The latest report from your
Fund's management team
SEMIANNUAL REPORT
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[GRAPHIC OMITTED]
Bank and Thrift
Opportunity Fund
APRIL 30, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
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TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Harold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
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
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
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
For Shareholder Assistance
Refer to Page 18
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DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting ready
to celebrate this historic transition to a new millennium. At John Hancock
Funds, we share the excitement, but we aren't popping the champagne corks just
yet. Rather, we are staying on the course that we set more than two years ago to
ensure that the transition to a new millennium is a smooth one for our
shareholders.
As many already know, the Year 2000 has created more than the prospect of New
Year's festivities of epic proportions. It has also presented the world with a
challenge: making sure that older computers, and any equipment powered by
computer chips, can properly read and process the date "00" as 2000, not 1900.
Much has been written about how the world will weather the change. Some view it
as a non-event, while others see the potential for disruptions. How much
disruption, and for how long, depends on whom you talk to.
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[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
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As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an important
issue to be dealt with and we have made it a top priority. Two years ago, John
Hancock Funds put a full-time team of experts on the case and established a
company-wide program to evaluate all computer applications and to modify or
replace those that needed changing.
These modifications and replacements are nearly done, and the tests of all our
systems are on schedule for completion by the end of July. The rest of 1999 will
be spent testing with our business partners and continuing to participate in
industry testing. We have also established additional contingency plans beyond
our regular ones to prepare for any challenges that the Year 2000 might present.
In the end, John Hancock will spend approximately $90-$95 million to ensure we
make a successful transition to the Year 2000.
Throughout 1999, each of our quarterly "Fundamentals" newsletters is featuring
articles with more detailed information on Y2K matters of importance to our
shareholders. I encourage you to read them, or contact one of our Customer
Service Representatives at 1-800-225-5291 for another copy. For your own peace
of mind, we also recommend that you save your 1999 statements, especially those
you receive between October and December, so that you are able to check them
against the first one you receive in 2000. It's a measure of prudence, not
panic. Good record keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although we
cannot make any ironclad assurances, we are confident that the steps we have
taken will provide shareholders with as smooth a transition as possible. Once
that occurs, we will happily raise our glasses to toast the New Year, future
prosperity and our hopes to serve you well into the 2000's.
Sincerely,
/s/Edward J. Boudreau, Jr.
- -------------------------------------------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
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By James K. Schmidt, CFA, Portfolio Management Team Leader, and
Thomas Finucane and Thomas Goggins, Portfolio Managers
John Hancock Bank and
Thrift Opportunity Fund
Financial stocks rebound; large money-center banks
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lead the way, smaller banks lag
-------------------------------
Buoyed by a surprisingly strong U.S. economy, solid corporate earnings growth
and less turbulence overseas, the stock market staged a strong rebound over the
last six months. Even though the major indices reached new highs by the end of
April, the market grew increasingly two-tiered. A small group of large-company
growth stocks, many in the technology sector, generated the bulk of the market's
advance, while a much larger number of stocks lagged. Across most industries,
investors continued to favor growth stocks over value stocks and large companies
over small ones.
Financial stocks, which suffered more than many groups during last
year's global economic turmoil, spent the last six months making up lost ground.
Following the trend of the broader market, however, the largest financial
stocks, including brokerage firms and money-center banks, dominated the sector's
advance. Because of their exposure to emerging markets, money-center banks and
brokerage firms fell more than the regional banks last summer, and they also
benefited more when emerging markets stabilized. Investors had worried that
Asia's economic slowdown, followed by problems in Russia and Latin America,
would translate into a global recession and massive loan defaults. When that
scenario did not play out and emerging markets showed signs of recovery instead,
money-center banks and brokerage
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[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock Bank and
Thrift Opportunity Fund. Caption below reads "Fund management team members
(l-r): (standing) "Jay McKelvey, Tom Goggins and Tom Finucane; (seated) Lisa
Welch, Jim Schmidt and Patricia Ouimet."]
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"The smaller regional banks and thrifts that are the Fund's focus stayed in the
doldrums..."
3
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John Hancock Funds - Bank and Thrift Opportunity Fund
"...underlying trends that have made investing in bank stocks so successful
...have remained firmly in place."
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[Table at top left hand column entitled "Top Five Stock Holdings." The first
listing is National City Corp. 4.2%, the second is Bank of America 4.0%, the
third Summit Bancorp 3.9%, the fourth SunTrust Banks, Inc. 3.9% and the fifth
U.S. Bancorp 3.9%. A note below the table reads "As a percentage of net assets
on April 30, 1999."]
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firms saw their fundamentals improve and their stocks take off.
The smaller regional banks and thrifts that are the Fund's focus stayed
in the doldrums despite solid earnings growth, as investors shunned them for
much of the period in favor of the large, headline-grabbing names. Finally, we
saw this trend begin to reverse itself at the end of the period.
