<PAGE> 1
John Hancock Funds
- --------------------------------------------------------------------------------
BANK AND
THRIFT
OPPORTUNITY
FUND
ANNUAL REPORT
October 31, 1995
<PAGE> 2
TRUSTEES
Edward J. Boudreau, Jr.
Thomas W. L. Cameron
James F. Carlin*
William H. Cunningham
Charles F. Fretz*
Harold R. Hiser, Jr.*
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
Andrew F. St. Pierre
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
INDEPENDENT PUBLIC AUDITORS
Deloitte & Touche llP
125 Summer Street
Boston, Massachusetts 02110-1617
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
Investors around the world have been watching Wall Street in awe for the better
part of 1995. Through October, the Standard & Poor's 500-Stock Index, a
widely-used barometer of stock performance, had grown by more than 25%.
Investors who stayed in the market after a disappointing 1994 have been
rewarded.
On another street, Pennsylvania Avenue, one of the hot topics many people are
watching is Medicare reform. While there's no clear-cut solution on the horizon,
today's Medicare debate should serve as another wake-up call to all Americans
about the need to have a financial plan and to save for retirement. Whether or
not the government changes the way health-care benefits are allotted to senior
citizens, the message is clear: your future security and well-being lies in your
own hands -- not Uncle Sam's.
We know you've heard it a hundred times. Pick up almost any financial
periodical today, and you'll see cover stories on retirement. Many of them will
perhaps scare you or make you think that the task of saving for retirement is
just too daunting. But take heart. We don't believe that and neither do many
financial experts.
Yet retirement planning is not to be taken lightly. To live the way you want
to -- the way you deserve to after all those years of hard work -- you need to
plan and save now, on a regular basis, no matter what your other costs, no
matter how small the amount, no matter what your current age. It may be easier
if you start earlier, but it's never too late.
Building a secure nest egg is indeed doable. Talk to your financial adviser
about establishing your retirement planning roadmap, if you haven't already. And
educate yourself by reading some of the many articles about how to save for
retirement. Take control of your future by saving today. That way, when it comes
time for retirement, you shouldn't have to think about any street but Easy
Street.
Sincerely,
/s/ Edward J. Boudreau. Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGER
JOHN HANCOCK
BANK AND THRIFT
OPPORTUNITY FUND
Financial sector outpaces a soaring market;
mergers and acquisitions drive stock prices
and industry fundamentals remain healthy
After suffering through a difficult 1994, stock and bond investors have been
treated royally in 1995. With inflation and the economy growing at a moderate,
but controlled pace, interest rates fell. The stock market took off and hasn't
looked back, reaching record highs this year. From the start of the year through
October, the Standard & Poor's 500-Stock Index was up 29%, while the 30-year
Treasury bond returned 27%.
[A 2 1/4" x 3 1/4" photo of James K. Schmidt at bottom right. Caption reads:
"JAMES K. SCHMIDT, PORTFOLIO MANAGER." ]
Bank and thrift stocks as a group have been among the leaders of the rally.
After a deeper sell-off in late 1994, the sector surged back smartly and has
outperformed the broader market so far in 1995. John Hancock Bank & Thrift
Opportunity Fund reflected this trend. For the year ended October 31, 1995, the
Fund's total return was 35.22% at net asset value. In comparison, the average
closed-end financial services fund returned 33.35% and the average open-end
financial services fund returned 26.12%, according to Lipper Analytical
Services.
[Caption]
"BANK AND THRIFT STOCKS AS A GROUP HAVE BEEN AMONG THE LEADERS OF THE RALLY."
3
<PAGE> 4
John Hancock Funds - Bank and Thrift Opportunity Fund
[Caption]
"THE BANKING INDUSTRY IS AS HEALTHY TODAY AS IT HAS BEEN IN THE LAST 30 YEARS."
The unprecedented level of bank mergers, from the biggest names in the
industry down to the smallest, has been the driving force behind the bank and
thrift rally this year. Banks also produced record earnings in 1995 and their
fundamentals remain positive. The banking industry is as healthy today as it has
been in the last 30 years. That is reflected in banks' loan quality, capital
levels and earnings capacity. As interest rates eased earlier in 1995 and the
pace of mergers accelerated, investors came to realize that these solid earnings
and takeover prospects could be purchased cheaply. That drove the stocks up from
their late-1994 lows.
MERGERS GALORE
In the first 14 months of its existence, 11 of the Fund's holdings announced
their intent to merge with another institution. This group includes several
blockbuster deals, such as Fleet-Shawmut and PNC-Midlantic. This is noteworthy
because there have been few deals in this size category in the past and none at
all last year. In addition, the fight for First Interstate Bancorp, between
hostile suitor Wells Fargo and "white knight" First Bank Systems, could be
precedent-setting because unfriendly takeovers are very rare in the banking
industry. A victory by Wells could intensify the consolidation activity that is
already prevalent.
