 84,809,481
Shares issued to shareholders in reinvestment of distributions .. 600,041 4,173,148 112,236 830,903
----------- ----------- ---------- ------------
10,483,679 73,244,108 11,329,733 85,640,384
Less shares repurchased.......................................... (2,496,190) (17,343,837) (491,223) (3,635,858)
----------- ----------- ---------- ------------
Net increase..................................................... 7,987,489 $55,900,271 10,838,510 $ 82,004,526
=========== =========== ========== ============
<FN>
** Class B shares became available on October 4, 1993.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

9
<PAGE> 46
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are as
follows:
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MAY 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............................. $ 7.17 $ 7.55 $ 7.78 $ 7.20 $ 7.33
-------- -------- -------- -------- -------
Net Investment Income............................................. 0.64 0.68 0.71 0.80 0.93
Net Realized and Unrealized Gain (Loss) on Investments,
Foreign Currency Transactions and Financial Futures Contracts .. (0.02) (0.33) (0.22) 0.52 (0.13)
-------- -------- -------- -------- -------
Total from Investment Operations................................ 0.62 0.35 0.49 1.32 0.80
-------- -------- -------- -------- -------
Less Distributions:
Dividends from Net Investment Income............................ (0.55) (0.58)+ (0.72) (0.74)+ (0.93)
Distributions in Excess of Net Investment Income................ -- (0.05) -- -- --
Distributions from Capital Paid-in.............................. (0.09) (0.10) -- -- --
-------- -------- -------- -------- -------
Total Distributions............................................... (0.64) (0.73) (0.72) (0.74) (0.93)
-------- -------- -------- -------- -------
Net Asset Value, End of Period.................................... $ 7.15 $ 7.17 $ 7.55 $ 7.78 $ 7.20
======== ======== ======== ======== =======
Total Investment Return at Net Asset Value........................ 9.33% 4.54% 6.81% 19.92% 12.31%

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......................... $327,876 $335,261 $262,137 $153,568 $79,272
Ratio of Expenses to Average Net Assets........................... 1.09% 1.32% 1.58% 1.69% 1.75%
Ratio of Net Investment Income to Average Net Assets.............. 9.24% 8.71% 9.63% 10.64% 13.46%
Portfolio Turnover Rate........................................... 55% 91% 97% 80% 60%
</TABLE>

THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE 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.

10
<PAGE> 47
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
OCTOBER 4, 1993
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
MAY 31, 1995 MAY 31, 1994
------------ ----------------
<S> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period..................................................... $ 7.17 $ 7.58(a)
-------- -------
Net Investment Income.................................................................... 0.60(b) 0.40
Net Realized and Unrealized Loss on Investments, Foreign Currency Transactions and
Financial Futures Contracts............................................................ (0.02) (0.41)
-------- -------
Total from Investment Operations....................................................... 0.58 (0.01)
-------- -------
Less Distributions:
Dividends from Net Investment Income................................................... (0.52) (0.32)
Distributions in Excess of Net Investment Income....................................... -- (0.03)
Distributions from Capital Paid-in..................................................... (0.08) (0.05)
-------- -------
Total Distributions...................................................................... (0.60) (0.40)
-------- -------
Net Asset Value, End of Period........................................................... $ 7.15 $ 7.17
======== =======
Total Investment Return at Net Asset Value............................................... 8.58% (0.22%)

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................................................ $134,527 $77,691
Ratio of Expenses to Average Net Assets.................................................. 1.76% 1.91%*
Ratio of Net Investment Income to Average Net Assets..................................... 8.55% 8.12%*
Portfolio Turnover Rate.................................................................. 55% 91%
<FN>
* On an annualized basis
(a) Initial price at commencement of operations.
(b) On average month end shares outstanding.
+ The dividend policy of the Fund was changed, effective August 1, 1991, from one which
utilized daily dividend declarations to one which declares dividends monthly.
Additionally, the dividend policy of the Fund was changed, effective October 1, 1993,
from one which declared dividends monthly to daily dividend declarations.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

11
<PAGE> 48
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
STRATEGIC INCOME FUND ON MAY 31, 1995. IT'S DIVIDED INTO FOUR MAIN CATEGORIES:
BONDS, COMMON AND PREFERRED STOCKS, WARRANTS AND RIGHTS, AND SHORT-TERM
INVESTMENTS. THE BONDS ARE FURTHER BROKEN DOWN BY INDUSTRY GROUPS. UNDER EACH
INDUSTRY GROUP IS A LIST OF THE BONDS OWNED BY THE FUND. SHORT-TERM INVESTMENTS,
WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE LISTED LAST.