Performance review
As it did last year, John Hancock Bank and Thrift Opportunity Fund's emphasis on
smaller-cap stocks caused us to produce more modest results than our peers over
the last six months. Other financial services funds tend to have much heavier
concentrations in the largest banks and own the non-bank financial companies
that have dominated performance. For the six months ended April 30, 1999, the
Fund posted a total return of 8.38% at net asset value, compared to the 19.08%
return of the average open-end financial
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[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 Colonial
BancGroup followed by an up arrow with the phrase "Market sees value after
surprise loss in fourth quarter." The second listing is West Coast Bancorp
followed by a down arrow with the phrase "Fears over bank's strategic shift."
The third listing is Southwest Bancorp of Texas followed by a sideways arrow
with the phrase "Rebounds after market skittishness over energy." A note below
the table reads "See `Schedule of Investments.' Investment holdings are subject
to change."]
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services fund, according to Lipper, Inc.
As long-time Bank and Thrift Opportunity Fund shareholders know, the
Fund's strategy of buying ttractively valued regional banks with solid
fundamentals and the potential to benefit from merger activity has served us
very well over time. This latest period with its more modest performance
(something we expect periodically with market fluctuations) serves as a good
example of why we encourage shareholders to take a longer-term perspective to
sector-specific investing, which is more susceptible to short-term volatility.
Reasons for optimism
Despite short-term market fluctuations, the underlying trends that have made
investing in bank stocks so successful over the years have remained firmly in
place. In our view, that makes the case for financial stock investing as
compelling now as it has ever been. Catalysts include:
o Industry consolidation: One of the founding principles behind Bank
and Thrift Opportunity Fund was to capitalize on the passage of interstate
banking legislation in 1985 that sparked a wave of bank mergers. Indeed, the
number of individual institutions has dropped from around 14,000 in 1985 to just
under 9,000 today. The opportunities continue to abound, since the enduring
reason for these mergers - excess capacity in the U.S. banking system - will
serve as a catalyst for this process well into the 21st century.
Recently, the number of bank deals abated; nevertheless eight of the
Fund's holdings announced mergers during the last six months - five of them
since January. The largest transaction was the announcement in March that
Boston's Fleet Bank would acquire BankBoston.
4
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John Hancock Funds - Bank and Thrift Opportunity Fund
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[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the six months ended April 30, 1999." The
chart is scaled in increments of 5% with 0% at the bottom and 20% at the top.
The first bar represents the 8.38% total return for John Hancock Bank and Thrift
Opportunity Fund . The second bar represents the 19.08% total return for Average
open-end financial services fund. A note below the chart reads "The total return
for John Hancock Bank and Thrift Opportunity Fund is at net asset value with all
distributions reinvested. The average open-end financial services fund is
tracked by Lipper, Inc."]
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We think the merger is a good one that should provide the banks with cost
savings and increased future earnings. Because of the overlapping geography of
these two banks, we believe Fleet will be able to easily achieve the
efficiencies they have promised.
Even though merger activity slowed in this period, the reasons appear
to be temporary, stemming from the transition to the year 2000 and a change in
the pricing environment. Banks have been holding back on attempting mergers
until Y2K is less of an issue. We believe the pressures should ease later this
year, since by then any merger wouldn't actually get implemented until next
year. Deal pricing also became tougher in the midst of last year's market
downturn, and selling banks grew more reluctant to agree to mergers at lower
stock prices. We believe this, too, should pass, either as prices go back up, or
as sellers adjust their expectations down.
Merger activity could get an additional boost if a proposed change in
the method of accounting for mergers is enacted, possibly as early as next year.
We believe this rule change may accelerate merger activity as banks seek to take
advantage of the current, and preferred, "pooling" accounting method before it
is eliminated.
o Solid fundamentals: The stock market lately has overlooked one very
positive ingredient in the bank equation: earnings growth. In the last two
quarters, bank earnings have been very solid, continuing the 12% to 14% growth
rate we saw in 1998. The strong economy helped banks produce
better-than-expected domestic loan growth and created a pickup in capital
markets activity, which includes trading, loan syndication and investment
banking. The level of non-performing loans remained low, net interest margins
were stable and share buybacks continue to aid earnings-per-share growth.
o Regulatory reform: Financial reform legislation aimed at repealing
restrictive and obsolete regulations has gotten off to a fast start this year,
with both the House and Senate banking committees already approving different
versions of the bill. Although there are still some significant issues to be
resolved, we believe it is inevitable that some form of financial deregulation
will be enacted, possibly this year. This will set the stage for a new round of
consolidation that will produce cross-ownership between financial services
companies previously separated by product specialization, such as banks,
brokerage firms and insurance companies.
o Compelling valuations: Last year's disruption had a silver lining: it
made attractive bank stocks inexpensive. Currently, bank stocks are selling at
16 times 1999 earnings, while the S&P 500 Index stocks are selling at 26 times
1999 earnings. That means bank stocks are selling at 60% of the S&P 500's
earnings level. This is cheap from a historical perspective, even though bank
earnings growth is at least as good as, if not
"In the last two quarters, bank earnings have been very solid..."
