January 2, 2004
EDGAR
United States Securities and
Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form N-CSR
John Hancock Bank and Thrift Opportunity Fund (the "Registrant")
File No. 811-8568
Ladies and Gentlemen:
Enclosed herewith for filing pursuant to the Investment Company Act of 1940 and
the Securities Exchange Act of 1934 is the Registrant's Form N-CSR filing for
the period ending October 31, 2003.
If you have any questions or comments regarding this filing, please contact the
undersigned at (617) 375-1513.
Sincerely,
/s/Alfred P. Ouellette
Alfred P. Ouellette
Senior Attorney and Assistant Secretary
ITEM 1. REPORT TO STOCKHOLDERS.
John Hancock
Bank and Thrift
OPPORTUNITY FUND
ANNUAL REPORT
10.31.03
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen R. Ford, Vice Chairman and Chief Executive Officer,
in upper left-hand corner.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
Fund's investments
page 6
Financial statements
page 10
Trustees & officers
page 24
For your information
page 29
Dear Fellow Shareholders,
The stock market has made a strong recovery in 2003. Historically low
interest rates, improving corporate earnings and government stimulus in
the form of tax cuts gave investors hope that the economy would begin to
strengthen, which it did. The market's move up began in April and the
breadth of the rally was enormous. As a result, the major indexes were
able to wipe out their first-quarter losses and post solid gains
year-to-date through October 31. With technology leading the way, the
tech-heavy Nasdaq Composite Index rose 45.22% through October, while the
Dow Jones Industrial Average was up 19.82% and the Standard & Poor's 500
Index returned 21.19%. With falling interest rates, bonds also did well,
although they began to reverse course in July. High yield bonds led the
pack, returning 24.23% through October, as measured by the Lehman
Brothers High Yield Index.
In other news, we are pleased to inform you that on September 28, 2003,
the Boards of Directors of Canada-based Manulife Financial Corporation
and Boston-based John Hancock Financial Services, Inc., the parent
company of John Hancock Funds, unanimously voted to merge the two
companies.
Please be assured that the completion of the merger -- anticipated to
occur in the first half of 2004 -- will have no effect on your
investment in our John Hancock mutual funds. Your fund's adviser and
board of trustees will remain the same, as will your relationship with
your financial adviser.
The merger is subject to customary closing conditions, including receipt
of required regulatory approvals and approval by John Hancock
stockholders. If you only own shares in a John Hancock mutual fund you
are not affected and will not receive a proxy.
Additional information on this transaction is available on our Web site:
www.jhfunds.com. If you have questions about the merger, you may also
call 800-732-5543. Separately, for information about your investments in
John Hancock funds, please contact your financial adviser or our
Customer Service representatives at 800-225-5291.
Sincerely,
/S/ MAUREEN FORD GOLDFARB
Maureen Ford Goldfarb,
Chairman and Chief Executive Officer
This commentary reflects the chairman's views as of October 31, 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 objec-
tive, by investing
primarily in stocks
of regional banks
and lending
companies.
Over the last twelve months
* The stock market staged a strong recovery as the economy and corporate
earnings began to improve.
* Financial stocks as a group did slightly better than the broad market,
led by market-sensitive and small-cap names.
* The Fund's best performers were large banks with improving credit
quality and business lines tied to the rising stock market.
[Bar chart with heading "John Hancock Bank and Thrift Opportunity Fund."
Under the heading is a note that reads "Fund performance for the year ended
October 31, 2003." The chart is scaled in increments of 10% with 0% at the
bottom and 30% at the top. The first bar represents the 27.57% 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."]
Top 10 holdings
3.6% FleetBoston Financial Corp.
3.1% Zions Bancorp.
3.1% Wachovia Corp.
2.9% SouthTrust Corp.
2.9% Wells Fargo & Co.
2.8% U.S. Bancorp.
2.7% Compass Bancshares, Inc.
2.7% Fifth Third Bancorp.
2.6% Bank of America Corp.
2.6% National Commerce Financial Corp.
As a percentage of net assets on October 31, 2003.
