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SEMIANNUAL REPORT
[PHOTO OMITTTED]
Bank and Thrift
Opportunity
Fund
APRIL 30, 1998
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
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<PAGE>
TRUSTEES
Edward J. Boudreau, Jr.
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 H. 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 and Chief Operating Officer
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
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 LLP
60 State Street
Boston, Massachusetts 02109-1803
Listed New York Stock Exchange Symbol: BTO
John Hancock Closed-End Funds:
1-800-843-0090
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CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
During the last decade, investors have become used to seeing stock market
returns averaging 15% or so each year. In the past three years, the stock market
has treated us to a record run, producing annual returns in excess of 20%.
After such a long and remarkable performance, many began this year wondering
what the market would do for an encore in 1998. The answer so far has been more
of the same. This achievement continues to bolster many investors' convictions
that the market will produce these results forever, or, in the worst case, that
market declines will always be short-lived. While the economy remains solid and
the environment favorable, history and reason tell us it's a highly unlikely
scenario.
[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right, next to third paragraph.]
This doesn't mean we know what the market will do next, or that it's
riding for a fall. But after such a run, even in this "new era" of strong
economic growth with low inflation, we believe it would be wise for investors to
set more realistic expectations. As we've said before, markets do indeed move in
two directions, even though we've seen "up" much more than "down" recently. Over
the long term, the market's historical results have been more in the 10% per
year range, which is still a solid result, considering it has been produced
despite wars, depressions and other social upheavals along the way.
In addition to adjusting, or at least re-examining, expectations, now could also
be a good time to review with your investment professional how your assets are
diversified, perhaps with an eye toward a more conservative approach. Stocks,
especially with their outsized gains of the last three years, might have grown
to represent a larger piece of your portfolio than you had originally intended,
given your objectives, time horizon and risk level.
At John Hancock Funds, our goal is to help you reach your financial objectives
and maintain wealth. One way we can do that is by helping you keep your feet on
the ground as you pursue your dreams.
Sincerely,
/s/ Edward J. Boudreau
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
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By James K. Schmidt, CFA, Portfolio Management Team Leader and
Thomas Finucane and Thomas Goggins, Portfolio Managers
John Hancock Bank and
Thrift Opportunity Fund
Bank stocks heat up with consolidation fever;
---------------------------------------------
industry fundamentals are stellar
---------------------------------
After some Asia-related weakness in late 1997, U.S. financial markets continued
their exuberant ascent in 1998, fueled by the powerful combination of strong
economic growth and low inflation. For the six months ended April 30, 1998, the
Standard & Poor's 500 Stock Index, a commonly used gauge of the broader stock
market, returned 22.49%, including reinvested dividends. As they have for the
last several years, large-company stocks led the market's charge.
Banks and other financial stocks also performed well. Mirroring the broad
market, the large superregional and money center bank stocks outperformed their
smaller counterparts. For the six months ended April 30, 1998, John Hancock Bank
and Thrift Opportunity posted a very strong absolute total return of 20.96% at
net asset value. That result was equal to the market's performance for all of
1997. Because the Fund's emphasis is on regional and community banks, rather
than on the larger banks that outperformed, our results were just behind the
average open-end financial services fund's return of 22.51%, according to Lipper
Analytical Services, Inc.
"The past six months have marked a period of frenzied merger activity..."
Performance review
The single most important factor contributing to the financial sector's success
is the ideal macroeconomic environment.
[A 2 1/4" x 3 3/4" photo at bottom of page of fund management team. Caption
reads "Fund management team members (l-r): (standing) Jay Mckelvey, Tom Goggins,
and Tom Finucane, (seated) Lisa Welch, Jim Schmidt and Patricia Ouimet.]
3
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John Hancock Funds - Bank and Thrift Opportunity Fund
[Chart at the top of left hand column with the heading "Top Five Common Stock
Holdings". The chart lists five holdings: 1.) National City Corp. 5.3%; 2.)
Summit Bancorp 4.3%; 3.) U.S. Bancorp 4.2%; 4.) NationsBankCorp. 4.0% and 5.)
First Union Corp. 3.6%. A note below the chart reads "As a percentage of net
assets on April 30, 1998".]
"...earnings in 1998 have generally equaled or surpassed expectations."
A string of mergers involving banks of all size levels, and healthy earnings
reports also helped our cause. But these two positives were made even more
robust by the moderate, sustainable growth, low inflation and stable interest
rates this country has experienced over the last few years. As long as these
economic conditions exist, we believe the bank and thrift sector will deliver
the bottom-line results and the consolidation wave will roll on.
Consolidation results in mega-banks
The past six months have marked a period of frenzied merger activity in the bank
world. The highlight of late 1997 was the First Union-CoreStates blockbuster, a
$17 billion transaction. However, 1998's merger activity has already
overshadowed that. April 13 became the most dramatic date in the annals of bank
consolidation as two mega-deals were announced.