5
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John Hancock Funds - Bank and Thrift Opportunity Fund
"Last year's disruption had a silver lining: it made attractive bank stocks
inexpensive."
better than, the S&P. As value investors, we'd rather buy good companies with
solid fundamentals and prospects at bargain prices and hold on to them, waiting
for the inevitable rebound. During this period, we pared our stakes in some of
the larger money-center banks and superregionals that had moved up strongly,
including Bank of America. In their place, we added to our positions in banks
such as Mississippi Valley Bancshares, where we saw real value.
Going forward
With robust U.S. growth, low interest rates and inflation, and an improving
climate overseas, the economic environment remains ripe for further stock market
advances. Regardless of market swings, we will continue to apply in-depth
fundamental company analysis and our extensive knowledge of the financial
industry to maintain a portfolio of quality regional bank and thrift stocks that
have the potential to provide superior results over time.
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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 greater risks than the market as a whole.
6
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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, 1999. You'll also
find the net asset value for each common share as of that date.
Statement of Assets and Liabilities
April 30, 1999 (Unaudited)
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Assets:
Investments at value - Note C:
Common stocks and warrants
(cost - $373,514,827) .................................. $ 932,667,270
Preferred stocks (cost - $7,320,000) .................... 7,795,020
Bonds (cost - $9,020,000) ............................... 9,070,975
Short-term investments (cost - $58,197,541) ............. 58,197,541
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1,007,730,806
Cash .................................................... 844
Receivable for investments sold ......................... 2,148,337
Interest receivable ..................................... 174,899
Dividends receivable .................................... 1,675,097
Other assets ............................................ 84,219
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Total Assets .................. 1,011,814,202
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Liabilities:
Payable for shares repurchased .......................... 751,663
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ................................ 1,410,677
Accounts payable and accrued expenses ................... 59,788
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Total Liabilities ............. 2,222,128
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Net Assets:
Capital paid-in ......................................... 415,842,717
Accumulated net realized gain on investments ............ 30,056,537
Net unrealized appreciation of investments .............. 559,684,315
Undistributed net investment income ..................... 4,008,505
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Net Assets .................... $1,009,592,074
===================================================
Net Asset Value Per Share:
(Based on 86,425,000 shares of beneficial
interest outstanding - unlimited number of
shares authorized with no par value) .................. $11.68
=============================================================================
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, 1999 (Unaudited)
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Investment Income:
Dividends (including $284,281 received from
affiliated issuers and net of foreign withholding
taxes of $10,595) ...................................... $11,575,355
Interest ................................................ 1,704,665
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13,280,020
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Expenses:
Investment management fee - Note B ...................... 5,705,062
Administration fee - Note B ............................. 1,240,231
Printing ................................................ 98,396
Custodian fee ........................................... 79,850
New York Stock Exchange fee ............................. 76,424
Trustees' fees .......................................... 31,512
Transfer agent fee ...................................... 23,036
Auditing fee ............................................ 18,422
Legal fees .............................................. 13,257
Miscellaneous ........................................... 12,048
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Total Expenses ................ 7,298,238
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Net Investment Income ......... 5,981,782
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Realized and Unrealized Gain on Investments:
Net realized gain on investments sold
(including $23,161 on sales of investments
in affiliated issuers) ................................. 30,057,614
Change in net unrealized appreciation/depreciation
of investments ......................................... 41,397,742
