HANCOCK JOHN INSTITUTIONAL SERIES TRUST, N-30B-2, 1995-10-25

HANCOCK JOHN INSTITUTIONAL SERIES TRUST
N-30B-2, 1995-10-25

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<PAGE> 1
JOHN HANCOCK FUNDS
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INSTITUTIONAL
SERIES TRUST

DIVIDEND PERFORMERS FUND
ACTIVE BOND FUND
GLOBAL BOND FUND
MULTI-SECTOR GROWTH FUND
FUNDAMENTAL VALUE FUND
INTERNATIONAL EQUITY FUND

SEMI-ANNUAL REPORT

August 31, 1995
<PAGE> 2

TABLE OF CONTENTS

JOHN HANCOCK FUNDS - Institutional Series Trust

<TABLE>
<CAPTION>
Page
<S> <C>
1) Chairman's Message...................................................... 3

2) Portfolio Manager's Commentary

John Hancock Dividend Performers Fund ................................ 4

John Hancock Active Bond Fund ........................................ 6

John Hancock Global Bond Fund......................................... 8

John Hancock Multi-Sector Growth Fund................................. 10

John Hancock Fundamental Value Fund................................... 12

John Hancock International Equity Fund................................ 14

3) Financial Statements.................................................... 16

4) Notes To Financial Statements........................................... 41
</TABLE>

TRUSTEES
Edward J. Boudreau, Jr.
Thomas W.L. Cameron
James F. Carlin*
Charles F. Fretz*
Harold R. Hiser, Jr. *
Charles L. Ladner*
Patricia P. McCarter*
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC*
John P. Toolan*
* Members of 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
James B. Little,
Senior Vice President and Chief Financial Officer
Thomas H. Drohan,
Senior Vice President and Secretary
Frederick L. Cavanaugh
Senior Vice President
(Active Bond Fund, Global Bond Fund,
Multi-Sector Growth Fund,
International Equity Fund)
Vice President
(Dividend Performers Fund)
Lawrence J. Daly
Senior Vice President
(Global Bond Fund)
Michael P. DiCarlo
Senior Vice President
Anthony A. Goodchild
Senior Vice President
(Global Bond Fund)
James K. Ho
Senior Vice President
John F. Snyder III
Senior Vice President
(Dividend Performers Fund)
James J. Stokowski,
Vice President and Treasurer
Susan S. Newton,
Vice President,
Assistant Secretary and Compliance Officer
David S. Beckwith
Vice President
(Multi-Sector Growth Fund and
International Equity Fund)
Barry H. Evans
Vice President
(Dividend Performers Fund and
Active Bond Fund)
John A. Morin,
Vice President

CUSTODIANS
Global Bond Fund
International Equity Fund
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Dividend Perfomers Fund
Active Bond Fund
Multi-Sector Growth Fund
Fundamental Value Fund
Investors Bank & Trust Company
89 South Street
Boston, MA 02111

TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9277
Boston, MA 02205-9277

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

SUB-INVESTMENT ADVISER
Dividend Performers Fund
Sovereign Asset Management Corporation
1235 Westlakes Drive
Berwyn, PA 19312
Fundamental Value Fund
NM Capital Management, Inc.
6501 Americas Parkway, Suite 950
Albuquerque, NM 87110-5372
International Equity Fund
John Hancock Advisers International Ltd.
34 Dover Street
London, England W1X 3RA

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

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

2
<PAGE> 3

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 first 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. 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 1-800-755-4371, from 8:30 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

3
<PAGE> 4

BY JOHN F. SNYDER III FOR THE PORTFOLIO MANAGEMENT TEAM

JOHN HANCOCK
DIVIDEND PERFORMERS FUND

FUND IS LAUNCHED AMID NEAR-IDEAL MARKET
CONDITIONS FOR STOCKS AND BONDS

John Hancock Dividend Performers Fund was launched on March 30, 1995 amid
near-ideal market conditions for the stock market -- declining interest rates,
slow growth and strong corporate earnings. As inflation fears subsided, the bond
market also rallied strongly through June, then settled back down as interest
rates steadied. Between March 30 and August 31, 1995, the Fund's total return
was 5.63% at net asset value. We have provided this performance information in
compliance with Securities and Exchange Commission regulations. The result isn't
particularly meaningful, however, because it is based on such a short time early
in the life of the Fund. Performance information is historical and assumes
reinvestment of all distributions. The Fund's investment return and share value
will fluctuate so that Fund shares, when redeemed, may be worth more or less
than their original cost.

[A 2 1/2" x 3 3/4" photo of the Dividend Performers management team, bottom
right. Caption reads: "The Dividend Performers management team (l-r): Jere
Estes, John Snyder, Tom Weary, Jim Moorhead"]

The Fund aims for long-term price gains and current income at a prudent
level of risk. We seek to accomplish this by investing in a diverse portfolio of
premier companies, those that consistently outperform their competitors in all
economic climates and consistently increase their dividends. In fact, we only
invest in companies that have increased their dividends for at least the last 10
years. These "dividend performers" are companies that share most, if not all of
the following characteristics: consistently rising earnings, high return on
equity, strong balance sheets, proven products, global distribution

[CAPTION]
"...WE ONLY INVEST IN COMPANIES THAT HAVE INCREASED THEIR DIVIDENDS FOR AT
LEAST THE LAST 10 YEARS."

4
<PAGE> 5

JOHN HANCOCK FUNDS - Institutional Series Trust -- Dividend Performers Fund

[Chart with heading the "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) General Electric 4.1%; 2) Johnson &
Johnson 3.5%; 3) Pepsico 3.4%; 4) Procter & Gamble 3.2%; and 5) Abbott
Laboratories 3.1%. A footnote below reads: "As a percentage of net assets on
August 31, 1995."]

networks, strong management and consistently strong cash flow.

Because of our insistence on rising dividends, we chose not to jump into the
fray with technology stocks, which have been the stock market's main catalyst
this year. Instead we focused on consumer non-durable stocks -- a sector which
includes food, pharmaceutical and beverage companies. As fear of health-care
reform disappeared, for example, Johnson & Johnson's stock went up. Procter &
Gamble benefited from a variety of factors, including the elimination of
products with low returns and the introduction of important new ones. Our
largest investment -- General Electric -- also delivered results.

We're finding companies with predictable, superior earnings growth -- 12% or
better -- in a variety of industries. But they have one or more of three themes
in common. First, a large part of their revenues comes from outside the United
States. An example is The Interpublic Group, one of the world's largest
advertising agencies. Second, they are companies -- like Alco Standard, the
largest distributor and servicer of copiers in the U.S. -- that dominate their
industry. Third, many of our companies have large cash flows (that is, earnings
after capital expenditures). DuPont is a good example with cash flow building up
to $3 billion a year. Like other companies with extra cash, DuPont recently
bought back some of its shares, pushing up its stock price.

We're hard pressed to say where the stock market will go from here. But long
term, we're optimistic. While a lot of companies are buying back shares, there
aren't many initial public offerings (IPOs) in the market right now. But demand
is strong as the baby boomers age and save more. What's more, interest from
foreign investors will probably pick up with a strengthening dollar. At their
current levels, stock prices seem reasonable. So, as long as inflation remains
under control and interest rates stay stable, we think the stock market is still
the place to be. But with uncertainty about the economy, investors have to be
more selective. We believe companies with predictable earnings growth will
become more attractive, which can only benefit John Hancock Dividend Performers
Fund.

[CAPTION]
"...THE STOCK MARKET IS STILL THE PLACE TO BE."

5
<PAGE> 6

BY JAMES K. HO FOR THE PORTFOLIO MANAGEMENT TEAM

JOHN HANCOCK
ACTIVE BOND FUND

BOND MARKET RECOVERS AS GROWTH SLOWS AND
INFLATIONARY FEARS SUBSIDE

John Hancock Active Bond Fund began operating on March 30, 1995 and was still in
the process of building positions when the Fund's period ended on August 31,
1995. During the period, the Fund's total return was 3.03% at net asset value.
We have provided this performance information in compliance with Securities and
Exchange Commission regulations. The result isn't particularly meaningful,
however, because it is based on such a short time early in the life of the Fund.
Performance information is historical and assumes reinvestment of all
distributions. The Fund's investment return and share value will fluctuate so
that Fund shares, when redeemed, may be worth more or less than their original
cost.

The Fund has begun implementing a strategy that will guide us in the months
and years to come. In the paragraphs that follow, we'll briefly discuss that
strategy and discuss some of the challenges that lie ahead.

[A 2 1/2" x 2 1/4" photo of James K. Ho, bottom center. Caption reads: "James K.
Ho."]

The Fund aims for a high level of current income consistent with prudent
investment risk. On August 31, 1995, the Fund's assets were divided roughly
60-40 between corporate and government bonds. As the Fund grows, however, it's
likely the emphasis will shift more heavily towards corporate bonds. While our
focus is on investment-grade bonds, we have the freedom to invest up to 20% of
the Fund's assets in high-yield bonds, which are bonds that have received credit
ratings below Baa by Moody's or BBB by Standard & Poor's. High-yield bonds offer
a higher rate of return to compensate for added credit risk. We expect they'll
play an

[CAPTION]
"...WE'VE BEEN DE-EMPHASIZING SO-CALLED CYCLICAL INDUSTRIES..."

6
<PAGE> 7

JOHN HANCOCK FUNDS - Institutional Series Trust -- Active Bond Fund

[Pie chart with the heading: "Portfolio Diversification" at top of left hand
column. The chart is divided into six sections. Going from top left to right:
U.S. Treasury and U.S. Gvt Agencies 42%; Foreign Banks 7%; Transportation 7%;
Utilities 23%; Other 12%; Cash 9%. Footnote below reads: "As a percentage of net
assets on August 31, 1995.

important, though subordinate, role in the Fund's investment strategy. At the
end of the period, they totaled 16% of the Fund's assets.

One way the Fund seeks to maximize value for shareholders is by rotating
among sectors. Accordingly, as the growth rate in the economy has slowed during
1995, we've been de-emphasizing so-called cyclical industries such as steel and
paper in favor of more stable industries such as communications and utilities.
Significant investments at the end of the period included media giant Time
Warner, which recently announced plans to merge with Turner Broadcasting System,
and Long Island Lighting Company, a well-managed utility. We've also extended
the Fund's duration. Duration measures how much a Fund's share price will vary
with changes in interest rates. When rates are falling and bond prices are
rising, it pays to be more aggressive and have a longer duration.

As we look ahead, we're aware that lower interest rates have made houses,
cars and other big-ticket items that much more affordable in recent months.
Also, surging domestic markets have left a significant portion of the population
feeling wealthier and in a position to spend. That's why we see the potential
for a return to somewhat faster growth later this year or early in 1996. If so,
then we'll take a more conservative stance on the bond market.

[CAPTION]
"...WE SEE THE POTENTIAL FOR A RETURN TO SOMEWHAT FASTER GROWTH LATER THIS
YEAR..."

7
<PAGE> 8

BY LAWRENCE J. DALY AND ANTHONY A. GOODCHILD
FOR THE PORTFOLIO MANAGEMENT TEAM

JOHN HANCOCK
GLOBAL BOND FUND

SLOWER GROWTH, BENIGN INFLATION OUTLOOK
BOOST BOND PRICES AROUND THE WORLD

John Hancock Global Bond Fund began operating on April 19, 1995 and was still in
the process of building positions in world markets when the Fund's period ended
on August 31, 1995. Between April 19 and August 31, 1995, the Fund's total
return was 0.71%. We have provided this performance information in compliance
with Securities and Exchange Commission regulations. The result isn't
particularly meaningful, however, for such a short time early in the Fund's
life.For instance, the Fund held its assets in domestic money market instruments
for a portion of the reporting period until it was able to purchase
appropriately diverse holdings among a variety of countries. Performance
information is historical and assumes reinvestment of all distributions. The
Fund's investment return and share value will fluctuate so that Fund shares,
when redeemed, may be worth more or less than their original cost. In the
paragraphs that follow, we'll briefly discuss the Fund's strategy, its
investment process and recent developments in world markets.

[A 2 1/2" x 2 1/2" photo of Lawrence J. Daly and Anthony A. Goodchild, bottom
center. Caption reads: "Lawrence J. Daly and Anthony A. Goodchild."]

The Fund aims for a competitive total return, seeking both current income
and price gains from a diverse portfolio of foreign and domestic government
bonds. As the pace of privatization and global development accelerates, the
demand for capital grows. The Fund seeks to capitalize on that demand by gaining
exposure to foreign currencies and foreign business cycles. Long term, the hope
is that such a strategy will produce returns that exceed those available from
investing only in domestic bonds.

At the core of our investment process is the belief that bond and currency
decisions are separate, but related. Both must be actively managed within a
disciplined process. We start by identifying economic and political trends that
could impact the global fixed-income markets.

[CAPTION]
"AS ... PRIVATIZATION AND GLOBAL DEVELOPMENT ACCELERATES, THE DEMAND FOR CAPITAL
GROWS."

8
<PAGE> 9

JOHN HANCOCK FUNDS - Institutional Series Trust -- Global Bond Fund

[Chart with the heading "Top Five Countries" at top of left hand column. The
chart lists five countries: 1) United States 35%; 2) United Kingdom 8%; 3)
Germany 8%; 4) France 8%; and 5) Australia 4%. A footnote below reads: "As a
percentage of net assets on August 31, 1995."]

Next, we establish global bond and currency scenarios within a three-to
six-month horizon and estimate how much volatility to expect. The third step is
a relative value analysis, that is, comparing various bonds and currencies and
their expected returns. Finally, we establish a core portfolio, determining the
best risk and return relationships among various investments. On an ongoing
basis, we evaluate the changing environment and the performance of our holdings
and make strategic adjustments accordingly.