The proposed merger of NationsBank and BankAmerica would create by far the
largest bank in the United States. Despite having coast-to-coast span and a
multiple of any other bank's market share, the "new" BankAmerica still falls
short of being a national banking institution. It will still fail to cover 28
states and will have no presence at all in populous states such as New York,
Ohio, and Michigan. The "other" merger of April 13, which would have dominated
banking news on any other day, was between Banc One and First Chicago. This deal
will create a banking company with approximately $240 billion in assets that
will rank as the nation's sixth largest. These deals, coupled with the merger of
Citicorp and Travelers into Citigroup that was announced a week earlier,
substantially increase the pressure for industry consolidation. The U.S. banking
system is on a path to more closely resemble those of other developed economies,
where a handful of institutions control most of the assets.
The asset size needed to join the surviving class of mega-banks keeps being
raised, and in this sense the pressure is increased on remaining large banks to
gain scale. Banks in the $30 billion to $80 billion range are no longer too big
to be acquisition targets. We think that the "mortality rate" through mergers
will be highest among banks in this size category. Importantly, the April
mega-mergers resulted in no earnings dilution to any of the banks involved and
had neutral or positive impacts on their stocks. Thus, we think the market will
not discourage similar transactions.
At the same time, there will also continue to be several thousand community
banks, many of which will continue to thrive and find their opportunities are
actually enhanced by the large bank mergers.
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Comerica,
Inc. followed by an up arrow with the phrase "Market recognized fundamental
strengths". The second listing is Capital Corp. of the West followed by an arrow
pointing to the left and right with the phrase "Questions about asset quality".
The third listing is Mercantile Bancorp followed by a down arrow and the phrase
"Market mistrusts aggressive acquisition strategy". A note below the table reads
"See 'Schedule of Investments.' Investment holdings are subject to change."]
4
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John Hancock Funds - Bank and Thrift Opportunity Fund
[Bar chart at top of left hand column with the heading "Fund Performance". Under
the heading is a note that reads "For the six months ended April 30, 1998". The
chart is scaled in increments of 5% with 0% at the bottom and 25% at the top.
The first bar represents the 20.96% total return for the John Hancock Bank and
Thrift Opportunity Fund. The second bar represents the 22.51% total return for
the average open-end financial services fund. A note below the chart reads
"Total returns for John Hancock Bank and Thrift Opportunity Fund are at net
asset value with all distributions reinvested. The average open-end financial
services fund is tracked by Lipper Analytical Services, Inc.]
A byproduct of the Citigroup merger, in our view, is increased likelihood that
Congress will enact financial services reform legislation. The bill under
consideration will create financial services holding companies that could own
commercial banks, securities brokers, and insurance underwriters. We think that
this change will prove to be more beneficial to other financial companies than
to banks, which is why the banking industry has not supported the legislation.
In 1997, the Fund witnessed a record 22 of its holdings announce mergers; in
1998 the merger tally stands at seven. These deals were dispersed across banks
of all sizes. We expect numerous additional transactions in the coming months.
We have observed often in the past that mergers beget mergers, and a few
landmark deals give other managements the incentive to negotiate like
transactions. The timing of such mergers is likely to be affected by the need to
revamp computer systems to be capable of properly recognizing and processing
dates when the new century arrives on January 1, 2000 (the "Y2K" problem). For
the next six months, activity could increase as institutions scrambling to meet
their Y2K deadlines will be induced to strike deals now and avoid the problem
totally. Subsequently, in early 1999, we could witness a brief hiatus in mergers
because systems would have to be combined perilously close to the magic date.
"...regional banks continue to represent attractive values..."
Earnings on track, valuations attractive Following an enormously fruitful 1997,
earnings in 1998 have generally equaled or surpassed expectations. The continued
economic conditions that are so ideal for bank stocks have enabled our companies
to report 12% year-over-year earnings growth in the first quarter of 1998.
Across the gamut of banks and thrifts, loan quality is very good, margins
generally remain stable, expense controls have been excellent and stock
repurchases continue to counter capital build-up. Decreasing levels of
write-offs and delinquent loans have lessened earlier worries about consumer
credit quality. In addition, the Asian economic swoon and gyrating U.S.
long-term interest rates have had little effect on the broad underlying strength
of the domestic economy. Thus, both loan demand and credit trends continue to
maintain a positive balance between quantity and quality. Given our outlook for
continued cooperation on the macro-economic front, we believe the average bank
firm can show 10% plus earnings increases over 1997.
In retrospect, merger speculation caused some of our favorite regional bank
stocks, such as Fund holdings Union Planters Corp., Mercantile Bancorp and
Summit Bancorp, to become overvalued at the end of 1997. These stock prices have
since declined from their year-end level and are once again reasonably priced.
Indeed, bank stocks have become less expensive than
5
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John Hanock Funds - Bank and Thrift Opportunity Fund
they were compared to the overall market. As a group, their price-earnings
multiple relative to the overall market declined from 80% at the end of 1997 to
the current level of 73%. That means bank stocks are 27% percent cheaper than
the market as a whole. We believe that regional banks continue to represent
attractive values, offering predictable, consistent earnings streams and ongoing
consolidation potential for less than the price of the market's average stock.
"...the seven-year-old U.S. economic expansion still has legs..."
