-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SGzvMQlz5zvZ5eHnix3lYTbx9wMfdArFgn/Lkdbk6ACS3hyB6g/bboKdRLEqz7vo dD4sNkcYledfjidMY0l0mw== 0001005477-96-000172.txt : 19960701 0001005477-96-000172.hdr.sgml : 19960701 ACCESSION NUMBER: 0001005477-96-000172 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960628 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK JOHN BANK & THRIFT OPPORTUNITY FUND CENTRAL INDEX KEY: 0000925683 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043241844 STATE OF INCORPORATION: MA FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08568 FILM NUMBER: 96588424 BUSINESS ADDRESS: STREET 1: 101 HUNTINGTON AVE CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 6173751700 MAIL ADDRESS: STREET 1: 101 HUNTINGTON AVE CITY: BOSTON STATE: MA ZIP: 02199 FORMER COMPANY: FORMER CONFORMED NAME: HANCOCK JOHN REGIONAL BANK & THRIFT FUND DATE OF NAME CHANGE: 19940620 N-30D 1 SEMI-ANNUAL REPORT ================================================================================ John Hancock Funds - -------------------------------------------------------------------------------- Bank and Thrift Opportunity Fund SEMI-ANNUAL REPORT April 30, 1996 ================================================================================ TRUSTEES EDWARD J. BOUDREAU, JR. THOMAS W. L. CAMERON JAMES F. CARLIN* WILLIAM H. CUNNINGHAM* CHARLES F. FRETZ* HAROLD R. HISER, JR.* ANNE C. HODSDON CHARLES L. LADNER* LEO E. LINBECK, JR.* PATRICIA P. MCCARTER* STEVEN R. PRUCHANSKY* RICHARD S. SCIPIONE LT. GEN. NORMAN J. SMITH, USMC (RET.)* JOHN P. TOOLAN* *Members of the Audit Committee OFFICERS EDWARD J. BOUDREAU, JR. Chairman and Chief Executive Officer ROBERT G. FREEDMAN Vice Chairman and Chief Investment Officer ANNE C. HODSDON President JAMES B. LITTLE Senior Vice President and Chief Financial Officer THOMAS H. DROHAN Senior Vice President and Secretary SUSAN S. NEWTON Vice President, Assistant Secretary and Compliance Officer JAMES J. STOKOWSKI Vice President and Treasurer INVESTMENT ADVISER JOHN HANCOCK ADVISERS, INC. 101 HUNTINGTON AVENUE BOSTON, MASSACHUSETTS 02199-7603 CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSER STATE STREET BANK AND TRUST COMPANY 225 FRANKLIN STREET BOSTON, MASSACHUSETTS 02110 LEGAL COUNSEL HALE AND DORR 60 STATE STREET BOSTON, MASSACHUSETTS 02109 LISTED: NEW YORK STOCK EXCHANGE SYMBOL:BTO CHAIRMAN'S MESSAGE DEAR FELLOW SHAREHOLDERS: The stock market's record-breaking, whirlwind performance in 1995 will be a tough act to follow in 1996. In fact, we've already seen greater market volatility this year, particularly among last year's leaders -- technology stocks. That's to be expected after a year that saw market indexes soar, including the Standard & Poor's 500-Stock Index's 37% advance. While many of the same economic conditions that fostered the stellar 1995 market are still in place -- slow economic growth, muted inflation and decent corporate earnings -- it would be unrealistic to expect the market to stage a repeat in 1996. The old saying "trees don't grow to the sky" comes to mind. Shareholders would do well to temper expectations of investment returns and perhaps revisit their investment allocations with their financial advisor to determine if rebalancing their portfolio makes sense. [A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive Officer, flush right, next to second paragraph.] No matter how you scale back your market expectations, you should always be able to count on consistent customer service performance. At John Hancock Funds, we never stop working to find ways to sustain and improve the quality of information and assistance we provide you. Our commitment to this task is no less than John Hancock's loyalty was to his fledgling country when he is said to have uttered, "if it does the public good, burn Boston." We won't go that far, of course, but we share our namesake's dedication to putting the public before all else. In our case, that public is you, our shareholders. We take very seriously the role you have entrusted to us, that of helping you achieve your financial goals. Part of that will always involve good customer service. So please do not hesitate to call your Customer Service Representative at 1-800-225-5291 if you have any questions or need information. We take pride in helping you with the same spirit that John Hancock displayed at the dawning of America. Sincerely, /s/ EDWARD J. BOUDREAU, JR. EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER 2 ================================================================================ BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGER John Hancock Bank and Thrift Opportunity Fund Larger banks outperform smaller in last six months; positive industry fundamentals remain in place After posting stellar results in 1995, the stock and bond markets have diverged this year. The equity market, as measured by the Standard & Poor's 500-Stock Index, rose by 6.0% between January and April and the technology-laden NASDAQ index leaped 12.5%. Meanwhile, bonds, haunted by the specter of a resurgent economy and rising energy and commodity prices, saw their prices drop sharply since February in anticipation of higher inflation. The bellwether 30-year Treasury bond, for example, has declined 10.2% since year-end 1995. After a strong finish in 1995, bank and thrift stocks have also shown divergent performance in 1996. Larger capitalization stocks, such as money center banks and superregionals, have posted solid gains while returns on the small- and mid-sized banks and thrifts have lagged. Because our strategy has been to focus on the small, lesser known issues, the Fund underperformed its peers in the recent period, despite a strong absolute return. For the six months ended April 30, 1996, John Hancock Bank and Thrift Opportunity Fund posted a total return of 9.88% at net asset value, compared to 11.47% for the average closed-end [A 2 1/4" x 3 1/4" photo of the portfolio management team. Caption reads: "James K. Schmidt (seated) and Fund management team members: (l-r) James Boyd, Patricia Ouimet, Thomas Finucane."] "Bank stocks are trading at historically inexpensive levels." 3 ================================================================================ John Hancock -- Banks and Thrift Opportunity Fund "...we recently added more exposure to the recovering state of California." [Chart with heading "Top Five Common Stock Holdings" at top of left hand column. The chart lists five holdings: 1) U.S. Bancorp 3.6% 2) PNC Bank Corp. 3.3% 3) Integra 2.8% 4) Summit Bancorp 2.4% 5) Southtrust Corp. 2.4%. A footnote below reads: "As a percentage of net assets on April 30, 1996."] financial services fund and 12.01% for the average open-end financial services fund, according to Lipper Analytical Services.1 Why is there a dichotomy in bank stock performance? From our perspective, the financial stock market in 1996 has been mainly liquidity driven, as large sums of mutual fund and institutional cash have flowed into bank stocks. Since this money needs to be deployed quickly, the larger, more liquid stocks are bid up first. Then, all other things being equal, the smaller banks and thrifts follow suit. We expect this process to play out in the next few months, given that none of the other variables -- industry fundamentals, valuation levels and the consolidation process -- has changed much and each remains a positive catalyst for stock prices. [Table entitled "Scorecard" at bottom of left hand column. The header for the left column is "Investments"; the header for the right column is "Recent performance ... and what's behind the numbers." The first listing is Imperial Bancorp followed by an up arrow and the phrase "Southern California recovery fuels bank revenues." The second listing is First Colorado Bancorp followed by an up arrow and the phrase "Market warmly receives thrift's recent conversion." The third listing is BNCCorp. followed by a down arrow and the phrase "North Dakota bank falters due to expensive acquisition." Footnote below reads: "See "Schedule of Investments." Investment