ITEM 1. REPORT TO STOCKHOLDERS.
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John Hancock
Bank
and Thrift
OPPORTUNITY FUND
SEMI
ANNUAL
REPORT
4.30.03
[LOGO] John Hancock
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[A photo of Maureen R. Ford, Chairman and Chief Executive Officer, flush left
next to first paragraph.]
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Table of contents
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Your fund at a glance
page 1
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Managers' report
page 2
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Fund's investments
page 6
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Financial statements
page 10
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For your information
page 25
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Dear Fellow Shareholders,
After a strong start to 2003, the stock market succumbed to the pressures of a
weak economy, rising oil prices, concerns about corporate earnings and
uncertainties about the war in Iraq. The tide turned in April, when the war
ended and first-quarter corporate earnings came in better than expected. As a
result, the major indexes all gained some ground year to date through April 30,
2003, with the Dow Jones Industrial Average returning 2.50%, the Standard &
Poor's 500 Index returning 4.82% and the tech-heavy Nasdaq Composite Index up
9.64%. Bonds, which have outperformed stocks for the last three years, continued
their upward trend this year, as investors still sought their relative safety.
After the jarring stock market losses of the last three years, it's a relief for
investors to be reminded that the market is indeed cyclical, and does eventually
move up - not just down. But while the stock market has been clawing its way
back, the ride has been extremely volatile. Uncertainty still abounds about the
strength of the economy, geopolitical issues, corporate governance problems,
rising unemployment and the sustainability of corporate earnings growth. And
despite rallies late last year and in April, many investors are still so bruised
and skeptical that they have remained on the sidelines. Even though the
statistics suggest we might be emerging from this long, difficult bear market,
we're not quite ready to call it history.
While no one can predict when this bear market cycle will turn, investors can
take charge of how they maneuver through such uncertain times. First, take a
look at how your portfolio is allocated among stocks, bonds and cash to make
sure it's in the proper balance. Work with your investment professional, who
knows your long-term goals and can help keep you on the right track, rather than
being lured by today's stars, which could wind up tomorrow's laggards. And as
always, keep a long-term investment horizon. We believe this offers the best way
for you to survive the tough times and reach your investment objectives.
Sincerely,
/s/Maureen R. Ford,
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Chairman and Chief Executive Officer
This commentary reflects the chairman's views as of April 30, 2003. They are
subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks long-term capital appreciation, with moderate income as a
secondary objective, by investing primarily in stocks of regional banks and
lending companies.
Over the last six months
[ ] The stock market advanced amid volatility caused by economic and war
concerns.
[ ] Financial stocks performed in line with the market, but bank stocks lagged
for the first time in several years.
[ ] Banks with strong mortgage-banking and fixed-income businesses had the best
gains.
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[Bar chart with heading "John Hancock Bank and Thrift Opportunity Fund". Under
the heading is a note that reads "Fund performance for the six months ended
April 30, 2003." The chart is scaled in increments of 3% with 0% at the bottom
and 6% at the top. The first bar represents the 5.18% total return for John
Hancock Bank and Thrift Opportunity Fund. A note below the chart reads "The
total return for the Fund is at net asset value with all distributions
reinvested."]
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Top 10 holdings
3.1% Wachovia Corp.
3.1% Zions Bancorp.
3.0% SouthTrust Corp.
3.0% Wells Fargo & Co.
2.9% Bank of America Corp.
2.9% Compass Bancshares, Inc.
2.9% FleetBoston Financial Corp.
2.8% U.S. Bancorp
2.6% M&T Bank Corp.
2.6% Comerica, Inc.
As a percentage of net assets on April 30, 2003.
1
BY JAMES K. SCHMIDT, CFA, LISA A. WELCH AND THOMAS C. GOGGINS, PORTFOLIO
MANAGERS
John Hancock
Bank and Thrift
Opportunity Fund
MANAGERS'
REPORT
Stocks advanced over the last six months, but the period was volatile, fueled by
concerns about the weak economy, its impact on corporate earnings and the war in
Iraq. When the period began last November, stocks were rebounding from a summer
sell-off. The market stalled shortly into the new year as war fears grew leading
up to the March invasion. April saw another rally as the war wound down and
corporate earnings were better than expected. For the six months ended April 30,
2003, the broad market, as measured by the Standard & Poor's 500 Index, returned
4.47%.
Financial stocks performed in line with the market, with the more
market-sensitive, higher-risk companies, such as brokerage firms, producing the
best results, moving up off of a low base. By contrast, regional banks, after
running up strongly for the last two years and leading the financial pack, did
less well this period. Investors began to question their ability to maintain the
same level of earnings growth in an environment of historically low interest
rates and stagnant economic growth.
"Financial stocks performed in line with the market..."