<TABLE>
SCHEDULE OF INVESTMENTS
May 31, 1995
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR VALUE
INTEREST S&P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING** OMITTED) VALUE
- ------------------- -------- -------- --------- ------
<S> <C> <C> <C> <C>
BONDS
AEROSPACE (0.63%)
Rohr Inc., Sr Note 05-15-03.............................................. 11.625% BB- 2,750 $2,901,250
----------
AUTOMOBILE/TRUCK (1.51%)
*Harvard Industries, Inc., Sr Note 07-15-04............................... 12.000 B 2,500 2,643,750
*JPS Automotive Products Corp., Sr Note 06-15-01.......................... 11.125 B 3,500 3,465,000
Venture Holdings Trust, Sr Sub Note 04-01-04............................. 9.750 B 1,000 870,000
----------
6,978,750
----------
BANKS (0.70% )
Barclays Bank, (England), Foreign Corp Bond 05-12-49#.................... 9.875 A+ 2,000 3,233,381
----------
BROADCASTING (1.79%)
*Australis Media, Unit (Sr Sub Disc Note 05-15-03 and Warrant) (Y)........ 14.000 CCC 3,000 1,530,000
*Chancellor Broadcasting Co., Sr Sub Notes 10-01-04....................... 12.500 B- 1,500 1,552,500
Outlet Broadcasting Inc., Sr Sub Note 07-15-03........................... 10.875 B- 2,000 2,060,000
SFX Broadcasting, Inc., Sr Sub Note 10-01-00............................. 11.375 B 3,000 3,135,000
----------
8,277,500
----------
BUILDING PRODUCTS (1.67%)
Nortek Inc., Sr Sub Note 03-01-04........................................ 9.875 CCC+ 1,500 1,417,500
*NVR Inc., Sr Note 04-15-03............................................... 11.000 B 2,500 2,375,000
P.T. Semen Cibinong, (Indonesia), Deb 12-15-98 (R), (Y).................. 9.000 BB 3,000 2,962,500
Tarkett International, (Germany), Sr Sub Note 03-01-02 (Y)............... 9.000 B+ 1,000 980,000
----------
7,735,000
----------
CABLE TV (6.69%)
Adelphia Communications Corp., Sr Note 05-15-02.......................... 12.500 B 3,000 2,970,000
*Bell Cablemedia PLC, (United Kingdom), Sr Discount Note, Stepped Coupon
(11.950%, 7-15-99), 07-15-04 (B)(Y).................................... Zero B+ 4,000 2,610,000
*CF Cable TV Inc., (Canada), Sr Note 02-15-05............................. 11.625 BB+ 1,000 1,065,000
Cablevision Systems Corp., Sr Sub Deb 04-01-23........................... 9.875 B 2,000 2,040,000
*Comcast Corp., Sr Sub Deb 05-15-05....................................... 9.375 B+ 4,000 3,960,000
*Diamond Cable Communications Co., (United Kingdom), Sr Discount Note,
Stepped Coupon (13.250%, 9-30-99), 09-30-04 (B)(Y)..................... Zero B- 3,000 1,852,500
Falcon Holdings Group, L.P., Payment-In-Kind Sr Sub Note 09-15-03........ 11.000 B 3,523 3,240,906
*International Cabletel, Sr Note, Stepped Coupon (12.750%, 4-15-00),
04-15-05 (B)(R)........................................................ Zero B3 1,500 855,000
Jones Intercable, Inc., Sr Sub Deb 07-15-04.............................. 11.500 B+ 3,000 3,300,000
*Jones Intercable, Inc., Sr Note 03-15-02................................. 9.625 BB 3,000 3,082,500
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

12
<PAGE> 49
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

Crown Packaging, Sr Note 11-01-00........................................ 10.750 B3 2,000 1,980,000
Stone Container Corp., Sr Note 02-01-01.................................. 9.875 B 2,500 2,487,500
*Stone Container Corp., Sr Note 10-01-04.................................. 11.500 B 2,000 2,140,000
-----------
6,607,500
-----------
COSMETICS & TOILETRIES (0.42%)
*Renaissance Cosmetics, Sr Note 08-15-01,................................. 13.750 B 2,000 1,940,000
-----------
DIVERSIFIED MANUFACTURING (1.91%)
Calpine Corp., Sr Note 02-01-04.......................................... 9.250 B 2,000 1,760,000
Great Dane Holdings, Sr Sub Deb 08-01-01................................. 12.750 B- 3,000 3,030,000
*Great Dane Holdings, Sub Deb 01-01-06.................................... 14.500 CCC 1,000 997,500
Interlake Corp. (The), Sr Sub Deb 03-01-02............................... 12.125 CCC+ 3,000 3,060,000
-----------
8,847,500
-----------
ELECTRONICS (0.54%)
*Alliant Techsystems, Inc., Sr Sub Note 03-01-03 (R)...................... 11.750 B2 1,375 1,450,625
Tracor, Inc., Sr Sub Note 08-15-01....................................... 10.875 B 1,000 1,030,000
-----------
2,480,625
-----------
FINANCE (1.26%)
Norgeskreditt, (Norway), Foreign Corp Bond 06-19-96#..................... 10.750 AAA 35,000 5,848,640
-----------
FOODS (0.63%)
PMI Acquisition Corp., Sr Sub Note 09-01-03.............................. 10.250 B 1,000 1,030,000
Pilgrim's Pride Corp., Sr Sub Note 08-01-03.............................. 10.875 B- 2,000 1,885,000
-----------
2,915,000
-----------
GOVERNMENTAL - FOREIGN (19.98%)
Government of New Zealand, (New Zealand), Government Bond 04-15-04#...... 8.000 AA3 10,000 6,914,399
*Government of New Zealand, (New Zealand), Foreign Government Debt
07-15-98# ............................................................. 8.000 AA3 10,000 6,671,987
*Kingdom of Denmark, (Denmark), Foreign Government Debt 12-15-04#......... 7.000 AAA 60,000 10,104,750
*Kingdom of Denmark, (Denmark), Government Bond 11-10-24#................. 7.000 AA1 65,000 9,750,000
Kingdom of Denmark, (Denmark), Government Bond-Bullet 11-15-95#.......... 9.000 AAA 20,000 3,657,848
Kingdom of Denmark, (Denmark), Government Bond-Bullet 11-15-96#.......... 9.000 AAA 25,000 4,670,623
Kingdom of Spain, (Spain), Government Bond 04-15-96#..................... 13.450 AA1 1,400,000 11,673,480
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