holdings are subject to change."] Fundamentals sound; stocks still inexpensive After record-breaking earnings in 1993 and 1994, banks and thrifts were thought to be hard-pressed to repeat their past performance. Nonetheless, according to recently released FDIC data, commercial bank earnings for 1995 exceeded 1994 by almost 10%, while thrift income grew at an even higher 14% rate. Net interest margins for the overall industry -- that is, the amount banks earn from the difference between what they charge borrowers and pay depositors -- continued a mild compression, falling from 4.36% for 1994 to 4.29% for 1995. But that was more than offset by strong loan growth, which was up 10.4% from December 1994. While banks were able to post these solid gains in net income, few compromised the quality of their earnings. Although problem loan levels continued to fall, banks still increased their loss provisions by 15% over the levels set aside in 1994 as a prudent measure against the recent increases in loan balances. Finally, bank earnings benefited from a moderation in non-interest expense growth. The primary driver behind this trend was the elimination in mid-1995 of FDIC premiums for the highest rated banks, which represent the bulk of the industry. These banking trends have continued to be in evidence in recently released earnings reports for the first quarter of 1996. The median bank in the Fund posted a 12% gain in core earnings-per-share over the same period in 1995. The earnings gains were driven by stable margins, static expenses and fewer outstanding shares due to stock repurchases. Given the recent mild resurgence in economic activity, our forecast 4 ================================================================================ John Hancock -- Banks and Thrift Opportunity Fund [Bar chart with heading "Fund Performance" at top of left hand column. Under the heading is the footnote: "For the six months ended April 30, 1996." The chart is scaled in increments of 5% from bottom to top, with 15% at the top and 0% at the bottom. Within the chart, there are two solid bars. The first represents the 9.88% total return for John Hancock Bank and Thrift Opportunity Fund. The second represents the 11.47% total return for the average closed-end financial services fund. The third represents the 12.01% total return for the average open-end financial services fund. Footnote below reads: "The total return for John Hancock Bank and Thrift Opportunity Fund is at net asset value with all distributions reinvested. The average closed-end financial services fund is tracked by Lipper Analytical Services."] for 10% earnings growth for full-year 1996 over 1995 looks attainable. We are pleased to see that overall asset quality has not deteriorated, even though delinquencies are increasing in the unsecured consumer portion of loan portfolios. With employment and real personal income continuing to rise, we believe that any increases in non-performing assets this year will be mild and will not jeopardize our earnings estimates. Currently, the average regional bank stock in the Fund trades at an inexpensive 10.5 times 1996 estimated earnings-per-share, or 61% of the Standard & Poor's multiple of 16.9 times. In spite of the steady price appreciation in bank stocks as a group over the last five years, this relative multiple is still near the lower end of its 30-year range. Bank stocks are trading at historically inexpensive levels. With future earnings evolving in a much more predictable pattern, we continue to believe that bank price-earnings multiples still have the potential to expand. "The overall picture is good for banks." Consolidation scorecard In the last six months, four of the Fund's holdings have announced their intent to be acquired. In 1996, while there have been quite a few takeovers, most are smaller transactions, standing in stark contrast to 1995 when deals were fewer in number but gargantuan in size, such as First Union-First Fidelity and Chase-Chemical. As 1996 unfolds, we expect a resumption of merger activity among major banks. At the moment, some of the key acquirers are preoccupied with integrating operations acquired last year. We believe that the forces that have driven the industry to consolidate from 14,000 banks in 1985 to under 10,000 today are still in place and will eventually result in fewer than 5,000 banks in existence. Portfolio composition The Fund's basic strategy is to invest in banks and savings and loans that are selling at prices that are inexpensive compared to their underlying economic value. Although we do not make investments strictly on the likelihood of a "takeover," we expect many of our holdings to be merger candidates over the upcoming years. We typically do not invest in money center and "superregional" banks, even though some of them are superbly managed institutions, because they are likely to be acquirers rather than acquirees and they tend to be well known and touted by other investors and analysts. On a tactical basis, we have been building positions in some of the smaller California commercial banks. After suffering through a recession far longer than the rest of the country, California has been recovering for the last year. 5 ================================================================================ John Hancock -- Banks and Thrift Opportunity Fund Even the beleaguered southern portion of the state is now showing gains in employment and real personal income. Problem real estate loans that have long plagued the state's banks have leveled off and from this point forward, asset quality should be improving. From a consolidation standpoint, California is in its infancy -- it resembles the Midwest ten years ago. There are only two large independent California banks, Wells Fargo and BankAmerica. The state's 41 other independent publicly traded banks all have market values under $700 million. We think there will be considerable merger activity among these banks and between them and out-of-state banks scrambling to establish market position in California. The Fund actively invests in mutual savings institutions that convert to stock ownership. Thrifts that have converted within the last year are among the least expensive of all financial institutions as many of them trade below their tangible book values. In many cases, they are worth more dead than alive, i.e. their franchise value exceeds their market value. In order to participate in these conversions at the price offered to depositors (which is usually lower than the market price after conversion) we have established deposits totaling over $50,000 at 25 mutual thrifts around the country. In recent months we have participated in two offerings at the depositor price: First Federal Savings Bank of Colorado and North Central Bancshares of Fort Dodge, Iowa. We expect most of the sizable mutuals to convert within the next five years. Trustee Update Recently, the Board of Trustees of John Hancock Bank and Thrift Opportunity Fund authorized the Fund to repurchase up to 1 million shares of the Fund, which is a closed-end equity fund whose shares are traded on the New York Stock Exchange. It is anticipated that the repurchase program will be conducted during 1996. The share repurchase was authorized in an attempt to reduce the discount on the shares' market value. With the buyback, management hopes to help the market recognize the value of the underlying shares of the Fund. Outlook We continue to see solid, long-term investment value in the bank and thrift stocks the Fund holds. The overall picture is good for banks: steady but not excessive growth, relatively low interest rates and moderate inflation. And stocks are inexpensive. Despite increasing profitability, the thrift and bank group still carries a low valuation, trading around 40% of the market multiple. The fundamentals are positive: favorable earnings and continued merger activity both augur well for stock prices. Given these factors, we reiterate our belief that the Fund can still generate attractive returns over the next several years. - -------------------- This commentary reflects the views of the portfolio manager through the end of the Fund's period discussed in this report. Of course, the manager's views are subject to change as market and other conditions warrant. 