The astounding size of this year's crop of mergers is due to the introduction
of national interstate banking, which went into effect in September as the
result of an act of Congress last year. These mergers have enormous significance
to what the banking industry will look like in the future. Each deal that
creates a new, larger bank increases the pressure on competitors to make
acquisitions to achieve similar size. When Fleet and Shawmut announced their
merger in February, creating an $82 billion banking institution, analysts
thought this would make them a major player among the nation's top banks for
years to come. But only eight months later, the "new" Fleet is dwarfed by banks
created in other mega-mergers, such as the "new" Chase with over $400 billion in
assets. It now seems that $100 billion in assets or more is needed to ensure
survival as an independent entity. Bank managements often consider size an
important indicator of competitiveness because it determines the bank's ability
to realize economies of scale in technological investments and sophistication of
products. We also believe there's a human element connected to the move to
increase assets, and it usually has to do with chief executives' drive to attain
greater prestige, power and wealth. Right or wrong, all of these factors are
highly correlated with asset size.
The merger activity we foresee over the next decade is important to us for
two reasons. First, it will allow us to earn takeover premiums as stocks we own
are acquired. Second, and more subtly, mergers are removing overcapacity from
the industry and allowing everyone left to make
[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 Ventura
County National Bancorp followed by an up arrow and the phrase ""Successfully
completes turnaround and rights offering." The second listing is Capital One
Financial followed by a flat arrow and the phrase "Market suspicious of credit
card loan quality." The third listing is Sterling Financial followed by a down
arrow and the phrase "Still suffering a hangover from rising rates and dilutive
acquisitions in 1994." Footnote below reads: "See "Schedule of Investments."
Investment holdings are subject to change."]
4
<PAGE> 5
John Hancock Funds - Bank and Thrift Opportunity Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote: "For the year ended October 31, 1995." The chart
is scaled in increments of 20% from bottom to top, with 40% at the top and 0%
at the bottom. Within the chart there are three solid bars. The first
represents the 35.22% total return for the John Hancock Bank and Thrift
Opportunity Fund. The second represents the 33.35% total return for the
average closed-end financial services fund. The third represents the 26.12%
total return for the average open-end financial services fund. A 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 and open-end financial services fund is tracked by Lipper
Analytical Services."]
more money. As banks merge, bankers are laid off, branches are closed and the
number of banks shrinks. Since interstate banking was introduced in 1985, the
number of commercial banks in the United States has declined from roughly 14,000
to 10,000. We think there will be around 4,000 by the year 2010. Removing banks
from the scene helps solve the problem of too many banks chasing too little
business.
Our basic investment concept in the Fund is to own banks that represent good
value on a stand-alone basis and to regard potential acquisitions as "icing on
the cake." We pay little attention to takeover rumors and approach every stock
as if we may own it for many years. Nevertheless, we expect many of the over 200
banks we own today to disappear through merger as the consolidation process
plays out.
INDUSTRY REPORT CARD
Even after a record-breaking 1995, banks appear poised for another good year
because the industry's fundamentals remain so healthy. The economic outlook
through 1996 calls for slow growth, low inflation and a flat-to-declining
interest-rate environment -- nirvana for bank stocks. Banks don't make enough on
loans when the economy "booms" to make up for what they lose when it "busts." As
bank investors, we would like to see consistent, slow, plodding growth forever.
That is what we have been getting lately. Even though a recent uptick in
consumer credit delinquencies and losses has caused some nervousness, these
trends are manageable and are to be expected. In 1996, we expect banks to
generate more interest revenues from higher loan volumes and stable rates, while
expenses should go down with tighter controls and lower FDIC insurance premiums.
That should more than offset a moderate increase in loan loss provisions from
the unsustainably low level we have witnessed this year.
Next year, we expect the average regional bank to report a 10% increase in
earnings-per-share over 1995. Despite 1995's bank stock rally, the stocks still
remain inexpensive. The stocks in the Fund trade at a median of 10.5 times 1996
earnings-per-share versus 16 times for the broad market, as measured by the S&P
500 index. This discount to the market is only slightly greater that the 30-year
average and we think unwarranted based on our earnings outlook.
PORTFOLIO TACTICS AND OUTLOOK
The Fund's focus continues to be on undervalued regional banks and thrifts with
healthy earnings' outlooks and the potential to benefit from a merger or
acquisition. Banks currently
[CAPTION]
"...11 OF THE FUND'S HOLDINGS ANNOUNCED THEIR INTENT TO MERGE WITH ANOTHER
INSTITUTION."
5
<PAGE> 6
John Hancock Funds - Bank and Thrift Opportunity Fund
[Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) Midlantic Corp. 3.0% 2) Crestar
Financial Corp. 2.5% 3) Southtrust Corp. 2.4% 4) Integra Financial Corp. 2.4%
5) First American Corp. 2.3%. A footnote below reads "As a percentage of net
assets on October 31, 1995."]
represent 63% of the Fund's assets. Another 32% is invested in thrifts and 5% is
in cash.
Our stock purchases this year have fallen into several categories. First, we
have increased our holdings in many mid-sized regionals -- those with $10-$30
billion in assets. In past years, there was less likelihood of banks in this
size category being acquired. The advent of national interstate banking and the
trend toward larger mergers has made many of these banks potential acquisition
targets. We doubt that many of the banks in this asset range will remain
independent over the long run.
Second, we have acquired many positions in mutual savings and loans which
have recently converted to public ownership. Measured on a price-to-book basis,
this is the least expensive group in the industry. While the median
publicly-traded commercial bank sells at 155% of book value and the median
thrift trades at 105% of book value, we are able to buy many of the recent
conversions in the 80% - 90% range. There have been so many conversions in the
past two years that we think many of these stocks individually suffer from a
lack of attention.