1
BY JAMES K. SCHMIDT, CFA, LISA A. WELCH AND JAMES J. MCKELVEY,
PORTFOLIO MANAGERS
MANAGERS'
REPORT
John Hancock
Bank and Thrift Opportunity Fund
Recently, Jay McKelvey, a member of the Fund's management team since
1998, was added as a portfolio manager, replacing Thomas Goggins.
The stock market staged a remarkable recovery over the 12 months ending
October 31, 2003. A variety of factors contributed to the market's
reversal from three years of negative results. They included increasing
signs of a rebounding economy, further interest-rate cuts, a significant
tax cut, a quick end to the major military phase of war in Iraq and
improved corporate earnings. As a result, the broad market, as measured
by the Standard & Poor's 500 Index, returned 20.79% for the year ending
October 31, 2003.
Financial stocks as a group slightly outperformed the S&P 500, returning
23.40% for the period, as measured by the Standard & Poor's 500
Financial Index. The best results came from market-sensitive companies,
such as asset managers and securities brokers -- who benefited from the
rebounding market -- and mortgage originators and specialty finance
companies. Among banks, the best performers were a few of the largest
names that have experienced credit quality improvements and enjoyed a
dramatic rebound after being beaten down in the market's long slide.
Small banks also did well, as they continued to benefit from strong
deposit and loan growth, a healthy mortgage climate and growing
speculation about takeover possibilities. Mid-size regional banks turned
in good, but more modest, results.
"Financial stocks as a
group slightly outper-
formed the S&P 500..."
FUND PERFORMANCE
For the year ended October 31, 2003, John Hancock Bank and Thrift
Opportunity Fund posted a total return of 27.57% at net
2
[Photos of Jim Schmidt, Lisa Welch and Jay McKelvey flush right next to
first paragraph.]
asset value, compared with the 25.48% return of the average open-end
financial services fund, 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.
MARKET- AND MORTGAGE-RELATED SURGE
Following the market's trend, many of the Fund's best performers were
large banks recovering from worries about credit problems that proved
less severe than expected, and which also had market-sensitive lines of
business. They included FleetBoston Financial, Wachovia and U.S.
Bancorp. In addition to improving fundamentals, Fleet's stock was lifted
at the end of the period by the announcement of its proposed acquisition
by Bank of America at an attractive premium.
With interest rates declining until the last several months of the
period, companies with hefty mortgage banking and fixed-income
businesses served us well, including Countrywide Financial, First
Tennessee National, National City Corp. and Washington Mutual. Our
standouts among the small banks were East-West Bancorp., Independent
Bank Corp. and UCBH Holdings.
"...many of the Fund's best
performers were large banks
recovering from worries
about credit problems..."
COMPANY-SPECIFIC DETRACTORS
On the downside, some of our biggest detractors struggled with company
specific problems. Fifth Third Bancorp., long-time Fund stalwart,
entered into an agreement with regulators to improve its operational
infrastructure following the disclosure of a material bookkeeping error
in its Treasury department. We are keeping our stake because we continue
to believe in the bank's strong balance sheet and in its ability to
produce double-digit growth. Insurance giant American International
Group was hit hard this year after it took a large charge for reserves
related to Director's and Officer's liability surrounding some
high-profile Internet names that failed between 1998 and 2001. Another
disappointment was government-sponsored mortgage giant
3
Freddie Mac, which came under fire for accounting re-audits and subsequent
dismissals of top management.
[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 4%, the fourth Investment management 4%, and the
fifth Finance 3%].
MERGERS AHEAD
Although the level of bank merger activity in 2003 is only slightly
ahead of last year's at this point, we believe the announced mega-merger
between FleetBoston and Bank of America will place more attention on
mergers and perhaps prompt additional activity. In our view, the climate
is ripe for more, since revenue growth is becoming harder to come by and
the market's uptick has made the stock of acquiring banks more valuable.
We continue to believe the bulk of the mergers going forward will be
between large banks buying smaller ones for specific tactical reasons,
such as increasing market share or the number of bank branches in areas
where they are weak.