FUND PERFORMANCE EXPLAINED
For the six months ended April 30, 2003, John Hancock Bank and Thrift
Opportunity Fund posted a total return of 5.18% at net asset value. By
comparison, the average open-end financial services fund returned 4.95%,
according to Lipper, Inc. Keep in mind that your net asset value return will be
different from the Fund's performance if you were not invested in the Fund for
the entire period and did not reinvest all distributions.
Just as our heavy focus on regional banks served the Fund well during the last
two years of outstanding returns, it held our performance back somewhat in this
period, as regional banks -
2
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[Photos' of Jim Schmidt, Lisa Welch and Tom Goggins flush right next to first
paragraph.]
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particularly mid-cap thrifts and thrift-like banks - underperformed during the
period's market rallies.
MORTGAGE BANKING AND BOND TRADING RULE
On an absolute basis, the best performers were banks that had a strong emphasis
on mortgage banking and fixed-income activities, such as bond trading, which
flourished as investors shunned equities and bought bonds. Mortgage banking
remained strong as continually low interest rates prompted individuals and
corporations to refinance their homes and balance sheets. Low rates also caused
companies needing to raise capital to turn to the bond market rather than the
still-weak equity IPO market, generating record bond issuance.
Among the Fund's top performers were First Tennessee National, National City
Corp. and Washington Mutual, all of which have hefty mortgage banking
businesses. Banks that were relatively cheap on a price-to-earnings basis also
did well in the period when concerns grew about bank fundamentals. FleetBoston
Financial and Zions Bancorp fit this category. They both had depressed stock
prices from problems last year and then produced better-than-expected results in
the first quarter.
"...the best performers were banks that had a strong emphasis on mortgage
banking and fixed-income activities..."
EARNINGS WORRIES HIT MID CAPS
The Fund's biggest detractors were those that had earnings shortfalls in the
first quarter. That prompted investor concerns that revenue growth would be more
difficult for banks, especially those in the mid-cap range, as the prolonged low
interest-rate environment was beginning to cause margin pressures, at the same
time commercial loan growth was not yet
3
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[Table at top left-hand side of page entitled "Top five industry groups." The
first listing is Banks-regional 51%, the second is Banks-superregional 29%, the
third Thrifts 5%, the fourth Mortgage banking 3%, and the fifth Finance 3%.]
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showing signs of picking up. This uncertainty hurt the stocks of Fund holdings
North Fork, National Commerce and TCF Financial Corporation. State Street, which
we did not own, also pre-announced lower-than-expected earnings, and that hit
the stocks of similar, more market-sensitive names, such as Fund holding Mellon
Financial.
Longstanding top performer Fifth Third Bancorp. had issues with regulators
surrounding its operational infrastructure. We are maintaining our position
because we believe Fifth Third has a strong balance sheet and the ability to
produce double-digit earnings growth. All of these banks, along with Fund
holdings Wells Fargo, Bank One and National Commerce, also suffered from
multiple compression, which brought their high price-to-earnings multiples down
from trading at a premium to being more in line with their group.
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[Pie chart in middle of page with heading "Portfolio diversification As a
percentage of net assets on 4-30-3." The chart is divided into two sections
(from top to left): Common stocks 97% and Short-term investments & other 3%.]
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RETURN TO CONSOLIDATION?
During the period, BB&T's stock tumbled after it announced its intent to buy
First Virginia in a deal the market considered too rich. But in our view, the
move could signal a pickup in bank consolidations - either as a means for an
acquiring bank to
4
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[Table at top of page entitled "SCORECARD". The header for the left column is
"INVESTMENT" and the header for the right column is "PERIOD'S PERFORMANCE...AND
WHAT'S BEHIND THE NUMBERS." The first listing is First Tennessee National
followed by an up arrow with the phrase "Mortgage boon lifts stock." The second
listing is Zions Bancorp followed by an up arrow with the phrase "Fundamentals
improved." The third listing is Fifth Third followed by a down arrow with the
phrase "Market punishes stock over regulatory issues."]
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address the challenge of where to find revenue growth, or for a seller to cash
in at a higher price now, in case revenue and earnings growth slows.
NON-BANK FINANCIALS HELP
Our stake in non-bank financials served us well for the most part in a period
where diversification helped. Brokerage firms Lehman Brothers and Legg Mason did
well because of their fixed-income business, and mortgage banker Fannie Mae
benefited from the continuing refinancing trend.
OUTLOOK
We anticipate that bank earnings growth for 2003 over 2002 will be in the high
single digits on average. But whereas in the last two years the mid-cap regional
banks and thrifts have mostly done well, we anticipate far more variation in
results going forward, as some managements better navigate their companies
through a potential slow-growth period ahead. That makes individual stock
picking and fundamental analysis more critical than ever, and we will continue
to apply our experience toward finding and holding onto those banks.