6 ================================================================================ Financial Statements John Hancock Funds - Bank and Thrift Opportunity Fund Statement of Assets and Liabilities April 30, 1996 (Unaudited) - -------------------------------------------------------------------------------- Assets: Investments at value - Note C: Common stocks and warrants (cost - $403,621,681) ................................. $569,869,762 Preferred stocks (cost-$9,300,000) .................... 10,472,250 Bonds (cost - $23,831,032) ............................ 24,490,000 Short-term investments (cost-$42,157,603) ............. 42,157,603 ------------ 646,989,615 Interest receivable ..................................... 530,696 Dividends receivable .................................... 789,844 Deferred organization expenses - Note A ................. 53,022 Prepaid expenses ........................................ 52,954 Other assets ............................................ 39,241 ------------ Total Assets .......... 648,455,372 -------------------------------------------- Liabilities: Payable for investments purchased ....................... 318,750 Payable to John Hancock Advisers, Inc. and affiliates - Note B ..................................... 856,349 ------------ Total Liabilities ..... 1,175,099 -------------------------------------------- Net Assets: Capital paid-in ......................................... 458,943,182 Accumulated net realized gain on investments ............ 16,280,295 Net unrealized appreciation of investments .............. 168,082,000 Undistributed net investment income ..................... 3,974,796 ------------ Net Assets ............ $647,280,273 ============================================ Net Asset Value Per Share: (based on 23,005,000 shares of beneficial interest outstanding - unlimited number of shares authorized with no par value) ........................... $ 28.14 ============================================================================== The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value of what the Fund owns, is due and owes on April 30, 1996. You'll also find the net asset value for each common share as of that date. The Statement of Operations summarizes the Fund's investment income earned and expenses incurred in operating the Fund. It also shows net gainsfor the period stated. Statement of Operations Six months ended April 30, 1996 (Unaudited) - -------------------------------------------------------------------------------- Investment Income: Dividends (including $131,040 received from affiliated issuers and net of foreign withholding taxes of $10,719) ........................................... $ 8,062,568 Interest .................................................... 2,427,593 ----------- 10,490,161 ----------- Expenses: Investment management fee - Note B ........................ 3,640,824 Administration fee - Note B ............................... 791,483 Printing .................................................. 53,235 Custodian fee ............................................. 46,655 Trustees' fees ............................................ 29,684 New York Stock Exchange fee ............................... 12,515 Auditing fee .............................................. 12,016 Miscellaneous ............................................. 10,564 Organization expense - Note A ............................. 7,955 Transfer agent fee ........................................ 7,809 Legal fees ................................................ 4,542 ----------- Total Expenses ............ 4,617,282 -------------------------------------------- Net Investment Income ..... 5,872,879 -------------------------------------------- Realized and Unrealized Gain on Investments: Net realized gain on investments sold (including $389,076 on sales of investments in affiliated issuers) ......................................... 16,263,594 Change in net unrealized appreciation/depreciation of investments .............................................. 34,808,285 ----------- Net Realized and Unrealized Gain on Investments ....... 51,071,879 -------------------------------------------- Net Increase in Net Assets Resulting from Operations . $56,944,758 ============================================ SEE NOTES TO FINANCIAL STATEMENTS. 7 ================================================================================ Financial Statements John Hancock Funds - Bank and Thrift Opportunity Fund Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 1996 YEAR ENDED (UNAUDITED) OCTOBER 31, 1995 ----------- ---------------- Increase (Decrease) in Net Assets: From Operations: Net investment income ............................................................. $ 5,872,879 $ 11,534,409 Net realized gain on investments sold ............................................. 16,263,594 7,493,313 Change in net unrealized appreciation/depreciation of investments ................. 34,808,285 139,216,330 ------------- ------------- Net Increase in Net Assets Resulting from Operations ............................ 56,944,758 158,244,052 ------------- ------------- Distributions to Shareholders: Dividends from net investment income ($0.4775 and $0.2250 per share, respectively). (10,984,868) (5,176,125) Distributions from net realized gain on investments sold ($0.3250 and none per share, respectively) .................. (7,476,612) -- ------------- ------------- Total Distributions to Shareholders ........................................... (18,461,480) (5,176,125) ------------- ------------- From Fund Share Transactions -- Net:* Reclassification of capital paid-in ............................................... 73,182 -- ------------- ------------- Net Assets: Beginning of period ............................................................... 608,723,813 455,655,886 ------------- ------------- End of period (including undistributed net investment income of $3,974,796 and $9,086,785, respectively) ..................................... $ 647,280,273 $ 608,723,813 ============= ============= *Analysis of Common Share Transactions: SIX MONTHS ENDED APRIL 30, 1996 YEAR ENDED (UNAUDITED) OCTOBER 31, 1995 ------------------------------- ------------------------------- SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ Shares outstanding, beginning of period ................ 23,005,000 $458,870,000 23,005,000 $458,870,000 Adjustment to capital paid-in - Note D ................. -- 73,182 -- -- ------------ ------------ ------------ ------------ Shares outstanding, end of period ...................... 23,005,000 $458,943,182 23,005,000 $458,870,000 ============ ============ ============ ============
The Statement of Changes in Net Assets shows how the value of the Fund's net assets has changed since the end of the previous period. The difference reflects earnings less expenses, any investment gains and losses, distributions paid to shareholders and any increase or decrease in money shareholders invested in the Fund. The footnote illustrates the number of Fund shares sold during the period, along with the corresponding dollar value. SEE NOTES TO FINANCIAL STATEMENTS. 8 ================================================================================ Financial Statements John Hancock Funds - Bank and Thrift Opportunity Fund Financial Highlights Selected data for a share of beneficial interest outstanding throughout the period indicated, investment returns, key ratios and supplemental data are listed as follows:
- ---------------------------------------------------------------------------------------------------------------------------------- FOR THE PERIOD AUGUST 23, 1994 SIX MONTHS ENDED (COMMENCEMENT OF APRIL 30, 1996 YEAR ENDED OPERATIONS) TO (UNAUDITED) OCTOBER 31, 1995 OCTOBER 31, 1994 ----------- ---------------- ---------------- Per Share Operating Performance Net Asset Value, Beginning of Period ............................. $ 26.46 $ 19.81 $ 20.00 ----------- ----------- ----------- Net Investment Income ............................................ 0.26 0.50 0.12 Net Realized and Unrealized Gain (Loss) on Investments ........... 2.23 6.38 (0.26) ----------- ----------- ----------- Total from Investment Operations ............................... 2.49 6.88 (0.14) ----------- ----------- ----------- Less Distributions: Dividends from Net Investment Income ............................. (0.48) (0.23) -- Distributions from Net Realized Gain on Investment Sold .......... (0.33) -- -- ----------- ----------- ----------- Total Distributions ............................................ (0.81) (0.23) -- ----------- ----------- ----------- Common Shares Offering Costs ..................................... -- -- (0.05) ----------- ----------- ----------- Net Asset Value, End of Period ................................... $ 28.14 $ 26.46 $ 19.81 =========== =========== =========== Per Share Market Value, End of Period ............................ $ 22.88 $ 22.75 $ 18.00 =========== =========== =========== Total Investment Return at Market Value .......................... 3.88%(a) 27.91% (10.00%)(a) Ratios and Supplemental Data Net Assets, End of Period (000's omitted) ........................ $ 647,280 $ 608,724 $ 455,656 Ratio of Expenses to Average Net Assets .......................... 1.47%* 1.49% 1.51%* Ratio of Net Investment Income to Average Net Assets ............. 1.87%* 2.22% 3.22%* Portfolio Turnover Rate .......................................... 7% 8% 0% Average Broker Commission Rate (per share of security) (b) ....... $ 0.07 N/A N/A
* On an annualized basis. (a) Not annualized. (b) Average broker commission rate (per share of security) as required by amended disclosure requirements effective September 1, 1995. The Financial Highlights summarizes the impact of the following factors on a single share for the period indicated: the net investment income, gains (losses), distributions and total investment return of the Fund. It shows how the Fund's net asset value for a share has changed since the end of the previous period. Additionally, important relationships between some items presented in the financial statements are expressed in ratio form. SEE NOTES TO FINANCIAL STATEMENTS. 9 ================================================================================ Financial Statements John Hancock Funds - Bank and Thrift Opportunity Fund Schedule of Investments April 30, 1996 (Unaudited) - ------------------------------------------------------------------------------ NUMBER OF MARKET DESCRIPTION, ISSUER, STATE SHARES VALUE - -------------------------- ------ ----- COMMON STOCKS AND WARRANT Money Center Banks (0.20%) Chase Manhattan Corp. (NY) ................... 18,387 $ 1,266,405 ------------ Super Regionals (7.92%) Barnett Banks, Inc. (FL) ..................... 230,000 14,576,250 Fleet Financial Group, Inc. (MA) ............. 205,206 8,823,858 Norwest Corp. (MN) ........................... 187,394 6,769,608 PNC Bank Corp. (PA) .......................... 697,000 21,084,250 ------------ 51,253,966 ------------ Regionals (51.71%) ABC Bancorp. (GA) ............................ 40,000 580,000 Alabama National Bancorp. (AL) ............... 130,000 1,738,750 American Bancorp. (WV) ....................... 17,500 393,750 American Bancshares, Inc. * (FL) ............. 60,000 397,500 Atlantic Bancorp. * (ME) (R) ................. 150,000 1,902,000 Bancorp Hawaii, Inc. (HI) .................... 300,000 10,875,000 BancorpSouth, Inc. (MS) ...................... 50,000 1,225,000 Banknorth Group, Inc. (VT) ................... 86,500 3,027,500 BanPonce Corp. (PR) .......................... 150,000 6,975,000 Benson Financial Corp. (TX) + ................ 228,300 4,508,925 Beverly National Corp. (MA) .................. 25,000 468,750 BNCCorp, Inc. * (ND) ......................... 45,000 427,500 Boatmen's Bancshares, Inc. (MO) .............. 62,000 2,402,500 Broad National Bancorp. (NJ) ................. 38,325 411,994 California State Bank (CA) ................... 89,200 1,326,850 Carolina First Corp. (NC) .................... 28,242 600,143 CCB Financial Corp. (NC) ..................... 34,800 1,796,550 Centura Banks, Inc. (NC) ..................... 80,000 2,920,000 Century Financial Corp. (PA) ................. 10,000 157,500 Chittenden Corp. (VT) ....................... 31,250 843,750 Colonial BancGroup, Inc. (AL) ................ 385,000 13,041,875 Columbia Bancorp. (MD) ....................... 24,000 462,000 Comerica, Inc. (MI) .......................... 165,000 7,177,500 Commercial Bankshares, Inc. (FL) ............. 34,000 467,500 Commonwealth Bankshares, Inc. * (VA) ......... 25,440 228,960 Community Banks, Inc. (PA) ................... 30,000 765,000 Compass Bancshares Inc. (AL) ................. 292,000 9,782,000 Corestates Financial Corp. (PA) .............. 250,875 9,784,125 County Bank of Chesterfield (VA) ............. 30,000 390,000 Crestar Financial Corp. (VA) ................. 267,000 15,052,125 Dauphin Deposit Corp. (PA) ................... 80,000 2,300,000 Desert Community Bank * (CA) ................. 37,000 531,875 The Schedule of Investments is a complete list of all securities owned by Bank and Thrift Opportunity Fund on April 30, 1996. It's divided into four main categories:common stocks and warrant, preferred stocks, bonds and short-term investments. The common stocks and warrant, preferred stocks and bonds are further broken down by industry groups. Short-term investments, which represent the Fund's "cash" position, are listed last. NUMBER OF MARKET DESCRIPTION, ISSUER, STATE SHARES VALUE - -------------------------- ------ ----- Regionals (continued) Empire Banc Corp. (MI) ....................... 13,625 $ 507,531 Evergreen Bancorp., Inc. (NY) ................ 25,000 587,500 Financial Trust Corp. (PA) ................... 90,000 2,745,000 First American Corp. (TN) .................... 317,100 13,556,025 First of America Bank Corp. (MI) ............. 308,300 13,950,575 First Commerce Corp. (LA) .................... 370,000 12,580,000 First Security Corp. (UT) .................... 155,000 3,913,750 First State Bancorp. (NM) .................... 82,625 939,859 First Tennessee National Corp. (TN) .......... 106,200 3,504,600 First Victoria National Bank (TX) ............ 48,100 1,082,250 Firstar Corp. (WI) ........................... 191,500 8,904,750 FNB Bankshares (ME) + ....................... 20,780 581,840 FNB Corp. (PA) ............................... 38,587 911,618 Harleysville National Corp. (PA) ............. 32,200 853,300 Hometown Bancorp., Inc. * (CT) ............... 42,000 708,750 Imperial Bancorp. * (CA) ..................... 83,700 2,029,725 Integra Financial Corp. (PA) ................. 245,700 18,151,088 Magna Group, Inc. (MO) ....................... 80,000 1,800,000 Mahaska Investment Co. (IA) + ................ 149,500 2,279,875 Mercantile Bancorp., Inc. (MO) ............... 255,247 11,358,491 MetroBanCorp. (IN) ........................... 49,000 294,000 Mississippi Valley Bankshares, Inc. (MO) ..... 47,500 1,436,875 New England Community Bancorp ................ (Class A) (CT) + ........................... 165,000 1,732,500 North Fork Bancorp., Inc. (NY) ............... 30,800 731,500 Old Kent Financial Corp. (MI) ................ 186,375 6,989,062 Oriental Bank & Trust (PR) ................... 68,750 1,246,094 Provident Bankshares Corp. (MD) .............. 111,825 3,620,334 Regions Financial Corp. (AL) ................. 82,956 3,826,345 Riggs National Corp. (DC) .................... 190,000 2,375,000 Salem Bank and Trust (VA) .................... 42,000 546,000 Santa Barbara Bancorp. (CA) .................. 4,500 115,313 SEE NOTES TO FINANCIAL STATEMENTS. 10 ================================================================================ Financial Statements John Hancock Funds - Bank and Thrift Opportunity Fund NUMBER OF MARKET DESCRIPTION, ISSUER, STATE SHARES VALUE - -------------------------- ------ ----- Regionals (continued) Security Shares, Inc. (TX) (r) ............... 