Fund activity
Overall, the Fund's investment focus has not wavered. We seek capital
appreciation by holding a portfolio of small- and mid-cap regional bank and
thrift stocks that have healthy fundamentals and may stand in the path of
consolidation. Currently, we see no need to overweight any specific geographic
regions, because, with the exception of Hawaii, every state is enjoying steady
growth. Over time, the Fund has built up substantial positions in several
superregional banks that were inherited through mergers. As market conditions
and relative valuations dictate, the Fund will continue to reduce these
positions to maintain our focus on the regional banks. In this period, we took
advantage of their rising stock prices to reduce our holdings in NationsBank and
U.S. Bancorp. In addition, we also have been reducing the Fund's holdings in
savings and loans, many of which have converted to public ownership and are now
buying back stock at attractive levels. We reinvested the money into some of the
regional and community banks, such as First Tennessee National and Associated
Banc-Corp., when their stock prices were attractive compared to their larger
counterparts.
Outlook
Our outlook for bank stocks and the economy in general remains upbeat. As long
as the current backdrop of solid economic growth, low interest rates and tame
inflation remains, we believe the seven-year-old U.S. economic expansion still
has legs and can go well into 1998 without producing inflationary side effects.
This positive macroeconomic picture, combined with continued bank mergers and a
favorable regulatory environment, keeps us encouraged about the prospects for
bank and thrift stocks.
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the end of
the Fund's period discussed in this report. Of course, the managers' views are
subject to change as market and other conditions warrant.
Sector investing is subject to different, and sometimes greater, risks than the
market as a whole.
6
<PAGE>
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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 April 30, 1998. You'll also
find the net asset value for each common share as of that date.
Statement of Assets and Liabilities
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value -D Note C:
Common stocks and warrant
(cost- $381,242,350) ................ $1,115,927,201
Preferred stocks (cost - $11,225,000).. 13,770,250
Bonds (cost - $20,882,875) ............ 22,124,500
Short-term investments
(cost - $66,845,167) ................ 66,845,167
--------------
1,218,667,118
Cash .................................. 26,838
Receivable for investments sold ....... 7,456,531
Interest receivable ................... 541,402
Dividends receivable .................. 3,137,979
Deferred organization expenses -
Note A ............................... 21,114
Other assets .......................... 46,179
--------------
Total Assets ................ 1,229,897,161
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Liabilities:
Payable for investments purchased ..... 6,196,614
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .............. 1,339,222
--------------
Total Liabilities ........... 7,535,836
---------------------------------------------------------------------
Net Assets:
Capital paid-in ....................... 435,267,021
Accumulated net realized gain on
investments ........................... 43,879,363
Net unrealized appreciation of
investments ........................... 738,477,603
Undistributed net investment
income ................................ 4,737,338
--------------
Net Assets .................. $1,222,361,325
=====================================================================
Net Asset Value Per Share:
(Based on 88,400,000 shares of beneficial
interest outstanding -D unlimited number of
shares authorized with no par value)... $13.83
===============================================================================
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.
Statement of Operations
Six months ended April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends (including $449,724 received from affiliated
issuers and net of foreign withholding taxes of
$20,729) ............................. $11,466,776
Interest .............................. 2,709,831
--------------
14,176,607
--------------
Expenses:
Investment management fee- Note B ..... 6,315,425
Administration fee- Note B ............ 1,372,919
New York Stock Exchange fee ........... 115,342
Printing .............................. 80,963
Custodian fee ......................... 80,392
Trustees' fees ........................ 40,905
Auditing fee .......................... 17,447
Transfer agent fee .................... 13,622
Miscellaneous ......................... 12,324
Legal fees ............................ 8,653
Organization expenses- Note A ......... 7,911
--------------
Total Expenses ............. 8,065,903
---------------------------------------------------------------------
Net Investment Income ...... 6,110,704
---------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold
(including $213,875 on sales of investments
in affiliated issuers) ............. 43,879,722
Change in net unrealized appreciation/depreciation
of investments ...................... 175,985,947
--------------
Net Realized and Unrealized
Gain on Investments ........ 219,865,669
---------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations .. $225,976,373
=====================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
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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