"...we anticipate far more variation in results going forward..."
This commentary reflects the views of the portfolio managers through the end of
the Fund's period discussed in this report. The managers' statements reflect
their own opinions. As such, they are in no way guarantees of future events and
are not intended to be used as investment advice or a recommendation regarding
any specific security. They are also subject to change at any time as market and
other conditions warrant.
Sector investing is subject to greater risks than the market as a whole.
5
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned by the Fund on April 30, 2003 (unaudited)
This schedule is divided into four main categories: common stocks, preferred
stocks, bonds and short-term investments. Common and preferred stocks and bonds
are further broken down by industry group. Short-term investments, which
represent the Fund's cash position, are listed last.
SHARES ISSUER VALUE
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COMMON STOCKS 97.28% $740,858,278
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(Cost $419,781,179)
Banks - Regional 50.64% 385,725,081
65,400 ABC Bancorp. (GA) 922,140
142,500 Alabama National Bancorp. (AL) + 6,566,400
108,000 Allegiant Bancorp., Inc. (MO) 1,858,680
325,383 AmericanWest Bancorp. (WA)* 5,538,019
95,879 AmSouth Bancorp. (AL) 2,018,253
482,474 Banknorth Group, Inc. (ME) 11,521,479
344,846 BB&T Corp. (NC) 11,241,980
47,500 Beverly National Corp. (MA) 1,042,625
76,500 BOK Financial Corp. (OK)*+ 2,758,590
140,000 Camden National Corp. (ME) 3,549,000
47,708 Capital City Bank Group, Inc. (FL) + 1,838,189
155,418 Cascade Bancorp. (OR) + 2,463,531
184,700 CCBT Financial Cos., Inc. (MA) 4,177,914
310,000 Charter One Financial, Inc. (OH) 9,005,500
140,196 Chittenden Corp. (VT) + 3,792,302
224,427 City National Corp. (CA) 9,239,660
615,200 Colonial BancGroup, Inc. (AL) 7,831,496
90,000 Columbia Bancorp. (MD) 2,307,600
50,962 Commercial Bankshares, Inc. (FL) 1,718,948
83,378 Community Banks, Inc. (PA) 2,417,962
213,100 Community First Bankshares, Inc. (ND) 5,736,865
650,857 Compass Bancshares, Inc. (AL) 21,946,898
20,000 Cullen/Frost Bankers, Inc. (TX) 655,800
See notes to
financial statements.
6
SHARES ISSUER VALUE
Banks - Regional (continued)
68,750 Desert Community Bank (CA) $2,508,687
62,696 DNB Financial Corp. (PA) 1,426,334
340,000 East-West Bancorp., Inc. (CA) 11,509,000
73,000 Financial Institutions, Inc. (NY) 1,603,810
52,200 First Charter Corp. (NC) + 906,714
65,000 First State Bancorp. (NM) 1,593,150
170,900 First Tennessee National Corp. (TN) 7,485,420
20,780 FNB Bankshares (ME) 851,980
85,761 F.N.B. Corp. (FL) + 2,608,850
101,718 Fulton Financial Corp. (PA) 2,028,257
213,987 Glacier Bancorp., Inc. (MT) 5,970,237
104,973 Harleysville National Corp. (PA) 2,781,785
230,000 Hibernia Corp. (Class A) (LA) 4,167,600
280,096 Independent Bank Corp. (MI) 6,674,688
310,000 Local Financial Corp. (OK) (R) 4,650,000
238,657 M&T Bank Corp. (NY) 20,159,357
334,545 Marshall & Ilsley Corp. (WI) 9,842,314
209,500 Mercantile Bankshares Corp. (MD) 8,032,230
71,541 Merrill Merchants Bankshares, Inc. (ME) 1,112,463
50,000 Mid-State Bancshares (CA) 920,000
873,392 National Commerce Financial Corp. (TN) 17,764,793
290,800 North Fork Bancorp., Inc. (NY) 9,410,288
70,053 Northrim Bancorp., Inc. (AK) 1,057,800
273,266 Pacific Capital Bancorp. (CA) 8,911,478
120,000 Prosperity Bancshares, Inc. (TX) 2,114,400
165,058 Provident Bankshares Corp. (MD) 4,192,473
154,700 S&T Bancorp., Inc. (PA) + 4,261,985
204,850 Sky Financial Group, Inc. (OH) 4,129,776
849,350 SouthTrust Corp. (AL) + 22,814,390
260,330 Southwest Bancorp. of Texas, Inc. (TX)* 8,846,013
139,500 Summit Bancshares, Inc. (TX) 3,190,365
450,000 Synovus Financial Corp. (GA) 8,761,500
213,200 Taylor Capital Group, Inc. (IL)* 4,485,728
214,008 TCF Financial Corp. (MN) 8,474,717
26,500 TriCo Bancshares (CA) 650,045
200,000 UCBH Holdings, Inc. (CA) 5,088,000
177,901 Umpqua Holdings Corp. (OR) 3,495,755
127,390 Union Planters Corp. (TN) 3,635,711
136,812 Univest Corp. (PA) 4,542,158
142,755 Valley National Bancorp. (NJ) 3,777,297
67,583 West Coast Bancorp. (OR) 1,050,916
106,500 Whitney Holding Corp. (LA) 3,597,570
350,000 Wilmington Trust Corp. (DE) 9,418,500
97,400 Yardville National Bancorp. (NJ) 1,774,628
472,825 Zions Bancorp. (UT) + 23,296,088
Banks - Superregional 28.52% 217,184,986
298,010 Bank of America Corp. (NC) 22,067,640
344,880 Bank One Corp. (OH) 12,432,924
447,400 Comerica, Inc. (MI) + 19,466,374
See notes to
financial statements.
