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John Hancock Funds
- --------------------------------------------------------------------------------
Bank and
Thrift
Opportunity
Fund
SEMI-ANNUAL REPORT
April 30, 1996
<PAGE>
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TRUSTEES
EDWARD J. BOUDREAU, JR.
THOMAS W. L. CAMERON
JAMES F. CARLIN*
WILLIAM H. CUNNINGHAM*
CHARLES F. FRETZ*
HAROLD R. HISER, JR.*
ANNE C. HODSDON
CHARLES L. LADNER*
LEO E. LINBECK, JR.*
PATRICIA P. MCCARTER*
STEVEN R. PRUCHANSKY*
RICHARD S. SCIPIONE
LT. GEN. NORMAN J. SMITH, USMC (RET.)*
JOHN P. TOOLAN*
*Members of the Audit Committee
OFFICERS
EDWARD J. BOUDREAU, JR.
Chairman and Chief Executive Officer
ROBERT G. FREEDMAN
Vice Chairman and
Chief Investment Officer
ANNE C. HODSDON
President
JAMES B. LITTLE
Senior Vice President and
Chief Financial Officer
THOMAS H. DROHAN
Senior Vice President and Secretary
SUSAN S. NEWTON
Vice President, Assistant Secretary
and Compliance Officer
JAMES J. STOKOWSKI
Vice President and Treasurer
INVESTMENT ADVISER
JOHN HANCOCK ADVISERS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSER
STATE STREET BANK AND TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
LEGAL COUNSEL
HALE AND DORR
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
LISTED: NEW YORK STOCK EXCHANGE SYMBOL:BTO
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
The stock market's record-breaking, whirlwind performance in 1995 will be a
tough act to follow in 1996. In fact, we've already seen greater market
volatility this year, particularly among last year's leaders -- technology
stocks. That's to be expected after a year that saw market indexes soar,
including the Standard & Poor's 500-Stock Index's 37% advance. While many of the
same economic conditions that fostered the stellar 1995 market are still in
place -- slow economic growth, muted inflation and decent corporate earnings --
it would be unrealistic to expect the market to stage a repeat in 1996. The old
saying "trees don't grow to the sky" comes to mind. Shareholders would do well
to temper expectations of investment returns and perhaps revisit their
investment allocations with their financial advisor to determine if rebalancing
their portfolio makes sense.
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
No matter how you scale back your market expectations, you should always be
able to count on consistent customer service performance. At John Hancock Funds,
we never stop working to find ways to sustain and improve the quality of
information and assistance we provide you. Our commitment to this task is no
less than John Hancock's loyalty was to his fledgling country when he is said to
have uttered, "if it does the public good, burn Boston." We won't go that far,
of course, but we share our namesake's dedication to putting the public before
all else.
In our case, that public is you, our shareholders. We take very seriously
the role you have entrusted to us, that of helping you achieve your financial
goals. Part of that will always involve good customer service. So please do not
hesitate to call your Customer Service Representative at 1-800-225-5291 if you
have any questions or need information. We take pride in helping you with the
same spirit that John Hancock displayed at the dawning of America.
Sincerely,
/s/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
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BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGER
John Hancock
Bank and Thrift
Opportunity Fund
Larger banks outperform smaller in last six months;
positive industry fundamentals remain in place
After posting stellar results in 1995, the stock and bond markets have diverged
this year. The equity market, as measured by the Standard & Poor's 500-Stock
Index, rose by 6.0% between January and April and the technology-laden NASDAQ
index leaped 12.5%. Meanwhile, bonds, haunted by the specter of a resurgent
economy and rising energy and commodity prices, saw their prices drop sharply
since February in anticipation of higher inflation. The bellwether 30-year
Treasury bond, for example, has declined 10.2% since year-end 1995.
After a strong finish in 1995, bank and thrift stocks have also shown
divergent performance in 1996. Larger capitalization stocks, such as money
center banks and superregionals, have posted solid gains while returns on the
small- and mid-sized banks and thrifts have lagged. Because our strategy has
been to focus on the small, lesser known issues, the Fund underperformed its
peers in the recent period, despite a strong absolute return. For the six months
ended April 30, 1996, John Hancock Bank and Thrift Opportunity Fund posted a
total return of 9.88% at net asset value, compared to 11.47% for the average
closed-end
[A 2 1/4" x 3 1/4" photo of the portfolio management team. Caption reads: "James
K. Schmidt (seated) and Fund management team members: (l-r) James Boyd, Patricia
Ouimet, Thomas Finucane."]
"Bank stocks are trading at historically inexpensive levels."
3
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John Hancock -- Banks and Thrift Opportunity Fund
"...we recently added more exposure to the recovering state of California."
[Chart with heading "Top Five Common Stock Holdings" at top of left hand column.
The chart lists five holdings: 1) U.S. Bancorp 3.6% 2) PNC Bank Corp. 3.3% 3)
Integra 2.8% 4) Summit Bancorp 2.4% 5) Southtrust Corp. 2.4%. A footnote below
reads: "As a percentage of net assets on April 30, 1996."]
financial services fund and 12.01% for the average open-end financial services
fund, according to Lipper Analytical Services.1
Why is there a dichotomy in bank stock performance? From our perspective,
the financial stock market in 1996 has been mainly liquidity driven, as large
sums of mutual fund and institutional cash have flowed into bank stocks. Since
this money needs to be deployed quickly, the larger, more liquid stocks are bid
up first. Then, all other things being equal, the smaller banks and thrifts
follow suit. We expect this process to play out in the next few months, given
that none of the other variables -- industry fundamentals, valuation levels and
the consolidation process -- has changed much and each remains a positive
catalyst for stock prices.
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers." The first listing is Imperial
Bancorp followed by an up arrow and the phrase "Southern California recovery
fuels bank revenues." The second listing is First Colorado Bancorp followed by
an up arrow and the phrase "Market warmly receives thrift's recent conversion."
The third listing is BNCCorp. followed by a down arrow and the phrase "North
Dakota bank falters due to expensive acquisition." Footnote below reads: "See
"Schedule of Investments." Investment holdings are subject to change."]
Fundamentals sound; stocks still inexpensive
After record-breaking earnings in 1993 and 1994, banks and thrifts were thought
to be hard-pressed to repeat their past performance. Nonetheless, according to
recently released FDIC data, commercial bank earnings for 1995 exceeded 1994 by
almost 10%, while thrift income grew at an even higher 14% rate. Net interest
margins for the overall industry -- that is, the amount banks earn from the
difference between what they charge borrowers and pay depositors -- continued a
mild compression, falling from 4.36% for 1994 to 4.29% for 1995. But that was
more than offset by strong loan growth, which was up 10.4% from December 1994.