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ................................... $12,354,294 $6,110,704
Net realized gain on investments sold ................... 52,635,494 43,879,722
Change in net unrealized appreciation/
depreciation of investments ............................. 308,986,988 175,985,947
-------------- --------------
Net Increase in Net Assets Resulting
from Operations ........................................ 373,976,776 225,976,373
-------------- --------------
Distributions to Shareholders:
Dividends from net investment income ($0.0297 and
$0.1400 per share, respectively) ........................ (2,629,876) (12,375,469)
Distributions from net realized
gain on investments sold ($0.0333 and
$0.5955 per share, respectively) ........................ (2,946,969) (52,637,780)
-------------- --------------
Total Distributions to Shareholders ..................... (5,576,845) (65,013,249)
-------------- --------------
From Fund Share Transactions - Net:*....................... (8,677,032) -
-------------- --------------
Net Assets:
Beginning of period ..................................... 701,675,302 1,061,398,201
-------------- --------------
End of period (including undistributed
net investment income of $11,002,103
and $4,737,338, respectively) ............................. $1,061,398,201 $1,222,361,325
============== ==============
* Analysis of Fund Share Transactions:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
------- ------- -------- -------
<S> <C> <C> <C> <C>
Shares outstanding, beginning
of period ........................ 9,588,400 $443,944,053 88,400,000 $435,267,021
Less shares repurchased .......... (1,188,400) (8,677,032) - -
Shares outstanding, end ----------- ------------- ---------- -----------
of period ........................ 88,400,000 $435,267,021 88,400,000 $435,267,021
========== ============ ========== ===========
</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 last
two periods, 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
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM AUGUST 23, 1994 YEAR ENDED OCTOBER 31, SIX MONTHS ENDED
(COMMENCEMENT OF OPERATIONS) ------------------------------ APRIL 30, 1998
TO OCTOBER 31, 1994 1995 1996 1997 (UNAUDITED)
------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance(1)
Net Asset Value, Beginning of Period ..... $5.00 $4.95 $6.62 $7.83 $12.01
-------- -------- ------- ------ -------
Net Investment Income .................... 0.03 0.13 0.14 0.14 0.07
Net Realized and Unrealized Gain
(Loss) on Investments .................... (0.07) 1.60 1.64 4.08 2.49
-------- -------- ------- ------- -------
Total from Investment Operations ......... (0.04) 1.73 1.78 4.22 2.56
-------- -------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income...... - (0.06) (0.23) (0.03) (0.14)
Distributions from Net Realized Gain
on Investments Sold ...................... - - (0.38) (0.03) (0.60)
-------- -------- ------- ------- -------
Total Distributions ...................... - (0.06) (0.61) (0.06) (0.74)
-------- -------- ------- ------- -------
Common Shares Offering Costs ............. (0.01) - - - -
-------- -------- ------- ------- -------
Increase due to Purchase of Bank and
Thrift Opportunity Fund Stock at less
than Net Asset Value ..................... - - 0.04 0.02 -
-------- -------- ------- ------- -------
Net Asset Value, End of Period ........... $4.95 $6.62 $7.83 $12.01 $13.83
======== ======== ======= ======== =======
Per Share Market Value, End of Period .... $4.50 $5.69 $6.75 $10.64 $13.25
======== ======== ======= ======== =======
Total Investment Return at Market Value... (10.00%)(3) 27.91% 29.78% 58.95% 30.80%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted).. $455,656 $608,724 $701,675 $1,061,398 $1,222,361
Ratio of Expenses to Average Net Assets.. 1.51%(2) 1.49% 1.50% 1.45% 1.47%(2)
Ratio of Net Investment Income to
Average Net Assets ...................... 3.22%(2) 2.22% 1.96% 1.42% 1.08%(2)
Portfolio Turnover Rate ................ 0% 8% 13% 9% 4%
(1) All per share amounts and net asset values have been restated to reflect
the four-for-one stock split effective December 2, 1997.
(2) Annualized.
(3) Not annualized.
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for each 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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Bank and Thrift Opportunity Fund on April 30, 1998. It's divided into four main
categories: common stocks and warrant, preferred stocks, bonds and short-term
investments. The common stocks and preferred stocks are further broken down by
industry groups. Short-term investments, which represent the Fund's "cash"
position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS AND WARRANT
Banks - Foreign (2.24%)
Allied Irish Banks PLC,
American Depositary Receipts (Ireland)....... 79,000 $6,557,000
Oriental Financial Group (Puerto Rico)....... 11,100 ` 462,038
Popular, Inc. (Puerto Rico).................. 290,000 20,372,500
-----------
27,391,538
-----------
Superregional Banks (14.08%)
First Union Corp. (NC) ...................... 723,125 43,658,672
Fleet Financial Group, Inc. (MA)............. 235,206 20,315,918
NationsBank Corp. (NC) ...................... 639,610 48,450,457
Norwest Corp. (MN) .......................... 528,102 20,959,048
PNC Bank Corp. (PA).......................... 641,500 38,770,656
-----------
172,154,751
-----------
Regional Banks (61.40%)
ABC Bancorp. (GA)............................ 59,500 1,033,813
Alabama National Bancorp. (AL) .............. 130,000 4,160,000
American Bancorp. (WV) ...................... 35,000 883,750
American Bancshares, Inc.* (FL) ............. 64,500 838,500
Associated Banc-Corp. (WI)................... 71,036 3,729,390