200,000 $ 1,518,000 Signet Banking Corp. (VA) .................... 355,000 8,697,500 Southern National Corp. (NC) ................. 558,880 15,578,780 Southtrust Corp. (AL) ....................... 580,000 15,732,500 Southwest Bancorp., Inc. (OK) ................ 78,500 1,491,500 Summit Bancorp. (NJ) (formerly UJB Financial Corp.) ........................... 452,420 16,060,910 Sun Bancorp., Inc. (NJ) (r) .................. 50,000 879,000 Surety Capital Corp. * (TX) + ................ 303,700 1,157,856 Tehama County Bank * (CA) .................... 46,052 529,598 Union Planters Corp. (TN) .................... 437,900 13,191,737 United Security Bancorp. * (WA) .............. 127,050 1,588,125 US Bancorp. (OR) ............................. 726,760 23,528,855 US Trust Corp. (NY) .......................... 26,000 1,423,500 Vectra Banking Corp. * (CO) .................. 34,100 417,725 Ventura County National Bancorp. * (CA) ...... 213,909 869,005 West Coast Bancorp. (OR) ..................... 48,950 911,694 Whitney Holding Corp. (LA) ................... 128,500 3,919,250 Yardville National Bank (NJ) ................. 25,500 408,000 ----------- 334,725,007 ----------- Thrifts (25.61%) Ambanc Holding Co., Inc. * (NY) .............. 45,000 421,875 American Federal Bank, FSB (SC) .............. 140,000 2,205,000 American National Bancorp., Inc. (MD) ........ 146,470 1,483,009 Avondale Financial Corp. * (IL) .............. 51,000 701,250 Bank West Financial Corp. (MI) + ............. 210,000 1,995,000 BostonFed Bancorp., Inc. (MA) ................ 101,300 1,253,588 Calumet Bancorp., Inc. * (IL) ................ 33,000 915,750 Cameron Financial Corp. (MO) ................. 90,000 1,260,000 CB Bancorp., Inc. * (IN) ..................... 45,000 731,250 Charter Financial, Inc. (IL) ................. 35,000 406,875 Collective Bancorp., Inc. (NJ) ............... 521,500 12,613,781 Community Financial Corp. * (IL) ............. 25,000 306,250 Community Investors Bancorp., Inc. (OH) ...... 10,000 152,500 Conestoga Bancorp., Inc. (NY) ................ 75,000 1,565,625 Crazy Woman Creek Bancorp., Inc. * (WY) ...... 30,000 315,000 CSB Financial Corp. (VA) ..................... 70,000 1,452,500 CSB Financial Group, Inc. * (IL) ............. 40,000 360,000 Equitable Federal Savings Bank * (MD) + ...... 40,000 1,050,000 FFVA Financial Corp. (VA) .................... 25,000 781,250 Fidelity Federal Bank (Class A) * (CA) ....... 282,858 2,581,079 Financial Bancorp., Inc. (NY) ................ 85,000 1,126,250 First Bell Bancorp., Inc, (PA) ............... 82,500 1,134,375 First Colorado Bancorp., Inc. (CO) ........... 191,500 2,321,938 First Defiance Financial Corp. (OH) .......... 526,885 5,664,014 First Federal Bancorp. * (MN) ................ 29,000 384,250 First Federal Bancshares Eau Claire, Inc. (WI) .................................. 140,000 1,960,000 First Financial Corp. (WI) ................... 30,418 714,823 First Keystone Financial, Inc. * (PA) ........ 55,000 935,000 First Mutual Bancorp., Inc. (IL) ............. 135,000 1,687,500 First State Financial Services, Inc. (NJ) .... 22,500 270,000 Fort Bend Holdings Corp. (TX) ................ 35,000 630,000 Fort Thomas Financial Corp. (KY) ............. 13,000 187,688 Frankfort First Bancorp. (KY) ................ 64,418 998,479 GA Financial, Inc. * (PA) .................... 90,000 1,001,250 GFSB Bancorp, Inc. (NM) ...................... 20,000 280,000 Greenpoint Financial Corp. (NY) .............. 345,000 9,961,875 Grove Bank (MA) .............................. 5,000 128,750 Harbor Federal Bancorp., Inc. (MD) ........... 35,000 459,375 Hardin Bancorp., Inc. (MO) ................... 40,000 480,000 Harvest Home Financial Corp. (OH) ............ 25,000 306,250 Highland Federal Bank * (CA) ................. 104,167 1,757,818 Hingham Institute for Savings (MA) ........... 58,000 841,000 HMN Financial, Inc. * (MN) ................... 96,500 1,471,625 Home Financial Corp. (FL) .................... 50,000 693,750 Horizon Bancorp., Inc. (TX) .................. 67,000 753,750 IBS Financial Corp. (NJ) ..................... 110,000 1,512,500 Imperial Thrift & Loan Assn * (CA) ........... 40,600 583,625 ISB Financial Corp. (LA) ..................... 95,000 1,472,500 L & B Financial, Inc. (TX) (formerly Sulphur Springs Building & Loan) + ......... 127,000 1,905,000 Lawrence Savings Bank * (MA) ................. 75,000 440,625 Leader Financial Corp. (TN) .................. 303,000 13,332,000 Little Falls Bancorp., Inc. * (NJ) ........... 150,000 1,650,000 Logansport Financial Corp. (IN) + ............ 77,500 968,750 Long Island Bancorp., Inc. (NY) .............. 270,000 7,492,500 MassBank Corp. (MA) .......................... 14,500 474,875 Meritrust Federal Savings Bank (LA) .......... 18,000 558,000 MFB Corp. * (IN) ............................. 15,000 213,750 Mid Continent Bancshares, Inc. (KS) .......... 60,000 1,072,500 Mississippi View Holding Co. (MN) ............ 45,000 506,250 MLF Bancorp., Inc. (PA) ...................... 20,000 482,500 Monterey Bay Bancorp., Inc. * (CA) ........... 130,000 1,543,750 New Hampshire Thrift Bancshares, Inc. ........ (NH) ....................................... 25,000 251,563 North Central Bancshares, Inc. (IA) .......... 95,000 1,009,375 Northeast Indiana Bancorp., Inc. (IN) ........ 45,000 562,500 Northwest Equity Corp. (WI) + ................ 61,000 610,000 NS & L Bancorp. (MO) ......................... 5,000 63,750 Ottawa Financial Corp. (MI) .................. 25,000 406,250 Pamrapo Bancorp., Inc. (NJ) .................. 81,000 1,559,250 SEE NOTES TO FINANCIAL STATEMENTS. 11 ================================================================================ Financial Statements John Hancock Funds - Bank and Thrift Opportunity Fund NUMBER OF MARKET DESCRIPTION, ISSUER, STATE SHARES VALUE - -------------------------- ------ ----- Thrifts (continued) Patriot Bank Corp. (PA) ...................... 150,000 $ 1,950,000 PennFed Financial Services, Inc. * (NJ) + .... 375,000 5,718,750 People's Bancshares, Inc. (MA) ............... 60,000 555,000 Permanent Bancorp., Inc. (IN) ................ 90,000 1,327,500 PFF Bancorp., Inc. * (CA) .................... 90,000 1,035,000 Pittsburgh Home Financial Corp. * (PA) ....... 100,000 1,068,750 Portsmouth Bank Shares, Inc. (NH) ............ 47,430 640,305 Potters Financial Corp. (OH) (formerly Potters Savings & Loan Co.) ................ 16,000 264,000 Primary Bank * (NH) .......................... 25,000 328,125 QCF Bancorp., Inc. * (MN) .................... 20,000 302,500 Quaker City Bancorp., Inc. * (CA) ............ 100,000 1,443,750 River Bank America * (NY) .................... 115,000 948,750 Roosevelt Financial Group, Inc. (MO) ......... 458,824 8,832,362 Scotland Bancorp., Inc. * (NC) ............... 22,500 264,375 Security Bancorp. (MT) ....................... 59,500 1,249,500 SFS Bancorp., Inc. * (NY) + .................. 89,000 1,134,750 SGV Bancorp., Inc. * (CA) .................... 30,000 277,500 Southern Banc Co., Inc. (AL) ................. 17,000 212,500 Southern Missouri Bancorp., Inc. (MO) ........ 72,000 1,044,000 Springfield Institution for Savings * (MA) ... 102,500 1,729,687 St. Landry Financial Corp. * (LA) + .......... 25,000 375,000 Standard Federal Bancorp. (MI) (formerly Standard Federal Bank of Troy) ................................... 195,000 7,726,875 Standard Financial, Inc. (IL) ................ 170,000 2,528,750 Sterling Financial Corp. * (WA) .............. 16,500 226,875 Sturgis Federal Savings Bank (MI) ............ 27,000 465,750 Tappan Zee Financial, Inc. (NY) .............. 55,000 660,000 Teche Holding Co. (LA) ....................... 100,000 1,325,000 Texarkana First Financial Corp. (AR) ......... 28,000 430,500 Washington Mutual, Inc. (WA) ................. 370,000 10,267,500 Wells Financial Corp. * (MN) + ............... 167,000 1,753,500 WesterFed Financial Corp. (MT) ............... 