While banks were able to post these solid gains in net income, few compromised
the quality of their earnings. Although problem loan levels continued to fall,
banks still increased their loss provisions by 15% over the levels set aside in
1994 as a prudent measure against the recent increases in loan balances.
Finally, bank earnings benefited from a moderation in non-interest expense
growth. The primary driver behind this trend was the elimination in mid-1995 of
FDIC premiums for the highest rated banks, which represent the bulk of the
industry.
These banking trends have continued to be in evidence in recently released
earnings reports for the first quarter of 1996. The median bank in the Fund
posted a 12% gain in core earnings-per-share over the same period in 1995. The
earnings gains were driven by stable margins, static expenses and fewer
outstanding shares due to stock repurchases. Given the recent mild resurgence in
economic activity, our forecast
4
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John Hancock -- Banks and Thrift Opportunity Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1996." The chart is
scaled in increments of 5% from bottom to top, with 15% at the top and 0% at the
bottom. Within the chart, there are two solid bars. The first represents the
9.88% total return for John Hancock Bank and Thrift Opportunity Fund. The second
represents the 11.47% total return for the average closed-end financial services
fund. The third represents the 12.01% total return for the average open-end
financial services fund. Footnote below reads: "The total return for John
Hancock Bank and Thrift Opportunity Fund is at net asset value with all
distributions reinvested. The average closed-end financial services fund is
tracked by Lipper Analytical Services."]
for 10% earnings growth for full-year 1996 over 1995 looks attainable. We are
pleased to see that overall asset quality has not deteriorated, even though
delinquencies are increasing in the unsecured consumer portion of loan
portfolios. With employment and real personal income continuing to rise, we
believe that any increases in non-performing assets this year will be mild and
will not jeopardize our earnings estimates.
Currently, the average regional bank stock in the Fund trades at an
inexpensive 10.5 times 1996 estimated earnings-per-share, or 61% of the Standard
& Poor's multiple of 16.9 times. In spite of the steady price appreciation in
bank stocks as a group over the last five years, this relative multiple is still
near the lower end of its 30-year range. Bank stocks are trading at historically
inexpensive levels. With future earnings evolving in a much more predictable
pattern, we continue to believe that bank price-earnings multiples still have
the potential to expand.
"The overall picture is good for banks."
Consolidation scorecard
In the last six months, four of the Fund's holdings have announced their intent
to be acquired. In 1996, while there have been quite a few takeovers, most are
smaller transactions, standing in stark contrast to 1995 when deals were fewer
in number but gargantuan in size, such as First Union-First Fidelity and
Chase-Chemical.
As 1996 unfolds, we expect a resumption of merger activity among major
banks. At the moment, some of the key acquirers are preoccupied with integrating
operations acquired last year. We believe that the forces that have driven the
industry to consolidate from 14,000 banks in 1985 to under 10,000 today are
still in place and will eventually result in fewer than 5,000 banks in
existence.
Portfolio composition
The Fund's basic strategy is to invest in banks and savings and loans that are
selling at prices that are inexpensive compared to their underlying economic
value. Although we do not make investments strictly on the likelihood of a
"takeover," we expect many of our holdings to be merger candidates over the
upcoming years. We typically do not invest in money center and "superregional"
banks, even though some of them are superbly managed institutions, because they
are likely to be acquirers rather than acquirees and they tend to be well known
and touted by other investors and analysts.
On a tactical basis, we have been building positions in some of the smaller
California commercial banks. After suffering through a recession far longer than
the rest of the country, California has been recovering for the last year.
5
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John Hancock -- Banks and Thrift Opportunity Fund
Even the beleaguered southern portion of the state is now showing gains in
employment and real personal income. Problem real estate loans that have long
plagued the state's banks have leveled off and from this point forward, asset
quality should be improving. From a consolidation standpoint, California is in
its infancy -- it resembles the Midwest ten years ago. There are only two large
independent California banks, Wells Fargo and BankAmerica. The state's 41 other
independent publicly traded banks all have market values under $700 million. We
think there will be considerable merger activity among these banks and between
them and out-of-state banks scrambling to establish market position in
California.
The Fund actively invests in mutual savings institutions that convert to
stock ownership. Thrifts that have converted within the last year are among the
least expensive of all financial institutions as many of them trade below their
tangible book values. In many cases, they are worth more dead than alive, i.e.
their franchise value exceeds their market value. In order to participate in
these conversions at the price offered to depositors (which is usually lower
than the market price after conversion) we have established deposits totaling
over $50,000 at 25 mutual thrifts around the country. In recent months we have
participated in two offerings at the depositor price: First Federal Savings Bank
of Colorado and North Central Bancshares of Fort Dodge, Iowa. We expect most of
the sizable mutuals to convert within the next five years.
Trustee Update
Recently, the Board of Trustees of John Hancock Bank and Thrift Opportunity Fund
authorized the Fund to repurchase up to 1 million shares of the Fund, which is a
closed-end equity fund whose shares are traded on the New York Stock Exchange.
It is anticipated that the repurchase program will be conducted during 1996. The
share repurchase was authorized in an attempt to reduce the discount on the
shares' market value. With the buyback, management hopes to help the market
recognize the value of the underlying shares of the Fund.
Outlook
We continue to see solid, long-term investment value in the bank and thrift
stocks the Fund holds. The overall picture is good for banks: steady but not
excessive growth, relatively low interest rates and moderate inflation. And
stocks are inexpensive. Despite increasing profitability, the thrift and bank
group still carries a low valuation, trading around 40% of the market multiple.
The fundamentals are positive: favorable earnings and continued merger activity
both augur well for stock prices. Given these factors, we reiterate our belief
that the Fund can still generate attractive returns over the next several years.
- --------------------
This commentary reflects the views of the portfolio manager through the end of
the Fund's period discussed in this report. Of course, the manager's views are
subject to change as market and other conditions warrant.
6
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Financial Statements
John Hancock Funds - Bank and Thrift Opportunity Fund
Statement of Assets and Liabilities
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common stocks and warrants
(cost - $403,621,681) ................................. $569,869,762
Preferred stocks (cost-$9,300,000) .................... 10,472,250
Bonds (cost - $23,831,032) ............................ 24,490,000
Short-term investments (cost-$42,157,603) ............. 42,157,603
------------
646,989,615
Interest receivable ..................................... 530,696
Dividends receivable .................................... 789,844
Deferred organization expenses - Note A ................. 53,022
Prepaid expenses ........................................ 52,954
Other assets ............................................ 39,241
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Total Assets .......... 648,455,372
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Liabilities:
Payable for investments purchased ....................... 318,750
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ..................................... 856,349
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Total Liabilities ..... 1,175,099
--------------------------------------------
Net Assets:
Capital paid-in ......................................... 458,943,182
Accumulated net realized gain on investments ............ 16,280,295
Net unrealized appreciation of investments .............. 168,082,000
Undistributed net investment income ..................... 3,974,796
------------
Net Assets ............ $647,280,273
============================================
Net Asset Value Per Share:
(based on 23,005,000 shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value) ........................... $ 28.14
==============================================================================
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on April 30, 1996. You'll also
find the net asset value for each common share as of that date.