The key to successful investing is having a long-term focus and staying
well-diversified. Global bond markets don't normally move in lockstep with each
other; some will perform better than others at any given time. Spreading our
investments across a broad range of bonds helps ensure that the Fund's
performance isn't overly dependent on, or susceptible to, the performance of one
market.

Under normal conditions, we expect to invest about half of the Fund's assets
in the United States and half in other countries. The Fund has the freedom to
invest up to 25% of its assets in so-called emerging markets in Asia, Latin
America and Eastern Europe. Emerging markets, with their weaker currencies and
less stable economies, are more volatile than the world's established markets
but carry the potential for higher returns. At the end of August, the Fund's net
assets were divided among the following countries and regions of the world: 35%
United States; 4% Canada, 35% Europe and the United Kingdom; and 4% Australia.
After the United States, those countries with the largest concentration of the
Fund's assets were France, Germany and the United Kingdom, each with about 8%.
The Fund had yet to invest in Japan or any emerging markets.

Since the Fund began operating, the global climate for fixed-income
investing has been favorable. Slow, steady growth and a benign inflationary
outlook have driven interest rates down from their inflated levels in 1994,
especially in the United States, causing bond prices to rise. The feeling as we
head toward 1996 is that global fixed-income markets may have stabilized for the
time being, with interest rates and bond prices varying within a narrow trading
range. Long-term trends appear positive. As world markets become more
intertwined and inflationary fears gradually dissipate, we could see a bias
developing toward still lower yields and higher bond prices.

- --------------------------------------------------------------------------------
International investing involves special risks, such as currency and political
risks and differences in accounting standards and financial reporting.

[CAPTION]
"...THE GLOBAL CLIMATE FOR FIXED-INCOME INVESTING HAS BEEN FAVORABLE."

9
<PAGE> 10

BY MICHAEL P. DICARLO, CHIEF EQUITY OFFICER AND
PORTFOLIO MANAGER

JOHN HANCOCK
MULTI-SECTOR GROWTH FUND

FAVORABLE CLIMATE FOR AGGRESSIVE GROWTH STOCKS
PREVAILS IN FUND'S FIRST MONTHS

John Hancock Multi-Sector Growth Fund was launched on April 11, 1995 just as the
stock market began to take off. The stock market hasn't looked back, fueled by
lower interest rates and slower growth -- the ideal conditions for aggressive
growth stocks that are the focus of this Fund. For the period from April 11,
1995 to August 31, 1995, the Fund produced a total return of 10.94% at net asset
value. We have provided this performance information in compliance with
Securities and Exchange Commission regulations. The result isn't particularly
meaningful, however, because it is based on such a short time early in the life
of the Fund. Performance information is historical and assumes reinvestment of
all distributions. The Fund's investment return and share value will fluctuate
so that Fund shares, when redeemed, may be worth more or less than their
original cost.

[A 2 " x 2 1/2" photo of Michael P. DiCarlo, bottom center. Caption reads:
"Michael P. DiCarlo, Portfolio Manager."]

The Fund aims for long-term capital growth by targeting what we think are
the five sectors of the economy with the best growth potential. We then select
the most attractive stocks within those sectors. Our investment criteria include
strong management, a superior competitive industry position, the ability to
self-finance expansion and solid prospects for earnings growth. Since inception,
the Fund has chosen to invest in technology, media and information distribution
companies, health care, energy and precious metals. What follows are brief
discussions of each category and our outlook.

The case for technology rests with our belief that companies worldwide are
in the midst of another industrial revolution spearheaded by computers and other
high-tech means to increase productivity and reduce costs. This phenomenon is
not about to end soon. Technology was our largest sector, at about 30% of the
Funds assets, and one of the most successful. Microsoft gained in anticipation
of the

[CAPTION]
"...IDEAL CONDITIONS FOR AGGRESSIVE GROWTH STOCKS..."

10
<PAGE> 11

JOHN HANCOCK FUNDS - Institutional Series Trust -- Multi-Sector Growth Fund

[Chart with the heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) Seagate Technology 4.5%; 2) Boston
Scientific 4.5%; 3) America Online 4.5%; 4) 3Com Corp. 4.4%; and 5) CUC
International 4.3%. A footnote below reads: "As a percentage of net assets on
August 31, 1995."]

release of Windows 95, its new operating system. The ripple effects of this
product also hold promise for many other high-tech stocks. The proliferation of
semiconductors is reaping benefits for such companies as Helix Technology, which
makes equipment used to manufacture semiconductors.

The Fund's second largest category, holding about 22% of the Fund's assets,
is media and information distribution, which focuses on companies profiting from
the new ways knowledge and information are conveyed. The exploding popularity of
the Internet has been a boon to on-line computer service companies like America
Online, now the largest provider. The Internet has also provided media companies
with a huge new distribution channel. We'll no doubt see more media
consolidations, like the recent announcement of Disney and ABC/Cap Cities, as
these entertainment giants try to gain control over both programming and
distribution channels.

We look for health-care companies that have the best chance of prospering as
the health-care industry continues to focus on containing costs. With reform
appearing to evolve in the private sector, rather than through government
mandates, medical device makers like Boston Scientific should prosper. Firms
that help doctors and hospitals manage costs, like HealthCare Compare will also
do well.

Energy and precious metals are attractive sectors because the supply demand
characteristics are compelling, leading us to expect higher prices during the
next 12 to 18 months. Demand for oil and gas is rising, especially in developing
countries, while gasoline stockpiles in the U.S. are as low as they've been
since 1971. We've bought stock in energy service companies that will prosper if
producers continue to increase their new drilling. Gold and silver have been in
a supply/demand deficit for the past six years. Stockpiles have diminished, yet
holders of unstable currencies overseas are clamoring for gold to protect and
build their wealth and jewelry demand is on the rise. We're targeting U.S.
mining companies with operating mines and existing reserves to meet the demand.

Looking ahead, we anticipate a slow growth economy that could favor
aggressive growth stocks more than the broader market in the months ahead. In
that environment, we will continue to build the Fund's positions within the
sectors outlined above, making modest adjustments to the holdings as we proceed.

[CAPTION]
"TECHNOLOGY WAS OUR LARGEST SECTOR..."

11
<PAGE> 12

BY ANGELA BRISTOW, CFA
FOR THE PORTFOLIO MANAGEMENT TEAM

JOHN HANCOCK
FUNDAMENTAL VALUE FUND

FUND FAVORS LONG-TERM PERSPECTIVE; PATIENCE

John Hancock Fundamental Value Fund began operating on April 19, 1995 and was
still in the process of building positions when the Fund's period ended on
August 31, 1995. The Fund aims for capital appreciation with income as a
secondary consideration. We seek to achieve these goals by buying stocks we
believe to be selling at low prices compared to their true value. A long-term
perspective and patience are keys to our strategy. We ignore the day-to-day,
even year-to-year fluctuations of the market and, to the best of our ability, we
shut out the noise of Wall Street. Instead, we spend our time looking for
significantly undervalued companies, those that are shunned or currently out of
favor with the investment community, but that are fundamentally sound and have
the potential to provide above-average returns at below-average risk levels over
the long haul.

[A 2 1/2" x 3 1/2" photo of The Fundamental Value portfolio management team,
bottom right. Caption reads: "The Fundamental Value Portfolio Management Team:
Charles Womack (left), Thomas Christopher (middle), Angela Bristow (right)."]

A key factor that drives our investment decisions is the "margin of safety"
concept coined by the legendary value investor Benjamin Graham. No single
formula can be used to calculate margin of safety. Only diligent, comprehensive
analysis of a company's unique circumstance can yield insight into the elements
that underwrite its highly specific margin of safety. This does not mean that
bad news -- like earnings disappointments, dividend cuts, or reduced
expectations for business prospects -- will never negatively impact a stock. But
such declines can be weathered with impunity by

[CAPTION]
"...WE SPEND OUR TIME LOOKING FOR SIGNIFICANTLY UNDERVALUED COMPANIES..."

12
<PAGE> 13

JOHN HANCOCK FUNDS - Institutional Series Trust -- Fundamental Value Fund

[Chart with the heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) Destec Energy 5.1%; 2) Outboard Marine
4.8%; 3) Parker Drilling 4.8%; 4) Russ Berrie 4.7%; and 5) Dole Food 4.7%. A
footnote below reads: "As a percentage of net assets on August 31, 1995."]

investors who understand that the more enduring economic realities indicated by
margin of safety will, under normal circumstances, inevitably prevail. And we're
willing to wait a long time, at least four or five years in many cases, to see
the result.

One stock that we have included in the Fund is Garan, a perfect example of
our approach to investing. The shares are not only selling at a low of 93% of
book value but are also selling at around 1.1 times net current asset value.
This is a classic Ben Graham stock. At roughly $17 a share today, the stock sold
as high as $36 a share in 1993 when investors were excited by Garan's success in
the sports licensing apparel business. Now, as that fad has faded, investors
have thrown out the stock. What they're really throwing out is one of the better
managed firms in the apparel industry with a long history of successfully
reinventing itself. Management is also extremely shareholder-oriented. The stock
has an attractive yield, which management supplements with special payouts when
excess cash is available. With no debt and a strong core business in children's
clothing, Garan has both the means and determination to survive and prosper when
the next mass merchandising opportunity comes along. We have no idea when that
will happen, and we don't need to know. It's always the bus you don't see coming
that hits you. Similarly, it's the unexpected positive change that provides the
largest gains in a stock.

During the period from April 19, 1995 to August 31, 1995, the Fund's total
return was 7.42% at net asset value. We have provided this performance
information in compliance with Securities and Exchange Commission regulations.
The result isn't particularly meaningful, however, because it is based on such a
short time early in the life of the Fund. Performance information is historical
and assumes reinvestment of all distributions. The Fund's investment return and
share value will fluctuate so that Fund shares, when redeemed, may be worth more
or less than their original cost. Because of our long-term approach, we don't
believe that six-month or even one-year returns are a good barometer of
performance. Virtually anything can happen in a six-month period; it's simply
not enough time to arrive at a meaningful conclusion.

While it's certainly important to be disciplined in buying stocks, it's just
as important to be disciplined in selling them. Once a stock reaches our target
price, we sell it. We don't get caught up in the euphoria of a rising stock. In
most cases, we sell a stock when the Wall Street crowd is just starting to buy
it.

Looking forward, you probably won't ever hear us predict what's going to
happen to the stock market, as all the crystal balls we have peered into have
proven notoriously unreliable. We will, however, patiently continue to invest in
out-of-favor, undervalued stocks with a strong margin of safety. Good things
come to those who know how to gather under-valued assets and patiently wait.

[CAPTION]
"...WE'RE WILLING TO WAIT A LONG TIME ... TO SEE THE RESULT."

13
<PAGE> 14

BY DAVID S. BECKWITH
FOR THE PORTFOLIO MANAGEMENT TEAM

JOHN HANCOCK
INTERNATIONAL EQUITY FUND

FOREIGN MARKETS, ESPECIALLY JAPAN, BENEFIT FROM STRONGER
U.S. DOLLAR IN FUND'S EARLY MONTHS

John Hancock International Equity Fund began operating on March 30, 1995, and
was still in the process of building positions when the Fund's period ended on
August 31, 1995. During the period, the Fund's total return was 3.29% at net
asset value. We have provided this performance information in compliance with
Securities and Exchange Commission regulations. The result isn't particularly
meaningful, however, because it is based on such a short time early in the life
of the Fund. Performance information is historical and assumes reinvestment of
all distributions. The Fund's investment return and share value will fluctuate
so that Fund shares, when redeemed, may be worth more or less than their
original cost.

[A 2 1/2" x 2 1/2" photo of David S. Beckwith, bottom center. Caption reads:
"David S. Beckwith."]

The Fund aims for long-term capital growth by investing in foreign stocks.
As of August 31, 1995, the regional breakdown was roughly as follows: 45% in
Asia and the Pacific (with 16% in Japan); 36% in Europe; 5% in Latin America;
and the balance in short-term cash equivalents awaiting investment. About 25% of
the Fund's total assets were in emerging markets, including Hong Kong,
Singapore, Malaysia, Mexico, the Philippines and Chile. Those regional
allocations are by no means fixed; they'll vary depending on where we find the
most attractive companies. As bottom-up investors, we'll devote our time and
energy to finding well-run companies with strong potential for high earnings
growth, rather than developing country-allocation models or trying to time
markets. Once we find stocks we like, we'll tend to hold them for a long time.
It's an approach that demands patience and a long-term vision, but one that
carries the potential for significant rewards.

[CAPTION]
"...AN APPROACH THAT DEMANDS PATIENCE AND A LONG-TERM VISION..."

14
<PAGE> 15

JOHN HANCOCK FUNDS - Institutional Series Trust -- International Equity Fund

[Chart with the heading "Top Five Countries" at top of left hand column. The
chart lists five countries: 1) Japan 16%; 2) Australia 9%; 3) Hong Kong 8%; 4)
United Kingdom 8%; 5) Singapore 7%. A footnote below reads: "As a percentage of
net assets on August 31, 1995."]

In the few months since the Fund began operating, most foreign markets have
lagged the booming U.S. stock market. One recent exception has been Japan, which
soared as the dollar gained strength versus the yen; Japan's Nikkei Index is up
nearly 20% in the final two months of the period. Our largest Japanese
investment is Jusco, a retailer well-positioned to benefit from the early stages
of economic recovery in Japan. In Australia, media giant News Corp. has had a
good run in recent months, helped by the wave of high-profile media-company
mergers in the United States. In Hong Kong, the Fund has large stakes in three
conglomerates with exposure to China: CITIC Pacific, Hutchison Whampoa and Swire
Pacific. In Europe, where stocks right now tend to be cheaper than comparable
offerings in the United States, our favorites include Britain's Thorn EMI, a
media and entertainment company which owns record retailer HMV; and BMW, the
German automaker.