13
<PAGE> 50
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

<TABLE>
SCHEDULE OF INVESTMENTS
May 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR VALUE
INTEREST S&P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING** OMITTED) VALUE
- ------------------- -------- -------- --------- ------
<S> <C> <C> <C> <C>
GOVERNMENTAL - FOREIGN (CONTINUED)
Kingdom of Sweden, (Sweden), Government Bond 09-01-95#................... 11.500% AA2 20,000 $ 2,738,806
*Mexican Tesobonos, (Mexico), Government Bond 06-01-95 (Y)................ Zero B 6,000 6,000,000
*Queensland Treasury, (Australia), Government Bond 06-14-05#.............. 6.500 AAA 5,700 3,384,002
*Republic of Brazil, (Brazil), Government Bond (Floating Rate Note)
04-15-24 (Y)........................................................... 4.250 B 10,000 4,512,500
United Kingdom of Great Britain Treasury Gilts, (England), Government
Bond 11-06-01#......................................................... 7.000 AAA 3,000 4,535,043
United Kingdom of Great Britain Treasury Gilts, (England), Government
Bond 08-27-02#......................................................... 9.750 AAA 4,000 6,988,736
United Kingdom of Great Britain Treasury Gilts, (England), Government
Bond 10-13-08#......................................................... 9.000 AAA 3,000 5,167,182
*United Mexican States, (Mexico), Series A, Deb 12-31-19 (Y).............. 6.250 BA3 7,000 3,937,500
*United Mexican States, (Mexico), Series B, Deb 12-31-19 (Y).............. 6.250 BA3 3,000 1,664,064
-----------
92,370,920
-----------
GOVERNMENTAL - FOREIGN AGENCY (1.08%)
Treasury Corp. of, Victoria, (Australia), Government Bond 10-15-03#...... 8.250 AA 7,300 4,984,513
-----------
GOVERNMENTAL - U.S. (10.43%)
*United States Treasury, Bond 02-15-16.................................... 9.250 AAA 11,000 14,013,010
United States Treasury, Bond 08-15-19.................................... 8.125 AAA 5,500 6,354,205
*United States Treasury, Note 11-15-95.................................... 8.500 AAA 7,000 7,079,870
United States Treasury, Note 05-15-01.................................... 8.000 AAA 19,000 20,772,320
-----------
48,219,405
-----------
GOVERNMENTAL - U.S. AGENCIES (0.45%)
Federal Home Loan Mortgage Corp., Remic 44-E 11-15-19.................... 9.000 AAA 1,523 1,605,124
Federal National Mortgage Association, Reverse PERLS 06-07-95............ 13.050 AAA 500 0
Federal National Mortgage Association, Multicurrency PERLS 07-10-96...... 11.450 AAA 500 60,000
Student Loan Marketing Association, Reverse PERLS 07-12-95............... 11.750 AAA 500 322,500
Student Loan Marketing Association, Multicurrency PERLS 11-19-96......... 10.000 AAA 500 75,000
-----------
2,062,624
-----------
HEALTHCARE (0.56%)
*Continental Medical Systems, Sr Sub Notes 08-15-02....................... 10.875 B+ 2,500 2,600,000
-----------
INSURANCE (0.85%)
*American Life Holding Co., Sr Sub Note 09-15-04.......................... 11.250 BB- 1,000 1,040,000
Bankers Life Holdings Corp., Sr Sub Note Ser B 11-01-02.................. 13.000 BB+ 2,500 2,887,500
-----------
3,927,500
-----------
LEASING (0.32%)
Scotsman Group, Sr Sec Note 12-15-00..................................... 9.500 BB- 1,500 1,462,500
-----------
LEISURE & RECREATION (3.59%)
*Act III Theatres, Inc., Sr Sub Notes 02-01-03............................ 11.875 B- 1,550 1,658,500
Bally's Grand, 1st Mtg Note 12-15-03..................................... 10.375 B+ 3,000 2,925,000
*GB Property Funding, 1st Mtg Note 01-15-04............................... 10.875 B+ 3,000 2,625,000
*Players International Inc., Sr Note 04-15-05 (R)......................... 10.875 BB 4,000 4,040,000
Roadmaster Industries Inc., Sr Sub Note 07-15-02......................... 11.750 B- 2,000 1,940,000
Station Casinos, Sr Sub Notes 06-01-03................................... 9.625 B 2,000 1,845,000
*Stratosphere Corp., 1st Mtg Note 05-15-02................................ 14.250 B 1,500 1,560,000
-----------
16,593,500
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