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Net Realized and Unrealized
Gain on Investments ........... 71,455,356
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Net Increase in Net Assets
Resulting from Operations ..... $77,437,138
===================================================
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Bank and Thrift Opportunity Fund
Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ........................................................... $11,979,930 $5,981,782
Net realized gain on investments sold ........................................... 103,277,328 30,057,614
Change in net unrealized appreciation/depreciation of investments ............... (44,205,083) 41,397,742
-------------- --------------
Net Increase in Net Assets Resulting from Operations ........................... 71,052,175 77,437,138
-------------- --------------
Distributions to Shareholders:
Dividends from net investment income ($0.1400 and $0.1425 per share, respectively) (12,375,469) (12,581,633)
Distributions from net realized gain on investments sold ($1.5955 and
$0.1691 per share, respectively) ............................................... (140,995,972) (14,929,632)
-------------- --------------
Total Distributions to Shareholders ............................................ (153,371,441) (27,511,265)
-------------- --------------
From Fund Share Transactions - Net:* ............................................. (435,140) (18,977,594)
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Net Assets:
Beginning of period ............................................................. 1,061,398,201 978,643,795
-------------- --------------
End of period (including undistributed net investment income
of $10,608,356 and $4,008,505, respectively) ................................... $978,643,795 $1,009,592,074
============== ==============
* Analysis of Fund Share Transactions:
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ------------ -----------
Shares outstanding, beginning of period.............. 88,400,000 $435,267,021 88,359,000 $434,820,311
Less shares repurchased ............................. (41,000) (435,140) (1,934,000) (18,977,594)
Reclassification of capital accounts................. -- (11,570) -- --
----------- ------------- ------------- -------------
Shares outstanding, end of period ................... 88,359,000 $434,820,311 86,425,000 $415,842,717
=========== ============= ============= =============
</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 repurchased 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
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:
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<TABLE>
<CAPTION>
FOR THE PERIOD FROM
AUGUST 23, 1994
(COMMENCEMENT YEAR ENDED OCTOBER 31, SIX MONTHS ENDED
OF OPERATIONS) _________________________________ APRIL 30, 1999
TO OCTOBER 31, 1994 1995 1996 1997 1998 (UNAUDITED)
------------------- ---- ---- ---- ---- ----------------
<S> <C> <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 $11.08
-------- ------- ------- ------- -------- --------
Net Investment Income .................................... 0.03 0.13 0.14 0.14 0.14 0.07
Net Realized and Unrealized Gain (Loss) on Investments ... (0.07) 1.60 1.64 4.08 0.67 0.84
-------- ------- ------- ------- -------- --------
Total from Investment Operations ........................ (0.04) 1.73 1.78 4.22 0.81 0.91
-------- ------- ------- ------- -------- --------
Less Distributions:
Dividends from Net Investment Income ..................... -- (0.06) (0.23) (0.03) (0.14) (0.14)
Distributions from Net Realized Gain on Investments Sold . -- -- (0.38) (0.03) (1.60) (0.17)
-------- ------- ------- ------- -------- --------
Total Distributions ..................................... -- (0.06) (0.61) (0.06) (1.74) (0.31)
-------- ------- ------- ------- -------- --------
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 $11.08 $11.68
======== ========= ======= ======= ======== ========
Per Share Market Value, End of Period .................... $4.50 $5.69 $6.75 $10.64 $11.69 $9.81
======== ========= ======= ======= ======== ========
Total Investment Return at Market Value .................. (10.00%)(2) 27.91% 29.78% 58.95% 25.35% (13.69%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ................. $455,656 $608,724 $701,675 $1,061,398 $978,644 $1,009,592
Ratio of Expenses to Average Net Assets .................. 1.51%(3) 1.49% 1.50% 1.45% 1.47% 1.48%(3)
Ratio of Net Investment Income to Average Net Assets ..... 3.22%(3) 2.22% 1.96% 1.42% 1.07% 1.22%(3)
Portfolio Turnover Rate .................................. 0% 8% 13% 9% 6% 2%
</TABLE>
(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) Not annualized.
(3) Annualized.
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>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Bank and Thrift Opportunity Fund
Schedule of Investments
April 30, 1999 (Unaudited)
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The Schedule of Investments is a complete list of all securities owned by the
Bank and Thrift Opportunity Fund on April 30, 1999. It's divided into four main
categories: common stocks and warrants, preferred stocks, bonds and short-term