As U.S. stock prices have surged, it has gotten that much harder to find
bargains on Wall Street. Meanwhile, overseas, for company after company, stock
prices have failed to keep pace with earnings. That bodes well for foreign
stocks as we head towards 1996.

[CAPTION]
"...OVERSEAS ...STOCK PRICES HAVE FAILED TO KEEP PACE WITH EARNINGS."

15
<PAGE> 16

FINANCIAL STATEMENTS

JOHN HANCOCK FUNDS - Institutional Series Trust

<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DIVIDEND ACTIVE GLOBAL
PERFORMERS BOND BOND
FUND FUND FUND
--------- -------- --------
<S> <C> <C> <C>
ASSETS:
Investments at value - Note C:
Common and preferred stocks (cost - $1,987,722, none and none, respectively)..... $2,084,675 $ -- $ --
Bonds (cost - none, $755,860 and $136,063, respectively)......................... -- 761,404 134,700
Joint repurchase agreement (cost - none, $75,000 and $32,000, respectively)...... -- 75,000 32,000
Corporate savings account........................................................ -- 739 --
---------- -------- --------
2,084,675 837,143 166,700

Cash.............................................................................. 77,162 -- 687
Receivable for shares sold........................................................ 177 -- --
Interest receivable............................................................... -- 15,943 3,603
Dividends receivable.............................................................. 5,835 -- --
Deferred organization expenses - Note A........................................... 38,322 38,239 38,425
Receivable from John Hancock Advisers, Inc. - Note B.............................. 27,534 24,555 22,630
---------- -------- --------
Total Assets.................................................... 2,233,705 915,880 232,045
------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for forward foreign currency exchange contracts sold - Note A............. -- -- 113
Dividend payable.................................................................. -- 179 21
Payable to John Hancock Advisers, Inc. and affiliates - Note B.................... 49,227 43,994 41,649
Accounts payable and accrued expenses............................................. 25,706 21,618 19,655
---------- -------- --------
Total Liabilities............................................... 74,933 65,791 61,438
------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in................................................................... 2,022,358 844,983 172,172
Accumulated net realized gain (loss) on investments............................... 32,192 (438) --
Net unrealized appreciation (depreciation) of investments and foreign currency
transactions..................................................................... 96,953 5,544 (1,565)
Undistributed net investment income............................................... 7,269 -- --
---------- -------- --------
Net Assets...................................................... $2,158,772 $850,089 $170,607
======================================================================================================
NET ASSET VALUE PER SHARE ($NAV)
(based on 242,549, 99,404 and 20,293 shares, respectively, of beneficial
interest outstanding - unlimited number of shares authorized with no par value)... $ 8.90 $ 8.55 $ 8.41
==========================================================================================================================
</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 AS OF AUGUST 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE PER SHARE AS OF THAT DATE.

SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 17

FINANCIAL STATEMENTS

JOHN HANCOCK FUNDS - Institutional Series Trust

<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MULTI-SECTOR FUNDAMENTAL INTERNATIONAL
GROWTH VALUE EQUITY
FUND FUND FUND
------------ ----------- -------------
<S> <C> <C> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $3,788,635, $1,350,797 and $712,357,respectively)............... $4,067,044 $1,414,689 $734,513
Joint repurchase agreement (cost - $278,000, $197,000 and $94,000, respectively)...... 278,000 197,000 94,000
Corporate savings account............................................................. 451 410 --
---------- ---------- --------
4,345,495 1,612,099 828,513
Cash................................................................................... -- -- 805
Foreign currency, at value (cost - none, none and $32,446)............................. -- -- 31,922
Receivable for shares sold............................................................. 1,441 -- 117
Receivable for investments sold........................................................ 179,022 1,054 --
Interest receivable.................................................................... 60 -- 417
Dividends receivable................................................................... 625 2,346 937
Deferred organization expenses - Note A................................................ 40,551 38,696 38,239
Receivable from John Hancock Advisers, Inc. - Note B................................... 28,098 23,632 24,395
---------- ---------- --------
Total Assets......................................................... 4,595,292 1,677,827 925,345
-------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased...................................................... 134,688 18,003 --
Payable to John Hancock Advisers, Inc. and affiliates - Note B......................... 50,123 44,121 45,391
Accounts payable and accrued expenses.................................................. 25,764 20,060 21,418
---------- ---------- --------
Total Liabilities.................................................... 210,575 82,184 66,809
-------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in........................................................................ 4,129,162 1,527,000 825,701
Accumulated net realized gain (loss) on investments and foreign currency transactions.. (29,719) 92 2,376
Net unrealized appreciation of investments and foreign currency transactions........... 278,410 63,892 21,599
Undistributed net investment income.................................................... 6,864 4,659 8,860
---------- ---------- --------
Net Assets........................................................... $4,384,717 $1,595,643 $858,536
=============================================================================================================
NET ASSET VALUE PER SHARE ($NAV)
(based on 465,020, 175,820 and 97,745 shares, respectively, of beneficial interest
outstanding - unlimited number of shares authorized with no par value)................. $ 9.43 $ 9.08 $ 8.78
===============================================================================================================================
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 18

FINANCIAL STATEMENTS

JOHN HANCOCK FUNDS - Institutional Series Trust

<TABLE>
STATEMENT OF OPERATIONS
Period ended August 31, 1995* (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DIVIDEND ACTIVE GLOBAL
PERFORMERS BOND BOND
FUND FUND FUND
---------- -------- --------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................................................................ $ 25,881 $ 26,253 $ 1,506
Dividends............................................................................... 18,265 -- --
--------- -------- --------
44,146 26,253 1,506
Expenses:
Custodian fee.......................................................................... 10,542 6,531 8,269
Registration and filing fees........................................................... 6,875 6,875 5,089
Investment management fee - Note B..................................................... 6,808 2,031 169
Printing............................................................................... 4,677 4,677 3,055
Organization expense - Note A.......................................................... 3,530 3,521 3,043
Auditing fee........................................................................... 3,437 3,438 3,181
Transfer agent fee - Note B............................................................ 567 203 11
Legal fees............................................................................. 92 44 23
Miscellaneous.......................................................................... 46 23 21
Trustees' fees......................................................................... 37 37 17
--------- -------- --------
Total Expenses........................................................ 36,611 27,380 22,878
Less Expenses Reimbursable by John Hancock Advisers, Inc. - Note B.... (27,534) (24,555) (22,630)
--------- -------- --------
Net Expenses.......................................................... 9,077 2,825 248
-------------------------------------------------------------------------------------------------------------
Net Investment Income................................................. 35,069 23,428 1,258
-------------------------------------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments sold............................................ 32,192 ( 438) --
Change in net unrealized appreciation (depreciation) of investments..................... 96,953 5,544 (1,363)
Change in net unrealized appreciation (depreciation) of foreign currency transactions... -- -- (202)
--------- -------- --------
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions......................................... 129,145 5,106 (1,565)
-------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations $ 164,214 $ 28,534 $ (307)
=============================================================================================================
<FN>
* Dividend Performers Fund and Active Bond Fund commenced investment operations
on March 30, 1995. Global Bond Fund commenced investment operations on April
19, 1995.
</TABLE>

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

SEE NOTES TO FINANCIAL STATEMENTS.
18

<PAGE> 19

FINANCIAL STATEMENTS

JOHN HANCOCK FUNDS - Institutional Series Trust

<TABLE>
STATEMENT OF OPERATIONS
Period ended August 31, 1995* (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MULTI-SECTOR FUNDAMENTAL INTERNATIONAL
GROWTH VALUE EQUITY
FUND FUND FUND
------------ ----------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest............................................................................... $ 12,677 $ 3,641 $ 4,836
Dividends (net of foreign withholding tax of $26, $62 and $1,277, respectively)........ 1,426 7,217 8,199
-------- ------- --------
14,103 10,858 13,035
Expenses:
Custodian fee......................................................................... 10,080 9,754 9,075
Registration and filing fees.......................................................... 6,574 5,089 5,500
Printing.............................................................................. 4,473 3,055 3,302
Organization expense - Note A......................................................... 3,419 3,065 3,522
Auditing fee.......................................................................... 4,492 3,180 3,437
Investment management fee - Note B.................................................... 5,792 2,203 3,449
Transfer agent fee - Note B........................................................... 362 157 181
Legal fees............................................................................ 88 64 44
Trustees' fees........................................................................ 35 34 37
Miscellaneous......................................................................... 22 21 23
-------- ------- --------
Total Expenses....................................................... 35,337 26,622 28,570
Less Expenses Reimbursable by John Hancock Advisers, Inc. - Note B... (28,098) (23,632) (24,395)
-------- ------- --------
Net Expenses......................................................... 7,239 2,990 4,175
--------------------------------------------------------------------------------------------------------------
Net Investment Income................................................ 6,864 7,868 8,860
--------------------------------------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments sold........................................... (34,497) 92 2,334
Net realized gain on foreign currency transactions..................................... 4,778 -- 42
Change in net unrealized appreciation (depreciation) of investments.................... 278,409 63,892 22,156
Change in net unrealized appreciation (depreciation) of foreign currency transactions.. 1 -- (557)
-------- ------- --------
Net Realized and Unrealized Gain on Investments and Foreign Currency
Transactions........................................................ 248,691 63,984 23,975
--------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations................. $255,555 $71,852 $ 32,835
==============================================================================================================

<FN>
* Multi-Sector Growth Fund, Fundamental Value Fund and International Equity Fund
commenced investment operations on April 11, 1995, April 19, 1995 and March
30, 1995, respectively.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
19

<PAGE> 20

FINANCIAL STATEMENTS

JOHN HANCOCK FUNDS - Institutional Series Trust

<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DIVIDEND ACTIVE GLOBAL
PERFORMERS BOND BOND
FUND FUND FUND
---------------- ---------------- ----------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
AUGUST 31, 1995+ AUGUST 31, 1995+ AUGUST 31, 1995+
(UNAUDITED) (UNAUDITED) (UNAUDITED)
---------------- ---------------- ----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income..................................................... $ 35,069 $ 23,428 $ 1,258
Net realized gain (loss) on investments sold.............................. 32,192 (438) --
Change in net unrealized appreciation (depreciation) of investments and
foreign currency transactions............................................ 96,953 5,544 (1,565)
----------- ----------- --------
Net Increase (Decrease) in Net Assets Resulting from Operations.......... 164,214 28,534 (307)
----------- ----------- --------
DISTRIBUTIONS TO SHAREHOLDERS: *
Dividends from net investment income...................................... (27,800) (23,428) (1,258)
----------- ----------- --------
FROM PORTFOLIO SHARE TRANSACTIONS: **
Shares sold............................................................... 4,590,185 1,827,306 215,978
Shares issued to shareholders in reinvestment of distributions............ 27,799 21,130 1,224
----------- ----------- --------
4,617,984 1,848,436 217,202
Less shares repurchased................................................... (2,595,626) (1,003,453) (45,030)
----------- ----------- --------
Net Increase............................................................. 2,022,358 844,983 172,172
----------- ----------- --------
NET ASSETS:
Beginning of period....................................................... -- -- --
----------- ----------- --------
End of period (including undistributed net investment income of $7,269,
none and none, respectively)............................................. $ 2,158,772 $ 850,089 $170,607
=========== =========== ========
* DISTRIBUTIONS TO SHAREHOLDERS:
Per share dividends from net investment income............................ $ 0.0773 $ 0.2049 $ 0.1504
----------- ----------- --------
** ANALYSIS OF PORTFOLIO SHARE TRANSACTIONS:
Shares sold............................................................... 533,466 214,981 25,547
Shares issued to shareholders in reinvestment of distributions............ 3,173 2,483 145
----------- ----------- --------
536,639 217,464 25,692
Less shares repurchased................................................... (294,090) (118,060) (5,399)
----------- ----------- --------
Net increase............................................................. 242,549 99,404 20,293
=========== =========== ========

<FN>
+ Dividend Performers Fund and Active Bond Fund commenced investment operations
on March 30, 1995. Global Bond Fund commenced investment operations on April
19, 1995.
</TABLE>

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

SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 21

FINANCIAL STATEMENTS

JOHN HANCOCK FUNDS - Institutional Series Trust

FROM PORTFOLIO SHARE TRANSACTIONS: **
Shares sold............................................................... 4,148,501 1,564,279 1,774,116
Shares issued to shareholders in reinvestment of distributions............ -- 3,209 --
---------- ---------- ----------
4,148,501 1,567,488 1,774,116
Less shares repurchased................................................... (119,339) (40,488) (948,415)
Initial investment by John Hancock Advisers, Inc. - Note A................ 100,000++ -- --
---------- ---------- ----------
Net Increase............................................................. 4,129,162 1,527,000 825,701
---------- ---------- ----------
NET ASSETS:
Beginning of period....................................................... -- -- --
---------- ---------- ----------
End of period (including undistributed net investment income of $6,864,
$4,659 and $8,860, respectively)......................................... $4,384,717 $1,595,643 $ 858,536
========== ========== ==========
* DISTRIBUTIONS TO SHAREHOLDERS:
Per share dividends from net investment income............................ -- $ 0.0480 --
---------- ---------- ----------
** ANALYSIS OF PORTFOLIO SHARE TRANSACTIONS:
Shares sold............................................................... 466,557 179,959 202,562
Shares issued to shareholders in reinvestment of distributions............ -- 373 --
---------- ---------- ----------
466,557 180,332 202,562
Less shares repurchased................................................... (13,302) (4,512) (104,817)
Initial investment by John Hancock Advisers, Inc. - Note A................ 11,765 -- --
---------- ---------- ----------
Net increase............................................................. 465,020 175,820 97,745
========== ========== ==========

<FN>
+ Multi-Sector Growth Fund, Fundamental Value Fund and International Equity
Fund commenced investment operations on April 11, 1995, April 19, 1995 and
March 30, 1995, respectively.