14
<PAGE> 51
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

<TABLE>
SCHEDULE OF INVESTMENTS
May 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR VALUE
INTEREST S&P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING** OMITTED) VALUE
- ------------------- -------- -------- --------- ------
<S> <C> <C> <C> <C>
MEDIA (0.90%)
*News America Holdings, Inc., (Australia), Deb 02-07-14#.................. 8.625% BBB- 7,000 $ 4,160,380
-----------
METALS (2.14%)
Easco Corp., Sr Note 03-15-01............................................ 10.000 B 2,000 2,020,000
Horsehead Industries, Inc., Sub Note 06-01-99............................ 14.000 CCC- 3,500 3,578,750
Kaiser Aluminum, Sr Sub Note 02-01-03.................................... 12.750 B- 4,000 4,310,000
-----------
9,908,750
-----------
OIL & GAS (4.12%)
*Columbia Gas System, Deb 08-01-93 (A)***................................. 9.000 D 3,000 4,170,000
Dual Drilling Co., Sr Sub Note 01-15-04.................................. 9.875 B- 1,000 882,500
*Falcon Drilling Company Inc., Sr Sub Notes 03-15-05...................... 12.500 B- 1,500 1,560,000
Mobil North Sea, Inc., (England), Foreign Corp Bond 07-15-99#............ 9.625 A 1,000 1,666,349
*Petroleum Heat & Power Company, Inc., Sub Deb 02-01-05................... 12.250 B+ 1,700 1,814,750
Santa Fe Energy Resource, Sr Sub Deb 05-15-04............................ 11.000 B 1,000 1,060,000
*Transamerican Refining Corp., Unit (1st Mtg Note 02-15-02 and Warrant)... 16.500 B- 2,000 2,239,460
TransTexas Gas Corp., Sr Note 09-01-00................................... 10.500 BB- 1,000 1,077,500
Wainoco Oil Corp., Sr Note 08-01-02...................................... 12.000 B- 2,500 2,575,000
Wilrig AS, (Norway), Sr Sec Note 03-15-04 (Y)............................ 11.250 B 2,000 2,010,000
-----------
19,055,559
-----------
PAPER (1.50%)
*Data Documents Inc., Unit (Sr Note 07-15-02 and Warrant)................. 13.500 B+ 2,000 2,020,000
P.T. Indah Kiat Pulp & Paper Corp., (Indonesia), Deb 11-01-00 (Y)........ 8.875 BB 3,000 2,730,000
*SD Warren Co., Sr Sub Notes 12-15-04..................................... 12.000 B+ 2,000 2,180,000
-----------
6,930,000
-----------
POLLUTION CONTROL (0.70%)
*Clean Harbors, Inc., Sr Note 05-15-01.................................... 12.500 B 1,000 890,000
ICF Kaiser International, Sr Sub Note 12-31-03........................... 12.000 B- 2,500 2,368,750
-----------
3,258,750
-----------
PRECIOUS METALS/JEWELRY (0.62%)
*Finlay Fine Jewelry, Sr Note 05-01-03.................................... 10.625 B 3,000 2,880,000
-----------
PRINTING (1.39%)
Mail-Well Envelope, Sr Sub Note 02-15-04................................. 10.500 B 3,000 2,670,000
Webcraft Tech, Sr Sub Note 02-15-02...................................... 9.375 B 2,000 1,760,000
Williamhouse-Regency of Delaware, Inc., Sr Sub Deb 06-15-05.............. 11.500 B- 2,000 1,990,000
-----------
6,420,000
-----------
RETAIL (4.53%)
American Restaurant Group Inc., Gtd Sr Sec Note 09-15-98................. 12.000 B+ 500 425,000
American Restaurant Group Inc., Sr Sec Note 09-15-98..................... 12.000 B+ 2,500 2,125,000
Cole National Group, Inc., Sr Note 10-01-01.............................. 11.250 B+ 3,000 2,865,000
*Flagstar Corp., Sr Sub Deb 11-01-04...................................... 11.250 CCC+ 3,000 2,295,000
Pathmark Stores Inc., Sub Note 06-15-02.................................. 11.625 B 1,000 1,040,000
Pathmark Stores Inc., Sub Note 06-15-02.................................. 12.625 B 2,500 2,662,500
Petro PSC Properties, L.P., Sr Note 06-01-02............................. 12.500 B 2,500 2,531,250
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