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gainsfor the period
stated.
Statement of Operations
Six months ended April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends (including $131,040 received from
affiliated issuers and net of foreign withholding
taxes of $10,719) ........................................... $ 8,062,568
Interest .................................................... 2,427,593
-----------
10,490,161
-----------
Expenses:
Investment management fee - Note B ........................ 3,640,824
Administration fee - Note B ............................... 791,483
Printing .................................................. 53,235
Custodian fee ............................................. 46,655
Trustees' fees ............................................ 29,684
New York Stock Exchange fee ............................... 12,515
Auditing fee .............................................. 12,016
Miscellaneous ............................................. 10,564
Organization expense - Note A ............................. 7,955
Transfer agent fee ........................................ 7,809
Legal fees ................................................ 4,542
-----------
Total Expenses ............ 4,617,282
--------------------------------------------
Net Investment Income ..... 5,872,879
--------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold (including
$389,076 on sales of investments in
affiliated issuers) ......................................... 16,263,594
Change in net unrealized appreciation/depreciation
of investments .............................................. 34,808,285
-----------
Net Realized and Unrealized
Gain on Investments ....... 51,071,879
--------------------------------------------
Net Increase in Net Assets
Resulting from Operations . $56,944,758
============================================
SEE NOTES TO FINANCIAL STATEMENTS.
7
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Financial Statements
John Hancock Funds - Bank and Thrift Opportunity Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 1996 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1995
----------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ............................................................. $ 5,872,879 $ 11,534,409
Net realized gain on investments sold ............................................. 16,263,594 7,493,313
Change in net unrealized appreciation/depreciation of investments ................. 34,808,285 139,216,330
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Net Increase in Net Assets Resulting from Operations ............................ 56,944,758 158,244,052
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Distributions to Shareholders:
Dividends from net investment income ($0.4775 and $0.2250 per share, respectively). (10,984,868) (5,176,125)
Distributions from net realized gain
on investments sold ($0.3250 and none per share, respectively) .................. (7,476,612) --
------------- -------------
Total Distributions to Shareholders ........................................... (18,461,480) (5,176,125)
------------- -------------
From Fund Share Transactions -- Net:*
Reclassification of capital paid-in ............................................... 73,182 --
------------- -------------
Net Assets:
Beginning of period ............................................................... 608,723,813 455,655,886
------------- -------------
End of period (including undistributed net investment income
of $3,974,796 and $9,086,785, respectively) ..................................... $ 647,280,273 $ 608,723,813
============= =============
*Analysis of Common Share Transactions:
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1996 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1995
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period ................ 23,005,000 $458,870,000 23,005,000 $458,870,000
Adjustment to capital paid-in - Note D ................. -- 73,182 -- --
------------ ------------ ------------ ------------
Shares outstanding, end of period ...................... 23,005,000 $458,943,182 23,005,000 $458,870,000
============ ============ ============ ============
</TABLE>
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment gains and losses, distributions paid to
shareholders and any increase or decrease in money shareholders invested in the
Fund. The footnote illustrates the number of Fund shares sold during the period,
along with the corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS.
8
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Financial Statements
John Hancock Funds - Bank and Thrift Opportunity Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
AUGUST 23, 1994
SIX MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1996 YEAR ENDED OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1995 OCTOBER 31, 1994
----------- ---------------- ----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period ............................. $ 26.46 $ 19.81 $ 20.00
----------- ----------- -----------
Net Investment Income ............................................ 0.26 0.50 0.12
Net Realized and Unrealized Gain (Loss) on Investments ........... 2.23 6.38 (0.26)
----------- ----------- -----------
Total from Investment Operations ............................... 2.49 6.88 (0.14)
----------- ----------- -----------
Less Distributions:
Dividends from Net Investment Income ............................. (0.48) (0.23) --
Distributions from Net Realized Gain on Investment Sold .......... (0.33) -- --
----------- ----------- -----------
Total Distributions ............................................ (0.81) (0.23) --
----------- ----------- -----------
Common Shares Offering Costs ..................................... -- -- (0.05)
----------- ----------- -----------
Net Asset Value, End of Period ................................... $ 28.14 $ 26.46 $ 19.81
=========== =========== ===========
Per Share Market Value, End of Period ............................ $ 22.88 $ 22.75 $ 18.00
=========== =========== ===========
Total Investment Return at Market Value .......................... 3.88%(a) 27.91% (10.00%)(a)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) ........................ $ 647,280 $ 608,724 $ 455,656
Ratio of Expenses to Average Net Assets .......................... 1.47%* 1.49% 1.51%*
Ratio of Net Investment Income to Average Net Assets ............. 1.87%* 2.22% 3.22%*
Portfolio Turnover Rate .......................................... 7% 8% 0%
Average Broker Commission Rate (per share of security) (b) ....... $ 0.07 N/A N/A
</TABLE>
* On an annualized basis.
(a) Not annualized.
(b) Average broker commission rate (per share of security) as required by
amended disclosure requirements effective September 1, 1995.