BancFirst Corp. (OK) ........................ 72,500 3,262,500
BancFirst Ohio Corp. (OH).................... 41,000 2,121,750
BancorpSouth, Inc. (MS) ..................... 59,000 2,629,187
Bank of Rhode Island * (RI) ................. 20,500 366,438
Bank of the Ozarks, Inc. (AR) ............... 60,000 2,085,000
Banknorth Group, Inc. (VT) .................. 126,000 4,567,500
BB&T Corp. (NC) ............................. 528,880 35,567,180
BCB Financial Services Corp. (PA)............ 27,500 821,563
Beverly Bancorp., Inc. (IL) ................. 45,150 1,179,544
Beverly National Corp. (MA) ................. 50,000 1,025,000
BNCCorp, Inc.* (ND).......................... 57,500 $1,135,625
Broad National Bancorp. (NJ)................. 96,139 2,042,954
BT Financial Corp. (PA) ..................... 18,950 1,099,100
BYL Bancorp. (CA) ........................... 110,000 2,392,500
California State Bank (CA) .................. 83,200 4,305,600
Cape Cod Bank & Trust Co. (MA) .............. 67,500 2,835,000
Capital Corp. of the West * (CA) ............ 57,000 812,250
Carolina First Corp. (SC) ................... 43,890 1,272,810
CCB Financial Corp. (NC) .................... 110,025 11,965,219
Centura Banks, Inc. (NC) .................... 82,500 5,940,000
Century Financial Corp. (PA) ................ 70,000 1,925,000
Chittenden Corp. (VT) ....................... 83,827 3,143,512
City National Corp. (CA) .................... 44,977 1,672,582
CNB Bancshares, Inc. (IN).................... 44,963 2,203,187
Colonial BancGroup, Inc. (AL)................ 756,500 27,139,437
Columbia Bancorp. (MD) ...................... 53,000 1,934,500
Comerica, Inc. (MI) ......................... 257,250 17,219,672
Commercial Bankshares, Inc. (FL)............. 40,110 975,174
Commonwealth Bankshares, Inc.* (VA) ......... 34,523 517,845
Community Banks, Inc. (PA) .................. 34,650 1,394,663
Community Bankshares, Inc. (VA) ............ 38,162 1,106,698
Compass Bancshares, Inc. (AL) ............... 543,905 26,379,392
Cowlitz Bancorp. * (WA) ..................... 42,500 584,375
Crestar Financial Corp. (VA) ................ 569,076 34,037,858
Desert Community Bank (CA) .................. 49,500 1,621,125
DNB Financial Corp. (PA) .................... 47,478 1,637,991
Empire Banc Corp. (MI) ...................... 21,126 1,151,367
Evergreen Bancorp., Inc. (NY) ............... 54,800 1,602,900
F & M National Corp.* (VA) .................. 16,000 516,000
First American Corp. (TN) ................... 644,200 31,767,112
First Commerce Corp. (LA) ................... 360,000 29,295,000
First Financial Corp. (RI) .................. 84,000 1,407,000
First Hawaiian, Inc. (HI) ................... 47,000 1,844,750
First Security Corp. (UT) ................... 391,250 9,585,625
First State Bancorp. (NM).................... 82,625 1,993,328
First Tennessee National Corp. (TN) ......... 241,400 8,313,212
First Victoria National Bank (TX) ........... 48,100 1,984,125
Firstar Corp. (WI) .......................... 275,352 10,274,071
F.N.B. Corp. (PA) .......................... 45,166 1,682,434
FNB Bankshares (ME) ......................... 20,780 709,014
FNB Financial Services Corp. (NC) ........... 40,000 930,000
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Regional Banks (continued)
FNB Rochester Corp. (NY) .................... 24,500 $496,125
Harleysville National Corp. (PA)............. 46,000 1,937,750
Imperial Bancorp.* (CA) ..................... 196,657 5,764,508
Independent Bankshares, Inc. (TX) ........... 32,500 593,125
Keystone Financial, Inc. (PA) ............... 129,850 5,064,150
Magna Group, Inc. (MO) ...................... 115,500 6,828,937
Mahaska Investment Co. (IA) ................. 249,171 5,481,762
Mahoning National Bancorp. (OH) ............. 68,600 2,606,800
Marathon Financial Corp. (VA) ............... 15,000 125,625
Mercantile Bancorp., Inc. (MO) .............. 502,450 27,823,169
MetroBanCorp. (IN) .......................... 51,450 546,656
Midwest Banc Holdings, Inc. (IL)............. 45,000 866,250
Mississippi Valley Bancshares, Inc. (MO)..... 92,500 3,754,922
National City Corp. (OH) .................... 929,340 64,356,795
New England Community Bancorp.
(Class A) (CT) ............................. 208,500 5,160,375
North Fork Bancorp., Inc. (NY) .............. 234,100 8,690,962
Old Kent Financial Corp. (MI) ............... 361,454 14,051,524
One Valley Bancorp., Inc. (WV) .............. 134,590 5,232,186
Pacific Century Financial Corp. (HI) ........ 602,500 14,874,219
Prime Bancshares, Inc.* (TX)................. 13,500 361,125
Provident Bankshares Corp. (MD) ............. 338,343 10,996,147
Regions Financial Corp. (AL)................. 174,912 7,630,536
Riggs National Corp. (DC) ................... 55,000 1,584,688
Salem Bank & Trust (VA) ..................... 44,990 877,305
Santa Barbara Bancorp. (CA) ................. 45,000 1,260,000
Security Bank Corp.* (VA).................... 31,000 372,000
Shore Financial Corp.* (VA) ................. 17,250 213,469
Six Rivers National Bank* (CA) .............. 33,500 640,688
Southtrust Corp. (AL) ....................... 720,000 30,735,000
Southwest Bancorp. of Texas, Inc.* (TX) ..... 98,990 3,959,600
Southwest Bancorp., Inc. (OK) ............... 10,500 330,750
Summit Bancorp. (NJ) ........................ 1,038,305 52,045,038
Summit Bancshares, Inc. (TX) ................ 227,400 5,102,287
Sun Bancorp., Inc. * (NJ) ................... 154,030 4,851,945
Surety Capital Corp.* (TX) .................. 253,700 1,363,638
TCF Financial Corp. (MN) .................... 50,008 1,628,386
Tehama Bancorp. (CA) ........................ 56,552 940,177
Texas Regional Bancshares, Inc.