Third, we continue to deploy cash in smaller capitalization stocks, debt
securities and private placements. Although these positions do not constitute a
significant portion of the Fund's assets, over time they will grow. We are
planting seeds now; as the companies grow and become discovered -- by both the
market and by potential acquirers -- our investment value appreciates.
Looking ahead, we continue to see tremendous long-term value for bank and
thrift stocks. The economic environment is right. The stocks remain inexpensive,
trading at just 65% of the market multiple, and the fundamentals are positive
for the industry's continued health. Even with the inevitable short-term swings,
the long-term prognosis is positive: rising earnings and continued merger
activity both bode well for stock prices and attractive returns over the next
several years.
[CAPTION]
"...RISING EARNINGS AND CONTINUED MERGER ACTIVITY BOTH BODE WELL FOR STOCK
PRICES AND ATTRACTIVE RETURNS..."
6
<PAGE> 7
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
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 OCTOBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE FOR EACH COMMON SHARE AS OF THAT DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $402,491,302)............................ $532,899,037
Preferred stocks (cost - $12,712,375).......................... 14,730,875
Bonds (cost - $23,827,833)..................................... 24,675,313
Short-term investments (cost - $32,715,500).................... 32,715,500
------------
605,020,725
Cash............................................................ 360
Receivable for investments sold................................. 5,556,562
Interest receivable............................................. 591,377
Dividends receivable............................................ 938,912
Deferred organization expenses - Note A......................... 60,977
------------
Total Assets.................................. 612,168,913
------------------------------------------------------------
LIABILITIES:
Payable for investments purchased............................... 2,524,687
Payable to John Hancock Advisers, Inc.
and affiliates - Note B....................................... 760,728
Accounts payable and accrued expenses........................... 159,685
------------
Total Liabilities............................. 3,445,100
------------------------------------------------------------
NET ASSETS:
Capital paid-in................................................. 458,870,000
Accumulated net realized gain on investments.................... 7,493,313
Net unrealized appreciation of investments...................... 133,273,715
Undistributed net investment income............................. 9,086,785
------------
Net Assets.................................... $608,723,813
============================================================
NET ASSET VALUE PER SHARE:
(based on 23,005,000 common shares of
beneficial interest outstanding -
unlimited number of shares authorized
with no par value).............................................. $ 26.46
==============================================================================
</TABLE>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS FOR THE PERIOD
STATED.
<TABLE>
STATEMENT OF OPERATIONS
Year Ended October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (including $289,593 received from
affiliated issuers and net of foreign
withholding taxes of $19,063)................................. $ 13,214,194
Interest........................................................ 6,035,694
------------
19,249,888
------------
EXPENSES:
Investment management fee - Note B............................. 5,966,529
Administration fee - Note B.................................... 1,297,072
Printing....................................................... 122,480
Custodian fee.................................................. 102,672
Trustees' fees................................................. 53,597
Miscellaneous.................................................. 46,155
New York Stock Exchange fee.................................... 41,249
Auditing fee................................................... 31,000
Transfer agent fee............................................. 23,222
Organization expense - Note A.................................. 16,000
Legal fees..................................................... 15,503
------------
Total Expenses................................ 7,715,479
------------------------------------------------------------
Net Investment Income......................... 11,534,409
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold
(including $20,625 on sales of investments
in affiliated issuers)......................................... 7,493,313
Change in net unrealized
appreciation/depreciation of investments...................... 139,216,330
------------
Net Realized and Unrealized
Gain on Investments........................... 146,709,643
------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations..................... $158,244,052
============================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
AUGUST 23, 1994
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
OCTOBER 31, 1995 OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........................................................... $ 11,534,409 $ 2,728,501
Net realized gain on investments sold ........................................... 7,493,313 --
Change in net unrealized appreciation/depreciation of investments ............... 139,216,330 (5,942,615)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations ................ 158,244,052 (3,214,114)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income $(0.2250 and none per share, respectively).. (5,176,125) --
------------- -------------
FROM FUND SHARE TRANSACTIONS -- NET:*
Proceeds from sale of common shares (net of $1,230,000 of offering costs) ....... -- 458,770,000
------------- -------------
NET ASSETS:
Initial investment in Common Shares by John Hancock Advisers, Inc - Note A ...... -- 100,000
Beginning of period ............................................................. 455,655,886 --
------------- -------------
End of period (including undistributed net investment income of $9,086,785 and
$2,728,501, respectively) ..................................................... $ 608,723,813 $ 455,655,886
============= =============
</TABLE>
*ANALYSIS OF COMMON SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
FOR THE PERIOD AUGUST 23, 1994
YEAR ENDED (COMMENCEMENT OF OPERATIONS)
OCTOBER 31, 1995 TO OCTOBER 31, 1994
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period ...... 23,005,000 $458,870,000 -- --
Shares sold .................................. -- -- 23,000,000 $458,770,000
Initial investment in Common Shares by
John Hancock Advisers, Inc. - Note A ....... -- -- 5,000 100,000
------------ ------------ ------------ ------------
Shares outstanding, end of period ............ 23,005,000 $458,870,000 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
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity 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 AUGUST 23, 1994
YEAR ENDED (COMMENCEMENT OF OPERATIONS)
OCTOBER 31, 1995 TO OCTOBER 31, 1994
---------------- -------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................................... $ 19.81 $ 20.00
----------- -----------
Net Investment Income .................................................... 0.50 0.12
Net Realized and Unrealized Gain (Loss) on Investments ................... 6.38 (0.26)
----------- -----------
Total from Investment Operations ........................................ 6.88 (0.14)
----------- -----------
Less Distributions:
Dividends from Net Investment Income .................................... (0.23) --
----------- -----------
Common Shares Offering Costs ............................................. -- (0.05)
----------- -----------
Net Asset Value, End of Period ........................................... $ 26.46 $ 19.81
=========== ===========
Per share market value, end of period .................................... $ 22.75 $ 18.00
=========== ===========
Total Investment Return at Market Value .................................. 27.91% (10.00)%(a)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ................................ $ 608,724 $ 455,656
Ratio of Expenses to Average Net Assets .................................. 1.49% 1.51%*
Ratio of Net Investment Income to Average Net Assets ..................... 2.22% 3.22%*
Portfolio Turnover Rate .................................................. 8% 0%
</TABLE>
* On an annualized basis.