The Financial Highlights summarizes the impact of the following factors on a
single share for the period indicated: the net investment income, gains
(losses), distributions and total investment return of the Fund. It shows how
the Fund's net asset value for a share has changed since the end of the previous
period. Additionally, important relationships between some items presented in
the financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
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Financial Statements
John Hancock Funds - Bank and Thrift Opportunity Fund
Schedule of Investments
April 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
NUMBER OF MARKET
DESCRIPTION, ISSUER, STATE SHARES VALUE
- -------------------------- ------ -----
COMMON STOCKS AND WARRANT
Money Center Banks (0.20%)
Chase Manhattan Corp. (NY) ................... 18,387 $ 1,266,405
------------
Super Regionals (7.92%)
Barnett Banks, Inc. (FL) ..................... 230,000 14,576,250
Fleet Financial Group, Inc. (MA) ............. 205,206 8,823,858
Norwest Corp. (MN) ........................... 187,394 6,769,608
PNC Bank Corp. (PA) .......................... 697,000 21,084,250
------------
51,253,966
------------
Regionals (51.71%)
ABC Bancorp. (GA) ............................ 40,000 580,000
Alabama National Bancorp. (AL) ............... 130,000 1,738,750
American Bancorp. (WV) ....................... 17,500 393,750
American Bancshares, Inc. * (FL) ............. 60,000 397,500
Atlantic Bancorp. * (ME) (R) ................. 150,000 1,902,000
Bancorp Hawaii, Inc. (HI) .................... 300,000 10,875,000
BancorpSouth, Inc. (MS) ...................... 50,000 1,225,000
Banknorth Group, Inc. (VT) ................... 86,500 3,027,500
BanPonce Corp. (PR) .......................... 150,000 6,975,000
Benson Financial Corp. (TX) + ................ 228,300 4,508,925
Beverly National Corp. (MA) .................. 25,000 468,750
BNCCorp, Inc. * (ND) ......................... 45,000 427,500
Boatmen's Bancshares, Inc. (MO) .............. 62,000 2,402,500
Broad National Bancorp. (NJ) ................. 38,325 411,994
California State Bank (CA) ................... 89,200 1,326,850
Carolina First Corp. (NC) .................... 28,242 600,143
CCB Financial Corp. (NC) ..................... 34,800 1,796,550
Centura Banks, Inc. (NC) ..................... 80,000 2,920,000
Century Financial Corp. (PA) ................. 10,000 157,500
Chittenden Corp. (VT) ....................... 31,250 843,750
Colonial BancGroup, Inc. (AL) ................ 385,000 13,041,875
Columbia Bancorp. (MD) ....................... 24,000 462,000
Comerica, Inc. (MI) .......................... 165,000 7,177,500
Commercial Bankshares, Inc. (FL) ............. 34,000 467,500
Commonwealth Bankshares, Inc. * (VA) ......... 25,440 228,960
Community Banks, Inc. (PA) ................... 30,000 765,000
Compass Bancshares Inc. (AL) ................. 292,000 9,782,000
Corestates Financial Corp. (PA) .............. 250,875 9,784,125
County Bank of Chesterfield (VA) ............. 30,000 390,000
Crestar Financial Corp. (VA) ................. 267,000 15,052,125
Dauphin Deposit Corp. (PA) ................... 80,000 2,300,000
Desert Community Bank * (CA) ................. 37,000 531,875
The Schedule of Investments is a complete list of all securities owned by Bank
and Thrift Opportunity Fund on April 30, 1996. It's divided into four main
categories:common stocks and warrant, preferred stocks, bonds and short-term
investments. The common stocks and warrant, preferred stocks and bonds are
further broken down by industry groups. Short-term investments, which represent
the Fund's "cash" position, are listed last.
NUMBER OF MARKET
DESCRIPTION, ISSUER, STATE SHARES VALUE
- -------------------------- ------ -----
Regionals (continued)
Empire Banc Corp. (MI) ....................... 13,625 $ 507,531
Evergreen Bancorp., Inc. (NY) ................ 25,000 587,500
Financial Trust Corp. (PA) ................... 90,000 2,745,000
First American Corp. (TN) .................... 317,100 13,556,025
First of America Bank Corp. (MI) ............. 308,300 13,950,575
First Commerce Corp. (LA) .................... 370,000 12,580,000
First Security Corp. (UT) .................... 155,000 3,913,750
First State Bancorp. (NM) .................... 82,625 939,859
First Tennessee National Corp. (TN) .......... 106,200 3,504,600
First Victoria National Bank (TX) ............ 48,100 1,082,250
Firstar Corp. (WI) ........................... 191,500 8,904,750
FNB Bankshares (ME) + ....................... 20,780 581,840
FNB Corp. (PA) ............................... 38,587 911,618
Harleysville National Corp. (PA) ............. 32,200 853,300
Hometown Bancorp., Inc. * (CT) ............... 42,000 708,750
Imperial Bancorp. * (CA) ..................... 83,700 2,029,725
Integra Financial Corp. (PA) ................. 245,700 18,151,088
Magna Group, Inc. (MO) ....................... 80,000 1,800,000
Mahaska Investment Co. (IA) + ................ 149,500 2,279,875
Mercantile Bancorp., Inc. (MO) ............... 255,247 11,358,491
MetroBanCorp. (IN) ........................... 49,000 294,000
Mississippi Valley Bankshares, Inc. (MO) ..... 47,500 1,436,875
New England Community Bancorp ................
(Class A) (CT) + ........................... 165,000 1,732,500
North Fork Bancorp., Inc. (NY) ............... 30,800 731,500
Old Kent Financial Corp. (MI) ................ 186,375 6,989,062
Oriental Bank & Trust (PR) ................... 68,750 1,246,094
Provident Bankshares Corp. (MD) .............. 111,825 3,620,334
Regions Financial Corp. (AL) ................. 82,956 3,826,345
Riggs National Corp. (DC) .................... 190,000 2,375,000