7
SHARES ISSUER VALUE
Banks - Superregional (continued)
377,563 Fifth Third Bancorp (OH) $18,610,080
827,483 FleetBoston Financial Corp. (MA) 21,944,849
320,000 KeyCorp (OH) 7,715,200
330,000 Mellon Financial Corp. (PA) 8,728,500
405,224 National City Corp. (OH) 12,140,511
390,500 PNC Financial Services Group (PA) 17,142,950
161,152 SunTrust Banks, Inc. (GA) 9,221,117
961,041 U.S. Bancorp (MN) 21,287,058
621,625 Wachovia Corp. (NC) 23,752,291
469,861 Wells Fargo & Co. (CA) 22,675,492
Broker Services 0.85% 6,472,710
27,000 Edwards (A.G.) Inc. (MO) 805,410
90,000 Lehman Brothers Holdings, Inc. (NY) + 5,667,300
Finance 3.20% 24,375,209
236,900 CIT Group, Inc. (NY)*+ 4,825,653
449,925 Citigroup, Inc. (NY) 17,659,556
100,000 MBNA Corp. (DE) + 1,890,000
Insurance 2.78% 21,176,870
110,088 American International Group, Inc. (NY) 6,379,600
134,000 MetLife, Inc. (NY) + 3,849,820
85,000 Prudential Financial, Inc. (NJ)* 2,717,450
100,000 XL Capital Ltd. (Class A) (Bermuda) 8,230,000
Investment Management 3.06% 23,279,385
200,500 Affiliated Managers Group, Inc. (MA)*+ 9,285,155
53,000 Eaton Vance Corp. (MA) 1,579,400
52,000 Federated Investors, Inc. (Class B) (PA) + 1,419,080
202,500 Legg Mason, Inc. (MD) 10,995,750
Mortgage Banking 3.23% 24,578,775
112,500 Countrywide Credit Industries, Inc. (CA) + 7,605,000
122,500 Fannie Mae (DC) 8,867,775
140,000 Freddie Mac (VA) 8,106,000
Thrifts 5.00% 38,065,262
71,910 Astoria Financial Corp. (NY) 1,799,188
64,600 BostonFed Bancorp., Inc. (MA) 1,695,750
225,000 Commercial Capital Bancorp., Inc. (CA)* 2,925,000
180,500 GreenPoint Financial Corp. (NY) 8,620,680
80,000 Hingham Institute for Savings (MA) 2,740,000
65,000 LSB Corp. (MA) 869,050
156,800 PennFed Financial Services, Inc. (NJ)* 4,225,760
124,718 Superior Financial Corp. (AR) 2,374,631
276,812 Washington Mutual, Inc. (WA) 10,934,074
50,110 Webster Financial Corp. (CT) 1,881,129
See notes to
financial statements.
8
SHARES ISSUER VALUE
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PREFERRED STOCKS 0.40% $3,001,000
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(Cost $2,920,000)
Banks & Thrifts 0.40% 3,001,000
40,000 Astoria Financial Corp., Ser B, 12.00% (NY) 1,075,000
40,000 IFC Capital Trust I, 9.25% (IN) 1,024,000
40,000 MVBI Capital Trust I, 3.43% (MO)** 902,000
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
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BONDS 0.12% $937,090
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(Cost $770,000)
Banks 0.12%
CSBI Capital Trust I, Sub Cap Income,
Ser A 06-06-27 11.750% $770 937,090
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SHORT-TERM INVESTMENTS 6.99% $53,269,489
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(Cost $53,269,489)
Certificates of Deposit 0.01%
Deposits in mutual banks 75,525
Joint Repurchase Agreement 2.15%
Investment in a joint repurchase agreement
transaction with State Street Bank & Trust
Co. - Date 04-30-03, due 05-01-03 (Secured
by U.S. Treasury Inflation Indexed Bond
3.875% due 04-15-29, U.S. Treasury
Inflation Indexed Notes 3.875% due 01-15-07
and 3.000% due 07-15-12) 1.280 16,358 16,358,000
SHARES
Cash Equivalents 4.83%
AIM Cash Investment Trust*** 36,835,964 36,835,964
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TOTAL INVESTMENTS 104.79% $798,065,857
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OTHER ASSETS AND LIABILITIES (4.79%) ($36,462,192)
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TOTAL NET ASSETS 100.00% $761,603,665
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+ All or a portion of this security is on loan on April 30, 2003.