(a) Not annualized.
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> 10
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY BANK
AND THRIFT OPPORTUNITY FUND ON OCTOBER 31, 1995. IT'S DIVIDED INTO FOUR MAIN
CATEGORIES: COMMON STOCKS, PREFERRED STOCKS, BONDS AND SHORT-TERM INVESTMENTS.
THE COMMON AND PREFERRED STOCKS ARE FURTHER BROKEN DOWN BY INDUSTRY GROUPS.
SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE LISTED
LAST.
<TABLE>
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<CAPTION>
MARKET
DESCRIPTION, ISSUER, STATE NUMBER OF SHARES VALUE
- -------------------------- ---------------- -----
<S> <C> <C>
COMMON STOCKS
MONEY CENTER BANKS (0.17)%
Chase Manhattan Corp. (NY) .................. 17,680* $ 1,007,760
-----------
SUPER REGIONALS (2.09)%
Barnett Banks, Inc. (FL) .................... 230,000 12,707,500
-----------
REGIONALS (55.32)%
ABC Bancorp (GA) ............................ 40,000 540,000
Alabama National Bancorporation (AL) ........ 130,000* 1,665,625
American Bancorporation (WV) ................ 17,500* 358,750
Atlantic Bancorp. (ME) (r) (R) .............. 150,000* 1,771,500
BNCCorp, Inc. (ND) .......................... 45,000* 455,625
Bancorp Hawaii, Inc. (HI) ................... 300,000 10,050,000
BancorpSouth, Inc. (MS) ..................... 20,000* 925,000
Banknorth Group, Inc. (VT) .................. 26,500* 841,375
BanPonce Corp. (PR) ......................... 150,000* 5,793,750
Benson Financial Corp. (TX) + .............. 258,300 4,584,825
Beverly National Corp. (MA) ................. 25,000* 437,500
Boatmen's Bancshares, Inc. (MO) ............. 62,000* 2,356,000
Broad National Bancorp (NJ) ................. 38,325 440,738
CCB Financial Corp. (NC) .................... 34,800* 1,722,600
California State Bank (CA) .................. 89,200* 1,248,800
Centura Banks, Inc. (NC) .................... 80,000 2,700,000
Century Financial Corp. (PA) ................ 10,000* 125,000
Chittenden Corp. (VT) ....................... 31,250* 851,563
Colonial BancGroup, Inc. (AL) .............. 385,000 11,116,875
Columbia Bancorp. (MD) ...................... 24,000* 414,000
Comerica, Inc. (MI) ......................... 155,000* 5,211,875
Commercial Bankshares, Inc. (FL) ............ 34,000* 459,000
Commonwealth Bankshares, Inc. (VA) .......... 24,000* 204,000
Compass Bancshares (AL) ..................... 292,000 9,052,000
Corestates Financial Corp. (PA) ............. 110,000* 4,001,250
County Bank of Chesterfield (VA) ............ 30,000* 337,500
Crestar Financial Corp. (VA) ................ 267,000 15,219,000
Dauphin Deposit Corp. (PA) .................. 80,000 2,320,000
Desert Community Bank (CA) .................. 37,000* 494,875
Empire Banc Corp. (MI) ...................... 10,900* 378,775
Evergreen Bancorp, Inc. (NY) ................ 25,000* 525,000
FNB Corp. (PA) .............................. 36,750* 771,750
FNB Bankshares (ME) ......................... 20,780* 571,450
First American Corp. (TN) ................... 317,100 13,912,762
First of America Bank Corp. (MI) ............ 308,300 13,141,287
First Commerce Corp. (LA) ................... 370,000 11,470,000
First Security Corp. (UT) ................... 100,000 3,275,000
First State Bancorporation (NM) ............. 66,100 1,057,600
First Tennessee National Corp. (TN) ......... 53,100 2,840,850
Firstar Corp. (WI) .......................... 393,000 13,902,375
Harleysville National Corp. (PA) ............ 35,200 924,000
Hawkeye Bancorp (IA) ........................ 50,175 1,210,472
Hometown Bancorporation, Inc. (CT) .......... 42,000* 530,250
Imperial Bancorp (CA) ....................... 52,500* 1,168,125
Integra Financial Corp. (PA) ................ 245,700 14,434,875
Magna Group, Inc. (MO) ...................... 80,000* 1,970,000
Mahaska Investment Co. (IA) + .............. 149,500 2,354,625
Mercantile Bancorporation, Inc. (MO) ........ 225,895 9,939,380
Meridian Bancorp, Inc. (PA) ................. 115,000 4,916,250
MetroBanCorp (IN) ........................... 39,000 253,500
Michigan National Corp. (MI) ................ 95,297 10,458,846
Midlantic Corp. (NJ) ........................ 340,000 18,020,000
Mississippi Valley Bankshares, Inc. (MO) .... 47,500 1,140,000
New England Community Bancorp (CT) + ........ 165,000* 1,650,000
North Fork Bancorporation, Inc. (NY) ........ 10,800* 236,250
Old Kent Financial Corp. (MI) .............. 186,375 7,128,844