160,000 2,320,000 ----------- 165,780,009 ----------- Other - Financial (2.19%) Aames Financial Corp. ........................ 20,000 882,500 Capital One Financial Corp. .................. 325,000 9,587,500 Olympic Financial Ltd. * ..................... 25,000 556,250 Union Acceptance Corp. (Class A) * ........... 205,000 3,177,500 ----------- 14,203,750 ----------- WARRANT (0.41%) Glendale Federal Savings Bank * (CA) ......... 325,000 2,640,625 ----------- TOTAL COMMON STOCKS AND WARRANT (Cost $403,621,681) (88.04%) 569,869,762 ----------- ----------- PREFERRED STOCKS Banks (1.62%) Chevy Chase Savings, 13.00% (MD) ............. 55,000 $ 1,718,750 Community Bank, Ser B, 13.00% (CA) ......................... 21,000 556,500 Fidelity Federal Bank, Ser A, 12.00% (CA) ......................... 40,000 1,085,000 Greater New York Savings Bank, Ser B, 12.00% (NY) ......................... 100,000 3,000,000 Matewan BancShares, Inc., Ser A, 7.50% (WV) .......................... 25,000 631,250 Riggs National Corp., Ser B, 10.75% (DC) ......................... 93,000 2,580,750 Sovereign Bancorp., Ser B, 6.25% (PA) .......................... 15,000 900,000 ----------- TOTAL PREFERRED STOCKS (Cost $9,300,000) ( 1.62%) 10,472,250 ----------- ----------- SEE NOTES TO FINANCIAL STATEMENTS. 12 ================================================================================ Financial Statements John Hancock Funds - Bank and Thrift Opportunity Fund INTEREST PAR VALUE MARKET DESCRIPTION, ISSUER RATE (000'S OMITTED) VALUE - ------------------- ---- -------------- ----- BONDS Beal Financial Corp. Sr Note 08-15-00 ................ 12.75% $ 2,000 $ 2,050,000 Berkeley Federal Bank & Trust Sub Deb 06-15-05 ................ 12.00 1,000 1,025,000 CENFED Financial Corp. (R) Sr Note 12-15-01 ................ 11.17 3,500 3,718,750 Centerbank Sub Note 10-01-02 .............. 8.375 1,000 993,750 Coastal Bancorp, Inc. Sr Note 06-30-02 ................ 10.00 3,000 2,970,000 Fidelity Federal Bancorp Sub Note 06-01-05 .............. 10.00 1,000 990,000 First Federal Financial Corp. Note 10-01-04 ................... 11.75 3,500 3,325,000 First Nationwide (Parent) Holdings Inc. (R) Sr Note 04-15-03 ................ 12.50 2,000 2,035,000 MAF Bancorp, Inc. Sub Note 09-30-05 .............. 8.30 1,500 1,477,500 SFFed Corp. (R) Sr Note 09-01-04 ................ 11.20 2,500 2,875,000 WSFS Financial Corp. Sr Note 12-31-05 ................ 11.00 3,000 3,030,000 ------------ TOTAL BONDS (Cost $ 23,831,032) (3.79%) 24,490,000 ------ ------------ DESCRIPTION, ISSUER, STATE - -------------------------- SHORT-TERM INVESTMENTS Certificates of Deposit (0.01%) Deposits in Mutual Banks .......... $ 55,603 ------------ Joint Repurchase Agreement (6.50%) Investment in a joint repurchase agreement transaction with SBC Capital Markets, Inc., Dated 4-30-96, Due 5-01-96 (secured by U.S. Treasury Bonds 10.375% due 11-15-12, and 7.250% due 5-15-16) - Note A .... 5.33% $42,102 42,102,000 ------------ TOTAL SHORT-TERM INVESTMENTS (6.51%) 42,157,603 ------- ------------ TOTAL INVESTMENTS (99.96%) $646,989,615 ======= ============ NOTES TO SCHEDULE OF INVESTMENTS * Non-income producing security (R) These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $10,530,750 as of April 30, 1996. See Note A of the Notes to Financial Statements for valuation policy. (r) The securities listed below are direct placement securities and are restricted as to resale. The Fund has limited rights to registration under the Securities Act of 1933 with respect to restricted securities (not including Rule 144A securities). In certain circumstances the Fund may bear a portion of the cost of such registrations; otherwise, such costs would be borne by the issuer. See Note A of the Notes to Financial Statements for valuation policy. Additional information on these restricted securities is as follows: MARKET MARKET VALUE AS A VALUE PERCENTAGE AS OF ACQUISITION ACQUISITION OF FUND'S APRIL 30, DATE COST NET ASSETS 1996 ---- ---- ---------- ---- Security Shares, Inc. ....... 09-29-94 1,150,000 0.23% 1,518,000 Sun Bancorp, Inc. ........... 09-29-94 650,000 0.14% 879,000 + Denotes an affiliated company in which the Fund has ownership of at least 5% of the voting securities. (See Note E of the Notes to Financial Statements). The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund. SEE NOTES TO FINANCIAL STATEMENTS. 13 ================================================================================ NOTES TO FINANCIAL STATEMENTS John Hancock Funds - Bank and Thrift Opportunity Fund (UNAUDITED) NOTE A -- ACCOUNTING POLICIES The John Hancock Bank and Thrift Opportunity Fund (the "Fund") is a diversified closed-end management investment company registered under the Investment Company Act of 1940. To provide the initial capital of the Fund, John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group, purchased a total of 5,000 common shares for an aggregate purchase price of $100,000 on August 8, 1994. The Adviser was the sole holder of common shares until the public offering was completed and the operations of the Fund commenced on August 23, 1994. The Fund's primary investment objective is long-term capital appreciation. Significant accounting policies of the Fund are as follows: VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the basis of market quotations, valuations provided by independent pricing services or, at fair value as determined in good faith in accordance with procedures approved by the Trustees. Short-term debt investments maturing within 60 days are valued at amortized cost, which approximates market value. JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the Securities and Exchange Commission, the Fund, along with other registered investment companies having a management contract with the Adviser, may participate in a joint repurchase agreement transaction. Aggregate cash balances are invested in one or more repurchase agreements, whose underlying securities are obligations of the U.S. government and/or its agencies. The Fund's custodian bank receives delivery of the underlying securities for the joint account on the Fund's behalf. The Adviser is responsible for ensuring that the agreement is fully collateralized at all times. FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all its taxable income, including any net realized gain on investments, to its shareholders. Therefore, no federal income tax provision is required. INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of purchase, sale or maturity. Net realized gains and losses on sales of investments are determined on the identified cost basis. DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities is recorded on the ex-dividend date. Interest income on investment securities is recorded on the accrual basis. The Fund records all distributions to shareholders from net investment income and realized gains on the ex-dividend date. Such distributions are determined in conformity with income tax regulations, which may differ from generally accepted accounting principles. OPTIONS Listed options will be valued at the last quoted sales price on the exchange on which they are primarily traded. Purchased put or call over-the-counter options will be valued at the average of the "bid" prices obtained from two independent brokers. Written put or call over-the-counter options will be valued at the average of the "asked' prices obtained from two independent brokers. Upon the writing of a call or put option, an amount equal to the premium received by the Fund will be included in the Statement of Assets and Liabilities as an asset and corresponding liability. The amount of the liability will be subsequently marked-to-market to reflect the current market value of the written option. The Fund may use option contracts to manage its exposure to the stock market. Writing puts and buying calls will tend to increase the Fund's exposure to the underlying instrument and buying puts and writing calls will tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The maximum exposure to loss for any purchased options will be limited to the premium