(Class A) (TX) .............................. 44,750 1,476,750
TriCo Bancshares (CA) ....................... 20,500 630,375
UCBH Holdings, Inc.* (CA) (r)............... 133,333 1,999,995
Union Planters Corp. (TN) ................... 706,975 43,478,962
United Security Bancorp.* (WA) .............. 172,215 3,853,311
Univest Corp. (PA) .......................... 25,000 1,762,500
U.S. Bancorp. (OR) .......................... 399,828 50,778,156
Regional Banks (continued)
U.S. Trust Corp. (NY) ....................... 52,000 $3,692,000
Vermont Financial Services Corp. (VT)........ 78,000 2,281,500
VRB Bancorp. (OR) ........................... 32,500 357,500
West Coast Bancorp. (OR) .................... 91,280 2,384,690
Western Bancorp. (CA) ....................... 11,000 472,313
Whitney Holding Corp. (LA) .................. 148,000 9,009,500
Yardville National Bank (NJ) ................ 98,400 1,820,400
Zions Bancorp. (UT) ......................... 52,875 2,703,234
-----------
750,470,927
===========
Thrifts (11.67%)
Bank Plus Corp.* (CA) ....................... 36,358 511,284
Bank West Financial Corp. (MI) .............. 168,000 2,373,000
BostonFed Bancorp., Inc. (MA) ............... 106,000 2,583,750
Cameron Financial Corp. (MO)................. 75,000 1,584,375
CitFed Bancorp, Inc. (OH) ................... 48,000 2,544,000
Commercial Federal Corp. (NE) ............... 69,758 2,528,727
Community Financial Corp. (IL) .............. 20,000 460,000
CSB Financial Group, Inc.* (IL) ............. 10,000 136,250
Dime Bancorp., Inc. (NY) .................. 24,500 751,844
Financial Bancorp., Inc. (NY) ............... 70,000 1,855,000
First Colorado Bancorp., Inc. (CO)........... 96,000 2,808,000
First Defiance Financial Corp. (OH).......... 90,885 1,363,275
First Federal Capital Corp. (WI) ............ 31,000 1,100,500
First Keystone Financial, Inc. (PA) ......... 40,000 825,000
First SecurityFed Financial, Inc.* (IL) ..... 65,000 1,088,750
First Source Bancorp., Inc. (NJ)............. 75,000 796,875
GA Financial, Inc. (PA) ..................... 72,500 1,431,875
Golden State Bancorp., Inc.* (CA)............ 33,000 1,287,000
GreenPoint Financial Corp. (NY) ............. 630,000 25,003,125
Guaranty Financial Corp. (VA)................ 30,000 465,000
Highland Bancorp., Inc. (CA) ................ 79,167 3,245,847
Hingham Institute for Savings (MA)........... 60,000 2,115,000
HMN Financial, Inc.* (MN) ................... 36,500 976,375
InterWest Bancorp., Inc. (WA) ............... 21,900 973,181
ISB Financial Corp. (LA) .................... 120,000 3,420,000
Lawrence Savings Bank* (MA) ................. 70,000 1,242,500
Little Falls Bancorp., Inc. (NJ) ............ 105,000 2,231,250
Local Financial Corp. (DE) (R) .............. 310,000 4,030,000
Long Island Bancorp., Inc. (NY).............. 174,200 11,497,200
New Hampshire Thrift Bancshares, Inc.
(NH) ........................................ 25,000 515,625
North Central Bancshares, Inc. (IA) ......... 55,000 1,326,875
Northwest Equity Corp. (WI) ................. 61,000 1,265,750
Pamrapo Bancorp., Inc. (NJ) ................. 86,000 2,408,000
Patriot Bank Corp. (PA) ..................... 51,600 915,900
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Thrifts (continued)
PennFed Financial Services, Inc. (NJ)........ 611,000 $10,921,625
PeopleOs Bancshares, Inc. (MA)............... 50,000 1,337,500
Peoples Heritage Financial Group, Inc. (ME).. 59,854 2,887,956
Pittsburgh Home Financial Corp. (PA)......... 100,000 1,800,000
Quaker City Bancorp., Inc.* (CA) ............ 80,000 1,810,000
St. Landry Financial Corp.* (LA)............. 25,000 443,750
Scotland Bancorp., Inc. (NC)................. 22,500 202,500
SFC Acquisition Corp. (AR) (r) .............. 150,000 1,500,000
SGV Bancorp., Inc.* (CA) .................... 20,000 360,000
SIS Bancorp., Inc. (MA) ..................... 92,000 3,933,000
Southern Missouri Bancorp., Inc. (MO)........ 40,700 854,700
Sovereign Bancorp., Inc. (PA) ............... 15,688 296,111
Stone Street Bancorp., Inc. (NC) ............ 3,500 70,438
Sturgis Federal Savings Bank (MI) ........... 40,500 1,316,250
Teche Holding Co. (LA) ...................... 80,000 1,675,000
Warren Bancorp., Inc. (MA) .................. 70,000 1,925,000
Washington Mutual, Inc. (WA)................. 222,300 15,574,894
Wells Financial Corp.* (MN) ................. 122,000 2,592,500
WesterFed Financial Corp. (MT)............... 209,162 5,490,502
-------------
142,652,859
-------------