investments. The common stocks and warrants 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 WARRANTS
Banks - Foreign (1.16%)
Popular, Inc. (Puerto Rico).................. 378,000 $11,718,000
-----------
Superregional Banks (29.62%)
Bank One Corp. (OH) ......................... 470,380 27,752,420
Bank of America Corp. (NC) .................. 565,510 40,716,720
First Union Corp. (NC) ...................... 574,625 31,819,859
Fleet Financial Group, Inc. (MA) ............ 442,912 19,072,898
National City Corp. (OH) .................... 590,362 42,358,473
PNC Bank Corp. (PA) ......................... 622,000 35,998,250
SunTrust Banks, Inc. (GA) ................... 550,772 39,380,198
U.S. Bancorp (MN) ........................... 1,057,484 39,193,001
Wells Fargo Co. (CA) ........................ 526,527 22,739,385
-----------
299,031,204
-----------
Regional Banks (49.73%)
ABC Bancorp. (GA) ........................... 59,500 855,313
Alabama National Bancorp. (AL) .............. 125,000 3,078,125
American Bancorp. (WV) ...................... 34,000 612,000
American Bancshares, Inc.* (FL) ............. 62,000 511,500
Associated Banc-Corp. (WI) .................. 109,295 3,975,606
BancFirst Corp. (OK) ........................ 75,000 2,662,500
BancFirst Ohio Corp. (OH) ................... 68,000 1,793,500
BancorpSouth, Inc. (MS) ..................... 119,750 1,990,844
BancWest Corp. (HI) ......................... 74,300 2,958,069
Bank of Rhode Island * (RI) ................. 20,500 215,250
Bank of the Ozarks, Inc. (AR) ............... 75,750 1,505,531
Banknorth Group, Inc. (VT) .................. 157,620 4,167,079
BB&T Corp. (NC) ............................. 833,160 33,274,327
Beverly National Corp. (MA) ................. 50,000 825,000
Broad National Bancorp. (NJ) ................ 100,945 2,435,298
BT Financial Corp. (PA) ..................... 38,400 972,000
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Regional Banks (continued)
BYL Bancorp. (CA) ........................... 81,000 $951,750
Carolina First Corp. (SC) ................... 30,890 834,030
CCB Financial Corp. (NC) .................... 220,150 12,713,662
CCBT Bancorp., Inc. (MA) .................... 170,200 3,042,325
Centura Banks, Inc. (NC) .................... 88,750 5,286,172
Chittenden Corp. (VT) ....................... 84,327 2,424,401
City National Corp. (CA) .................... 85,977 3,320,862
CNB Bancshares, Inc. (IN) ................... 44,461 1,886,814
Colonial BancGroup, Inc. (AL) ............... 1,485,000 18,376,875
Columbia Bancorp. (MD) ...................... 107,000 1,498,000
Columbia Bancorp. (OR) ...................... 61,000 488,000
Comerica, Inc. (MI) ......................... 310,000 20,169,375
Commercial Bankshares, Inc. (FL) ............ 42,115 842,300
Commonwealth Bankshares, Inc.* (VA) ......... 34,523 491,953
Community Banks, Inc. (PA) .................. 54,573 1,282,465
Community Bankshares, Inc. (VA) ............. 38,162 892,037
Compass Bancshares, Inc. (AL) ............... 805,357 21,945,978
Cowlitz Bancorp. (WA) ....................... 61,500 384,375
Desert Community Bank (CA) .................. 51,500 1,126,562
DNB Financial Corp. (PA) .................... 50,901 1,463,404
East-West Bancorp, Inc.* (CA) (r) ........... 1,040,000 10,270,000
Eldorado Bancshares, Inc.* (CA) ............. 65,000 641,875
Empire Banc Corp. (MI) ...................... 31,689 1,140,804
F & M National Corp. (VA) ................... 32,743 910,665
Fifth Third Bancorp. (OH) ................... 56,500 4,050,344
First American Corp. (TN) ................... 645,200 25,041,825
First Charter Corp. (NC) .................... 41,500 897,438
First Financial Corp. (RI) .................. 109,000 1,294,375
First Security Corp. (UT) ................... 592,716 11,261,604
First State Bancorp. (NM) ................... 82,625 1,569,875
First Tennessee National Corp. (TN) ......... 232,900 10,043,812
Firstar Corp. (WI) .......................... 462,021 13,889,506
FirstMerit Corp. (OH) ....................... 67,500 1,877,344
F.N.B. Corp. (PA) ........................... 46,666 1,149,150
FNB Bankshares (ME) ......................... 20,780 675,350
FNB Financial Service Corp. (NC) ............ 50,750 850,063
FNB Rochester Corp. (NY) .................... 22,000 770,000
FVNB Corp. (TX) ............................. 48,100 1,515,150
Harleysville National Corp. (PA) ............ 46,500 1,627,500
Imperial Bancorp.* (CA) ..................... 216,033 4,158,635
Independent Bankshares, Inc. (TX) ........... 50,500 536,563
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)
Keystone Financial, Inc. (PA) ............... 129,750 $4,168,219
M&T Bank Corp. (NY) ......................... 6,450 3,605,550
Mahaska Investment Co. (IA) ................. 249,171 3,612,979
Mahoning National Bancorp. (OH) ............. 71,600 2,022,700
Main Street Bancorp., Inc. (PA) ............. 40,307 644,912
Marathon Financial Corp. (VA) ............... 15,000 99,375
Mercantile Bancorp., Inc. (MO) .............. 421,950 24,051,150
MetroBanCorp. (IN) .......................... 56,595 417,388
Midwest Banc Holdings, Inc. (IL) ............ 44,500 750,938
Mississippi Valley Bancshares, Inc. (MO) .... 97,400 3,165,500
New England Community Bancorp.