15
<PAGE> 52
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

<TABLE>
SCHEDULE OF INVESTMENTS
May 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR VALUE
INTEREST S&P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING** OMITTED) VALUE
- ------------------- -------- -------- --------- ------
<S> <C> <C> <C> <C>
RETAIL (CONTINUED)
*Specialty Retailers, Inc., Sr Sub Note 08-15-03.......................... 11.000% B- 3,000 $ 2,835,000
Thrifty Payless, Inc., Sr Sub Note 04-15-04.............................. 12.250 B- 4,000 4,160,000
-----------
20,938,750
-----------
SHOES (0.28%)
United States Leather, Inc., Sr Note 07-31-03............................ 10.250 B+ 1,500 1,275,000
-----------
STEEL (4.00%)
AK Steel Holding Corp., Sr Note 04-01-04................................. 10.750 B+ 2,000 2,107,500
ARMCO Steel Corp., Sr Note 11-01-00...................................... 9.375 B 2,000 1,940,000
*Acme Metals, Inc., Sr Sec Note 08-01-02.................................. 12.500 B 3,000 3,105,000
Geneva Steel Co., Sr Note 03-15-01....................................... 11.125 B+ 2,000 1,750,000
Inland Steel Industries, Inc., Note 12-15-02............................. 12.750 B+ 2,000 2,220,000
WCI Steel Inc., Sr Note Ser B 03-01-02................................... 10.500 B+ 1,000 1,012,500
Weirton Steel Corp., Sr Note 10-15-99.................................... 10.875 B 3,500 3,561,250
*Wheeling-Pittsburgh Steel Corp., Sr Note 11-15-03........................ 9.375 BB 3,000 2,797,500
-----------
18,493,750
-----------
TELECOMMUNICATIONS (1.12%)
Dial Page, Inc., Sr Note 02-15-00........................................ 12.250 CCC- 2,000 2,075,000
MFS Communication, Sr Note, Stepped Coupon (9.375%, 1-15-99) 01-15-04 (B) Zero B 2,400 1,632,000
*Nextel Communications, Inc. Sr Discount Note 08-15-04.................... 9.750 CCC- 3,000 1,485,000
-----------
5,192,000
-----------
TEXTILES (1.97%)
CMI Industries, Inc., Sr Sub Note 10-01-03............................... 9.500 B+ 2,000 1,860,000
Consoltex Group, Inc., Sr Sub Note Ser B 10-01-03........................ 11.000 B 2,500 2,287,500
Dan River, Inc., Sr Sub Note 12-15-03.................................... 10.125 B 2,000 2,000,000
Westpoint Stevens, Sr Sub Deb 12-15-05................................... 9.375 B+ 3,000 2,940,000
-----------
9,087,500
-----------
TRANSPORTATION (6.40%)
*AmGeneral Corp., Sr Note 05-01-02 (R).................................... 12.875 B3 2,000 1,990,000
Burlington Motor Holdings, Inc., Sr Sub Note 11-01-03.................... 11.500 CCC+ 3,000 2,625,000
*Fruehauf Trailer Corp., Sr Sec Note 04-30-02 (r)......................... 14.750 B 3,000 2,992,500
NWA, Inc., Note 08-01-96................................................. 8.625 B- 5,000 5,025,000
*Terex Corp., Unit (Sr Sec Note 05-15-02 and Stock Rights) (R)............ 13.750 Caa 3,000 2,917,500
TNT Transport PLC/TNT USA, Sr Note 04-15-04.............................. 11.500 B+ 4,000 4,160,000
*UAL Corporation, Sub Deb 02-01-25........................................ 6.375 B+ 3,000 2,778,750
*USAfrica Airways Inc., Unit (Sr Note 05-31-99 and Warrant), (r).......... 12.000 D 2,000 1,915,600
*USAir Inc., Sr Note 02-01-01............................................. 9.625 CCC+ 6,000 5,190,000
-----------
29,594,350
-----------
UTILITIES (0.98%)
*Cleveland Electric Illuminating Co., 1st Mtg Note 05-15-05............... 9.500 BB 2,625 2,628,518
Midland Cogeneration Venture, Deb 07-23-02............................... 10.330 BB- 1,832 1,896,573
-----------
4,525,091
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