* Non-income-producing security.
** Floating rate effective April 30, 2003.
*** Represents investment of security lending collateral.
(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 $4,650,000 or 0.61% of net assets as of April 30, 2003.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
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.
9
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
April 30, 2003
(unaudited)
This Statement of Assets and Liabilities is the Fund's balance sheet. It shows
the value of what the Fund owns, is due and owes. You'll also find the net asset
value for each common share.
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ASSETS
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Investments at value, including $36,232,083 of
securities loaned
Unaffiliated issuers (cost $474,148,080) $793,803,190
Affiliated issuers (cost $2,592,588) 4,262,667
Cash 60
Dividends and interest receivable 1,066,862
Other assets 166,883
Total assets 799,299,662
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LIABILITIES
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Payable for securities on loan 36,835,964
Payable to affiliates 759,983
Other payables and accrued expenses 100,050
Total liabilities 37,695,997
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NET ASSETS
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Capital paid-in 396,943,038
Accumulated net realized gain on investments 40,207,640
Net unrealized appreciation of investments 321,325,189
Accumulated net investment income 3,127,798
Net assets $761,603,665
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NET ASSET VALUE PER SHARE
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Based on 84,400,000 shares outstanding $9.02
See notes to
financial statements.
10
FINANCIAL STATEMENTS
OPERATONS
For the period ended
April 30, 2003
(unaudited)1
This Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
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INVESTMENT INCOME
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Dividends (including $40,032 received from affiliated issuers) $10,002,347
Interest (including securities lending income of $76,739) 411,127
Total investment income 10,413,474
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EXPENSES
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Investment management fee 4,308,552
Administration fee 936,641
Printing 60,982
Custodian fee 58,901
Registration and filing fee 29,126
Legal fee 26,737
Trustees' fee 20,496
Auditing fee 15,930
Transfer agent fee 14,212
Miscellaneous 11,086
Interest expense 773
Total expenses 5,483,436
Less expense reductions (187,328)
Net expenses 5,296,108
Net investment income 5,117,366
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REALIZED AND UNREALIZED GAIN (LOSS)
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Net realized gain on investments 40,339,439
Change in net unrealized appreciation (depreciation)
of investments (16,629,087)
Net realized and unrealized gain 23,710,352
Increase in net assets from operations $28,827,718
1 Semiannual period from 11-1-02 through 4-30-03.
See notes to
financial statements.
11
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
This 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, if any, and any increase or decrease due to the sale of common
shares.
YEAR PERIOD
ENDED ENDED
10-31-02 4-30-031
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INCREASE (DECREASE) IN NET ASSETS
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From operations
Net investment income $9,239,742 $5,117,366
Net realized gain 62,746,904 40,339,439
Change in net unrealized
appreciation (depreciation) 12,647,511 (16,629,087)
Increase in net assets resulting
from operations 84,634,157 28,827,718
Distributions to shareholders
From net investment income (11,181,690) (9,831,756)
From net realized gain (91,547,836) (62,701,604)
(102,729,526) (72,533,360)
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NET ASSETS
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Beginning of period 823,404,676 805,309,307
End of period 2 $805,309,307 $761,603,665
1 Semiannual period from 11-1-02 through 4-30-03. Unaudited.
2 Including accumulated net investment income of $7,842,188 and $3,127,798,
respectively.
See notes to
financial statements.
12
FINANCIAL
HIGHLIGHTS
COMMON SHARES
The Financial Highlights show how the Fund's net asset value for a share has
changed since the end of the previous period.