Salem Bank and Trust (VA) .................... 42,000 546,000
Santa Barbara Bancorp. (CA) .................. 4,500 115,313
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
================================================================================
Financial Statements
John Hancock Funds - Bank and Thrift Opportunity Fund
NUMBER OF MARKET
DESCRIPTION, ISSUER, STATE SHARES VALUE
- -------------------------- ------ -----
Regionals (continued)
Security Shares, Inc. (TX) (r) ............... 200,000 $ 1,518,000
Signet Banking Corp. (VA) .................... 355,000 8,697,500
Southern National Corp. (NC) ................. 558,880 15,578,780
Southtrust Corp. (AL) ....................... 580,000 15,732,500
Southwest Bancorp., Inc. (OK) ................ 78,500 1,491,500
Summit Bancorp. (NJ) (formerly UJB
Financial Corp.) ........................... 452,420 16,060,910
Sun Bancorp., Inc. (NJ) (r) .................. 50,000 879,000
Surety Capital Corp. * (TX) + ................ 303,700 1,157,856
Tehama County Bank * (CA) .................... 46,052 529,598
Union Planters Corp. (TN) .................... 437,900 13,191,737
United Security Bancorp. * (WA) .............. 127,050 1,588,125
US Bancorp. (OR) ............................. 726,760 23,528,855
US Trust Corp. (NY) .......................... 26,000 1,423,500
Vectra Banking Corp. * (CO) .................. 34,100 417,725
Ventura County National Bancorp. * (CA) ...... 213,909 869,005
West Coast Bancorp. (OR) ..................... 48,950 911,694
Whitney Holding Corp. (LA) ................... 128,500 3,919,250
Yardville National Bank (NJ) ................. 25,500 408,000
-----------
334,725,007
-----------
Thrifts (25.61%)
Ambanc Holding Co., Inc. * (NY) .............. 45,000 421,875
American Federal Bank, FSB (SC) .............. 140,000 2,205,000
American National Bancorp., Inc. (MD) ........ 146,470 1,483,009
Avondale Financial Corp. * (IL) .............. 51,000 701,250
Bank West Financial Corp. (MI) + ............. 210,000 1,995,000
BostonFed Bancorp., Inc. (MA) ................ 101,300 1,253,588
Calumet Bancorp., Inc. * (IL) ................ 33,000 915,750
Cameron Financial Corp. (MO) ................. 90,000 1,260,000
CB Bancorp., Inc. * (IN) ..................... 45,000 731,250
Charter Financial, Inc. (IL) ................. 35,000 406,875
Collective Bancorp., Inc. (NJ) ............... 521,500 12,613,781
Community Financial Corp. * (IL) ............. 25,000 306,250
Community Investors Bancorp., Inc. (OH) ...... 10,000 152,500
Conestoga Bancorp., Inc. (NY) ................ 75,000 1,565,625
Crazy Woman Creek Bancorp., Inc. * (WY) ...... 30,000 315,000
CSB Financial Corp. (VA) ..................... 70,000 1,452,500
CSB Financial Group, Inc. * (IL) ............. 40,000 360,000
Equitable Federal Savings Bank * (MD) + ...... 40,000 1,050,000
FFVA Financial Corp. (VA) .................... 25,000 781,250
Fidelity Federal Bank (Class A) * (CA) ....... 282,858 2,581,079
Financial Bancorp., Inc. (NY) ................ 85,000 1,126,250
First Bell Bancorp., Inc, (PA) ............... 82,500 1,134,375
First Colorado Bancorp., Inc. (CO) ........... 191,500 2,321,938
First Defiance Financial Corp. (OH) .......... 526,885 5,664,014
First Federal Bancorp. * (MN) ................ 29,000 384,250
First Federal Bancshares Eau Claire,
Inc. (WI) .................................. 140,000 1,960,000
First Financial Corp. (WI) ................... 30,418 714,823
First Keystone Financial, Inc. * (PA) ........ 55,000 935,000
First Mutual Bancorp., Inc. (IL) ............. 135,000 1,687,500
First State Financial Services, Inc. (NJ) .... 22,500 270,000
Fort Bend Holdings Corp. (TX) ................ 35,000 630,000
Fort Thomas Financial Corp. (KY) ............. 13,000 187,688
Frankfort First Bancorp. (KY) ................ 64,418 998,479
GA Financial, Inc. * (PA) .................... 90,000 1,001,250
GFSB Bancorp, Inc. (NM) ...................... 20,000 280,000
Greenpoint Financial Corp. (NY) .............. 345,000 9,961,875
Grove Bank (MA) .............................. 5,000 128,750
Harbor Federal Bancorp., Inc. (MD) ........... 35,000 459,375
Hardin Bancorp., Inc. (MO) ................... 40,000 480,000
Harvest Home Financial Corp. (OH) ............ 25,000 306,250
Highland Federal Bank * (CA) ................. 104,167 1,757,818
Hingham Institute for Savings (MA) ........... 58,000 841,000
HMN Financial, Inc. * (MN) ................... 96,500 1,471,625
Home Financial Corp. (FL) .................... 50,000 693,750
Horizon Bancorp., Inc. (TX) .................. 67,000 753,750
IBS Financial Corp. (NJ) ..................... 110,000 1,512,500
Imperial Thrift & Loan Assn * (CA) ........... 40,600 583,625
ISB Financial Corp. (LA) ..................... 95,000 1,472,500
L & B Financial, Inc. (TX) (formerly
Sulphur Springs Building & Loan) + ......... 127,000 1,905,000
Lawrence Savings Bank * (MA) ................. 75,000 440,625
Leader Financial Corp. (TN) .................. 303,000 13,332,000
Little Falls Bancorp., Inc. * (NJ) ........... 150,000 1,650,000
Logansport Financial Corp. (IN) + ............ 77,500 968,750
Long Island Bancorp., Inc. (NY) .............. 270,000 7,492,500
MassBank Corp. (MA) .......................... 14,500 474,875
Meritrust Federal Savings Bank (LA) .......... 18,000 558,000
MFB Corp. * (IN) ............................. 15,000 213,750
Mid Continent Bancshares, Inc. (KS) .......... 60,000 1,072,500
Mississippi View Holding Co. (MN) ............ 45,000 506,250
MLF Bancorp., Inc. (PA) ...................... 20,000 482,500
Monterey Bay Bancorp., Inc. * (CA) ........... 130,000 1,543,750
New Hampshire Thrift Bancshares, Inc. ........