++ On January 11, 1995, the Adviser made an initial investment of $100,000 in
order to seed the Trust.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
21

<PAGE> 22

FINANCIAL STATEMENTS

JOHN HANCOCK FUNDS - Institutional Series Trust - Dividend Performers 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
listed as follows:
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD MARCH 30, 1995
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 1995
(UNAUDITED)
-----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period....................................... $ 8.50(b)
------
Net Investment Income...................................................... 0.11
Net Realized and Unrealized Gain on Investments............................ 0.37
------
Total from Investment Operations........................................ 0.48
------
Less Distributions:
Dividends from Net Investment Income...................................... ( 0.08)
------
Net Asset Value, End of Period............................................. $ 8.90
======
Total Investment Return at Net Asset Value................................. 5.63%(c)
Total Adjusted Investment Return at Net Asset Value (a).................... 3.20%(c)

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).................................. $2,159
Ratio of Expenses to Average Net Assets.................................... 0.80%*
Ratio of Adjusted Expenses to Average Net Assets (a)(d).................... 3.23%*
Ratio of Net Investment Income to Average Net Assets....................... 3.09%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a)(d)....... 0.66%*
Portfolio Turnover Rate.................................................... 59%

<FN>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.

(d) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets are expected to increase as the net assets of the Fund grow.
</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 COMMENCEMENT OF OPERATIONS.
ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE
FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.

SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 23

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Active Bond 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 listed as follows:
- --------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD MARCH 30, 1995
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 1995
(UNAUDITED)
----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............................. $ 8.50(b)
------
Net Investment Income ............................................ 0.20
Net Realized and Unrealized Gain on Investments .................. 0.05
------
Total from Investment Operations .............................. 0.25
------
Less Distributions:
Dividends from Net Investment Income ............................ (0.20)
------
Net Asset Value, End of Period ................................... $ 8.55
======
Total Investment Return at Net Asset Value ....................... 3.03%(c)
Total Adjusted Investment Return at Net Asset Value (a) .......... (3.02%)(c)

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ........................ $ 850
Ratio of Expenses to Average Net Assets .......................... 0.70%*
Ratio of Adjusted Expenses to Average Net Assets (a)(d) .......... 6.75%*
Ratio of Net Investment Income to Average Net Assets ............. 5.77%*
Ratio of Adjusted Net Investment Loss to Average Net Assets (a)(d) (0.28%)*
Portfolio Turnover Rate .......................................... 18%

<FN>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets are expected to increase as the net assets of the Fund grow.

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
23

<PAGE> 24

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Global Bond 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 listed as follows:
- --------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD APRIL 19, 1995
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 1995
(UNAUDITED)
----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................................. $ 8.50(b)
------
Net Investment Income ................................................. 0.15
Net Unrealized Loss on Investments .................................... (0.09)
------
Total from Investment Operations ................................... 0.06
------
Less Distributions:
Dividends from Net Investment Income ................................. (0.15)
------
Net Asset Value, End of Period ........................................ $ 8.41
======
Total Investment Return at Net Asset Value ............................ 0.71%(c)
Total Adjusted Investment Return at Net Asset Value (a) ............... N/M

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ............................. $ 171
Ratio of Expenses to Average Net Assets ............................... 1.10%*
Ratio of Adjusted Expenses to Average Net Assets (a)(d) ............... N/M
Ratio of Net Investment Income to Average Net Assets .................. 5.58%*
Ratio of Adjusted Net Investment Income to Average Net Assets (a)(d)... N/M
Portfolio Turnover Rate ............................................... 0%

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
24

<PAGE> 25

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Multi-Sector Growth 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 listed as follows:
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD APRIL 11, 1995
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 1995
(UNAUDITED)
-----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............................................... $ 8.50(b)
------
Net Investment Income .............................................................. 0.03**
Net Realized and Unrealized Gain on Investments and Foreign Currency Transactions... 0.90
------
Total from Investment Operations .................................................. 0.93
------
Net Asset Value, End of Period ..................................................... $ 9.43
======
Total Investment Return at Net Asset Value ......................................... 10.94%(c)
Total Adjusted Investment Return at Net Asset Value (a) ............................ 7.06%(c)

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .......................................... $4,385
Ratio of Expenses to Average Net Assets ............................................ 1.00%*
Ratio of Adjusted Expenses to Average Net Assets (a)(d) ............................ 4.88%*
Ratio of Net Investment Income to Average Net Assets ............................... 0.95%*
Ratio of Adjusted Net Investment Loss to Average Net Assets (a)(d) ................. (2.93%)*
Portfolio Turnover Rate ............................................................ 33%

<FN>
* On an annualized basis.
** On average month end shares outstanding.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets are expected to increase as the net assets of the Fund grow.

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
25

<PAGE> 26

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Fundamental Value Fund

<TABLE>

FINANCIAL HIGHLIGHTS

Less Distributions:

Dividends from Net Investment Income ............................... (0.05)
------
Net Asset Value, End of Period ...................................... $ 9.08
======
Total Investment Return at Net Asset Value .......................... 7.42%(c)
Total Adjusted Investment Return at Net Asset Value (a) ............. (0.09%)(c)

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ........................... $1,596
Ratio of Expenses to Average Net Assets ............................. 0.95%*
Ratio of Adjusted Expenses to Average Net Assets (a)(d) ............. 8.46%*
Ratio of Net Investment Income to Average Net Assets ................ 2.50%*
Ratio of Adjusted Net Investment Loss to Average Net Assets (a)(d)... (5.01%)*
Portfolio Turnover Rate ............................................. 0%

<FN>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets is expected to increase as the net assets of the Fund grow.

</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26

<PAGE> 27

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- International Equity Fund

<TABLE>
FINANCIAL HIGHLIGHTS

<CAPTION>
FOR THE PERIOD MARCH 30, 1995
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 1995
(UNAUDITED)
-----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............................................... $ 8.50(b)
------
Net Investment Income .............................................................. 0.09
Net Realized and Unrealized Gain on Investments and Foreign Currency Transactions... 0.19
------
Total from Investment Operations .................................................. 0.28
------

Net Asset Value, End of Period ..................................................... $ 8.78
======
Total Investment Return at Net Asset Value ......................................... 3.29%(c)
Total Adjusted Investment Return at Net Asset Value (a) ............................ (3.43%)(c)

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .......................................... $ 859
Ratio of Expenses to Average Net Assets ............................................ 1.15%*
Ratio of Adjusted Expenses to Average Net Assets (a)(d) ............................ 7.87%*
Ratio of Net Investment Income to Average Net Assets ............................... 2.44%*
Ratio of Adjusted Net Investment Loss to Average Net Assets (a)(d) ................. (4.28%)*
Portfolio Turnover Rate ............................................................ 8%

</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27

<PAGE> 28

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Dividend Performers Fund

SCHEDULE OF INVESTMENTS
August 31, 1995 (Unaudited)
Per share earnings and dividends and their compound growth rates are shown for
the most recently reported ten year periods on common stocks.
- --------------------------------------------------------------------------------

THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
DIVIDEND PERFORMERS FUND ON AUGUST 31, 1995. ITS DIVIDED INTO TWO MAIN
CATEGORIES: COMMON STOCKS AND PREFERRED STOCKS. THE COMMON STOCKS ARE FURTHER
BROKEN DOWN BY INDUSTRY GROUPS.

<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS (94.97%) RATE VALUE
- --------- ---- -----
<S> <C> <C> <C>
BANKS (2.84%)
1,000 NationsBank Corp. @ 61 3/8............................................................... $ 61,375
Largest superregional bank in the Southeast --------
Earnings P/S...................$2.51, 2.01, 2.87, 4.44, 2.61, .76, 1.39, 4.42, 5.42, 6.19 10.5%
Dividends P/S.....................$.66, .78, .86, .94, 1.10, 1.42, 1.48, 1.51, 1.64, 1.88 12.3%
Price/Earnings Ratio..................................................................8.9
BASIC INDUSTRY (1.87%)
1,500 Sonoco Products Corp. @ 26 7/8........................................................... 40,312
Containers, paper products and packaging --------
Earnings P/S......................$.63, .77, 1.10, 1.18, 1.21, .53, 1.04, .94, 1.24, 1.44 9.6%
Dividends P/S...........................$.16, .18, .21, .30, .39, .43, .44, .48, .50, .53 14.2%
Price/Earnings Ratio.................................................................17.7
CHEMICALS (6.58%)
1,000 Air Products & Chemicals, Inc. @ 53 5/8.................................................. 53,625
Producer of industrial and specialty chemicals and gases
Earnings P/S $1.17, 1.42, 1.95, 1.93, 2.08, 2.23, 2.45, 1.76, 2.05, 2.84 10.4%
Dividends P/S $ .32, .39, .45, .55, .63, .69, .75, .83, .89, .95 12.9%
Price/Earnings Ratio.................................................................20.7
700 E.I. du Pont de Nemours and Co.
@ 65 3/8................................................................................. 45,762
Nation's largest chemical manufacturer
Earnings P/S..................$2.12, 2.46, 3.03, 3.53, 3.40, 3.38, 1.84, 1.52, 1.04, 4.46 8.6%
Dividends P/S................$ 1.00, 1.02, 1.10, 1.23, 1.45, 1.62, 1.68, 1.74, 1.76, 1.82 6.9%
Price/Earnings Ratio.................................................................16.2
1,000 PPG Industries, Inc. @ 42 3/4............................................................ 42,750
Manufacturer of specialty chemicals, coatings and resins
Earnings P/S.................$ 1.33, 1.60, 2.13, 2.09, 2.22, 1.74, 1.22, 1.66, 1.45, 2.92 9.1%
Dividends P/S.........................$.41, .47, .56, .64, .74, .82, .86, .94, 1.04, 1.12 11.8%
Price/Earnings Ratio.................................................................15.6
--------
142,137
--------
COMPUTER & OFFICE EQUIPMENT (2.24%)
600 Alco Standard Corp. @ 80 1/2............................................................. 48,300
Distributor of office and paper products --------
Earnings P/S...................$1.28, 1.68, 2.29, 3.91, 2.56, 1.62, 2.07, 2.36, .10, 1.48 1.6%
Dividends P/S..........................$.61, .63, .65, .70, .78, .85, .89, .93, .97, 1.01 5.8%
Price/Earnings Ratio.................................................................53.6
CONSUMER CYCLICALS & SERVICES (4.44%)
2,000 Sysco Corp. @ 28 3/4..................................................................... 57,500
Largest distributor of food service products
Earnings P/S.........................$.34, .35, .45, .60, .73, .81, .90, 1.00, 1.16, 1.33 16.4%
Dividends P/S...........................$.05, .06, .07, .08, .09, .10, .14, .22, .28, .36 24.5%
Price/Earnings Ratio.................................................................22.4
700 V.F. Corp. @ 54 3/4...................................................................... $ 38,325
International apparel manufacturer
Earnings P/S..................$2.05, 2.65, 2.55, 2.72, 1.33, 1.44, 3.00, 4.07, 3.78, 4.28 8.5%
Dividends P/S......................$.58, .66, .75, .85, .91, 1.00, 1.02, 1.11, 1.22, 1.30 9.4%
Price/Earnings Ratio.................................................................12.9
--------
95,825
--------
CONSUMER DURABLES (1.79%)
800 Leggett & Platt, Inc. @ 48 3/8........................................................... 38,700
Produces intermediate products for the home furnishings industry --------
Earnings P/S.....................$.95, 1.11, 1.09, 1.29, .84, .70, 1.28, 1.74, 2.24, 2.93 13.3%
Dividends P/S...........................$.17, .20, .28, .32, .37, .42, .43, .46, .54, .62 15.5%
Price/Earnings Ratio.................................................................15.8
CONSUMER NON-DURABLES (13.65%)
500 Anheuser-Busch Cos., Inc. @ 57 1/8....................................................... 28,562
Nation's largest brewer
Earnings P/S..................$1.69, 2.04, 2.45, 2.68, 2.95, 3.02, 3.31, 3.43, 2.22, 3.98 10.0%
Dividends P/S.......................$.37, .44, .54, .66, .80, .94, 1.06, 1.20, 1.36, 1.52 17.0%
Price/Earnings Ratio.................................................................13.9
1,000 Campbell Soup Co. @ 45 3/4............................................................... 45,750
Leading food manufacturer and distributor
Earnings P/S.........................$.86, .95, .94, .05, .02, .33, 1.85, .98, 2.42, 2.80 14.0%
Dividends P/S..........................$.31, .33, .36, .42, .46, .50, .58, .76, .97, 1.12 15.3%
Price/Earnings Ratio...................................................................17
500 CPC International Inc. @ 62 7/8.......................................................... 31,438
Major International food processor
Earnings P/S..................$1.15, 2.17, 1.84, 2.11, 2.42, 2.50, 2.68, 2.85, 2.13, 3.42 12.9%
Dividends P/S......................$.55, .57, .65, .76, .88, 1.00, 1.10, 1.20, 1.28, 1.38 10.8%
Price/Earnings Ratio................................................................18.79
1,600 PepsiCo, Inc. @ 45 1/4................................................................... 72,400
Second largest soft drink company
Earnings P/S....................$ .58, .76, .97, 1.13, 1.35, 1.40, 1.38, 1.64, 1.99, 2.27 16.4%
Dividends P/S...........................$.19, .21, .22, .27, .32, .38, .46, .51, .61, .70 15.6%
Price/Earnings Ratio.................................................................19.4
1,000 Procter & Gamble Co. (The) @ 69 3/8...................................................... 69,375
Leading producer of household consumer products
Earnings P/S...................$ 1.04, .46, 1.48, 1.74, 2.25, 2.43, 2.57, 2.54, .70, 2.50 10.2%
Dividends P/S.......................$.65, .67, .68, .70, .83, .93, 1.00, 1.08, 1.17, 1.32 8.2%
Price/Earnings Ratio.................................................................27.7
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
28