PERIOD ENDED 10-31-98 1 10-31-99 10-31-00 10-31-01 10-31-02 4-30-03 2
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PER SHARE OPERATING PERFORMANCE
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Net asset value,
beginning of period $12.01 $11.08 $11.31 $9.53 $9.76 $9.54
Net investment income3 0.14 0.14 0.19 0.15 0.11 0.06
Net realized and unrealized
gain (loss) on investments 0.67 0.40 (1.27) 0.86 0.88 0.28
Total from
investment operations 0.81 0.54 (1.08) 1.01 0.99 0.34
Less distributions
From net investment income (0.14) (0.14) (0.15) (0.21) (0.13) (0.12)
From net realized gain (1.60) (0.17) (0.55) (0.57) (1.08) (0.74)
(1.74) (0.31) (0.70) (0.78) (1.21) (0.86)
Net asset value,
end of period $11.08 $11.31 $9.53 $9.76 $9.54 $9.02
Per share market value,
end of period $11.69 $9.50 $7.81 $7.88 $7.92 $7.59
Total return at market value4 (%) 25.35 (16.44) (10.58) 9.56 5 15.39 5 6.61 5,6
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RATIOS AND SUPPLEMENTAL DATA
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Net assets, end of period
(in millions) $979 $955 $804 $823 $805 $762
Ratio of expenses
to average net assets (%) 1.47 1.48 1.47 1.43 1.43 1.43 7
Ratio of adjusted expenses
to average net assets8 (%) - - - 1.45 1.46 1.48 7
Ratio of net investment income
to average net assets (%) 1.07 1.29 2.18 1.51 1.11 1.38 7
Portfolio turnover (%) 6 5 13 27 20 2
1 Per share amounts have been restated to reflect the 4-for-1 stock split
effective 12-2-97.
2 Semiannual period from 11-1-02 through 4-30-03. Unaudited.
3 Based on the average of the shares outstanding.
4 Assumes dividend reinvestment.
5 Total return would have been lower had certain expenses not been reduced
during the periods shown.
6 Not annualized.
7 Annualized.
8 Does not take into consideration expense reductions during the periods shown.
See notes to
financial statements.
13
NOTES TO
STATEMENTS
NOTE A
Accounting policies
John Hancock Bank and Thrift Opportunity Fund (the "Fund") is a diversified
closed-end 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.
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. Investments in AIM Cash Investment Trust
are valued at their net asset value each business day.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Exchange Commission,
the Fund, along with other registered investment companies having a management
contract with John Hancock Advisers, LLC (the "Adviser"), a wholly owned
subsidiary of The Berkeley Financial Group, LLC, 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. Discount and premium on securities The Fund
accretes discount and amortizes premium from par value on securities from either
the date of issue or the date of purchase over the life of the security.
Expenses
The majority of the expenses are directly identifiable to an individual fund.
Expenses that are not readily identifiable to a specific
14
fund will be allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the funds.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the Fund
negotiated lender fees. These fees are included in interest income. The loans
are collateralized at all times with cash or securities with a market value at
least equal to the market value of the securities on loan. As with other
extensions of credit, the Fund may bear the risk of delay of the loaned
securities in recovery or even loss of rights in the collateral, should the
borrower of the securities fail financially. On April 30, 2003, the Fund loaned
securities having a market value of $36,232,083 collateralized by cash in the
amount of $36,835,964. The cash collateral was invested in a short-term
instrument.
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 that 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 or,
in the case of some foreign securities, on the date thereafter when the Fund
identifies the dividend. Interest income on investment securities is recorded on
the accrual basis. Foreign income may be subject to foreign withholding taxes,
which are accrued as applicable.
The Fund records distributions to shareholders from net investment income and
net realized gains on the ex-dividend date. Such distributions, on a tax basis,
are determined in conformity with income tax regulations, which may differ from
accounting principles generally accepted in the United States of America.
Distributions in excess of tax basis earnings and profits, if any, are reported
in the Fund's financial statements as a return of capital.
Use of estimates
The preparation of these financial statements, in accordance with accounting
principles generally accepted in the United States of America, incorporates
estimates made by management in determining the reported amount of assets,
liabilities, revenues and expenses of the Fund. Actual results could differ from
these estimates.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under the
investment management contract, the Fund pays a monthly management fee to the
Adviser at an annual rate of 1.15% of the Fund's average weekly net asset value.
The Fund has an agreement with the Adviser to provide certain administrative
services for the Fund. The compensation for the period was at an annual rate of
0.25% of the average weekly net assets of the Fund. The Adviser agreed to limit
the administration fee to 0.20% of the Fund's average weekly net assets.
Accordingly, the reduction amounted to $187,328 for the period ended April 30,
2003. The Adviser reserves the right to terminate this limitation in the future
with Trustees' approval.
Ms. Maureen R. Ford and Mr. John M. DeCiccio 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 unaffiliated
Trustees may elect to defer for tax purposes their receipt of this compensation
under the John Hancock Group of
15
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 other asset are always equal and are marked to market
on a periodic basis to reflect any income earned by the investments as well as
any unrealized gains or losses. The Deferred Compensation Plan investments had
no impact on the operations of the Fund.