(NH) ....................................... 25,000 251,563
North Central Bancshares, Inc. (IA) .......... 95,000 1,009,375
Northeast Indiana Bancorp., Inc. (IN) ........ 45,000 562,500
Northwest Equity Corp. (WI) + ................ 61,000 610,000
NS & L Bancorp. (MO) ......................... 5,000 63,750
Ottawa Financial Corp. (MI) .................. 25,000 406,250
Pamrapo Bancorp., Inc. (NJ) .................. 81,000 1,559,250
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
================================================================================
Financial Statements
John Hancock Funds - Bank and Thrift Opportunity Fund
NUMBER OF MARKET
DESCRIPTION, ISSUER, STATE SHARES VALUE
- -------------------------- ------ -----
Thrifts (continued)
Patriot Bank Corp. (PA) ...................... 150,000 $ 1,950,000
PennFed Financial Services, Inc. * (NJ) + .... 375,000 5,718,750
People's Bancshares, Inc. (MA) ............... 60,000 555,000
Permanent Bancorp., Inc. (IN) ................ 90,000 1,327,500
PFF Bancorp., Inc. * (CA) .................... 90,000 1,035,000
Pittsburgh Home Financial Corp. * (PA) ....... 100,000 1,068,750
Portsmouth Bank Shares, Inc. (NH) ............ 47,430 640,305
Potters Financial Corp. (OH) (formerly
Potters Savings & Loan Co.) ................ 16,000 264,000
Primary Bank * (NH) .......................... 25,000 328,125
QCF Bancorp., Inc. * (MN) .................... 20,000 302,500
Quaker City Bancorp., Inc. * (CA) ............ 100,000 1,443,750
River Bank America * (NY) .................... 115,000 948,750
Roosevelt Financial Group, Inc. (MO) ......... 458,824 8,832,362
Scotland Bancorp., Inc. * (NC) ............... 22,500 264,375
Security Bancorp. (MT) ....................... 59,500 1,249,500
SFS Bancorp., Inc. * (NY) + .................. 89,000 1,134,750
SGV Bancorp., Inc. * (CA) .................... 30,000 277,500
Southern Banc Co., Inc. (AL) ................. 17,000 212,500
Southern Missouri Bancorp., Inc. (MO) ........ 72,000 1,044,000
Springfield Institution for Savings * (MA) ... 102,500 1,729,687
St. Landry Financial Corp. * (LA) + .......... 25,000 375,000
Standard Federal Bancorp. (MI)
(formerly Standard Federal Bank
of Troy) ................................... 195,000 7,726,875
Standard Financial, Inc. (IL) ................ 170,000 2,528,750
Sterling Financial Corp. * (WA) .............. 16,500 226,875
Sturgis Federal Savings Bank (MI) ............ 27,000 465,750
Tappan Zee Financial, Inc. (NY) .............. 55,000 660,000
Teche Holding Co. (LA) ....................... 100,000 1,325,000
Texarkana First Financial Corp. (AR) ......... 28,000 430,500
Washington Mutual, Inc. (WA) ................. 370,000 10,267,500
Wells Financial Corp. * (MN) + ............... 167,000 1,753,500
WesterFed Financial Corp. (MT) ............... 160,000 2,320,000
-----------
165,780,009
-----------
Other - Financial (2.19%)
Aames Financial Corp. ........................ 20,000 882,500
Capital One Financial Corp. .................. 325,000 9,587,500
Olympic Financial Ltd. * ..................... 25,000 556,250
Union Acceptance Corp. (Class A) * ........... 205,000 3,177,500
-----------
14,203,750
-----------
WARRANT (0.41%)
Glendale Federal Savings Bank * (CA) ......... 325,000 2,640,625
-----------
TOTAL COMMON STOCKS
AND WARRANT
(Cost $403,621,681) (88.04%) 569,869,762
----------- -----------
PREFERRED STOCKS
Banks (1.62%)
Chevy Chase Savings, 13.00% (MD) ............. 55,000 $ 1,718,750
Community Bank,
Ser B, 13.00% (CA) ......................... 21,000 556,500
Fidelity Federal Bank,
Ser A, 12.00% (CA) ......................... 40,000 1,085,000
Greater New York Savings Bank,
Ser B, 12.00% (NY) ......................... 100,000 3,000,000
Matewan BancShares, Inc.,
Ser A, 7.50% (WV) .......................... 25,000 631,250
Riggs National Corp.,
Ser B, 10.75% (DC) ......................... 93,000 2,580,750
Sovereign Bancorp.,
Ser B, 6.25% (PA) .......................... 15,000 900,000
-----------
TOTAL PREFERRED STOCKS
(Cost $9,300,000) ( 1.62%) 10,472,250
----------- -----------
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
================================================================================
Financial Statements
John Hancock Funds - Bank and Thrift Opportunity Fund
INTEREST PAR VALUE MARKET
DESCRIPTION, ISSUER RATE (000'S OMITTED) VALUE
- ------------------- ---- -------------- -----
BONDS
Beal Financial Corp.
Sr Note 08-15-00 ................ 12.75% $ 2,000 $ 2,050,000
Berkeley Federal Bank & Trust
Sub Deb 06-15-05 ................ 12.00 1,000 1,025,000
CENFED Financial Corp. (R)
Sr Note 12-15-01 ................ 11.17 3,500 3,718,750
Centerbank
Sub Note 10-01-02 .............. 8.375 1,000 993,750
Coastal Bancorp, Inc.
Sr Note 06-30-02 ................ 10.00 3,000 2,970,000
Fidelity Federal Bancorp
Sub Note 06-01-05 .............. 10.00 1,000 990,000
First Federal Financial Corp.
Note 10-01-04 ................... 11.75 3,500 3,325,000
First Nationwide (Parent)
Holdings Inc. (R)
Sr Note 04-15-03 ................ 12.50 2,000 2,035,000
MAF Bancorp, Inc.
Sub Note 09-30-05 .............. 8.30 1,500 1,477,500
SFFed Corp. (R)
Sr Note 09-01-04 ................ 11.20 2,500 2,875,000
WSFS Financial Corp.
Sr Note 12-31-05 ................ 11.00 3,000 3,030,000
------------
TOTAL BONDS
(Cost $ 23,831,032) (3.79%) 24,490,000
------ ------------
DESCRIPTION, ISSUER, STATE
- --------------------------
SHORT-TERM INVESTMENTS
Certificates of Deposit (0.01%)
Deposits in Mutual Banks .......... $ 55,603
------------
Joint Repurchase Agreement (6.50%)
Investment in a joint repurchase
agreement transaction with
SBC Capital Markets, Inc.,
Dated 4-30-96, Due 5-01-96
(secured by U.S. Treasury Bonds
10.375% due 11-15-12, and
7.250% due 5-15-16) - Note A .... 5.33% $42,102 42,102,000
------------
TOTAL SHORT-TERM INVESTMENTS (6.51%) 42,157,603
------- ------------
TOTAL INVESTMENTS (99.96%) $646,989,615
======= ============
NOTES TO SCHEDULE OF INVESTMENTS
* Non-income producing security
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $10,530,750 as of April 30, 1996. See Note
A of the Notes to Financial Statements for valuation policy.
(r) The securities listed below are direct placement securities and are
restricted as to resale. The Fund has limited rights to registration under
the Securities Act of 1933 with respect to restricted securities (not
including Rule 144A securities). In certain circumstances the Fund may bear
a portion of the cost of such registrations; otherwise, such costs would be
borne by the issuer. See Note A of the Notes to Financial Statements for
valuation policy. Additional information on these restricted securities is
as follows:
MARKET MARKET
VALUE AS A VALUE
PERCENTAGE AS OF
ACQUISITION ACQUISITION OF FUND'S APRIL 30,
DATE COST NET ASSETS 1996
---- ---- ---------- ----
Security Shares, Inc. ....... 09-29-94 1,150,000 0.23% 1,518,000
Sun Bancorp, Inc. ........... 09-29-94 650,000 0.14% 879,000
+ Denotes an affiliated company in which the Fund has ownership of at least
5% of the voting securities. (See Note E of the Notes to Financial
Statements).
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.