(Class A) (CT) ............................. 213,500 4,296,687
North Fork Bancorp., Inc. (NY) .............. 349,650 7,867,125
Oak Hill Financial, Inc. (OH) ............... 41,000 758,500
Old Kent Financial Corp. (MI) ............... 350,871 16,578,655
One Valley Bancorp., Inc. (WV) .............. 141,590 5,451,215
Pacific Capital Bancorp. (CA) ............... 109,000 2,908,937
Pacific Century Financial Corp. (HI) ........ 599,500 13,039,125
Patriot Bank Corp. (PA) ..................... 40,500 405,000
Provident Bankshares Corp. (MD) ............. 335,835 8,353,896
Regions Financial Corp. (AL) ................ 155,412 5,866,803
Riggs National Corp. (DC) ................... 45,500 767,813
Salem Bank & Trust (VA) ..................... 46,789 754,473
Shore Financial Corp. (VA) .................. 18,750 166,406
Six Rivers National Bank* (CA) .............. 33,500 368,500
Sky Financial Group, Inc. (OH) .............. 78,530 2,208,656
SouthTrust Corp. (AL) ....................... 712,925 28,405,605
Southwest Bancorp. of Texas, Inc.* (TX) ..... 211,730 3,572,944
Summit Bancorp (NJ) ......................... 932,305 39,506,424
Summit Bancshares, Inc. (TX) ................ 232,400 4,648,000
Sun Bancorp., Inc.* (NJ) .................... 173,231 3,529,582
TCF Financial Corp. (MN) .................... 54,508 1,580,732
Tehama Bancorp. (CA) ........................ 57,552 719,400
Texas Regional Bancshares, Inc. (Class A)
(TX) ....................................... 49,750 1,425,648
TriCo Bancshares (CA) ....................... 30,000 523,125
Union Planters Corp. (TN) ................... 526,348 22,534,274
United Security Bancorp.* (WA) .............. 190,436 2,475,668
Univest Corp. (PA) .......................... 52,500 1,548,750
Vail Banks, Inc.* (CO) ...................... 51,500 527,875
Vermont Financial Services Corp. (VT) ....... 69,000 2,126,062
VRB Bancorp. (OR) ........................... 104,304 788,799
West Coast Bancorp. (OR) .................... 98,508 1,699,263
Whitney Holding Corp. (LA) .................. 147,500 5,973,750
Wilmington Trust Corp. (DE) ................. 60,500 3,716,969
Yardville National Bank (NJ) ................ 127,400 1,719,900
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Regional Banks (continued)
Zions Bancorp. (UT) ......................... 109,175 $7,280,608
-----------
502,059,040
-----------
Thrifts (10.75%)
Astoria Financial Corp. (NY) ................ 160,955 8,067,869
Bank West Financial Corp. (MI) .............. 148,000 1,424,500
BostonFed Bancorp., Inc. (MA) ............... 106,000 1,908,000
Cameron Financial Corp. (MO) ................ 72,500 978,750
Commercial Federal Corp. (NE) ............... 151,942 3,684,593
Dime Bancorp., Inc. (NY) .................... 17,500 403,594
Dime Community Bancshares (NY) .............. 87,754 1,974,465
First Defiance Financial Corp. (OH) ......... 70,000 822,500
First Federal Capital Corp. (WI) ............ 67,500 961,875
First Keystone Financial, Inc. (PA) ......... 37,500 529,688
First Sentinel Bancorp, Inc. (NJ) ........... 50,000 381,250
GA Financial, Inc. (PA) ..................... 65,500 1,039,812
Golden State Bancorp., Inc.* (CA) ........... 31,000 761,438
GreenPoint Financial Corp. (NY) ............. 607,000 21,245,000
Guaranty Financial Corp. (VA) ............... 30,000 356,250
Highland Bancorp., Inc. (CA) ................ 77,667 3,126,097
Hingham Institute for Savings (MA) .......... 90,000 1,440,000
HMN Financial, Inc. (MN) .................... 54,750 653,578
InterWest Bancorp., Inc. (WA) ............... 20,850 484,763
ISB Financial Corp. (LA) .................... 106,000 2,173,000
Lawrence Savings Bank* (MA) ................. 70,000 700,000
Little Falls Bancorp., Inc. (NJ) ............ 105,000 2,165,625
Local Financial Corp. (OK) .................. 310,000 2,945,000
New Hampshire Thrift Bancshares, Inc.