initially paid for the option. In all other cases, the face (or "notional") amount of each contract at value will reflect the maximum exposure of the Fund in these contracts, but the actual exposure will be limited to the change in value of the contract over the period the contract remains open. Risks may also arise if counterparties do not perform under the contracts' terms, or if the Fund is unable to offset a contract with 14 ================================================================================ NOTES TO FINANCIAL STATEMENTS John Hancock Funds - Bank and Thrift Opportunity Fund a counterparty on a timely basis ("liquidity risk"). Exchange-traded options have minimal credit risk as the exchanges act as counterparties to each transaction, and only present liquidity risk in highly unusual market conditions. To minimize credit and liquidity risks in over- the-counter option contracts, the Fund will continuously monitor the creditworthiness of all its counterparties. At any particular time, except for purchased options, market or credit risk may involve amounts in excess of those reflected in the Fund's period-end Statement of Assets and Liabilities. There were no written option transactions for the period ended April 30, 1996. USE OF ESTIMATES The preparation of these financial statements in accordance with generally accepted accounting principles incorporates estimates made by management in determining the reported amounts of assets, liabilities, revenues, and expenses of the Fund. DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities purchased from either the date of issue or the date of purchase over the life of the security, as required by the Internal Revenue Code. ORGANIZATION EXPENSES Expenses incurred in connection with the organization of the Fund have been capitalized and are being charged to the Fund's operations ratably over a five-year period that began with the commencement of investment operations of the Fund. NOTE B -- MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES AND OTHERS Under the present investment management contract, the Fund pays a monthly management fee to the Adviser, for a continuous investment program, equivalent on an annual basis to 1.15% of the Fund's average weekly net asset value. The Fund has also entered into an administrative agreement with the Adviser pursuant to which the Adviser provides certain administrative services on behalf of the Fund. In return, the Fund has agreed to pay a monthly administration fee at an annual rate of 0.25% of the Fund's average weekly net asset value. Messrs. Edward J. Boudreau, Jr., Thomas W.L. Cameron, and Richard S. Scipione and Ms. Anne C. Hodsdon are directors and/ or officers of the Adviser, and/or its affiliates, as well as Trustees of the Fund. The compensation of unaffiliated Trustees is borne by the Fund. The Adviser owns 5,000 shares of beneficial interest of the Fund. Effective with the fees paid for 1995, the unaffiliated Trustees may elect to defer for tax purposes their receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments into other John Hancock Funds, as applicable, to cover its liability for the deferred compensation. Investments to cover the Fund's deferred compensation liability are recorded on the Fund's books as an other asset. The deferred compensation liability and the related asset are always equal and are marked to market on a periodic basis to reflect any income earned by the investment as well as any unrealized gains or losses. At April 30, 1996, the Fund's investments to cover the deferred compensation liability had unrealized appreciation of $2,701. NOTE C -- INVESTMENT TRANSACTIONS Purchases and proceeds from sales of securities, other than short-term obligations, during the period ended April 30, 1996, aggregated $44,133,554 and $62,973,359, respectively. The cost of investments owned at April 30, 1996 for Federal income tax purposes was $436,752,713. Gross unrealized appreciation and depreciation of investments aggregated $169,547,822 and $1,468,523, respectively, resulting in net unrealized appreciation of $168,079,299. 15 ================================================================================ NOTES TO FINANCIAL STATEMENTS John Hancock Funds - Bank and Thrift Opportunity Fund NOTE D -- CAPITAL In connection with a public offering, the Fund recorded proceeds of $458,770,000, net of estimated offering costs of $1,230,000 through the issuance of 23,000,000 common shares at $20.00 per share. As of April 30, 1996, the Fund had incurred $1,156,818 of public offering expenses and has adjusted capital paid-in for $73,182 which represents the balance of estimated offering costs which the Fund does not expect to incur. NOTE E -- TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS Affiliated issuers, as defined by the Investment Company Act of 1940, are those in which the Fund's holdings of an issuer represent 5% or more of the outstanding voting securities of the issuer. A summary of the Fund's transactions in the securities of these issuers during the period ended April 30, 1996 is set forth below.
ACQUISITIONS DISPOSITIONS BEGINNING ---------------------------------------- ENDING SHARE SHARE SHARE SHARE REALIZED DIVIDEND ENDING AFFILIATE AMOUNT AMOUNT COST AMOUNT COST AMOUNT GAIN INCOME VALUE - --------- ------------------------------------------------------------------------------------------------- Bank West Financial Corp. (MI) 210,000 -- $-- -- $ -- 210,000 $ -- $ 14,700 $ 1,995,000 Benson Financial Corp. (TX) ... 258,300 -- -- 30,000 545,000 228,300 200,000 -- 4,508,925 Equitable Federal Savings Bank (MD) .................. 40,000 -- -- -- -- 40,000 -- -- 1,050,000 FNB Bankshares (ME) .......... 20,780 -- -- -- -- 20,780 -- 6,234 581,840 L&B Financial, Inc. (TX) 127,000 -- -- -- -- 127,000 -- 12,700 1,905,000 Logansport Financial Corp. (IN) 77,500 -- -- -- -- 77,500 -- 15,500 968,750 Mahaska Investment Co. (IA) ... 149,500 -- -- -- -- 149,500 -- 51,951 2,279,875 New England Community Bancorp (CT) ............... 165,000 -- -- -- -- 165,000 -- 18,975 1,732,500 Northwest Equity Corp. (WI) ... 96,000 -- -- 35,000 379,375 61,000 106,250 10,980 610,000 PennFed Financial Services, Inc. (NJ) .................. 375,000 -- -- -- -- 375,000 -- -- 5,718,750 SFS Bancorp, Inc. (NY) ........ 105,000 -- -- 16,000 196,875 89,000 14,075 -- 1,134,750 St. Landry Financial Corp. (LA) 25,000 -- -- -- -- 25,000 -- -- 375,000 Surety Capital Corp. (TX) ..... 303,700 -- -- -- -- 303,700 -- -- 1,157,856 Wells Financial Corp. (MN) .... 212,000 -- -- 45,000 475,001 167,000 68,751 -- 1,753,500 ------ ---------- --------------------------------- $-- $1,596,251 $389,076 $131,040 $25,771,746 ====== ========== =================================
16 ================================================================================ NOTES TO FINANCIAL STATEMENTS John Hancock Funds - Bank and Thrift Opportunity Fund NOTE F -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Unaudited quarterly results of operations for the period ended April 30, 1996 and the year ended October 31, 1995 are as follows:
1996 ---------------------- THREE MONTHS ENDED JANUARY 31 APRIL 30 ---------- -------- (000's OMITTED EXCEPT PER SHARE DATA) ---------------------- Total Investment Income .................................... $ 5,152 $ 5,338 Net investment income ...................................... 2,834 3,039 Dividends from net investment income ....................... 10,985 -- Distributions from net realized gain on investments sold ... 7,477 -- Net realized and unrealized gain on investments ............ 36,793 14,279 Per share of beneficial interest: Net investment income .................................. 0.12 0.14 Dividends from net investment income ................... 0.48 -- Distributions from net realized gain on investments sold ... 0.33 -- Net realized and unrealized gain on investments ............ 1.60 0.63 Net asset value at end of quarter .......................... $ 23.78 $ 28.14 Market value per share: High ................................................... 24.750 23.625 Low .................................................... 22.625 21.750