<PAGE> 29

<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS RATE VALUE
- --------- ---- -----
<S> <C> <C> <C>
CONSUMER NON-DURABLES (CONTINUED)
1,700 Sara Lee Corp. @ 27 3/4.................................................................... $ 47,175
Manufacturer of brand name packaged food and consumer products
Earnings P/S.........................$ .51, .59, .71, .88, .94, 1.03, 1.49, 1.36, 1.47, .52 0.2%
Dividends P/S............................$ .20, .25, .30, .36, .42, .47, .50, .58, .64, .68 14.6%
Price/Earnings Ratio...................................................................53.9
--------
294,700
--------

DIVERSIFIED OPERATIONS (3.54%)
1,000 Corning Inc. @ 32 5/8...................................................................... 32,625
Operations are in laboratory services, fiber optics,
specialty materials and consumer products
Earnings P/S....................$.93, 1.03, 1.63, 1.40, 1.54, 1.55, 1.75, 1.32, (.07), 1.39 4.6%
Dividends P/S.............................$.33, .35, .36, .38, .41, .46, .53, .62, .68, .69 8.5%
Price/Earnings Ratio...................................................................25.9
800 Minnesota Mining &
Manufacturing Co. @ 54 5/8................................................................. 43,700
Diversified manufacturer of industrial, commercial,
health care and consumer products
Earnings P/S....................$1.70, 2.01, 2.55, 2.80, 2.96, 2.89, 2.65, 2.88, 2.87, 3.31 7.7%
Dividends P/S......................$.88, .90, .93, 1.06, 1.30, 1.46, 1.56, 1.60, 1.66, 1.76 8.0%
Price/Earnings Ratio...................................................................17.8

--------
76,325
--------

ELECTRICAL EQUIPMENT (10.60%)
1,000 AMP Inc. @ 40 5/8.......................................................................... 40,625
Produces and sells electrical/electronic products and systems
Earnings P/S.....................$.76, 1.16, 1.48, 1.32, 1.35, 1.31, 1.23, 1.39, 1.45, 1.88 10.6%
Dividends P/S.............................$.36, .37, .43, .50, .60, .68, .72, .76, .80, .84 9.9%
Price/Earnings Ratio...................................................................23.1
900 Emerson Electric Co. @ 71 3/8.............................................................. 64,238
Produces and sells electrical/electronic products and systems
Earnings P/S...................$ 1.87, 2.00, 2.31, 2.63, 2.75, 2.79, 2.88, 3.05, 3.81, 3.89 8.5%
Dividends P/S......................$.88, .93, .98, 1.03, 1.16, 1.28, 1.34, 1.40, 1.47, 1.60 6.9%
Price/Earnings Ratio...................................................................19.3
1,500 General Electric Co. @ 58 7/8.............................................................. 88,312
Dominant force in home appliances, electrical power, and financial services
Earnings P/S....................$1.37, 1.60, 1.88, 2.18, 2.43, 2.48, 2.54, 2.55, 2.57, 3.56 11.2%
Dividends P/S.........................$.55, .58, .65, .70, .82, .94, 1.02, 1.12, 1.26, 1.44 11.3%
Price/Earnings Ratio...................................................................16.8
600 W.W. Grainger, Inc. @ 59 1/2............................................................... 35,700
Leading distributor of electrical equipment
Earnings P/S...................$ 1.24, 1.48, 1.57, 1.96, 2.19, 2.31, 2.38, 2.70, 3.04, 2.61 8.6%
Dividends P/S.............................$.33, .36, .39, .43, .50, .57, .61, .65, .71, .78 10.0%
Price/Earnings Ratio...................................................................23.2
--------
228,875
--------

ENERGY (2.23%)
700 Exxon Corp. @ 68 3/4....................................................................... 48,125
Major factor in the crude oil, natural gas and chemical industry --------
Earnings P/S...................$ 3.71, 3.43, 3.95, 2.32, 3.96, 4.73, 3.73, 3.70, 4.19, 4.48 2.1%
Dividends P/S...................$1.73, 1.80, 1.90, 2.15, 2.30, 2.47, 2.68, 2.83, 2.88, 2.91 5.9%
Price/Earnings Ratio...................................................................15.9
HEALTHCARE (11.17%)
1,700 Abbott Laboratories @ 38 3/4............................................................... $ 65,875
Major pharmaceutical and healthcare firm
Earnings P/S.........................$.49, .58, .70, .84, .97, 1.11, 1.15, 1.32, 1.53, 1.73 15.0%
Dividends P/S.............................$.17, .20, .24, .29, .34, .40, .48, .58, .66, .74 17.8%
Price/Earnings Ratio...................................................................19.6
1,100 Johnson & Johnson @ 69..................................................................... 75,900
Major producer of prescription and non-prescription drugs, toiletries,
medical instruments and supplies
Earnings P/S.....................$.45, 1.18, 1.41, 1.60, 1.72, 1.98, 2.25, 2.55, 2.82, 3.29 24.7%
Dividends P/S...........................$.32, .34, .40, .48, .56, .66, .77, .89, 1.01, 1.13 15.0%
Price/Earnings Ratio...................................................................19.8
1,000 Merck & Co., Inc. @ 49 7/8................................................................. 49,875
World's largest ethical drug manufacturer
Earnings P/S.....................$ .54, .74, 1.02, 1.26, 1.52, 1.59, 1.89, 2.18, 1.87, 2.45 18.3%
Dividends P/S...........................$.18, .21, .27, .43, .55, .64, .77, .92, 1.03, 1.14 22.8%
Price/Earnings Ratio.....................................................................20
1,000 Pfizer Inc. @ 49 3/8....................................................................... 49,375
Leading ethical pharmaceutical producer
Earnings P/S.....................$.98, 1.02, 1.18, 1.01, 1.19, 1.21, 1.11, 1.69, 1.11, 2.18 9.3%
Dividends P/S.............................$.37, .41, .45, .50, .55, .60, .66, .74, .84, .94 10.9%
Price/Earnings Ratio...................................................................20.4
--------
241,025
--------

INSURANCE (5.02%)
400 American International
Group, Inc. @ 80 5/8....................................................................... 32,250
One of the world's leading insurance organizations
Earnings P/S....................$1.73, 2.23, 2.61, 2.95, 3.07, 3.13, 3.35, 3.68, 4.24, 4.91 12.3%
Dividends P/S...................$.078, .081, .093, .125, .157, .183, .209, .236, .258, .287 15.6%
Price/Earnings Ratio..................................................................16.74
500 Chubb Corp. @ 90 1/4....................................................................... 45,625
Broadly based property-casualty insurance organization
Earnings P/S....................$3.53, 3.97, 4.27, 4.91, 6.07, 6.29, 6.44, 6.98, 3.10, 6.78 7.5%
Dividends P/S......................$.76, .80, .89, 1.08, 1.16, 1.32, 1.48, 1.60, 1.72, 1.84 10.3%
Price/Earnings Ratio...................................................................11.9
800 Reliastar Financial Corp. @ 38............................................................. 30,400
Financial services company engaged in life/health insurance and consumer finance
Earnings P/S....................$2.29, 1.86, 1.58, 2.07, 1.99, 1.96, 1.67, 2.26, 2.83, 3.48 4.8%
Dividends P/S.............................$.40, .43, .47, .57, .59, .65, .69, .73, .79, .88 9.2%
Price/Earnings Ratio...................................................................10.8
--------
108,275
--------
MEDIA AND INFORMATION SERVICES (1.80%)
1,000 Interpublic Group Inc. @ 38 7/8............................................................ 38,875
One of the largest advertising agencies in the world --------
Earnings P/S......................$ .62, .75, .91, 1.05, 1.19, 1.17, 1.32, 1.39, 1.69, 1.89 13.2%
Dividends P/S.............................$.18, .20, .22, .26, .32, .37, .41, .45, .49, .55 13.2%
Price/Earnings Ratio...................................................................19.1
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 30

<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS RATE VALUE
- --------- ---- -----
<S> <C> <C> <C>
METALS - STEEL (1.82%)
800 Nucor Corp. @ 49........................................................................... $ 39,200
Nation's fifth largest steelmaker in the U.S. ----------
Earnings P/S............................$.55, .60, .84, .68, .88, .86, .78, .98, 1.57, 2.97 20.6%
Dividends P/S.............................$.07, .08, .09, .10, .11, .12, .13, .14, .16, .18 11.1%
Price/Earnings Ratio...................................................................20.6
POLLUTION CONTROL (2.31%)
1,700 WMX Technologies Inc. @ 29 3/8............................................................. 49,938
Nation's largest provider of waste management services ----------
Earnings P/S.......................$.88, .73, 1.03, 1.22, 1.49, 1.52, 1.28, 1.88, .87, 1.49 6.0%
Dividends P/S.............................$.11, .13, .17, .21, .27, .34, .40, .48, .56, .60 20.7%
Price/Earnings Ratio...................................................................20.6
RETAIL (6.59%)
800 May Department Stores Co.
(The) @ 42 3/8............................................................................. 33,900
Operates 318 department stores and 3,295 shoe stores
Earnings P/S...................$ 1.22, 1.45, 1.82, 1.76, 1.83, 1.99, 2.03, 2.42, 2.83, 3.07 10.8%
Dividends P/S............................$.46, .51, .56, .62, .69, .77, .81, .83, .90, 1.01 9.1%
Price/Earnings Ratio.....................................................................14
1,700 Pep Boys (The) - Manny, Moe &
Jack @ 27 1/2.............................................................................. 46,750
Retailer of automotive parts and accessories
Earnings P/S............................$.52, .62, .76, .63, .66, .63, .73, .93, 1.13, 1.30 10.7%
Dividends P/S.............................$.06, .07, .08, .09, .11, .12, .13, .14, .15, .17 12.3%
Price/Earnings Ratio...................................................................22.3
2,500 Wal-Mart Stores, Inc. @ 24 5/8............................................................. 61,563
Operates chain of discount department stores
Earnings P/S............................$.20, .28, .37, .48, .50, .59, .73, .90, 1.05, 1.20 22.0%
Dividends P/S...........................$.018, .021, .03, .04, .06, .07, .09, .11, .13, .17 28.3%
Price/Earnings Ratio...................................................................21.9
----------
142,213
----------

TECHNOLOGY (5.17%)
1,000 Automatic Data Processing, Inc. @ 65....................................................... 65,000
Largest independent computing services firm in the U.S.
Earnings P/S.....................$ .70, .84, 1.07, 1.23, 1.44, 1.58, 1.79, 2.02, 2.29, 2.67 16.0%
Dividends P/S.............................$.17, .19, .21, .25, .29, .34, .39, .45, .51, .58 14.6%
Price/Earnings Ratio.....................................................................24
1,000 General Motors Corp. Class E @ 46 5/8...................................................... 46,625
Leading provider of information processing services
Earnings P/S........................$.53, .66, .79, .91, 1.04, 1.03, 1.21, 1.37, 1.55, 1.77 14.3%
Dividends P/S.............................$.05, .10, .13, .17, .24, .28, .32, .36, .40, .48 28.6%
Price/Earnings Ratio...................................................................24.9
----------
111,625
----------

TELECOMMUNICATIONS (6.88%)
1,000 ALLTEL Corp. @ 28 1/4...................................................................... 28,250
One of the country's largest telephone systems
Earnings P/S.....................$ .77, .90, 1.04, 1.13, 1.18, 1.18, 1.10, 1.29, 1.43, 1.46 7.4%
Dividends P/S.............................$.41, .44, .45, .51, .57, .64, .70, .74, .80, .88 8.9%
Price/Earnings Ratio...................................................................17.7
700 Bell Atlantic Corp. @ 59 3/4............................................................... $ 41,825
Provides telephone services in Mid-Atlantic states
Earnings P/S...................$ 2.93, 3.12, 3.33, 2.72, 3.38, 2.46, 3.27, 3.14, 3.45, 3.25 1.2%
Dividends P/S...................$1.70, 1.80, 1.92, 2.04, 2.20, 2.36, 2.52, 2.60, 2.68, 2.76 5.5%
Price/Earnings Ratio...................................................................17.7
1,500 Frontier Corp. @ 27 7/8.................................................................... 41,813
Provides telephone service to the city of Rochester N.Y. and outlying areas
Earnings P/S.........................$.89, .93, 1.06, .99, .86, .87, 1.20, 1.09, 1.26, 1.56 6.4%
Dividends P/S.............................$.61, .64, .66, .68, .71, .73, .75, .77, .79, .81 3.2%
Price/Earnings Ratio...................................................................15.7
1,000 GTE Corp. @ 36 5/8......................................................................... 36,625
Largest independent local telephone holding company
Earnings P/S....................$1.72, 1.61, 1.77, 2.08, 1.93, 1.58, 1.95, 1.96, 1.07, 2.59 4.7%
Dividends P/S...................$1.04, 1.10, 1.24, 1.30, 1.40, 1.52, 1.64, 1.76, 1.85, 1.88 6.8%
Price/Earnings Ratio...................................................................13.5
----------
148,513
----------