Oriental Bank & Trust (PR) .................. 68,750* 1,014,062
Provident Bankshares Corp. (MD) ............. 106,500* 3,248,250
Regions Financial Corp. (AL) ................ 80,000* 3,190,000
Riggs National Corp. (DC) ................... 190,000 2,493,750
Salem Bank and Trust (VA) ................... 40,000* 470,000
Santa Barbara Bancorp (CA) .................. 3,000* 88,500
Security Shares, Inc. (TX) (r) .............. 200,000 1,448,000
Shawmut National Corp. (MA) ................. 230,000* 7,791,250
Signet Banking Corp. (VA) ................... 355,000 8,431,250
Southern National Corp. (NC) ................ 337,375* 8,687,406
Southtrust Corp. (AL) ....................... 580,000 14,572,500
Southwest Bancorp, Inc. (OK) ................ 78,500 1,305,062
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
<TABLE>
<CAPTION>
MARKET
DESCRIPTION, ISSUER, STATE NUMBER OF SHARES VALUE
- -------------------------- ---------------- -----
<S> <C> <C>
REGIONALS (CONTINUED)
Summit Bancorp (NJ) ......................... 63,800 $ 1,810,325
Sun Bancorp, Inc. (NJ) (r) .................. 50,000 870,000
Surety Capital Corp. (TX) + ................. 303,700* 1,290,725
UJB Financial Corp. (NJ) .................... 395,000 12,590,625
Union Planters Corp. (TN) ................... 433,200 13,266,750
United Security Bancorp. (WA) .............. 115,500* 1,443,750
US Bancorp (OR) ............................. 347,500 10,294,687
U S Trust Corp. (NY) ........................ 26,000* 1,261,000
Vectra Banking Corp. (CO) ................... 34,100 375,100
Ventura County National Bancorp. (CA) ....... 213,909* 802,159
West Coast Bancorp. (OR) .................... 48,950* 819,912
West One Bancorp. (ID) ...................... 258,000* 10,965,000
Whitney Holding Corp. (LA) .................. 128,500* 3,983,500
Yardville National Bank (NJ) ................ 25,500* 408,000
------------
336,802,855
------------
THRIFTS (28.50)%
American Federal Bank (SC) .................. 140,000* 2,065,000
American National Bancorp, Inc. (MD) ........ 146,470* 1,409,774
Amfed Financial, Inc. (NV) .................. 182,806 5,347,076
Avondale Financial Corp. (IL) .............. 136,000* 1,972,000
Bank West Financial Corp. (MI) + ............ 210,000* 2,073,750
Bell Bancorp, Inc. (IL) ..................... 100,000* 2,925,000
Brooklyn Bancorp, Inc. (NY) ................. 335,000 13,190,625
CB Bancorp, Inc. (IN) ....................... 35,000 612,500
CSB Financial Group, Inc. (IL) .............. 40,000* 370,000
Calumet Bancorp, Inc. (IL) .................. 33,000* 899,250
Cameron Financial Corp. (MO) + .............. 190,000* 2,612,500
Collective Bancorp, Inc. (NJ) .............. 521,500 12,320,438
Community Financial Corp. (IL) .............. 25,000* 325,000
Community Investments Bancorp, Inc. (OH) .... 10,000* 175,000
Conestoga Bancorp, Inc. (NY) ................ 75,000 1,406,250
East Texas Financial Services, Inc. (TX) .... 25,000* 387,500
Equitable Federal Savings Bank (MD) + ....... 40,000 950,000
FFVA Financial Corp. (VA) ................... 40,000 1,140,000
Fidelity Federal Bank (CA) .................. 739,500* 1,479,000
Financial Bancorp, Inc. (NY) ................ 85,000* 1,105,000
First Bell Bancorp, Inc, (PA) .............. 82,500* 1,082,813
First Defiance Financial Corp. (OH) ......... 176,885* 1,768,850
First Federal Bancorporation (MN) ........... 42,000* 567,000
First Federal Bancshares Eau Claire (WI) .... 190,000 2,755,000
First Financial Corp. (WI) .................. 30,418* 650,185
First Keystone Financial, Inc. (PA) ......... 55,000* 1,058,750
First Mutual Bancorp, Inc. (IL) ............. 135,000* 1,653,750
First State Financial Services, Inc. (NJ) ... 22,500* 306,563
Fort Bend Holding Corp. (TX) ................ 40,000 720,000
Fort Thomas Financial Corp. (KY) ............ 25,000* 300,000
Frankfort First Bancorp, Inc. (KY) .......... 54,418* 680,225
GFSB Bancorp Inc. (NM) ...................... 20,000* 265,000
Glendale Federal Savings Bank Warrants (CA) . 325,000 2,275,000
Greenpoint Financial Corp. (NY) ............. 445,000* 12,015,000
HMN Financial, Inc. (MN) .................... 146,500 2,234,125
Harbor Federal Bancorp, Inc. (MD) ........... 100,000 1,475,000
Hardin Bancorp, Inc. (MO) ................... 40,000* 500,000
Harvest Home Financial Corp. (OH) ........... 25,000* 281,250
Hingham Institute of Savings (MA) ........... 58,000 754,000