13
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
The John Hancock Bank and Thrift Opportunity Fund (the "Fund") is a diversified
closed-end management investment company registered under the Investment Company
Act of 1940. To provide the initial capital of the Fund, John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
purchased a total of 5,000 common shares for an aggregate purchase price of
$100,000 on August 8, 1994. The Adviser was the sole holder of common shares
until the public offering was completed and the operations of the Fund commenced
on August 23, 1994. The Fund's primary investment objective is long-term capital
appreciation. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with the Adviser, 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.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
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.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles.
OPTIONS Listed options will be valued at the last quoted sales price on the
exchange on which they are primarily traded. Purchased put or call
over-the-counter options will be valued at the average of the "bid" prices
obtained from two independent brokers. Written put or call over-the-counter
options will be valued at the average of the "asked' prices obtained from two
independent brokers. Upon the writing of a call or put option, an amount equal
to the premium received by the Fund will be included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked-to-market to reflect the current market
value of the written option.
The Fund may use option contracts to manage its exposure to the stock
market. Writing puts and buying calls will tend to increase the Fund's exposure
to the underlying instrument and buying puts and writing calls will tend to
decrease the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited to
the premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value will reflect the maximum exposure
of the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms, or if the Fund is unable to offset a contract with
14
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
a counterparty on a timely basis ("liquidity risk"). Exchange-traded options
have minimal credit risk as the exchanges act as counterparties to each
transaction, and only present liquidity risk in highly unusual market
conditions. To minimize credit and liquidity risks in over- the-counter option
contracts, the Fund will continuously monitor the creditworthiness of all its
counterparties.
At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended April 30,
1996.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues,
and expenses of the Fund.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
purchased from either the date of issue or the date of purchase over the life of
the security, as required by the Internal Revenue Code.
ORGANIZATION EXPENSES Expenses incurred in connection with the organization of
the Fund have been capitalized and are being charged to the Fund's operations
ratably over a five-year period that began with the commencement of investment
operations of the Fund.
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program, equivalent
on an annual basis to 1.15% of the Fund's average weekly net asset value.
The Fund has also entered into an administrative agreement with the Adviser
pursuant to which the Adviser provides certain administrative services on behalf
of the Fund. In return, the Fund has agreed to pay a monthly administration fee
at an annual rate of 0.25% of the Fund's average weekly net asset value.
Messrs. Edward J. Boudreau, Jr., Thomas W.L. Cameron, and Richard S.
Scipione and Ms. Anne C. Hodsdon are directors and/ or officers of the Adviser,
and/or its affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The Adviser owns 5,000 shares of
beneficial interest of the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund makes investments into other John Hancock Funds, as applicable, to
cover its liability for the deferred compensation. Investments to cover the
Fund's deferred compensation liability are recorded on the Fund's books as an
other asset. The deferred compensation liability and the related asset are
always equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. At April 30,
1996, the Fund's investments to cover the deferred compensation liability had
unrealized appreciation of $2,701.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended April 30, 1996, aggregated $44,133,554 and
$62,973,359, respectively.
The cost of investments owned at April 30, 1996 for Federal income tax
purposes was $436,752,713. Gross unrealized appreciation and depreciation of
investments aggregated $169,547,822 and $1,468,523, respectively, resulting in
net unrealized appreciation of $168,079,299.
15
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
NOTE D --
CAPITAL
In connection with a public offering, the Fund recorded proceeds of
$458,770,000, net of estimated offering costs of $1,230,000 through the issuance
of 23,000,000 common shares at $20.00 per share. As of April 30, 1996, the Fund
had incurred $1,156,818 of public offering expenses and has adjusted capital
paid-in for $73,182 which represents the balance of estimated offering costs
which the Fund does not expect to incur.
NOTE E --
TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS
Affiliated issuers, as defined by the Investment Company Act of 1940, are those
in which the Fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of the Fund's
transactions in the securities of these issuers during the period ended April
30, 1996 is set forth below.
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
BEGINNING ---------------------------------------- ENDING
SHARE SHARE SHARE SHARE REALIZED DIVIDEND ENDING
AFFILIATE AMOUNT AMOUNT COST AMOUNT COST AMOUNT GAIN INCOME VALUE
- --------- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bank West Financial Corp. (MI) 210,000 -- $-- -- $ -- 210,000 $ -- $ 14,700 $ 1,995,000
Benson Financial Corp. (TX) ... 258,300 -- -- 30,000 545,000 228,300 200,000 -- 4,508,925
Equitable Federal Savings
Bank (MD) .................. 40,000 -- -- -- -- 40,000 -- -- 1,050,000
FNB Bankshares (ME) .......... 20,780 -- -- -- -- 20,780 -- 6,234 581,840
L&B Financial, Inc. (TX) 127,000 -- -- -- -- 127,000 -- 12,700 1,905,000
Logansport Financial Corp. (IN) 77,500 -- -- -- -- 77,500 -- 15,500 968,750
Mahaska Investment Co. (IA) ... 149,500 -- -- -- -- 149,500 -- 51,951 2,279,875
New England Community
Bancorp (CT) ............... 165,000 -- -- -- -- 165,000 -- 18,975 1,732,500
Northwest Equity Corp. (WI) ... 96,000 -- -- 35,000 379,375 61,000 106,250 10,980 610,000
PennFed Financial Services,
Inc. (NJ) .................. 375,000 -- -- -- -- 375,000 -- -- 5,718,750
SFS Bancorp, Inc. (NY) ........ 105,000 -- -- 16,000 196,875 89,000 14,075 -- 1,134,750
St. Landry Financial Corp. (LA) 25,000 -- -- -- -- 25,000 -- -- 375,000
Surety Capital Corp. (TX) ..... 303,700 -- -- -- -- 303,700 -- -- 1,157,856
Wells Financial Corp. (MN) .... 212,000 -- -- 45,000 475,001 167,000 68,751 -- 1,753,500
------ ---------- ---------------------------------
$-- $1,596,251 $389,076 $131,040 $25,771,746
====== ========== =================================
</TABLE>
16
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
NOTE F --
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Unaudited quarterly results of operations for the period ended April 30, 1996
and the year ended October 31, 1995 are as follows:
<TABLE>
<CAPTION>
1996
----------------------
THREE MONTHS ENDED
JANUARY 31 APRIL 30
---------- --------
(000's OMITTED
EXCEPT PER SHARE DATA)
----------------------
<S> <C> <C>
Total Investment Income .................................... $ 5,152 $ 5,338
Net investment income ...................................... 2,834 3,039
Dividends from net investment income ....................... 10,985 --
Distributions from net realized gain on investments sold ... 7,477 --
Net realized and unrealized gain on investments ............ 36,793 14,279
Per share of beneficial interest:
Net investment income .................................. 0.12 0.14
Dividends from net investment income ................... 0.48 --
Distributions from net realized gain on investments sold ... 0.33 --
Net realized and unrealized gain on investments ............ 1.60 0.63
Net asset value at end of quarter .......................... $ 23.78 $ 28.14
Market value per share:
High ................................................... 24.750 23.625
Low .................................................... 22.625 21.750
</TABLE>
<TABLE>
<CAPTION>
1995
----------------------------------------------------
THREE MONTHS ENDED
----------------------------------------------------
JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
---------- -------- ------- ----------
(OOO's OMITTED EXCEPT PER SHARE DATA)
----------------------------------------------------
<S> <C> <C> <C> <C>
Total Investment Income .................................... $ 5,189 $ 4,429 $ 4,871 $ 4,761
Net investment income ...................................... 3,525 2,654 2,875 2,480
Dividends from net investment income ....................... 5,176 -- -- --
Net realized and unrealized gain on investments ............ 3,772 45,475 64,320 33,143
Per share of beneficial interest:
Net investment income .................................... 0.15 0.12 0.12 0.11
Dividends from net investment income ..................... 0.23 --
Net realized and unrealized gain on investments .......... 0.16 1.98 2.80 1.44
Net asset value at end of quarter .......................... $ 19.90 $ 21.99 $ 24.91 $ 26.46
Market value per share:
High ..................................................... 18.375 19.750 23.125 25.000
Low ...................................................... 15.875 18.125 19.125 22.375
</TABLE>
17
<PAGE>
================================================================================
John Hancock Funds - Bank and Thrift Opportunity Fund
INVESTMENT OBJECTIVE AND POLICY
John Hancock Bank and Thrift Opportunity fund is a closed-end diversified
management investment company, shares of which were initially offered to the
public on August 23, 1994 and are publicly traded on the New York Stock
Exchange. Its investment objective is long-term capital appreciation.