Other (1.31%)
Capital One Financial Corp. (VA) ............ 167,000 16,042,438
Core Cap, Inc.* (Class A) (NY) (r)........... 500 10,000
------------
16,052,438
-------------
WARRANT (0.59%)
Golden State Bancorp., Inc.* (CA) ........... 265,000 7,204,688
-------------
TOTAL COMMON STOCKS
AND WARRANT
(Cost $381,242,350) (91.29%) 1,115,927,201
---------- -------------
PREFERRED STOCKS
Banks & Thrifts (1.13%)
Astoria Financial Corp., Ser B, 12.00%
(NY) ........................................ 50,000 1,650,000
Chevy Chase Savings, 13.00% (MD)............ 55,000 1,705,000
Community Bank, Ser B, 13.00%(CA)............ 21,000 582,750
First Preferred Capital I, 9.25% (MO)....... 50,000 1,337,500
IFC Capital Trust I, 9.25% (IN) ............. 40,000 1,075,000
Matewan BancShares, Inc., Ser A,
7.50% (WV) .................................. 25,000 737,500
MVBI Capital Trust, 7.46% ** (MO) ......... 40,000 1,000,000
Riggs National Corp., Ser B, 10.75% (DC).... 93,000 2,557,500
Sovereign Bancorp., Ser B, 6.25% (PA)....... 15,000 2,040,000
Sterling Bancshares Capital Trust I,
9.28% (TX) .................................. 20,000 535,000
Banks & Thrifts (continued) VBC Capital I,
9.50% (CO) .................................. 20,000 $537,500
-------------
13,757,750
-------------
Other (0.00%)
Core Cap, Inc., Ser A/I, 10.00% (NY) (r) .... 500 12,500
-------------
TOTAL PREFERRED STOCKS
(Cost $11,225,000) ................. (1.13%) 13,770,250
---------- -------------
INTEREST PAR VALUE MARKET
RATE (000s OMITTED) VALUE
---- -------------- -----
BONDS
BFC Capital Trust I,
Capital Securities, Ser A,
01-15-27 .................................... 9.650% $250 274,375
CENFED Financial Corp. (R),
Sr Note 12-15-01 ............................ 11.170 3,500 3,880,625
Coastal Bancorp., Inc.,
Sr Note 06-30-02 ............................ 10.000 3,000 3,090,000
CSBI Capital Trust I (R),
Sub Cap Income, Ser A,
06-06-27 .................................... 11.750 770 816,200
Dime Bancorp.,
Sr Note 11-15-05 ............................ 10.500 3,690 3,948,300
Fidelity Federal Bancorp.,
Sub Note 06-01-05 ........................... 10.000 1,000 980,000
First Federal Financial Corp.,
Note 10-01-04 ............................... 11.750 2,000 2,210,000
MAF Bancorp., Inc.,
Sub Note 09-30-05 ........................... 8.320 1,500 1,485,000
ML Capital Trust I,
Capital Securities 03-01-27 ................. 9.875 1,000 1,150,000
Ocwen Federal Bank,
Sub Deb 06-15-05 ............................ 12.000 1,000 1,110,000
WSFS Financial Corp.,
Sr Note 12-31-05 ............................ 11.000 3,000 3,180,000
-------------
TOTAL BONDS
(Cost $20,882,875) ................. (1.81%) 22,124,500
------- -------------
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
INTEREST PAR VALUE MARKET
RATE (000s OMITTED) VALUE
---- -------------- -----
SHORT-TERM INVESTMENTS
Certificates of Deposit (0.01%)
Deposits in Mutual Banks .............. $57,167
-------------
Joint Repurchase Agreement (5.46%)
Investment in a joint repurchase
agreement transaction with
Toronto Dominion Securities
USA, Inc.-D Dated 04-30-98,
due 05-1-98 (Secured by
U.S. Treasury Notes,
5.00% thru 9.125%, due
02-15-99 thru 07-31-00)
- -DNote A ............................... 5.500% $66,788 66,788,000
--------------
TOTAL SHORT-TERM INVESTMENTS (5.47%) 66,845,167
--------------
TOTAL INVESTENTS (99.70%) 1,218,667,118
--------------
OTHER ASSETS AND LIABILITIES, NET (0.30%) 3,694,207
--------------
TOTAL NET ASSETS (100.00%) $1,222,361,325
==============
NOTES TO SCHEDULE OF INVESTMENTS
* Non-income producing security.
** Floating rate effective April 30, 1998.
(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 $8,726,825 as of April 30, 1998.
(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. Additional information on these restricted securities
is as follows:
<TABLE>
<CAPTION>
MARKET MARKET
VALUE AS A VALUE
PERCENTAGE AS OF
ACQUISITION ACQUISITION OF FUND'S APRIL 30,
DATE COST NET ASSETS 1998
---- ---- ---------- ----
<S> <C> <C> <C> <C>
Core Cap, Inc.
(Common Stock) ................ 10-31-97 $10,000 0.00% $10,000
(Preferred Stock) ............. 10-31-97 12,500 0.00 12,500
SFC Acquisition Corp. ......... 03-30-98 1,500,000 0.12 1,500,000
UCBH Holdings, Inc. ........... 04-16-98 2,000,000 0.16 1,999,995
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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,
Inc., purchased a total of 20,000 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.