NOTE C
Fund common share transactions
This listing illustrates the reclassification of capital accounts and the number
of common shares outstanding at the beginning and end of the last two periods,
along with the corresponding dollar value.
YEAR ENDED 10-31-02 PERIOD ENDED 4-30-031
SHARES AMOUNT SHARES AMOUNT
Beginning of period 84,400,000 $396,952,307 84,400,000 $396,943,038
Reclassification of
capital accounts - (9,269) - -
End of period 84,400,000 $396,943,038 84,400,000 $396,943,038
1 Semiannual period from 11-1-02 through 4-30-03. Unaudited.
NOTE D
Investment transactions
Purchases and proceeds from sales or maturities of securities, other than
short-term securities and obligations of the U.S. government, during the period
ended April 30, 2003, aggregated $14,082,160 and $83,897,465, respectively.
The cost of investments owned on April 30, 2003, including short-term
investments, for federal income tax purposes was $476,867,547. Gross unrealized
appreciation and depreciation of investments aggregated $328,415,141 and
$7,216,831, respectively, resulting in net unrealized appreciation of
$321,198,310. The difference between book basis and tax basis net unrealized
appreciation of investments is attributable primarily to the tax deferral of
losses on wash sales.
16
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, 2003 is set forth below.
BEGINNING ENDING
SHARE SHARE REALIZED DIVIDEND ENDING
AFFILIATE AMOUNT AMOUNT GAIN INCOME VALUE
Desert Community Bank (CA)
Common stock
bought: none 68,750 68,750 - $8,250 $2,508,687
sold: none
FNB Bankshares (ME)
Common stock
bought: 20,780 shares at $567,150 20,780 20,780 - 13,507 851,980
sold: none
MVBI Capital Trust (MO)
Preferred stock
bought: none 40,000 40,000 - 18,275 902,000
sold: none
Totals $40,032 $4,262,667
17
INVESTMENT OBJECTIVE AND POLICY
The 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.
On November 20, 2001 the Fund's Trustees approved the following investment
policy changes, which became effective December 15, 2001. Under normal
circumstances, the Fund will invest at least 80% of its net assets in equity
securities of U.S. regional banks and thrifts and holding companies that
primarily own or receive a substantial portion of their income from regional
banks or thrifts. "Net assets" is defined as net assets plus borrowings for
investment purposes. "Primarily owned" means that the bank or financial holding
company derives a substantial portion of its business from U.S. regional banks
or thrifts as determined by the Adviser, based upon generally accepted measures
such as revenues, asset size and number of employees. U.S. regional banks or
thrifts are ones that provide full-service banking (i.e., savings accounts,
checking accounts, commercial lending and real estate lending) and whose assets
are primarily of domestic origin. The Fund will notify shareholders at least 60
days prior to any change in this 80% investment policy.
The Fund may invest in investment-grade debt securities as well as debt
securities rated BB or below by Standard & Poor's Ratings group ("Standard &
Poor's") or Ba or below by Moody's Investors Service, Inc. ("Moody's"), or, if
unrated by such rating organizations, determined by the Adviser to be of
comparable quality.
On November 19, 2002, the Board of Trustees adopted several amendments to the
Fund's by-laws, including provisions relating to the calling of a special
meeting and requiring advance notice of shareholder proposals or nominees for
Trustee. The advance notice provisions in the by-laws require shareholders to
notify the Fund in writing of any proposal which they intend to present at an
annual meeting of shareholders, including any nominations for Trustee, between
90 and 120 days prior to the first anniversary of the mailing date of the notice
from the prior year's annual meeting of shareholders. The notification must be
in the form prescribed by the by-laws. The advance notice provisions provide the
Fund and its Trustees with the opportunity to thoughtfully consider and address
the matters proposed before the Fund prepares and mails its proxy statement to
shareholders. Other amendments set forth the procedures that must be followed in
order for a shareholder to call a special meeting of shareholders. Please
contact the Secretary of the Fund for additional information about the advance
notice requirements or the other amendments to the by-laws.
DIVIDEND
REINVESTMENT PLAN
The Fund offers its shareholders a Dividend Reinvestment Plan, (the "Plan"),
which offers the opportunity to earn compounded yields. Each holder of common
shares will automatically have all distributions of dividends and capital gains
reinvested by Mellon Investor Services as Plan agent for the common shareholders
(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. Shareholders may also make their election by
notifying the Plan Agent by telephone or by visiting the Plan Agent's Web site
at www.melloninvestor.com. Holders of common shares who elect not to participate
in the Plan will receive
18
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 Fund will not
issue any new shares in connection with the Plan. 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.
Participants in the Plan may withdraw from the Plan at any time by contacting
the Plan Agent by telephone, in writing or by visiting the Plan Agent's Web site
at www.melloninvestor.com. Such withdrawal will be effective immediately if
received 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. The Plan
Agent will hold common shares in the account of each Plan participant 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.