DIVIDEND REINVESTMENT PLAN
The Fund provides shareholders with a Dividend Reinvestment Plan, (the "Plan"),
which offers the opportunity to earn compound yields. Each holder of Common
Shares will automatically have all distributions of dividends and capital gains
reinvested by State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as agent for holders of Common Shares pursuant to the Plan
(the "Plan Agent") unless an election is made to receive cash. Each registered
shareholder will receive from the Plan Agent an authorization card to be signed
and returned if the shareholder elects to receive distributions from net
investment income in cash or elects not to receive capital gains distributions
in the form of a shares dividend. The Plan Agent will effect purchases of Common
Shares under the Plan in the open market. The Fund will not issue any new shares
in connection with the Plan. Holders of Common Shares who elect not to
participate in the Plan will receive all distributions in cash paid by check
mailed directly to the shareholder of record (or if the Common Shares are held
in street or other nominee name, then to the nominee) by the Plan Agent, as
divided disbursing agent. Shareholders whose shares are held in the name of a
broker or nominee or shareholders transferring such an account to a new broker
or nominee should contact the broker or nominee to determine whether and how
they may participate in the Plan.
The Plan Agent serves as agent for the holders of Common Shares in
administering the Plan. After the Fund declares a dividend or makes a capital
gains distribution, the Plan Agent will, as agent for the participants, receive
the cash payment and use it to buy Common Shares in the open market, on the New
York Stock Exchange or elsewhere, for the participants' accounts. The price of
the shares will be the average market price at which such shares were purchased
by the Plan Agent.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent. Such withdrawal will be effective immediately if received not
less than ten days prior to a dividend record date; otherwise, it will be
effective for all subsequent dividend record dates. When a participant withdraws
from the Plan or upon termination of the Plan as provided below, either a cash
payment will be made to the participant for the full value of the Common Shares
credited to the account upon instruction by the participant or certificates for
whole Common Shares credited to his or her account under the Plan will be issued
and a cash payment will be made for any fraction of a Common Share credited to
such account.
The Plan Agent maintains each shareholder's account in the Plan and
furnishes monthly written confirmations of all transactions in the accounts,
including information needed by the shareholders for personal and tax records.
Common Shares in the account of each Plan participant will be held by the Plan
Agent in non-certified form in the name of the participant. Proxy material
relating to shareholders' meetings of the Fund will include those shares
purchased as well as shares held pursuant to the Plan.
In the case of shareholders, such as banks, brokers, or nominees, which
hold Common Shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of Common Shares certified from
time to time by the record shareholders as representing the total amount
registered in the record shareholder's name and held for the account of
beneficial owners who are participants in the Plan. Shares may be purchased
through broker dealers.
The Plan Agent's fees for the handling of reinvestment of dividends and
other distributions will be paid by the Fund. Each participant will pay a pro
rata share of brokerage commissions incurred with respect to the Plan Agent's
open market purchases in connection with the reinvestment of distributions.
There are no other charges to participants for reinvesting dividends or capital
gain distributions.
Dividends and capital gains distributions are taxable whether received in
cash or reinvested in additional Common Shares, and the automatic reinvestment
of dividends and capital gain distributions
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John Hancock Funds - Bank and Thrift Opportunity Fund
will not relieve participants of any U.S. income tax that may be payable or
required to be withheld on such dividends or distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any distribution paid subsequent to written notice of the change sent
to all shareholders of the Fund at least 90 days before the record date for the
dividend or distribution. The Plan also may be amended or terminated by the Plan
Agent by at least 90 days' written notice to all shareholders of the Fund. All
correspondence concerning the Plan should be directed to the Plan Agent at P.O.
Box 8209, Boston, Massachusetts 02266-8209 (telephone 1-800-426-5523).
SHAREHOLDER MEETING
On March 7, 1996, the Annual Meeting of John Hancock Bank and Thrift Opportunity
Fund (the "Fund") was held to elect five Trustees and to ratify the action of
the Trustees in selecting independent auditors for the Fund.
The shareholders elected the following Trustees to serve until their
respective successors are duly elected and qualified, with the votes tabulated
as follows:
WITHHELD
NAME OF TRUSTEE FOR AUTHORITY
- --------------- --- ---------
James F. Carlin.............. 21,421,930 176,353
William H. Cunningham........ 21,414,122 184,160
Charles F. Fretz............. 21,416,174 182,108
Harold R. Hiser, Jr.......... 21,414,058 184,224
John P. Toolan............... 21,424,847 173,436
The shareholders also ratified the Trustees' selection of Deloitte and
Touche, LLP as the Fund's independent auditors for the Fund for the fiscal year
ending October 31, 1996, with the votes tabulated as follows: 21,383,842 FOR,
76,565 AGAINST and 137,875 ABSTAINING.
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right, a cube in lower left and a diamond in lower right. A tag line below
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