TOBACCO (2.07%)
600 Philip Morris Cos., Inc. @ 74 5/8.......................................................... 44,775
Global tobacco, brewing and food company ----------
Earnings P/S...................$ 1.55, 1.94, 2.22, 3.18, 3.83, 3.98, 4.45, 5.63, 4.02, 5.71 15.6%
Dividends P/S......................$.50, .62, .79, 1.01, 1.25, 1.55, 1.91, 2.35, 2.60, 3.03 22.2%
Price/Earnings Ratio...................................................................13.4
UTILITIES (2.36%)
800 National Fuel Gas Co. @ 28 1/8............................................................. 22,500
Integrated natural gas system serving
New York, Pennsylvania and Ohio
Earnings P/S...................$ 1.75, 1.49, 1.65, 1.93, 1.83, 1.95, 1.89, 1.88, 2.05, 2.10 2.0%
Dividends P/S...................$1.02, 1.12, 1.19, 1.25, 1.32, 1.40, 1.45, 1.49, 1.53, 1.57 4.9%
Price/Earnings Ratio...................................................................13.1
800 Union Electric Co. @ 35 5/8................................................................ 28,500
Largest electric utility in Missouri
Earnings P/S....................$2.89, 2.91, 2.56, 2.91, 2.74, 2.68, 2.98, 2.95, 2.71, 3.01 0.5%
Dividends P/S...................$1.78, 1.86, 1.92, 1.94, 2.02, 2.10, 2.18, 2.26, 2.34, 2.40 3.4%
Price/Earnings Ratio...................................................................12.3

----------
51,000
----------
TOTAL COMMON STOCKS
Cost $1,952,673) 2,050,113
----------
PREFERRED STOCKS (1.60%)
700 American Express Co. DECS,
61/4% Conv @ 48 1/2........................................................................ 34,562
----------
TOTAL PREFERRED STOCKS
(Cost $35,049) 34,562
----------
TOTAL INVESTMENTS (96.57%) $2,084,675
====== ==========
</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.
30

<PAGE> 31

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Active Bond Fund

<TABLE>

SCHEDULE OF INVESTMENTS
August 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<CAPTION>
PAR VALUE
INTEREST S+P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
PUBLICLY TRADED BONDS
BANKS (6.86%)
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21..................... 9.750% AA- $ 25 $ 28,422
RBSG Capital Corp.,
Gtd Cap Note 03-01-04..................... 10.125 A+ 25 29,889
---------
58,311
---------
BROADCASTING (3.12%)
Century Communications Corp.,
Sr Sub Deb 10-15-03....................... 11.875 B+ 25 26,500
---------
GOVERNMENTAL - U.S. (18.26%)
United States Treasury,
Bond 08-15-17............................. 8.875 AAA 15 18,572
Bond 05-15-18............................. 9.125 AAA 25 31,727
Bond 02-15-23............................. 7.125 AAA 25 26,105
Note 11-15-96............................. 7.250 AAA 25 25,426
Note 05-15-98............................. 9.000 AAA 25 26,887
Note 11-30-99............................. 7.750 AAA 25 26,535
---------
155,252
---------
GOVERNMENTAL - U.S. AGENCIES (23.43%)
Financing Corp.,
Bond Ser B 04-06-18....................... 9.800 AAA 25 32,328
Government National Mortgage Association,
30 Yr Sf Pass thru Ctf 11-15-24........... 8.000 AAA 163 166,822
---------
199,150
---------
PUBLISHING (3.14%)
Time Warner Inc.,
Deb 01-15-13.............................. 9.125 BBB- 25 26,716
---------
STEEL (2.70%)
Weirton Steel Corp.,
Sr Note 06-01-05 (R)...................... 10.750 B 25 23,000
---------
TOBACCO (2.87%)
RJR Nabisco, Inc.,
Note 09-15-03............................. 7.625 BBB- 25 24,363
---------
TRANSPORTATION (6.68%)
AMR Corp.,
Deb 05-15-01.............................. 9.500 BB+ 25 27,612
United Air Lines, Inc.,
Deb Ser A 05-01-04........................ 10.670 BB 25 29,171
---------
56,783
---------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
31

<PAGE> 32

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Active Bond Fund

<TABLE>
<CAPTION>
PAR VALUE
INTEREST S+P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
UTILITIES (22.51%)
BVPS II Funding Corp.,
Collateralized Lease 12-01-07................................. 8.330% BB $ 10 $ 9,521
CTC Mansfield Funding Corp.,
Sec Lease Oblig 09-30-16...................................... 11.125 B+ 25 25,576
E.I.P. Refunding Corp.,
Sec Fac Bond 10-01-12......................................... 10.250 B+ 25 25,897
GTE Corp.,
Deb 11-15-17.................................................. 10.300 BBB+ 25 28,375
Hydro-Quebec (Gtd by Province of Quebec),
Deb 02-01-03.................................................. 7.375 A+ 25 25,567
Iberdrola International B.V.,
Gtd Note 06-01-03 (R)......................................... 7.125 AA- 25 25,157
Long Island Lighting Co.,
Gen Ref 05-01-21.............................................. 9.750 BBB- 25 25,424
Midland Funding Corp. I,
Sr Sec Lease Oblig Ser C 07-23-02............................. 10.330 BB- 25 25,812
---------
191,329
---------
TOTAL PUBLICLY TRADED BONDS
(Cost $755,860) (89.57%) 761,404
------ ---------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (8.82%)
Investment in a joint repurchase agreement transaction
with UBS Securities, Inc., Dated 08-31-95, Due 09-01-95
(Secured by U.S. Treasury Bill, 5.54% due 05-30-96,
U.S. Treasury Bonds 12.50% thru 14.00%
due 11-15-10 thru 08-15-14, and U.S.
Treasury Notes, 4.375% thru 7.25%
due 08-15-96 thru 12-31-98) - Note A......................... 5.800 -- $ 75 75,000
---------
CORPORATE SAVINGS ACCOUNT (0.09%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%........................................... 739
---------
TOTAL SHORT-TERM INVESTMENTS ( 8.91%) 75,739
------ ---------
TOTAL INVESTMENTS (98.48%) $ 837,143
====== =========
</TABLE>

NOTES TO THE SCHEDULE OF INVESTMENTS
(R) These securites are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securites amounted to $48,157 as of August 31, 1995. See note A of the Notes
to Financial Statements for valuation policy.
* Credit ratings are rated by Moody's Investor Services or John Hancock
Advisers, Inc. where Standard and Poors ratings are not available.
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.
32

<PAGE> 33

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Global Bond Fund

SCHEDULE OF INVESTMENTS
August 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------

THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY GLOBAL
BOND FUND ON AUGUST 31, 1995. IT'S DIVIDED INTO TWO MAIN CATEGORIES: BONDS AND
SHORT-TERM INVESTMENTS. THE BONDS ARE FURTHER BROKEN DOWN BY CURRENCY
DENOMINATION.

<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000'S MARKET
ISSUER RATE OMITTED)# VALUE
- ------ ---- --------- -----
<S> <C> <C> <C>
BONDS
AUSTRALIA (4.38%)
Commonwealth of
Australia, 7-15-05................................................ 7.500% 11 $ 7,477
--------
CANADA (4.14%)
Government of Canada, 12-01-05..................................... 8.750 9 7,070
--------
DENMARK (3.85%)
Kingdom of Denmark, 12-15-04....................................... 7.000 40 6,569
--------
FRANCE(7.87%)
Government of France, 10-25-05..................................... 7.750 66 13,433
--------
GERMANY (8.08%)
Federal Republic of
Germany, 5-12-05.................................................. 6.875 20 13,781
--------
GREAT BRITAIN (8.41%)
United Kingdom Treasury Bonds,
12-07-05.......................................................... 8.500 9 14,341
--------
ITALY (3.40%)
Republic of Italy, 04-01-05........................................ 10.500 10,000 5,809
--------
SPAIN (1.76%)
Government of Spain, 02-28-05...................................... 10.000 400 3,004
--------
SWEDEN (2.03%)
Swedish Export Credit, 06-05-01.................................... 6.500 30 3,469
--------
UNITED STATES (35.03%)
United States Treasury
Notes, 05-15-05................................................... 6.500 59 59,747
--------
TOTAL BONDS
(Cost $136,063) (78.95%) 134,700
------ --------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (18.76%)
Investment in a joint repurchase
agreement transaction with UBS
Securities Inc. - Dated 08-31-95,
Due 09-01-95 (secured by U.S.
Treasury Bill, 5.54% Due 05-30-96,
and by U.S. Treasury Note, 5.625%
Due 01-31-98) Note A.............................................. 5.800% $ 32 $ 32,000
--------
TOTAL SHORT-TERM INVESTMENTS
(Cost $32,000) (18.76%) 32,000
------ --------

TOTAL INVESTMENTS (97.71%) $166,700
====== ========

<FN>

# Par value of foreign bonds are expressed in local currency.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.

</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33

<PAGE> 34

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Global Bond Fund

PORTFOLIO CONCENTRATION (Unaudited)
- --------------------------------------------------------------------------------

THE FUND PRIMARILY INVESTS IN BONDS ISSUED BY COMPANIES AND GOVERNMENTS OF OTHER
COUNTRIES. THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC
CONDITIONS WITHIN THE COUNTRIES IN WHICH IT INVESTS. THE CONCENTRATION OF
INVESTMENT BY COUNTRY OF DENOMINATION FOR INDIVIDUAL SECURITIES HELD BY THE FUND
IS SHOWN IN THE SCHEDULE OF INVESTMENTS. IN ADDITION, THE CONCENTRATION OF
INVESTMENTS CAN BE AGGREGATED BY VARIOUS INDUSTRY GROUPS. THE TABLE BELOW SHOWS
THE PERCENTAGES OF THE FUND'S INVESTMENTS AT AUGUST 31, 1995 ASSIGNED TO THE
VARIOUS INVESTMENT CATEGORIES.

<TABLE>
<CAPTION>
MARKET VALUE OF SECURITIES
INVESTMENT CATEGORIES AS A % OF NET ASSETS
- --------------------- --------------------
<S> <C>
Banking ................................................. 2.03%
Governmental - Foreign .................................. 41.90
Governmental - United States ............................ 35.02
Short-term Investments .................................. 18.76
-----
TOTAL INVESTMENTS 97.71%
=====
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
34

<PAGE> 35

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Multi-Sector Growth Fund

SCHEDULE OF INVESTMENTS
August 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------

THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
MULTI-SECTOR GROWTH FUND ON AUGUST 31, 1995. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: COMMON STOCKS AND SHORT-TERM INVESTMENTS. COMMON STOCKS ARE FURTHER
BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE
FUNDS'S "CASH" POSITION ARE LISTED LAST.

<TABLE>
<CAPTION>
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
BROADCASTING (10.13%)
Capital Cities/ABC Inc........................................... 500 $ 57,500
Infinity Broadcasting Corp. (Class A)*........................... 4,500 161,432
Lin Television Corp.*............................................ 3,000 109,500
New World Communications Group, Inc.*............................ 1,000 23,250
Renaissance Communications Corp.*................................ 2,500 92,500
--------
444,182
--------
COMPUTERS (18.62%)
BMC Software, Inc.*.............................................. 4,000 170,500
Computer Associates International, Inc........................... 2,000 139,000
Discreet Logic, Inc. (Canada)*................................... 500 20,250
Microsoft Corp.*................................................. 1,000 92,500
Seagate Technology, Inc.*........................................ 4,500 199,125
3Com Corp.*...................................................... 5,000 195,000
--------
816,375
--------
DIVERSIFIED OPERATIONS (4.28%)
CUC International Inc.*.......................................... 5,500 187,688
--------
ELECTRICAL (4.74%)
Integrated Device Technology, Inc.*.............................. 1,500 86,438
Linear Technology Corp........................................... 1,500 121,500
--------
207,938
--------
ELECTRONICS (7.40%)
Hadco Corp.*..................................................... 1,500 42,188
Helix Technology Corp............................................ 2,500 127,266
SCI Systems, Inc.*............................................... 5,000 155,000
--------
324,454
--------
HEALTHCARE (2.17%)
American Oncology Resources, Inc.*............................... 500 18,875
HealthCare COMPARE Corp.*........................................ 1,000 37,625
Rotech Medical Corp.*............................................ 700 18,025
Vencor, Inc.*.................................................... 700 20,738
--------
95,263
--------
LEISURE & RECREATION (3.20%)
Walt Disney Co., (The)........................................... 2,500 140,313
--------

MEDICAL (7.60%)
Boston Scientific Corp.*......................................... 5,000 198,750
Community Health Systems, Inc.*.................................. 3,500 134,750
--------
333,500
--------
METALS (8.49%)
Asarco, Inc...................................................... 2,500 $ 80,938
Hemlo Gold Mines, Inc. (Canada).................................. 2,600 24,700
Kinross Gold Corp. (Canada)*..................................... 10,000 81,892
Placer Dome, Inc. (Canada)....................................... 3,000 78,375
Prime Resource Group, Inc. (Canada)*............................. 8,000 64,024
Santa Fe Pacific Gold Corp....................................... 3,500 42,438
--------
372,367
--------
OIL & GAS (13.17%)
Benton Oil & Gas Co.*............................................ 4,600 47,725
Falcon Drilling Co.*............................................. 5,600 64,400
Nabors Industries, Inc.*......................................... 8,000 74,000
Petroleum Geo-Services AS,
American Depositary Receipts (Norway)*.......................... 1,500 38,438
Pride Petroleum Services, Inc.*.................................. 8,000 71,000
Reading & Bates Corp.*........................................... 11,000 133,375
Triton Energy Corp.*............................................. 2,800 148,400
--------
577,338
--------
POLLUTION CONTROL (1.74%)
Tetra Technologies, Inc.*........................................ 5,500 76,313
--------
PUBLISHING (0.56%)
Houghton Mifflin Co.............................................. 500 24,438
--------
TELECOMMUNICATIONS (9.12%)
America Online, Inc.*............................................ 3,000 197,625
Cascade Communications Corp.*.................................... 2,000 91,000
U.S. Order, Inc.*................................................ 5,000 111,250
--------
399,875
--------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
35

<PAGE> 36

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Multi-Sector Growth Fund

<TABLE>
<CAPTION>
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
TEXTILE - APPAREL MANUFACTURING (1.53%)
Tommy Hilfiger Corp.*............................................. 2,000 $ 67,000
----------
TOTAL COMMON STOCKS
(Cost $3,788,635) (92.75%) 4,067,044
------ ----------
</TABLE>

<TABLE>
<CAPTION>
INTEREST PAR VALUE
RATE (000'S OMITTED)
---- ---------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (6.34%)
Investment in a joint repurchase agreement
transaction with UBS Securities Inc., Dated
8-31-95, due 09-01-95 (secured by U.S.
Treasury Bill, 5.54% due 05-30-96, U.S.
Treasury Bonds 12.50% thru 14.00% due
11-15-10 thru 08-15-14, and U.S. Treasury
Notes, 4.375% thru 7.25% due 08-15-96 thru
12-31-98) Note A............................... 5.80% $278 278,000
----------

CORPORATE SAVINGS ACCOUNT (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% ............................ 451
----------
TOTAL SHORT-TERM INVESTMENTS ( 6.35%) 278,451
------ ----------
TOTAL INVESTMENTS (99.10%) $4,345,495
====== ==========
<FN>

* Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.