Bank earnings over the last year have been mixed, but generally
positive. Credit costs have been better than expected, deposits continue
to flow into the banking system, even with the stock market's rebound,
and mortgage banking continued to be strong, although we expect a
slowdown in that trend as interest rates have begun to go up. We have
yet to see a pickup in commercial loan growth, although many bank
managements tell us they expect a pickup, and we find this credible
because we believe the economy will accelerate.
[Pie chart in middle of page with heading "Portfolio diversification As a
percentage of net assets on 10-31-03." The chart is divided into two
sections (from top to left): Common stocks 98% and Short-term investments &
other 2%.]
OUTLOOK
Our outlook remains positive for the financial sector, including bank
stocks. We believe that in the current environment, banks can produce
earnings growth in the 8% to 10% range. If economic growth continues at
the blistering pace of the third
4
quarter of 2003, however, bank earnings growth could be more modest than
that of other sectors more leveraged to economic recovery. But we believe
the case for bank stock investing remains compelling, with banks'
consistency of earnings and the potential for accelerating merger activity.
What's more, with the new favorable tax treatment of stock dividends, we
believe more financial companies, which tend to have above-average dividend
yields, will increase their dividend payout ratios, following the lead of
Bank of America, which increased its dividend payout by 25% in the period.
Going forward, we are turning more attention toward those banks that will
benefit most when commercial lending activity picks up. We'll also continue
to add a number of high-quality small banks and thrifts with strong
fundamentals in what appear to be consolidating markets.
"Our outlook remains positive
for the financial sector,
including bank stocks."
[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 Zions
Bancorp. followed by an up arrow with the phrase "Improving fundamentals."
The second listing is FleetBoston Financial followed by an up arrow with
the phrase "Sells for significant premium." The third listing is Fifth
Third Bancorp. followed by a sideways arrow with the phrase "Heightened
regulatory scrutiny."]
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
October 31, 2003
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
COMMON STOCKS 98.10% $905,879,377
(Cost $431,220,847)
Banks -- Regional 50.97% 470,673,507
65,400 ABC Bancorp. (GA) 1,100,028
142,500 Alabama National Bancorp. (AL)+ 7,502,625
108,000 Allegiant Bancorp., Inc. (MO) 2,376,000
325,383 AmericanWest Bancorp. (WA)* 6,494,645
95,879 AmSouth Bancorp. (AL) 2,264,662
482,474 Banknorth Group, Inc. (ME) 15,111,086
344,846 BB&T Corp. (NC) 13,335,195
47,500 Beverly National Corp. (MA) 1,223,125
113,795 BOK Financial Corp. (OK)* 4,301,451
140,000 Camden National Corp. (ME) 4,228,000
59,635 Capital City Bank Group, Inc. (FL)+ 2,304,893
155,418 Cascade Bancorp. (OR) 2,937,400
184,700 CCBT Financial Cos., Inc. (MA) 4,911,173
370,000 Charter One Financial, Inc. (OH) 11,825,200
140,196 Chittenden Corp. (VT) 4,511,507
224,427 City National Corp. (CA) 13,512,750
615,200 Colonial BancGroup, Inc. (AL) 9,646,336
90,000 Columbia Bancorp. (MD) 2,503,800
50,962 Commercial Bankshares, Inc. (FL) 1,608,361
83,378 Community Banks, Inc. (PA) 2,905,723
213,100 Community First Bankshares, Inc. (ND) 5,785,665
650,857 Compass Bancshares, Inc. (AL) 24,589,377
20,000 Cullen/Frost Bankers, Inc. (TX) 775,200
137,500 Desert Community Bank (CA) 2,868,250
62,696 DNB Financial Corp. (PA) 1,691,538
340,000 East-West Bancorp., Inc. (CA) 16,690,600
73,000 Financial Institutions, Inc. (NY) 1,825,730
52,200 First Charter Corp. (NC)+ 1,070,100
65,000 First State Bancorp. (NM) 2,041,650
170,900 First Tennessee National Corp. (TN) 7,752,024
20,780 FNB Bankshares (ME) 1,090,950
See notes to
financial statements.