Dividends and capital gains distributions are taxable whether received in cash
or reinvested in additional common shares, and the automatic reinvestment of
dividends and capital gain distributions will not relieve participants of any
U.S. federal income tax that may be payable or required to be withheld on such
dividends or distributions. The amount of dividends to be reported on 1099-DIV
should be the amount of cash used by the Plan Agent to purchase shares in the
open market, including the amount of cash allocated to brokerage commissions
paid on such purchases.
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
19
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 may be
amended or terminated by the Plan Agent after at least 90 days' written notice
to all shareholders of the Fund. All correspondence or additional information
concerning the Plan should be directed to the Plan Agent, Mellon Bank, N.A., c/o
Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938
(telephone 1-800-852-0218).
SHAREHOLDER COMMUNICATION AND ASSISTANCE
If you have any questions concerning the 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:
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Telephone: 1-800-852-0218
If your shares are held with a brokerage firm, you should contact that firm,
bank or other nominee for assistance.
20
SHAREHOLDER MEETING
On February 10, 2003, the Annual Meeting of the Fund was held to elect four
Trustees and to ratify the action of the Trustees in selecting independent
auditors for the Fund.
The shareholders elected the following Trustees to serve until their respective
successors are duly elected and qualified, with the votes tabulated as follows:
WITHHELD
FOR AUTHORITY
--------------------------------------------------------------------------------
Ronald R. Dion 69,221,199 12,488,796
Charles L. Ladner 69,221,850 12,438,145
John A. Moore 69,155,197 12,554,798
Maureen R. Ford 68,870,675 12,839,320
The shareholders also ratified the Trustees' selection of Deloitte and Touche
LLP as the Fund's independent auditors for the fiscal year ending October 31,
2003, with the votes tabulated as follows: 71,978,944 FOR, 706,418 AGAINST and
9,024,632 ABSTAINING.
A shareholder proposal recommending that the Board consider merging the Fund
into the John Hancock Regional Bank Fund was rejected, with the votes tabulated
as follows: 18,516,875 FOR, 24,555,030 AGAINST and 1,703,101 ABSTAINING.
21
22
23
24
FOR YOUR
INFORMATION
TRUSTEES
James F. Carlin
William H. Cunningham
John M. DeCiccio
Ronald R. Dion
Maureen R. Ford
Charles L. Ladner*
Patti McGill Peterson*
Dr. John A. Moore*
Steven R. Pruchansky
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Maureen R. Ford
Chairman, President
and Chief Executive Officer
William L. Braman
Executive Vice President
and Chief Investment Officer
Richard A. Brown
Senior Vice President
and Chief Financial Officer
Susan S. Newton
Senior Vice President
and Secretary
William H. King
Vice President and Treasurer
Thomas H. Connors
Vice President and
Compliance Officer
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSER
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
STOCK SYMBOL
Listed New York Stock Exchange: BTO
For shareholder assistance
refer to page 20
--------------------------------------------------------------------------------
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Customer service representatives 1-800-852-0218
Portfolio commentary 1-800-344-7054
24-hour automated information 1-800-843-0090
TDD Line 1-800-231-5469
25
--------------------------------------------------------------------------------
[LOGO] John Hancock
PRESORTED
STANDARD
U. S. Postage
PAID
MIS
1-800-852-0218
1-800-843-0090
1-800-231-5469 (TDD)
www.jhfunds.com
P90SA 4/03 6/03
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this amended Form
N-CSR, the registrant's principal executive officer and principal financial
officer have concluded that those disclosure controls and procedures provide
reasonable assurance that the material information required to be disclosed by
the registrant on this report is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
ITEM 10. EXHIBITS.
(a) Not applicable at this time.
(b)(1) Separate certifications for the registrant's principal executive officer
and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of
1940, are attached as Ex99.CERT.
(b)(2) Separate certifications for the registrant's principal executive officer
and principal financial officer, as required by 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule
30a-2(b) under the Investment Company Act of 1940, are attached as Ex99.CERT.
The certifications furnished pursuant to this paragraph are not deemed to be
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or
otherwise subject to the liability of that section. Such certifications are not
deemed to be incorporated by reference into any filing under the Securities Act
of 1933 or the Securities Exchange Act of 1934, except to the extent that the
Registrant specifically incorporates them by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
By:
-----------------------
Maureen R. Ford
Chairman, President and Chief Executive Officer
Date: June 30, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:
-----------------------
Maureen R. Ford
Chairman, President and Chief Executive Officer
Date: June 30, 2003
By:
-----------------------
Richard A. Brown
Senior Vice President and Chief Financial Officer
Date: June 30, 2003