</TABLE>

PORTFOLIO CONCENTRATION
- --------------------------------------------------------------------------------
THE MULTI-SECTOR GROWTH FUND INVESTS PRIMARILY IN SECURITIES ISSUED IN THE
UNITED STATES OF AMERICA. THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE
ECONOMIC AND FINANCIAL CONDITIONS WITHIN THE COUNTRIES IN WHICH IT INVESTS. THE
CONCENTRATION OF INVESTMENTS BY INDUSTRY CATEGORY FOR INDIVIDUAL SECURITIES HELD
BY THE FUND IS SHOWN IN THE SCHEDULE OF INVESTMENTS. IN ADDITION, CONCENTRATION
OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS COUNTRIES. THE TABLE BELOW SHOWS THE
PERCENTAGES OF THE FUND'S INVESTMENTS AT AUGUST 31, 1995 ASSIGNED TO VARIOUS
COUNTRY CATEGORIES.

<TABLE>
<CAPTION>
MARKET VALUE AS A
PERCENTAGE OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
- ----------------------- -----------------
<S> <C>
Canada...................................................... 6.14%
Norway...................................................... 0.88
United States............................................... 92.08
-----
TOTAL INVESTMENTS 99.10%
=====
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
36

<PAGE> 37

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- Fundamental Value Fund

SCHEDULE OF INVESTMENTS
August 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------

THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
FUNDAMENTAL VALUE FUND ON AUGUST 31, 1995. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: COMMON STOCKS AND SHORT-TERM INVESTMENTS. COMMON STOCKS ARE FURTHER
BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE
FUND'S "CASH" POSITION ARE LISTED LAST.

<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
COMMON STOCKS
AIRCRAFT (5.75%)
Boeing Co. (The) .............................. 400 $ 25,500
Thiokol Corp................................... 1,900 66,263
---------
91,763
---------
BEVERAGES (4.37%)
Coors (Adolph) Co.............................. 4,100 69,700
---------
DIVERSIFIED OPERATIONS (8.90%)
Hanson PLC, American Depository Receipts....... 4,000 68,500
Tejon Ranch.................................... 5,200 73,450
---------
141,950
---------
FOODS (9.42%)
Archer-Daniels-Midland Co. .................... 4,515 75,062
Dole Food Co................................... 2,300 75,325
---------
150,387
---------
LEISURE & RECREATION (9.54%)
Outboard Marine Corp........................... 3,600 76,950
Russ Berrie & Co. Inc.......................... 5,200 75,400
---------
152,350
---------
Machinery (2.07%)
Harnischfeger Industries, Inc.................. 900 33,075
---------
OIL & GAS (9.42%)
Daniel Industries, Inc......................... 4,800 73,800
Parker Drilling Co.*........................... 13,600 76,500
---------
150,300
---------
PAPER (5.01%)
Crown Vantage, Inc.*........................... 130 3,152
Glatfelter (P.H.) Co........................... 1,400 31,500
James River Corporation of Virginia............ 1,300 45,175
---------
79,827
---------
POLLUTION CONTROL (4.21%)
Calgon Carbon Corp............................. 5,900 67,112
---------
PUBLISHING (2.50%)
Times Mirror Co. (The) Class A................. 1,300 39,813
---------
RETAIL (7.63%)
Great Atlantic & Pacific Tea Co., Inc. (The)... 2,600 73,775
Ross Stores, Inc............................... 3,000 48,000
---------
121,775
---------
SHOES (4.57%)
Brown Group, Inc............................... 4,000 $ 73,000
---------
TEXTILE (5.88%)
Delta Woodside Industries, Inc................. 2,900 24,287
Garan Inc...................................... 4,000 69,500
---------
93,787
---------
TRANSPORTATION - SHIP (4.32%)
Overseas Shipholding Group, Inc................ 3,300 68,888
---------
UTILITY - ELECTRIC POWER (5.07%)
Destec Energy, Inc............................. 5,100 80,962
---------
TOTAL COMMON STOCKS
(Cost $1,350,797) (88.66%) 1,414,689
------ ---------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
37

<PAGE> 38

Financial Statements

John Hancock Funds - Institutional Series Trust -- Fundamental Value Fund

<TABLE>
<CAPTION>
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000'S OMITTED) MARKET VALUE
- ------------------- ---- --------------- ------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (12.35%)
Investment in a joint repurchase
agreement transaction with UBS
Securities Inc., Dated 8-31-95,
due 09-01-95 (secured by U.S.
Treasury Bill, 5.54% due 05-30-96,
U.S. Treasury Bonds 12.50% thru
14.00% due 11-15-10 thru 8-15-14,
and U.S. Treasury Notes, 4.375%
thru 7.25% due 8-15-96 thru
12-31-98) Note A..................... 5.80% $197 $ 197,000
----------
CORPORATE SAVINGS ACCOUNT (0.02%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% .................. 410
----------
TOTAL SHORT-TERM INVESTMENTS ( 12.37%) 197,410
------- ----------
TOTAL INVESTMENTS (101.03%) $1,612,099
======= ==========
<FN>

* Non-income producing security
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
38

<PAGE> 39

Financial Statements

John Hancock Funds - Institutional Series Trust -- International Equity Fund

SCHEDULE OF INVESTMENTS
August 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------

THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
INTERNATIONAL EQUITY FUND ON AUGUST 31, 1995. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: COMMON STOCKS AND SHORT-TERM INVESTMENTS. COMMON STOCKS ARE FURTHER
BROKEN DOWN BY COUNTRY. UNDER EACH COUNTRY HEADING IS A LIST OF THE SECURITIES
OWNED BY THE FUND. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH"
POSITION, ARE LISTED LAST.

<TABLE>
<CAPTION>
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS Australia (8.54%)
Broken Hill Proprietary Co., Ltd.
(Diversified Operations)............................. 1,210 $ 17,557
BTR Nylex Ltd. (Diversified Operations)............... 7,700 20,493
News Corp. Ltd. (The) (Publishing).................... 3,100 17,806
Western Mining Corp. Holdings Ltd.
(Metal Processing & Products)........................ 2,600 17,475
---------
73,331
---------
CHILE (2.52%)
Santa Isabel S.A., American Depositary
Receipts (ADR) (Retail)*............................. 1,000 21,625
---------
DENMARK (1.83%)
Tele Danmark AS (Telecommunications).................. 300 15,748
---------
FRANCE (4.33%)
Banque Nationale de Paris (Banks)..................... 280 11,487
LVMH Moet Henessey Louis Vuitton (Beverages).......... 75 13,496
Renault SA (Automobile/Trucks)........................ 430 12,169
---------
37,152
---------
GERMANY (3.72%)
Bayerische Motoren Werke AG
(Automobile/Trucks).................................. 29 16,145
Mannesmann AG (Diversified Operations)................ 50 15,782
---------
31,927
---------
HONG KONG (7.86%)
CITIC Pacific Ltd. (Diversified Operations)........... 6,000 17,091
HSBC Holdings Ltd. (Banks)............................ 1,200 16,122
Hutchison Whampoa Ltd.
(Diversified Operations)............................. 4,000 19,274
Swire Pacific Ltd. (Diversified Operations)........... 2,000 14,985
---------
67,472
---------
JAPAN (15.60%)
Daido Steel Co., Ltd. (Steel)......................... 3,000 15,189
Denki Kagaku Kogyo K.K. (Chemicals)*.................. 4,000 13,624
Fujisawa Pharmaceutical Co., Ltd. (Drugs)............. 1,000 10,024
Jusco Co., Ltd. (Retail).............................. 1,000 22,399
Matsushita Electric Industrial Co.,
Ltd. (Electronics)................................... 1,000 15,649
NKK Corp. (Steel)*.................................... 6,000 14,728
Seino Transportation Co., Ltd. (Transportation)....... 1,000 16,672
Sumitomo Osaka Cement Co., Ltd.
(Building Products).................................. 3,000 12,059
Sumitomo Trust & Banking Co., Ltd.
(The) (Banks)........................................ 1,000 $ 13,603
---------
133,947
---------
MALAYSIA (2.72%)
Aokam Perdana Berhad (Building Products).............. 3,000 7,335
Land & General Berhad
(Diversified Operations)............................. 5,000 16,032
---------
23,367
---------
MEXICO (1.91%)
Telefonos de Mexico S.A. de C.V. (ADR)
(Telecommunications)................................. 500 16,375
---------
NETHERLANDS (3.60%)
Koninklijke P.T.T. Nederland
(Telecommunications)................................. 425 14,653
Polygram N.V. (Audio/Video)........................... 265 16,227
---------
30,880
---------
NEW ZEALAND (1.67%)
Carter Holt Harvey Ltd. (Paper)....................... 6,300 14,341
---------
NORWAY (3.57%)
Den Norske Bank AS (Banks)............................ 5,500 14,315
Orkla AS (Diversified Operations)..................... 350 16,364
---------
30,679

---------
PHILIPPINES (1.74%)
San Miguel Corp. (Beverages).......................... 4,290 14,979
---------
SINGAPORE (6.52%)
Fraser & Neave Ltd. (Diversified Operations).......... 2,000 22,657
Jardine Matheson Holdings Ltd.
(Diversified Operations)............................. 2,400 17,280
Keppel Corp. (Diversified Operations)................. 2,000 16,043
---------
55,980
---------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
39

<PAGE> 40

FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust -- International Equity Fund

<TABLE>
<CAPTION>
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
SPAIN (1.83%)
Repsol SA (Oil & Gas)................................. 500 $ 15,687
---------
SWEDEN (4.24%)
Investor AB (Diversified Operations).................. 550 16,734
Telefonaktiebolaget (LM) Ericsson
(Telecommunications)................................. 920 19,669
---------
36,403
---------
SWITZERLAND (5.50%)
BBC Brown Boveri AG (Engineering)..................... 80 16,465
Ciba-Geigy AG (Drugs)................................. 22 15,573
Nestle S.A. (Food).................................... 15 15,174
---------
47,212
---------
UNITED KINGDOM (7.85%)
Carlton Communications PLC
(Broadcasting)....................................... 1,000 16,142
Glaxo Welcome PLC (Drugs)............................. 1,200 14,243
Reed International PLC (Publishing)................... 1,170 17,760
Thorn EMI PLC (Leisure & Recreation).................. 840 19,263
---------
67,408
---------
TOTAL COMMON STOCKS
(Cost $712,357) (85.55%) 734,513
------ ---------
</TABLE>

INTEREST PAR VALUE
RATE (000'S OMITTED) MARKET VALUE
---- --------------- ------------
<S> <C> <C> <C>

SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (10.95%)
Investment in a joint repurchase
agreement transaction with UBS
Securities Inc. - Dated 08-31-95,
Due 09-01-95 (secured by U.S.
Treasury Bill, 5.54% Due 05-30-96
and by U.S. Treasury Note, 5.625%
Due 01-31-98) Note A.................. 5.80% $94 94,000
---------
TOTAL SHORT-TERM INVESTMENTS (10.95%) 94,000
------ ---------
TOTAL INVESTMENTS (96.50%) $ 828,513
====== =========
<FN>

*Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.

</TABLE>

INDUSTRY DIVERSIFICATION
- --------------------------------------------------------------------------------
THE FUND PRIMARILY INVESTS IN SECURITIES ISSUED BY COMPANIES OF OTHER COUNTRIES.
THE PERFORMANCE OF THE FUND IS CLOSELY TIED TO THE ECONOMIC CONDITIONS WITHIN
THE COUNTRIES IT INVESTS. THE CONCENTRATION OF INVESTMENTS BY COUNTRY FOR
INDIVIDUAL SECURITIES HELD BY THE FUND IS SHOWN IN THE SCHEDULE OF INVESTMENTS.
IN ADDITION, THE CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS
INDUSTRY GROUPS. THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS
AT AUGUST 31, 1995 ASSIGNED TO THE VARIOUS INVESTMENT CATEGORIES.