(NH) ....................................... 25,000 359,375
North Central Bancshares, Inc. (IA) ......... 54,500 940,125
Northwest Equity Corp. (WI) ................. 61,000 1,357,250
Pamrapo Bancorp., Inc. (NJ) ................. 86,000 1,978,000
PBOC Holdings, Inc.* (CA) ................... 46,500 406,875
PennFed Financial Services, Inc. (NJ) ....... 611,000 9,012,250
People's Bancshares, Inc. (MA) .............. 45,000 956,250
Peoples Heritage Financial Group, Inc. (ME) . 337,333 6,535,827
Pittsburgh Home Financial Corp. (PA) ........ 90,000 1,237,500
Quaker City Bancorp., Inc.* (CA) ............ 97,500 1,523,437
Seacoast Financial Services Corp.* (MA) ..... 52,357 526,842
SFC Acquisition Corp.* (AR) (r) ............. 150,000 1,500,000
Southern Missouri Bancorp., Inc. (MO) ....... 16,000 216,000
Sovereign Bancorp., Inc. (PA) ............... 74,348 1,012,991
St. Paul Bancorp., Inc. (IL) ................ 35,994 872,855
Sturgis Federal Savings Bank (MI) ........... 106,000 993,750
Superior Financial Corp.* (AR) .............. 40,000 400,000
Teche Holding Co. (LA) ...................... 70,000 1,098,125
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)
UCBH Holdings, Inc. (CA) (r) ................ 133,333 $1,999,995
Warren Bancorp., Inc. (MA) .................. 158,500 1,347,250
Washington Mutual, Inc. (WA) ................ 301,200 12,386,850
Wells Financial Corp. (MN) .................. 122,000 1,936,750
WesterFed Financial Corp. (MT) .............. 101,162 1,694,463
-----------
108,520,407
-----------
Other (0.75%)
Capital One Financial Corp. (VA) ............ 43,500 7,555,406
Core Cap, Inc. (Class A)* (NY) (r) .......... 500 7,900
-----------
7,563,306
-----------
WARRANTS (0.37%)
Golden State Bancorp, Inc.* (Litigation)
(CA) ....................................... 33,000 61,875
Golden State Bancorp, Inc.* (CA) ............ 255,000 3,713,438
-----------
3,775,313
-----------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $373,514,827) (92.38%) 932,667,270
-------- -----------
PREFERRED STOCKS
Banks & Thrifts (0.77%)
Astoria Financial Corp., Ser B, 12.00%
(NY) ....................................... 40,000 1,000,000
Chevy Chase Savings, 13.00% (MD) ............ 55,000 1,670,625
First Preferred Capital I, 9.25% (MO) ....... 50,000 1,287,500
IFC Capital Trust I, 9.25% (IN) ............. 40,000 1,045,000
Matewan BancShares, Inc., Ser A, 7.50%
(WV) ....................................... 25,000 775,000
MVBI Capital Trust, 6.76% ** (MO) ........... 40,000 970,000
Sterling Bancshares Capital Trust I, 9.28%
(TX) ....................................... 20,000 515,000
VBC Capital I, 9.50% (CO) ................... 20,000 520,000
-----------
7,783,125
-----------
Other (0.00%)
Core Cap, Inc., Ser A/I, 10.00% (NY) (r) .... 500 11,895
-----------
TOTAL PREFERRED STOCKS
(Cost $7,320,000) (0.77%) 7,795,020
------- -----------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- ---- -------------- -----
BONDS
BFC Capital Trust I,
Capital Securities, Ser A,
01-15-27........................... 9.650% $250 $264,375
Coastal Bancorp., Inc.,
Sr Note 06-30-02 .................. 10.000 3,000 2,970,000
CSBI Capital Trust I,
Sub Cap Income, Ser A,
06-06-27 (R) ...................... 11.750 770 831,600
Fidelity Federal Bancorp.,
Sub Note 06-01-05 ................. 10.000 1,000 900,000
First Federal Financial Corp.,
Note 10-01-04 ..................... 11.750 2,000 2,060,000
ML Capital Trust I,
Capital Securities 03-01-27 ....... 9.875 1,000 1,072,500
Ocwen Federal Bank,
Sub Deb 06-15-05 .................. 12.000 1,000 972,500
-----------
TOTAL BONDS
(Cost $9,020,000) (0.90%) 9,070,975
-------- -----------
SHORT-TERM INVESTMENTS
Certificates of Deposit (0.01%)
Deposits in Mutual Banks ........... 63,541
-----------
Joint Repurchase Agreement (5.76%)
Investment in a joint repurchase
agreement transaction with
SBC Warburg, Inc. - Dated
04-30-99, due 05-03-99
(Secured by U.S. Treasury Bonds,
6.875% thru 13.875%, due
05-15-11 thru 08-15-25)
- Note A........................... 4.890 58,134 58,134,000
------------
TOTAL SHORT-TERM INVESTMENTS (5.77%) 58,197,541
------- ------------
TOTAL INVESTMENTS (99.82%) 1,007,730,806
------- -------------
OTHER ASSETS AND LIABILITIES, NET (0.18%) 1,861,268
------- -------------
TOTAL NET ASSETS (100.00%) $1,009,592,074
======== ==============
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Bank and Thrift Opportunity Fund
NOTES TO SCHEDULE OF INVESTMENTS
* Non-income producing security.
** Floating rate effective April 30, 1999.
(R) This security is exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $831,600 as of April 30,
1999.
(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:
MARKET MARKET
VALUE AS A VALUE
PERCENTAGE AS OF
ACQUISITION ACQUISITION OF FUND'S APRIL 30,
DATE COST NET ASSETS 1999
----------- ----------- ---------- ---------
Core Cap, Inc.
(Common Stock) 10-31-97 $10,000 0.00% $7,900
(Preferred Stock) 10-31-97 12,500 0.00 11,895
East-West Bank Corp. 06-09-98 10,400,000 1.02 10,270,000
SFC Acquisition Corp. 03-30-98 1,500,000 0.15 1,500,000
UCBH Holdings, Inc. 04-16-98 2,000,000 0.20 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.