Horizon Bancorp, Inc. (TX) + ................ 107,000* 856,000
IBS Financial Corp. (NJ) .................... 295,000 4,720,000
Kirksville Bancshares, Inc. (MO) ............ 12,000* 456,000
Lawrence Savings Bank (MA) .................. 75,000* 384,375
Leader Financial Corp. (TN) ................. 303,000* 10,794,375
Logansport Financial Corp. (IN) + ........... 77,500* 978,437
Long Island Bancorp, Inc. (NY) .............. 340,000 7,777,500
MFB Corp, Inc. (IN) ......................... 10,000* 152,500
MLF Bancorp, Inc. (PA) ...................... 20,000* 450,000
MassBank Corp. (MA) ......................... 14,500* 454,937
Meritrust Federal Savings Bank (LA) ......... 28,000 812,000
Mid Continent Bancshares, Inc. (KS) ......... 50,000 868,750
Mississippi View Holding Co. (MN) ........... 75,000* 862,500
Monterey Bay Bancorp, Inc. (CA) + ........... 230,000* 2,760,000
NS & L Bancorp. (MO) ........................ 15,000* 202,500
New Hampshire Thrift Bancshares, Inc. (NH) .. 25,000* 256,250
Northeast Indiana Bancorp, Inc. (IN) ........ 100,000* 1,250,000
Northwest Equity Corp. (WI) + .............. 96,000 1,032,000
Ottawa Financial Corp. (MI) ................. 75,000 1,181,250
Pamrapo Bancorp, Inc. (NJ) .................. 81,000 1,660,500
PennFed Financial Services, Inc. (NJ) + ..... 375,000 5,437,500
Permanent Bancorp, Inc. (IN) ................ 90,000 1,462,500
Portsmouth Bank Shares, Inc. (NH) ........... 46,500* 697,500
Potters Savings & Loan Co. (OH) ............. 16,000* 272,000
QCF Bancorp, Inc. (MN) ...................... 20,000* 285,000
Quaker City Bancorp, Inc. (CA) .............. 70,000* 980,000
River Bank of America (NY) .................. 115,000 805,000
Roosevelt Financial Group (MO) .............. 429,500 6,925,687
SFS Bancorp, Inc. (NY) + .................... 105,000* 1,260,000
SGV Bancorp, Inc. (CA) ...................... 30,000* 277,500
St. Landry Financial Corp. (LA) + ........... 25,000* 250,000
Security Bancorp. (MT) ...................... 59,500* 1,249,500
Southern Banc Company, Inc. (AL) ............ 17,000* 212,500
Southern Missouri Bancorp, Inc. (MO) ........ 32,000* 528,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
<TABLE>
<CAPTION>
MARKET
DESCRIPTION, ISSUER, STATE NUMBER OF SHARES VALUE
- -------------------------- ---------------- -----
<S> <C> <C>
THRIFTS (CONTINUED)
Springfield Institution for Savings (MA) ..... 102,500* $ 1,575,937
Standard Federal Bank of Troy (MI) ........... 195,000 6,922,500
Standard Financial, Inc. (IL) ................ 270,000 3,712,500
Sterling Financial Corp. (WA) ................ 16,500* 222,750
Sturgis Federal Savings Bank (MI) ............ 27,000 432,000
Sulphur Springs Building & Loan (TX) + ....... 127,000 1,746,250
Tappan Zee Financial, Inc. (NY) .............. 30,000* 360,000
Teche Holding Company (LA) ................... 100,000* 1,350,000
Washington Mutual Savings Bank (WA) .......... 370,000 9,527,500
Wells Financial Corp. (MN) + ................. 212,000* 2,332,000
WesterFed Financial Corp. (MT) ............... 160,000 2,620,000
------------
173,462,172
------------
OTHER - FINANCIAL (1.46)%
Aames Financial Corp. (CA) ................... 20,000* 500,000
Capital One Financial Corp. (VA) ............. 325,000* 7,962,500
Olympic Financial Ltd. (MN) .................. 25,000* 456,250
------------
8,918,750
------------
TOTAL COMMON STOCKS
(Cost $402,491,302) ............... (87.54)% 532,899,037
------------ ------------
PREFERRED STOCKS
BANKS (2.42)%
Carolina First Corp. 7.32% (South Carolina) .. 15,000* 446,250
Chevy Chase Federal Savings Bank
13.00% (Maryland) .......................... 55,000 1,718,750
Community Bank of Huntington 13.00%
(California) ................................ 21,000 525,000
Greater New York Savings Bank
12.00% Ser B (New York) .................... 100,000 2,850,000
Riggs National Corp. 10.75%
(Washington DC) ............................ 93,000 2,604,000
Southern National Corp. 6.75% Ser
A (North Carolina) ......................... 150,000 5,737,500
Sovereign Bancorp Ser B (Pennsylvania) ....... 15,000* 849,375
------------
TOTAL PREFERRED STOCKS
(Cost $12,712,375) ............... (2.42)% 14,730,875
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
DESCRIPTION, ISSUER RATE (000'S OMITTED) VALUE
- ------------------- ---- --------------- -----
<S> <C> <C> <C>
BONDS
Beal Financial Corp.