<TABLE>
<CAPTION>
MARKET VALUE OF
SECURITIES AS A %
INVESTMENT CATEGORIES OF NET ASSETS
- --------------------- -------------
<S> <C>
Audio/Video................................................ 1.89%
Automobile/Trucks.......................................... 3.30
Banks...................................................... 6.47
Beverages.................................................. 3.32
Broadcasting............................................... 1.88
Building Products.......................................... 2.26
Chemicals.................................................. 1.59
Diversified Operations..................................... 24.49
Drugs...................................................... 4.64
Electronics................................................ 1.82
Engineering................................................ 1.92
Food....................................................... 1.77
Leisure & Recreation....................................... 2.24
Metal Processing & Products................................ 2.03
Oil & Gas.................................................. 1.83
Paper...................................................... 1.67
Publishing................................................. 4.14
Retail..................................................... 5.13
Steel...................................................... 3.48
Telecommunications......................................... 7.74
Transportation............................................. 1.94
Short-Term Investments..................................... 10.95
-----
TOTAL INVESTMENTS 96.50%
=====
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
40

<PAGE> 41

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust

(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES

John Hancock Dividend Performers Fund ("Dividend Performers Fund"), John Hancock
Active Bond Fund ("Active Bond Fund"), John Hancock Global Bond Fund ("Global
Bond Fund"), John Hancock Multi-Sector Growth Fund ("Multi-Sector Growth Fund"),
John Hancock Fundamental Value Fund ("Fundamental Value Fund") and John Hancock
International Equity Fund ("International Equity Fund"), (each, a "Fund" and
collectively, the "Funds"), are separate portfolios of John Hancock
Institutional Series Trust (the "Trust"), an open-end management investment
company, registered under the Investment Company Act of 1940. Prior to September
12, 1995, Dividend Performers Fund was known as John Hancock Berkeley Dividend
Performers Fund, Active Bond Fund was known as John Hancock Berkeley Bond Fund,
Global Bond Fund was known as John Hancock Berkeley Global Bond Fund,
Multi-Sector Growth Fund was known as John Hancock Berkeley Sector Opportunity
Fund, Fundamental Value Fund was known as John Hancock Berkeley Fundamental
Value Fund and International Equity Fund was known as John Hancock Berkeley
Overseas Growth Fund. The Trust, organized as a Massachusetts business trust in
1994, consists of eleven series portfolios: the Funds, John Hancock Independence
Balanced Fund, John Hancock Independence Diversified Core Equity Fund II, John
Hancock Independence Growth Fund, John Hancock Independence Medium
Capitalization Fund and John Hancock Independence Value Fund. Each Fund
currently has one class of shares with equal rights as to voting, redemption,
dividends and liquidation within their respective Fund. The Trustees may
authorize the creation of additional portfolios from time to time to satisfy
various investment objectives.

Significant accounting policies of the Funds are as follows:

VALUATION OF INVESTMENTS Securities in the Funds portfolios are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.

JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
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. Capital gains realized
on some foreign securities are subject to foreign taxes and are accrued, as
applicable.

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.
They 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 gains and losses for accounting
purposes.

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 Funds are 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 Funds record all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such

<PAGE> 42
NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust

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

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.

ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Funds have been capitalized and will be charged to the Funds operations
ratably over a five-year period that will begin with the commencement of
investment operations of the Funds.

In the event that any of the initial shares are redeemed during the
amortization period, the redemption proceeds will be reduced by a pro rata
portion of the then unamortized organization expense in the same proportion as
the number of the initial shares redeemed bears to the number of the initial
shares outstanding at the time of such redemption.

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

FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Funds. Transactions affecting
statement of operations accounts and net realized gain/loss on investments are
translated at the rates prevailing at the dates of the transactions.

The 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.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Funds may enter into forward
foreign currency exchange contracts as a hedge against the effect of
fluctuations in currency exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date at a set price. The aggregate principal amounts of the contracts are
marked-to-market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of the
Fund's daily net assets. The Funds record 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
Funds 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 August 31, 1995 for Global
Bond Fund were as follows:

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY: COVERED BY CONTRACT MONTH DEPRECIATION
- -------- ------------------- ---------- ------------
<S> <C> <C> <C>
GERMAN MARK 29,454.000 OCT 95 ($113)
=====
</TABLE>

There were no open forward currency exchange contracts at August 31, 1995 for
all other Funds.

<PAGE> 43

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust

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

Under the present investment management contract, each Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis as follows:

<TABLE>
<CAPTION>
FUND RATE
---- ----
<S> <C>
Dividend Performers Fund .60% of average daily net assets up to $500 million
.55% of such assets in excess of $500 million
Active Bond Fund .50% of average daily net assets up to $1.5 billion
.45% of such assets in excess of $1.5 billion
Global Bond Fund .75% of average daily net assets up to $250 million
.70% of such assets in excess of $250 million
Multi-Sector Growth Fund .80% of average daily net assets up to $500 million
.75% of such assets in excess of $500 million
Fundamental Value Fund .70% of average daily net assets up to $500 million
.65% of such assets in excess of $500 million
International Equity Fund .90% of average daily net assets up to $500 million
(.95% prior to September 12, 1995)
.65% of such assets in excess of $500 million
</TABLE>

In the event normal operating expenses of the Funds, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Funds are registered to sell shares of beneficial interest, the
fees 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 assets, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.

As of August 31, 1995, the Adviser agreed to limit the Funds expenses,
including the management fee, to the extent required to prevent expenses from
exceeding: 0.80% of Dividend Performers Fund's average daily net assets, 0.70%
of Active Bond Fund's average daily net assets, 1.10% of Global Bond Fund's
average daily net assets, 1.00% of Multi-Sector Growth Fund's average daily net
assets, 0.95% of Fundamental Value Fund's average daily net assets and 1.15% of
International Equity Fund's average daily net assets. The Adviser reserves the
right to terminate this limitation in the future. Accordingly, for the period
ended August 31, 1995, the reduction in the Fund's expenses collectively with
any additional amounts not borne by the Funds by virtue of the expense limit
amounted to $27,534 for Dividend Performers Fund, $24,555 for Active Bond Fund,
$22,630 for Global Bond Fund, $28,098 for Multi-Sector Growth Fund, $23,632 for
Fundamental Value Fund and $24,395 for International Equity Fund.

Effective September 12, 1995, the Adviser plans to limit the Funds expenses
further to the extent required to prevent expenses from exceeding: 0.70% of
Dividend Performers Fund's average daily net assets, 0.60% of Active Bond Fund's
average daily net assets, 0.85% of Global Bond Fund's average daily net assets,
0.90% of Multi-Sector Growth Fund's average daily net assets, 0.80% of
Fundamental Value Fund's average daily net assets and 1.00% of International
Equity Fund's average daily net assets. The Adviser reserves the right to
terminate this limitation in the future.

SAMCorp serves as subadviser to Dividend Performers Fund pursuant to a
subadvisory agreement with that Fund and the Adviser. SAMCorp was organized in
1992 and is a wholly-owned subsidiary of The Berkeley Financial Group. The
Adviser pays SAMCorp a monthly management fee, equivalent on an annual basis, to
the sum of (a) .20% of the advisory fee payable on the Fund's average daily net
assets up to $100 million and (b) .55% of the advisory fee payable on the Fund's
assets exceeding $100 million.

NM Capital serves as subadviser to Fundamental Value Fund pursuant to a
subadvisory agreement with that Fund and the Adviser. NM Capital was organized
in 1977 and is a wholly-owned subsidiary of The Berkeley Financial Group. The
Adviser pays NM Capital a monthly management fee, equivalent on an annual basis,
to the sum of (a) .20% of the advisory fee payable on the Fund's average daily
net assets up to $100 million and (b) .55% of the advisory fee payable on the
Fund's assets exceeding $100 million.

John Hancock Advisers International, Ltd. serves as subadviser to
International Equity Fund pursuant to a subadvisory agreement with that Fund and
the Adviser. Formed in 1987, it is a wholly-owned sub-

<PAGE> 44

NOTES TO FINANCIAL STATEMENTS

John Hancock Funds - Institutional Series Trust

sidiary of the Adviser. The Adviser pays John Hancock Advisers International,
Ltd. a monthly management fee, equivalent on an annual basis, to the sum of (a)
.70% of the advisory fee payable on the Fund's average daily net assets up to
$500 million and (b) .90% of the advisory fee payable on the Fund's assets
exceeding $500 million.

The Funds are not responsible for payment of these subadvisory fees.

The Funds have a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended August
31, 1995, all sales of shares of beneficial interest were sold at net asset
value. The Funds pay all expenses of printing prospectuses and other sales
literature, all fees and expenses in connection with qualification as a dealer
in various states, and all other expenses in connection with the sale and
offering for sale of the shares of the Fund which have not been herein
specifically allocated to the Trust.

The Funds have a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Each fund pays Investor Services an annual fee accrued daily of
0.05% of its average daily net assets, plus certain out-of-pocket expenses.

Messrs. Edward J. Boudreau, Jr., Richard S. Scipione and Thomas W.L. Cameron
are directors and/or officers of the Adviser, and/or its affiliates as well as
Trustees of the Fund. The Adviser and other subsidiaries of John Hancock Mutual
Life Insurance Company owned, as of August 31, 1995, the following shares of
beneficial interest: 6 shares of Dividend Performers Fund, 6 shares of Active
Bond Fund, 6 shares of Global Bond Fund, 5 shares of Multi-Sector Growth Fund, 6
shares of Fundamental Value Fund and 6 shares of International Equity Fund,
respectively. The compensation of unaffiliated Trustees is borne by the Funds.

NOTE C --
INVESTMENT TRANSACTIONS

Cost of purchases and proceeds from sales of securities, excluding short term
obligations, for the period ended August 31, 1995 were as follows:

<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
Dividend Performers Fund
U.S. Government Securities...................... $ 302,641 None
Other Investments............................... 2,848,566 $1,195,677
Active Bond Fund..................................
U.S. Government Securities...................... 162,770 91,228
Other Investments............................... 734,032 49,297
Global Bond Fund.................................. 136,033 None
Multi-Sector Growth Fund.......................... 4,675,235 852,103
Fundamental Value Fund............................ 1,351,759 1,054
International Equity Fund......................... 757,282 47,259
</TABLE>

At August 31, 1995, the cost (excluding the corporate savings account) and
gross unrealized appreciation and depreciation in value of investments owned by
the Funds, as computed on a federal income tax basis, were as follows:

<TABLE>
<CAPTION>
NET UNREALIZED
AGGREGATE GROSS UNREALIZED GROSS UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
---- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Dividend
Performers Fund.... $1,987,722 $121,801 ($24,848) $ 96,953
Active Bond Fund..... 830,860 6,401 (857) 5,544
Global Bond Fund..... 168,063 856 (2,219) (1,363)
Multi-Sector
Growth Fund........ 4,066,635 318,315 (39,906) 278,409
Fundamental
Value Fund......... 1,547,797 99,596 (35,704) 63,892
International
Equity Fund........ 806,357 54,054 (31,898) 22,156
</TABLE>

<PAGE> 45

John Hancock Funds - Institutional Series Trust

DIVIDEND INCREASES (Unaudited)
Listed below are the most recent dividend increases for the common stocks held
in the Dividend Performers Fund as of August 31, 1995.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PERCENT OF
COMPANY DIVIDEND INCREASE
- ------- -----------------
<S> <C>
Abbott Laboratories.......................................... 10.5%
Air Products &Chemicals, Inc. ............................... 6.1
Alco Standard ............................................... 4.0
ALLTEL Corp. ................................................ 9.1
AMP, Inc..................................................... 9.5
Anheuser Busch............................................... 10.0
Automatic Data Processing, Inc............................... 16.7
Bell Atlantic Corp........................................... 1.4
Campbell Soup, Co. .......................................... 10.7
Chubb Corp. ................................................. 6.5
Corning, Inc. ............................................... 5.9
CPC International............................................ 5.6
E. I. DuPont De Nemours & Co., Inc. ......................... 10.6
Emerson Electric Co. ........................................ 10.3
Exxon Corp. ................................................. 4.2
Frontier Corp. .............................................. 2.5
General Electric Co. ........................................ 13.9
General Motors Corp., CI E................................... 8.3
GTECorp...................................................... 3.3
Interpublic Group............................................ 10.7
Johnson & Johnson............................................ 13.8
Legget & Platt, Inc.......................................... 12.5
May Department Stores........................................ 9.6
Merck........................................................ 13.3
Minnesota Mining & Manufacturing............................. 6.8
National Fuel Gas............................................ 2.5
NationsBank Corp. ........................................... 8.7
Nucor Corp................................................... 55.6
Pep Boys (The)............................................... 11.8
PepsiCo Inc. ................................................ 11.1
Pfizer, Inc.................................................. 10.6
Phillip Morris............................................... 19.6
PPGIndustries................................................ 3.4
Procter & Gamble............................................. 14.3
Reliastar Financial.......................................... 11.1
Sara Lee Corp. .............................................. 6.3
Sonoco Products.............................................. 18.2
Sysco........................................................ 22.2
Union Electric Co............................................ 2.5
V F Corp. ................................................... 6.3
W. W. Grainger, Inc.......................................... 15.0
Wal-Mart..................................................... 17.6
WMX Technologies, Inc........................................ 15.4
-----
The average dividend increase for this group was 10.9%
=====
</TABLE>

<PAGE> 46

NOTES

John Hancock Funds - Institutional Series Trust

<PAGE> 47

NOTES

John Hancock Funds - Institutional Series Trust

<PAGE> 48

[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

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

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JHD KB0SA 8/95