6
FINANCIAL STATEMENTS
SHARES ISSUER VALUE
Banks -- Regional (continued)
90,049 F.N.B. Corp. (FL)+ $2,976,119
101,718 Fulton Financial Corp. (PA) 2,100,477
235,385 Glacier Bancorp., Inc. (MT) 7,240,443
131,216 Harleysville National Corp. (PA) 3,962,723
230,000 Hibernia Corp. (Class A) (LA) 5,195,700
308,105 Independent Bank Corp. (MI) 8,913,478
310,000 Local Financial Corp. (OK) (R) 6,017,100
238,657 M&T Bank Corp. (NY) 22,409,892
334,545 Marshall & Ilsley Corp. (WI) 11,983,402
209,500 Mercantile Bankshares Corp. (MD) 8,876,515
71,541 Merrill Merchants Bankshares, Inc. (ME) 1,374,303
50,000 Mid-State Bancshares (CA) 1,216,500
873,392 National Commerce Financial Corp. (TN) 23,992,078
290,800 North Fork Bancorp., Inc. (NY) 11,335,384
70,053 Northrim Bancorp., Inc. (AK) 1,467,610
273,266 Pacific Capital Bancorp. (CA) 9,307,440
120,000 Prosperity Bancshares, Inc. (TX)+ 2,772,000
165,058 Provident Bankshares Corp. (MD) 5,121,750
154,700 S&T Bancorp., Inc. (PA) 4,678,128
9,500 Sandy Spring Bancorp., Inc. (MD)+ 342,665
234,850 Sky Financial Group, Inc. (OH) 5,718,598
849,350 SouthTrust Corp. (AL) 27,051,798
260,330 Southwest Bancorp. of Texas, Inc. (TX)* 9,348,450
139,500 Summit Bancshares, Inc. (TX) 3,949,245
450,000 Synovus Financial Corp. (GA)+ 12,420,000
213,200 Taylor Capital Group, Inc. (IL)* 5,419,544
214,008 TCF Financial Corp. (MN) 11,166,937
26,500 TriCo Bancshares (CA) 848,000
200,000 UCBH Holdings, Inc. (CA) 7,142,000
177,901 Umpqua Holdings Corp. (OR) 3,638,075
127,390 Union Planters Corp. (TN) 4,238,265
136,812 Univest Corp. (PA) 4,986,797
142,755 Valley National Bancorp. (NJ) 4,175,584
67,583 West Coast Bancorp. (OR) 1,409,106
106,500 Whitney Holding Corp. (LA) 4,043,805
350,000 Wilmington Trust Corp. (DE) 11,788,000
97,400 Yardville National Bancorp. (NJ)+ 2,281,108
472,825 Zions Bancorp. (UT) 28,979,444
Banks -- Superregional 29.07% 268,403,756
318,010 Bank of America Corp. (NC)+ 24,082,897
359,880 Bank One Corp. (OH)+ 15,276,906
447,400 Comerica, Inc. (MI) 23,032,152
422,563 Fifth Third Bancorp. (OH) 24,491,751
827,483 FleetBoston Financial Corp. (MA) 33,422,037
See notes to
financial statements.