16
<PAGE> 53
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

NUMBER OF SHARES
UNITS OR WARRANTS
-----------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS, WARRANTS AND RIGHTS
*Apparel Ventures Inc., Warrants (r)........................................................ 1,500 67,500
Avnet, Inc., Common Stock.................................................................. 3,606 164,073
California Federal Bank, 10.625% Ser B Pref Stock.......................................... 6,667 706,702
Credit Lyonnais Capital S.C.A., American Depositary Shares, 9.50% Ser DTC Pref Stock (R)... 100,000 2,320,000
*Finlay Enterprises, Inc., Common Stock***.................................................. 4,000 47,000
*First Nationwide Bank, 11.50% Pref Stock................................................... 5,000 537,500
Grand Union Holdings Corp., 12.00% Series C Pref Stock***.................................. 9,550 0
Greater New York Savings Bank, Inc., 12.00% Ser B Pref Stock............................... 80,000 2,180,000
ICF International, Inc., Warrants***....................................................... 12,000 9,000
Indosuez Holdings S.C.A., American Depositary Receipts, 10.375% Pref Stock (R)............. 40,000 1,040,000
K-III Communications Corp., $2.875 Sr Exch Pref Stock...................................... 60,000 1,567,500
Lasmos PLC , 10.00% Ser A Pref Stock....................................................... 50,000 1,218,750
Maxus Energy Corp., 10.00% Pref Stock...................................................... 40,000 925,000
Northwest Airlines Corp., Common Stock (Class A)***........................................ 200,000 5,675,000
*Panamsat Corp., 12.75% Pref Stock.......................................................... 1,750 1,833,125
*Petro PSC Properties, LP, Warrants (r)..................................................... 2,000 68,000
RJR Nabisco Holdings, $2.3125, Ser B Pref Stock............................................ 80,000 1,980,000
*Renaissance Cosmetics, Warrants............................................................ 4,000 70,000
St Johnsbury Trucking Co Inc., Common Stock (r)***......................................... 47,224 472
Specialty Equipment Co., Common Stock***................................................... 50,000 590,625
Sun Carriers Inc., Common Stock (r) ***.................................................... 195,600 1,956
TLC Beatrice International Holdings, Common Stock (Class A) (r)............................ 20,000 1,000,000
*Thrifty Payless Holdings, Common Stock (Class C) (r)....................................... 38,000 142,500
*TransTexas Gas Corp., Common Stock***...................................................... 10,000 143,750
*Tyco International Ltd., Common Stock...................................................... 2,817 152,470
*UAL Corp., 12.25% Ser B Pref Stock......................................................... 280,000 8,365,000
*Valero Energy Corp., $3.125, Pref Stock.................................................... 25,000 1,184,375
*Walter Industries Inc., Common Stock***.................................................... 354 4,691
-----------
TOTAL COMMON AND PREFERRED STOCKS AND WARRANTS
(Cost $29,865,995) (6.92%) 31,994,989
----- -----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

17
<PAGE> 54
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund
<TABLE>
<CAPTION>
PAR VALUE
(000'S MARKET
ISSUER, DESCRIPTION OMITTED) VALUE
- ------------------- --------- ------
<S> <C>> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (1.21%)
Investment in a joint repurchase agreement transaction with Bankers Trust -
Dated 05-31-95, Due 06-01-95 (secured by U.S. Treasury Bonds, 11.25% Due
02-15-15, 9.125% Due 05-15-09, 13.25% Due 05-15-14, and U.S Treasury Note
6.75% Due 05-31-97).............................................................. $5,631 $ 5,631,000
CORPORATE SAVINGS ACCOUNT (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%............................................................... 46,280
------------
TOTAL SHORT TERM INVESTMENTS ( 1.22%) 5,677,280
------ ------------
TOTAL INVESTMENTS (98.26%) $454,376,931
====== ============
<FN>
* Securities, other than short-term investments, newly added to the portfolio during the year ended May 31, 1995.
** Credit ratings are unaudited and rated by Moody's Investors Service or John Hancock Advisers, Inc. where Standard
& Poor's ratings are not available.
*** Non-income producing security.
# Par value of foreign bonds is expressed in local currency, as shown parenthetically in security description.
(A) Issuer filed for protection under the Federal Bankruptcy Code and has filed a comprehensive reorganization plan.
(B) Cash interest will be paid on this obligation at the stated rate beginning on the stated date.
(R) Security is 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. See Note A of the Notes to
Financial Statements for valuation policy. Rule 144A securities amounted to $22,675,625 as of May 31, 1995.
(Y) Parenthetical disclosure of a foreign country in the security description represents country of foreign issuer,
however, security is U.S. dollar denominated.
(r) Direct placement securities are restricted to resale. They have been valued at fair value by the Trustees after
considerations of restrictions as to resale, financial condition and prospects of the issuer, general market
conditions and pertinent information in accordance with the Fund's By-Laws and the Investment Company Act of 1940,
as amended. The Fund has limited rights to registration under the Securities Act of 1933 with respect to these
restricted securities.
</TABLE>

Additional information on each restricted security is as follows:

<TABLE>
<CAPTION>
VALUE AS A
PERCENTAGE
AQUISITION AQUISITION OF FUND'S VALUE AT
DATE COST NET ASSETS MAY 31, 1995
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Apparel Ventures, Warrants........................................... 10-27-94 $ 1,125 0.01% $ 67,500
Fruehauf Trailer Corp., Sr Sec Note 04-30-02......................... 05-31-95 2,975,625 0.65 2,992,500
Petro PSC Properties, LP Warrants.................................... 05-17-94 73,140 0.01 68,000
St. Johnsbury Trucking Co., Inc., Common Stock....................... 01-19-93 1,301,659 0.00 472
Sun Carriers Inc., Common Stock...................................... 11-23-88 218,247 0.00 1,956
TLC Beatrice International Holdings, Common Stock (Class A).......... 11-25-87 1,006,000 0.22 1,000,000
Thrifty Payless Holdings, Class C Shares............................. 07-22-94 213,334 0.03 142,500
USAfrica Airways Inc, Unit (Sr Note 05-31-99 and Warrants)........... 10-13-94 2,000,000 0.41 1,915,600
</TABLE>

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.