Sr Note 08-15-00 ....................... 12.75% $4,000* $3,980,000
Berkeley Federal Bank & Trust
Sub Deb 06-15-05 ....................... 12.00% 1,000* 1,020,000
CENFED Financial Corp. (R)
Sr Note 12-15-01 ....................... 11.17% 3,500* 3,817,188
Centerbank
Sub Note 10-01-02 ...................... 8.375% 1,000* 1,015,000
Coastal Bancorp, Inc.
Sr Note 06-30-02 ....................... 10.00% 3,000* 3,000,000
Fidelity Federal Bancorp
Sub Note 06-01-05 ...................... 10.00% 1,000* 1,000,000
First Federal Financial Corp. ............
Note 10-01-04 .......................... 11.75% 3,500 3,447,500
MAF Bancorp, Inc.
Sub Note 09-30-05 ...................... 8.30% 1,500* 1,500,000
SFFed Corp. (R)
Sr Note 09-01-04 ....................... 11.20% 2,500 2,865,625
WSFS Financial Corp.
Sr Note 12-31-05 ....................... 11.00% 3,000 3,030,000
----------
TOTAL BONDS
(Cost $23,827,833) (4.05)% 24,675,313
------ ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
DESCRIPTION, ISSUER, STATE RATE (000'S OMITTED) VALUE
- -------------------------- ---- --------------- -----
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
CERTIFICATES OF DEPOSIT (0.00)%
Deposits in Mutual Banks ....... $ 28,500
------------
JOINT REPURCHASE AGREEMENT (5.38)%
Investment in a joint repurchase
agreement with SBC Capital
Markets. - Dated 10-31-95,
Due 11-01-95 (secured by
U.S. Treasury Bonds 8.75%,
Due 05-15-17 and U.S. Treasury
Note 5.75% Due 09-30-97)
Note A ....................... 5.89% $ 32,687 32,687,000
------------
TOTAL SHORT-TERM INVESTMENTS (5.38)% 32,715,500
------- ------------
TOTAL INVESTMENTS (99.39)% $605,020,725
======== ============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
* Securities, other than short-term investments, newly added to the portfolio
during the period ended October 31, 1995.
(R) The securities indicated by (R) 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.
See Note A of the Notes to Financial Statements for valuation policy. Rule
144A securities amounted to $8,454,313 as of October 31, 1995.
(r) Direct placement securities are restricted as to resale. They have been
valued at fair value by the Trustees after consideration of restrictions as
to resale, financial condition and prospects of the issuer, general market
conditions and pertinent information in accordance with the Fund's By-Laws
and the Investment Company Act of 1940, as amended. The Fund has limited
rights to registration under the Securities Act of 1933 with respect to the
restricted securities.
Additional information on each restricted security is as follows:
<TABLE>
<CAPTION>
VALUE AS A
PERCENTAGE
AQUISITION AQUISITION OF FUND'S VALUE AT
DATE COST NET ASSETS OCTOBER 31, 1995
---- ---- ---------- ----------------
<S> <C> <C> <C> <C>
Atlantic Bancorp ...... 06-09-95 $1,500,000 0.29% $1,771,500
Security Shares, Inc... 09-29-94 1,150,000 0.24% 1,448,000
Sun Bancorp, Inc. ..... 09-29-94 650,000 0.14% 870,000
</TABLE>
+ Denotes an affiliated company in which the Fund has ownership of at least 5%
of the voting securities. Investments in affiliates at October 31, 1995 were
as follows:
<TABLE>
<CAPTION>
AFFILIATE COST DIVIDEND INCOME
- --------- ---- ---------------
<S> <C> <C>
Bank West Financial Corp. (MI) ................. $1,821,875 $29,400
Benson Financial Corp. (TX) .................... 2,932,313 25,830
Cameron Financial Corp. (MO) ................... 2,061,563 13,300
Equitable Federal Savings Bank (MD) ............ 660,000 --
Horizon Bancorp, Inc. (TX) ..................... 749,375 4,770
Logansport Financial Corp. (IN) ................ 902,813 7,750
Mahaska Investment Co. (IA) .................... 2,184,313 90,203
Monterey Bay Bancorp,, Inc. (CA) ............... 2,082,500 --
New England Community Bancorp (CT) ............. 1,320,000 33,000
Northwest Equity Corp. (WI) .................... 746,813 23,040
PennFed Financial Services, Inc. (NJ) .......... 4,216,250 --
SFS Bancorp, Inc. (NY) ......................... 1,195,625 --
St. Landry Financial Corp. (LA) ................ 250,000 --
Sulphur Springs Building & Loan (TX) ........... 1,306,500 62,300
Surety Capital Corp. (TX) ...................... 987,025 --
Wells Financial Corp. (MN) ..................... 1,936,375 --
</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.