On November 7, 1997 the Board of Trustees of the Fund voted to split the shares
four for one, effective December 2, 1997. All per share amounts and net asset
values have been restated to reflect the stock split.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group,
Inc., may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more large repurchase agreements, whose
underlying securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
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.
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.
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 operations
of the Fund.
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. Actual results could differ from these estimates.
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.
14
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls will tend to increase the Fund's exposure to the
underlying instrument, and buying puts and writing calls will tend to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited to the
premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value will reflect the maximum exposure
of the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit risk may
involve amounts in excess of those reflected in the Fund's period-end Statement
of Assets and Liabilities.
There were no written option transactions for the period ended April 30, 1998.
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.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S. Scipione are
trustees 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 20,000 shares of beneficial interest of the Fund. The
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund makes investments into other John Hancock Funds, as applicable, to
cover its liability for the deferred compensation. Investments to cover the
Fund's deferred compensation liability are recorded on the Fund's books as an
other asset. The deferred compensation liability and the related 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,
1998, the Fund's investments to cover the deferred compensation liability had
unrealized appreciation of $5,877.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the year ended April 30, 1998, aggregated $42,930,671 and
$92,476,569, respectively.
The cost of investments owned at April 30, 1998 for federal income tax purposes
was $480,195,392.
Gross unrealized appreciation and depreciation of investments aggregated
$738,578,220 and $106,494, respectively, resulting in net unrealized
appreciation of $738,471,726.
NOTE D - CAPITAL
In connection with the Fund's initial public offering in August 1994, the Fund
recorded proceeds of $458,770,000, net of estimated offering costs of
$1,230,000, through the issuance of 92,000,000 common shares at $5.00 per share.
As of April 30, 1998, the Fund had incurred $1,156,818 of public offering
expenses and had adjusted capital paid-in for $73,182 which represents the
balance of estimated offering costs which the Fund does not expect to incur.
During the years ended October 31, 1996 and 1997, 2,431,600 shares and 1,188,400
15
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
shares, respectively, of the Fund's stock were purchased from stockholders at an
average discount of 18.0% from net asset value. These shares were retired and
restored to the status of authorized but unissued shares.
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, 1998 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) 112,000 - $- - $- 168,000(1) $- $10,080 $2,373,000
Bank Yorba Linda (CA) 110,000 - - - - 110,000 - 5,500 2,392,500
First Financial Corp. (RI) 94,000 - - 10,000 93,750 84,000 68,120 9,740 1,407,000
Mahaska Investment Co. (IA) 149,500 - - - - 249,171(2) - 67,784 5,481,762
MVBI Capital Trust (MO) 40,000 - - - - 40,000 - - 1,000,000
Northwest Equity Corp. (WI) 61,000 - - - - 61,000 - 18,910 1,265,750
Penn Fed Financial Services, Inc. (NJ) 305,500 - - - - 611,000(4) - 42,770 10,921,625
Pittsburgh Home Financial Corp. (PA) 100,000 - - - - 100,000 - 262,000 1,800,000
St. Landry Financial Corp. (LA) 25,000 - - - - 25,000 - - 443,750
Surety Capital Corp. (TX) 296,800 - - 43,100 140,075 253,700(3) 145,755 - -
Wells Financial Corp. (MN) 122,000 - - - - 122,000 - 32,940 2,592,500
------- -------- -------- -------- ---------
$- $233,825 $213,875 $449,724 $29,677,887
========= ======= ======= ==========
(1) Reflects three-for-two stock split as of December 3, 1997.
(2) Reflects five-for-three stock split as of November 12, 1997.
(3) As of April 30, 1998, no longer an affiliated issuer.
(4) Reflects two-for-one stock split as of February 11, 1998.
</TABLE>
16
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Bank and Thrift Opportunity Fund
SHAREHOLDER MEETING
On March 5, 1998, the Annual Meeting of John Hancock Bank and Thrift Opportunity
Fund (the "Fund") was held to elect four 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:
FOR AUTHORITY WITHHELD
Edward J. Boudreau, Jr. 82,209,531 643,781
Anne C. Hodsdon 82,172,651 680,661
Steven R. Pruchansky 82,205,287 648,025
Norman H. Smith 82,185,016 668,296
The shareholders also ratified the Trustees' selection of Deloitte
and Touche LLP as the Fund's independent auditors for the fiscal year ending
October 31, 1998, with the votes tabulated as follows: 82,011,104 FOR, 375,644
AGAINST and 466,653 ABSTAINING.
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.
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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 with at least 90 days' written notice to all shareholders of the Fund. All
correspondence concerning the Plan should be directed to the Plan Agent, State
Street Bank and Trust Company, at P.O. Box 8209, Boston, Massachusetts
02266-8209 (telephone 1-800-426-5523).
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[LOGO] JOHN HANCOCK FUNDS -----------------
A Global Investment Management Firm Bulk Rate
101 Huntington Avenue, Boston, MA 02199-7603 U.S. Postage
1-800-843-0090 PAID
INTERNET: www.jhancock.com/funds S. Hackensack, NJ
Permit No. 750
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[RECYCLE LOGO] Printed on Recycled Paper P90SA 4/98
6/98