18
<PAGE> 55
FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

THE STRATEGIC INCOME FUND INVESTS PRIMARILY IN SECURITIES ISSUED IN THE UNITED
STATES OF AMERICA. THE PERFORMANCE OF THIS FUND IS CLOSELY TIED TO THE ECONOMIC
AND FINANCIAL CONDITIONS WITHIN THE COUNTRIES 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
MAY 31, 1995 ASSIGNED TO COUNTRY CATEGORIES.

<TABLE>
PORTFOLIO CONCENTRATION (Unaudited)
- -------------------------------------------------------------------------------
<CAPTION>
MARKET VALUE
AS A PERCENTAGE
OF FUND'S
COUNTRY DIVERSIFICATION: NET ASSETS
- ----------------------- ---------------
<S> <C>
Australia............................................... 2.71%
Brazil.................................................. 0.98
Canada.................................................. 1.18
Denmark................................................. 6.10
England................................................. 5.98
Germany................................................. 0.21
Indonesia............................................... 1.23
Mexico.................................................. 2.51
New Zealand............................................. 2.94
Norway.................................................. 1.70
Spain................................................... 2.52
Sweden.................................................. 0.59
United States........................................... 69.61
-----
TOTAL INVESTMENTS 98.26%
=====
</TABLE>

ADDITIONALLY, THE CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY THE QUALITY
RATING FOR EACH DEBT SECURITY.

<TABLE>
<CAPTION>
MARKET VALUE
AS A PERCENTAGE
OF FUND'S
QUALITY DISTRIBUTION: NET ASSETS
- -------------------- ---------------
<S> <C>
AAA................................................ 21.20%
AA................................................. 9.24
A.................................................. 1.06
BAA................................................ 0.90
BA................................................. 10.28
B.................................................. 45.69
CAA................................................ 1.34
D.................................................. 0.41
-----
TOTAL BONDS 90.12%

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

19
<PAGE> 56

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

NOTE A --
ACCOUNTING POLICIES

John Hancock Strategic Series (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of three series of portfolios: John Hancock Strategic Income Fund (the "Fund"),
John Hancock Utilities Fund and John Hancock Independence Diversified Core
Equity Fund.

The Trustees have authorized the issuance of two classes of shares of the
Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemption, 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/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
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. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below. The Fund may invest in indexed securities whose value is linked either
directly or inversely to changes in foreign currencies, interest rates,
commodities, indices or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.

FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders. For Federal income tax purposes, net currency
exchange gains and losses from sales of foreign debt securities may be treated
as ordinary income even though such items are capital gains and losses for
accounting purposes. The Fund has $36,343,494 of capital loss carryforwards
available, to the extent provided by regulations, to offset future net realized
capital gains. To the extent that such carryforwards are used by the Fund, no
capital gains distributions will be made. The carryforwards expire as follows:
May 31, 1998 -- $2,471,816, May 31, 1999 -- $13,103,961, May 31, 2002 --
$454,810 and May 31, 2003 -- $20,312,907. Expired capital loss carryforwards are
reclassified to capital paid-in, in the year of expiration. Additionally, net
capital losses of $1,474,240 attributable to security transactions incurred
after October 31, 1994 are treated as arising on the first day (June 1, 1995) of
the Fund's current taxable year.

DIVIDENDS, DISTRIBUTIONS AND INTEREST 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 is made aware of 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 all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such

20
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

distributions are determined in conformity with income tax regulations, which
may differ from generally accepted accounting principles. Dividends 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 as explained previously.

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/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.

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 contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from 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 other than that offset by the currency amount of the underlying
transaction.

Open foreign currency forward sell contracts at May 31, 1995 were as follows:

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY: COVERED BY CONTRACT MONTH DEPRECIATION
<S> <C> <C> <C>
GERMAN MARK 4,563,000 JUNE 95 $ (66,413)
SPANISH PESETA 1,482,000,000 JULY 95 (310,073)
GERMAN MARK 38,600,000 JULY 95 (819,494)
-----------
$(1,195,980)
===========
</TABLE>

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.

OPTIONS Listed options will be valued at the last quoted sales price on the
exchange on which they are primarily traded. Purchased put or call
over-the-counter options will be valued at the average of the "bid" prices
obtained from two independent brokers. Written put or call

21
<PAGE> 58

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

over-the-counter options will be valued at the average of the "asked" prices
obtained from two independent brokers. Upon the writing of a call or put option,
an amount equal to the premium received by the Fund will be included in the
Statement of Assets and Liabilities as an asset and corresponding liability. The
amount of the liability will be subsequently marked-to-market to reflect the
current market value of the written option.

The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls will tend to increase the Fund's exposure to the
underlying instrument and buying puts and writing calls will tend to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments.

The maximum exposure to loss for any purchased options will be limited to the
premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value will reflect the maximum exposure
of the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.

Risks may also arise if counterparties do not perform under the contracts'
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.

At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.

There were no written option transactions for the period ended May 31, 1995.

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

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

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

At May 31, 1995, there were no open positions in financial futures contracts.

DISCOUNTS ON SECURITIES The Fund accretes discounts from par value on securities
purchased from either the date of issue or the date of purchase over the life of
the security, as required by the Internal Revenue Code.

NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS

Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of: (a) 0.60% of the first $100,000,000 of the
Fund's average daily net asset value,

22
<PAGE> 59

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

(b) 0.45% of the next $150,000,000, (c) 0.40% of the next $250,000,000, (d)
0.35% of the next $150,000,000, and (e) 0.30% of the Fund's average daily net
asset value in excess of $650,000,000.

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

The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. Prior to January 1, 1995, JH
Funds was known as John Hancock Broker Distributions Services, Inc. For the
period ended May 31, 1995, JH Funds received net sales charges of $1,746,666
with regard to sales of Class A shares. Out of this amount, $205,192 was
retained and used for printing of prospectuses, advertising, sales literature
and other purposes, $522,502 was paid as sales commissions and service fees to
unrelated broker-dealers and $1,018,972 was paid as sales commissions and
service fees to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"), all of which are broker dealers. The Adviser's indirect
parent, John Hancock Mutual Life Insurance Company, is the indirect sole
shareholder of Distributors and John Hancock Freedom Securities Corporation and
its subsidiaries, which include Tucker Anthony and Sutro.

Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% 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 CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended May 31, 1995,
contingent deferred sales charges received by JH Funds amounted to $401,317.

In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution Plans with
respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to JH
Funds for distribution and service expenses at an annual rate not to exceed
0.30% of Class A average daily net assets and 1.00% of Class B average daily net
assets, to reimburse JH Funds for its distribution and service costs. Up to a
maximum of 0.25% of these payments may be service fees as defined by the amended
Rules of Fair Practice of the National Association of Securities Dealers. Under
the amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.

The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Effective January 1, 1995, the Fund pays transfer
agent fees based on transaction volume and the number of shareholder accounts.
Prior to January 1, 1995, the Fund paid Investor Services a monthly transfer
agent fee equivalent, on an annual basis, to 0.22% of the average daily net
asset value of Class A and Class B shares of the Fund, respectively, plus out of
pocket expenses incurred by Investor Services on behalf of the Fund for proxy
mailings.

Messrs. Edward J. Boudreau, Jr. and Richard S. Scipione are directors and
officers of the Adviser and its affiliates, as well as Trustees of the Fund. The
Adviser owns 10,000 shares of beneficial interest in the Fund. The compensation
of unaffiliated Trustees is borne by the Fund. Effective with the fees paid for
1995, the unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund will make investments into other John Hancock funds,
as applicable, to cover its liability for the deferred compensation. Investments
to cover the Fund's deferred

23
<PAGE> 60

Notes to Financial Statements

John Hancock Funds - Strategic Income Fund

compensation liability will be recorded on the Fund's books as an other asset.
The deferred compensation liability will be marked to market on a periodic basis
and income earned by the investment will be recorded on the Fund's books.

NOTE C --
INVESTMENT TRANSACTIONS

Purchases and proceeds from sales and maturities of securities, other than
obligations of the U.S. government and its agencies and short-term investments,
during the period ended May 31, 1995, aggregated $227,151,871 and $198,645,958,
respectively. Purchases and proceeds from sales of obligations of the U.S.
government and its agencies during the period ended May 31, 1995, aggregated
$145,074,405 and $143,134,643 respectively.

The cost of investments owned at May 31, 1995 (excluding the corporate
savings account), for Federal income tax purposes was $449,494,935. Gross
unrealized appreciation and depreciation of investments aggregated $16,390,547
and $11,554,831, respectively, resulting in net unrealized appreciation of
$4,835,716.

NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS

During the year end May 31, 1995, the Fund reclassified amounts to reflect a
decrease in undistributed net investment income $3,780,503, a decrease in
accumulated net realized loss on investments of $9,093,416 and a decrease in
capital paid-in of $5,312,913. This represents the cumulative amount necessary
to report these balances on a tax basis, excluding certain temporary
differences, as of May 31, 1995. 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 certain
differences in the computation of distributable income and capital gains under
federal tax rules versus generally accepted accounting principles.

24
<PAGE> 61

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Strategic Income Fund

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders of John Hancock Strategic Income Fund and the Trustees of
John Hancock Strategic Series

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, (except for Moody's and Standard and Poor's
ratings), 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 John Hancock Strategic Income Fund (the "Fund") (a
portfolio of John Hancock Strategic Series) at May 31, 1995, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. 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 generally accepted
auditing standards 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 at May 31, 1995 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.

Price Waterhouse LLP
Boston, Massachusetts
July 17, 1995

TAX INFORMATION NOTICE (UNAUDITED)

For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund for its fiscal year ended May 31, 1995.

With respect to the Fund's ordinary taxable income for the fiscal year ended
May 31, 1995, 5% of the dividends qualify for the corporate dividends received
deduction.

Shareholders will receive a 1995 U.S. Treasury Department Form 1099-DIV in
January of 1996. This will reflect the total of all distributions which are
taxable for the calendar year 1995.

25
<PAGE> 62

NOTES

John Hancock Funds - Strategic Income Fund

<PAGE> 63
NOTES

John Hancock Funds - Strategic Income Fund

27
<PAGE> 64

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

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

[A recycled logo in lower left hand corner with the caption "Printed on
Recycled Paper."]

JHD 9100A 5/95