1995 ---------------------------------------------------- THREE MONTHS ENDED ---------------------------------------------------- JANUARY 31 APRIL 30 JULY 31 OCTOBER 31 ---------- -------- ------- ---------- (OOO's OMITTED EXCEPT PER SHARE DATA) ---------------------------------------------------- Total Investment Income .................................... $ 5,189 $ 4,429 $ 4,871 $ 4,761 Net investment income ...................................... 3,525 2,654 2,875 2,480 Dividends from net investment income ....................... 5,176 -- -- -- Net realized and unrealized gain on investments ............ 3,772 45,475 64,320 33,143 Per share of beneficial interest: Net investment income .................................... 0.15 0.12 0.12 0.11 Dividends from net investment income ..................... 0.23 -- Net realized and unrealized gain on investments .......... 0.16 1.98 2.80 1.44 Net asset value at end of quarter .......................... $ 19.90 $ 21.99 $ 24.91 $ 26.46 Market value per share: High ..................................................... 18.375 19.750 23.125 25.000 Low ...................................................... 15.875 18.125 19.125 22.375
17 ================================================================================ John Hancock Funds - Bank and Thrift Opportunity Fund INVESTMENT OBJECTIVE AND POLICY John Hancock Bank and Thrift Opportunity fund is a closed-end diversified management investment company, shares of which were initially offered to the public on August 23, 1994 and are publicly traded on the New York Stock Exchange. Its investment objective is long-term capital appreciation. DIVIDEND REINVESTMENT PLAN The Fund provides shareholders with a Dividend Reinvestment Plan, (the "Plan"), which offers the opportunity to earn compound yields. Each holder of Common Shares will automatically have all distributions of dividends and capital gains reinvested by State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as agent for holders of Common Shares pursuant to the Plan (the "Plan Agent") unless an election is made to receive cash. Each registered shareholder will receive from the Plan Agent an authorization card to be signed and returned if the shareholder elects to receive distributions from net investment income in cash or elects not to receive capital gains distributions in the form of a shares dividend. The Plan Agent will effect purchases of Common Shares under the Plan in the open market. The Fund will not issue any new shares in connection with the Plan. Holders of Common Shares who elect not to participate in the Plan will receive all distributions in cash paid by check mailed directly to the shareholder of record (or if the Common Shares are held in street or other nominee name, then to the nominee) by the Plan Agent, as divided disbursing agent. Shareholders whose shares are held in the name of a broker or nominee or shareholders transferring such an account to a new broker or nominee should contact the broker or nominee to determine whether and how they may participate in the Plan. The Plan Agent serves as agent for the holders of Common Shares in administering the Plan. After the Fund declares a dividend or makes a capital gains distribution, the Plan Agent will, as agent for the participants, receive the cash payment and use it to buy Common Shares in the open market, on the New York Stock Exchange or elsewhere, for the participants' accounts. The price of the shares will be the average market price at which such shares were purchased by the Plan Agent. Participants in the Plan may withdraw from the Plan upon written notice to the Plan Agent. Such withdrawal will be effective immediately if received not less than ten days prior to a dividend record date; otherwise, it will be effective for all subsequent dividend record dates. When a participant withdraws from the Plan or upon termination of the Plan as provided below, either a cash payment will be made to the participant for the full value of the Common Shares credited to the account upon instruction by the participant or certificates for whole Common Shares credited to his or her account under the Plan will be issued and a cash payment will be made for any fraction of a Common Share credited to such account. The Plan Agent maintains each shareholder's account in the Plan and furnishes monthly written confirmations of all transactions in the accounts, including information needed by the shareholders for personal and tax records. Common Shares in the account of each Plan participant will be held by the Plan Agent in non-certified form in the name of the participant. Proxy material relating to shareholders' meetings of the Fund will include those shares purchased as well as shares held pursuant to the Plan. In the case of shareholders, such as banks, brokers, or nominees, which hold Common Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the record shareholders as representing the total amount registered in the record shareholder's name and held for the account of beneficial owners who are participants in the Plan. Shares may be purchased through broker dealers. The Plan Agent's fees for the handling of reinvestment of dividends and other distributions will be paid by the Fund. Each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of distributions. There are no other charges to participants for reinvesting dividends or capital gain distributions. Dividends and capital gains distributions are taxable whether received in cash or reinvested in additional Common Shares, and the automatic reinvestment of dividends and capital gain distributions 18 ================================================================================ John Hancock Funds - Bank and Thrift Opportunity Fund will not relieve participants of any U.S. income tax that may be payable or required to be withheld on such dividends or distributions. Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan as applied to any distribution paid subsequent to written notice of the change sent to all shareholders of the Fund at least 90 days before the record date for the dividend or distribution. The Plan also may be amended or terminated by the Plan Agent by at least 90 days' written notice to all shareholders of the Fund. All correspondence concerning the Plan should be directed to the Plan Agent at P.O. Box 8209, Boston, Massachusetts 02266-8209 (telephone 1-800-426-5523). SHAREHOLDER MEETING On March 7, 1996, the Annual Meeting of John Hancock Bank and Thrift Opportunity Fund (the "Fund") was held to elect five Trustees and to ratify the action of the Trustees in selecting independent auditors for the Fund. The shareholders elected the following Trustees to serve until their respective successors are duly elected and qualified, with the votes tabulated as follows: WITHHELD NAME OF TRUSTEE FOR AUTHORITY - --------------- --- --------- James F. Carlin.............. 21,421,930 176,353 William H. Cunningham........ 21,414,122 184,160 Charles F. Fretz............. 21,416,174 182,108 Harold R. Hiser, Jr.......... 21,414,058 184,224 John P. Toolan............... 21,424,847 173,436 The shareholders also ratified the Trustees' selection of Deloitte and Touche, LLP as the Fund's independent auditors for the Fund for the fiscal year ending October 31, 1996, with the votes tabulated as follows: 21,383,842 FOR, 76,565 AGAINST and 137,875 ABSTAINING. 19 ================================================================================ [A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the page. A box sectioned in quadrants with a triangle in upper left, a circle in upper right, a cube in lower left and a diamond in lower right. A tag line below reads: "A Global Investment Management Firm."] A recycled logo in lower left hand corner with the caption "Printed on Recycled Paper." 101 Huntington Avenue Boston, MA 02199-7603 Bulk Rate U.S. Postage PAID So. Hackensack Permit No. 750 P90SA 4/96 6/96 -----END PRIVACY-ENHANCED MESSAGE-----