13
<PAGE> 14
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
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 (which the Adviser owned at October 31,
1995) 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.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all its taxable income, including any net realized gain, to its
shareholders. Therefore, no federal income tax provision is required.
DISTRIBUTIONS AND INCOME 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. Upon the writing of a call or put
option, an amount equal to the premium received by the Fund will be included in
the Statement of Assets and Liabilities as an asset and corresponding liability.
The amount of the liability will be subsequently marked-to-market to reflect the
current market value of the written option.
The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls will tend to increase the Fund's exposure to the
underlying instrument and buying puts and writing calls will tend to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited to the
premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value will reflect the maximum exposure
of the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
14
<PAGE> 15
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
There were no written option transactions for the period ended October 31,
1995.
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 COSTS 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 ANDTRANSACTIONS 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.
Messers. Edward J. Boudreau, Jr., Thomas W. L. Cameron, and Richard S.
Scipione are directors and/or officers of the Adviser, and/or its affiliates, as
well as Trustees of the Fund. The compensation of unaffiliated Trustees is borne
by the Fund. Effective with the fees paid for 1995, the unaffiliated Trustees
may elect to defer for tax purposes their receipt of this compensation under the
John Hancock Group of Funds Deferred Compensation Plan. The Fund will make
investments into other John Hancock Funds, as applicable, to cover its liability
for the deferred compensation. Investments to cover the Fund's deferred
compensation liability will be recorded on the Fund's books as an other asset.
The deferred compensation liability and the related other asset will always be
equal and will be marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
investment will have no impact on the operations of the Fund.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended October 31, 1995, aggregated $238,039,048
and $35,674,351, respectively. There were no purchases or sales of obligations
of the U.S. government and its agencies during the period ended October 31,
1995.
The cost of investments owned at October 31, 1995 for Federal income tax
purposes was $471,747,010. Gross unrealized appreciation and depreciation of
investments aggregated $137,809,429 and $4,535,714, respectively, resulting in
net unrealized appreciation of $133,273,715.
NOTE D --
CAPITAL
In connection with a public offering, the Fund received proceeds of
$458,770,000, net of offering costs of $1,230,000 $(0.05 per share), through the
issuance of 23,000,000 common shares at $20.00 per share. John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony Incorporated ("Tucker
Anthony") and Sutro & Co., Inc. ("Sutro") earned commissions amounting to
$68,000, $2,000,000 and $840,000, respectively for their participation as
underwriters in the public offering. Distributors is a wholly owned subsidiary
of the Berkeley Financial Group. The Adviser's indirect parent, John Hancock
Mutual Life Insurance Company, is the indirect sole shareholder of Distributors
and John Hancock Freedom Securities Corporation and its subsidiaries, which
include, Tucker Anthony and Sutro, which are broker-dealers.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
NOTE E --
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Unaudited quarterly results of operations for the period ended October 31, 1994
and the year ended October 31, 1995 are as follows:
<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 ............................................. 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>
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
OCTOBER 31, 1994
----------------
<S> <C>
Total Investment Income .......................................................................... $ 4,013
Net investment income ............................................................................ 2,729
Dividends from net investment income ............................................................. --
Net realized and unrealized loss on investments .................................................. (5,943)
Per share of beneficial interest:
Net investment income .......................................................................... 0.12
Dividends ...................................................................................... --
Net realized and unrealized loss on investments ................................................ (0.26)
Net asset value at end of quarter ................................................................ 18.00
Market value per share:
High ........................................................................................... 19.750
Low ............................................................................................ 17.875
</TABLE>
16
<PAGE> 17
John Hancock Funds - Bank and Thrift Opportunity Fund
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Trustees
John Hancock Bank and Thrift Opportunity Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of John Hancock Bank and Thrift Opportunity Fund
(the "Fund") as of October 31, 1995, the related statement of operations for the
year then ended and the statement of changes in net assets and the financial
highlights for the year ended October 31, 1995 and for the period August 23,
1994 (commencement of operations) to October 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1995 by correspondence with the custodian and brokers, where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund at October
31, 1995, the results of its operations, the changes in its net assets, and its
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
December 8, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund for its fiscal year ended October 31,
1995.
Shareholders will receive a 1995 U.S. Treasury Department Form 1099-DIV in
January of 1996. This will reflect the total of all distributions which are
taxable for the calendar year 1995.
For the fiscal year ending October 31, 1995, 100% of the ordinary income
distributions qualify for the dividends received deductions.
17
<PAGE> 18
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
dividend 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.
18
<PAGE> 19
John Hancock Funds - Bank and Thrift Opportunity Fund
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 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).
19
<PAGE> 20
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 PAID
So. Hackensack
Permit No. 750
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."]
[A recycled logo in lower left hand corner with caption "Printed on Recycled
Paper."]