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 September 15, 1998 the Board of Trustees of the Fund authorized the
Fund to repurchase up to four million shares of the Fund. The repurchase program
commenced September 1998 and will run through September 1999.
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 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 qualifies as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and will
not be subject to federal income tax on taxable income which is distributed to
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.
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. Over-the-counter options will be
valued at the mean between the last bid and asked prices. 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
14
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - Bank and Thrift Opportunity Fund
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 ("credit risk"), 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, 1999.
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., Mr. Stephen L. Brown, 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 Adviser owns 20,000 shares
of beneficial interest of the Fund. The compensation of unaffiliated Trustees is
borne by 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, 1999, 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 period ended April 30, 1999, aggregated $17,720,149 and
$59,348,100, respectively.
The cost of investments owned at April 30, 1999 for federal income tax
purposes was $448,052,368.
Gross unrealized appreciation and depreciation of investments
aggregated $562,131,520 and $2,453,082, respectively, resulting in net
unrealized appreciation of $559,678,438.
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, 1999, the Fund had incurred $1,156,818 of public offering
expenses and has adjusted capital paid-in for $73,182 which represents the
balance of estimated offering costs which the Fund does not expect to incur.
During the years ended October 31, 1996 and 1997, 2,431,600 shares and 1,188,400
shares,
15
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - Bank and Thrift Opportunity Fund
respectively, of the Fund's stock were purchased from stockholders at an average
discount of 18.0% from net asset value. During the year ended October 31, 1998,
41,000 shares of the Fund's stock were repurchased from stockholders at an
average discount of 10% from net asset value. During the period ended April 30,
1999, 1,934,000 shares of the Fund's stock were repurchased from stockholders at
an average discount of 13% 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 year ended April 30,
1999 is set forth below.
<TABLE>
<CAPTION>
BEGINNING ACQUISITIONS DISPOSITIONS 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) 168,000 -- $-- 20,000 $154,333 148,000 $23,161 $10,080 $1,424,500
First Financial Corp. (RI) 84,000 25,000 318,750 -- -- 109,000 -- 26,160 1,294,375
Mahaska Investment Co. (IA) 249,171 -- -- -- -- 249,171 -- 72,260 3,612,979
MVBI Capital Trust (MO) 40,000 -- -- -- -- 40,000 -- 51,261 970,000
Northwest Equity Corp. (WI) 61,000 -- -- -- -- 61,000 -- 20,740 1,357,250
PennFed Financial
Services, Inc. (NJ) 611,000 -- -- -- -- 611,000 -- 48,880 9,012,250
Wells Financial Corp. (MN) 122,000 -- -- -- -- 122,000 -- 54,900 1,936,750
-------- -------- ------- -------- -----------
$318,750 $154,333 $23,161 $284,281 $19,608,104
======== ======== ======= ======== ===========
</TABLE>
16
<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 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-certificated form in the name of the participant. Proxy material
relating to shareholders' meetings of the Fund will include those shares
purchased as well as shares held pursuant to the Plan.
In the case of shareholders, such as banks, brokers, or nominees, which
hold Common Shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of Common Shares certified from
time to time by the record shareholders as representing the total amount
registered in the record shareholder's name and held for the account of
beneficial owners who are participants in the Plan. Shares may be purchased
through broker-dealers.
The Plan Agent's fees for the handling of reinvestment of dividends and
other distributions will be paid by the Fund. Each participant will pay a pro
rata share of brokerage commissions incurred with respect to the Plan Agent's
open market purchases in connection with the reinvestment of distributions.
There are no other charges to participants for reinvesting dividends or capital
gain distributions.
Dividends and capital gain 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
17
<PAGE>
================================================================================
John Hancock Funds - Bank and Thrift Opportunity Fund
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, State
Street Bank and Trust Company, at P.O. Box 8209, Boston, Massachusetts
02266-8209 (telephone 1-800-426-5523).
YEAR 2000 COMPLIANCE
The Adviser and the Fund's service providers are taking steps to address any
year 2000-related computer problems. However, there is some risk that these
problems could disrupt the issuers in which the Fund invests, the Fund's
operations or financial markets generally.
SHAREHOLDER COMMUNICATION AND ASSISTANCE
If you have any questions concerning the John Hancock Bank and Thrift
Opportunity Fund, we will be pleased to assist you. If you hold shares in your
own name and not with a brokerage firm, please address all notices,
correspondence, questions or other communications regarding the Fund to the
transfer agent at:
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
Telephone: (800) 426-5523
If your shares are held with a brokerage firm, you should contact that firm,
bank or other nominee for assistance.
18
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John Hancock Funds - Bank and Thrift Opportunity Fund
19
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[LOGO] JOHN HANCOCK FUNDS -----------------
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INTERNET: www.jhancock.com/funds S. Hackensack, NJ
Permit No. 750
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