7
FINANCIAL STATEMENTS
SHARES ISSUER VALUE
Banks -- Superregional (continued)
320,000 KeyCorp (OH)+ $9,040,000
330,000 Mellon Financial Corp. (PA) 9,857,100
500,224 National City Corp. (OH) 16,337,316
390,500 PNC Financial Services Group (PA)+ 20,919,085
161,152 SunTrust Banks, Inc. (GA)+ 10,808,465
961,041 U.S. Bancorp (MN) 26,159,536
621,625 Wachovia Corp. (NC)+ 28,513,939
469,861 Wells Fargo & Co. (CA) 26,462,572
Broker Services 0.82% 7,573,500
27,000 Edwards (A.G.) Inc. (MO) 1,093,500
90,000 Lehman Brothers Holdings, Inc. (NY) 6,480,000
Finance 3.44% 31,766,023
236,900 CIT Group, Inc. (NY) 7,964,578
449,925 Citigroup, Inc. (NY) 21,326,445
100,000 MBNA Corp. (DE) 2,475,000
Insurance 2.29% 21,138,653
110,088 American International Group, Inc. (NY) 6,696,653
134,000 MetLife, Inc. (NY) 4,207,600
85,000 Prudential Financial, Inc. (NJ) 3,284,400
100,000 XL Capital Ltd. (Class A) (Bermuda) 6,950,000
Investment Management 3.75% 34,680,815
200,500 Affiliated Managers Group, Inc. (MA)*+ 14,536,250
53,000 Eaton Vance Corp. (MA) 1,848,640
52,000 Federated Investors, Inc. (Class B) (PA) 1,437,800
202,500 Legg Mason, Inc. (MD) 16,858,125
Mortgage Banking 3.27% 30,171,905
112,500 Countrywide Financial Corp. (CA)+ 11,826,000
122,500 Fannie Mae (DC) 8,782,025
140,000 Freddie Mac (VA) 7,858,200
46,000 New Century Financial Corp. (CA)+ 1,705,680
Thrifts 4.49% 41,471,218
71,910 Astoria Financial Corp. (NY) 2,490,962
337,500 Commercial Capital Bancorp., Inc. (CA)*+ 6,334,875
255,750 GreenPoint Financial Corp. (NY) 7,966,613
80,000 Hingham Institute for Savings (MA) 3,380,000
65,000 LSB Corp. (MA) 1,143,350
156,800 PennFed Financial Services, Inc. (NJ) 4,910,976
276,812 Washington Mutual, Inc. (WA) 12,110,525
70,110 Webster Financial Corp. (CT) 3,133,917
See notes to
financial statements.
8
FINANCIAL STATEMENTS
SHARES ISSUER VALUE
PREFERRED STOCKS 0.11% $1,034,000
(Cost $1,000,000)
Banks & Thrifts 0.11%
40,000 IFC Capital Trust I, 9.25% (IN) 1,034,000
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
BONDS 0.10% $929,390
(Cost $770,000)
Banks 0.10%
CSBI Capital Trust I, Sub Cap Income, Ser A 06-06-27 (A) 11.750% $770 929,390
SHORT-TERM INVESTMENTS 10.03% $92,597,356
(Cost $92,597,356)
Certificates of Deposit 0.01%
Deposits in mutual banks 76 75,884
Joint Repurchase Agreement 1.65%
Investment in a joint repurchase agreement transaction
with Barclays Capital, Inc. -- Dated 10-31-03, due
11-03-03 (Secured by U.S. Treasury Inflation Indexed
Bond 3.625% due 04-15-28, U.S. Treasury Inflation
Indexed Note 1.875% due 07-15-13) 1.020 15,188 15,188,000
SHARES
Cash Equivalents 8.37%
AIM Cash Investment Trust** 77,333,472 77,333,472
TOTAL INVESTMENTS 108.34% $1,000,440,123
OTHER ASSETS AND LIABILITIES, NET (8.34%) ($77,013,206)
TOTAL NET ASSETS 100.00% $923,426,917
+ All or a portion of this security is on loan as of October 31, 2003.
* Non-income producing security.
** Represents investment of security lending collateral.
(A) This security is valued in good faith under procedures established by
the Board of Trustees.
(R) This security is exempt from registration under Rule 144A of the
Securities Act of 1933. Such security may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $6,017,100 or 0.65% of
net assets as of October 31, 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
October 31, 2003
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.
ASSETS
Investments at value (including $76,152,148 of securities loaned)
Unaffiliated issuers (cost $525,021,053) $999,349,173
Affiliated issuers (cost $567,150) 1,090,950
Cash 1,660
Dividends and interest receivable 1,353,034
Other assets 155,253
Total assets 1,001,950,070
LIABILITIES
Payable for securities on loan 77,333,472
Payable to affiliates
Management fee 775,273
Other 141,835
Other payables and accrued expenses 272,573
Total liabilities 78,523,153
NET ASSETS
Capital paid-in 396,939,741
Accumulated net realized gain on investments 43,448,697
Net unrealized appreciation of investments 474,851,920
Accumulated net investment income 8,186,559
Net assets $923,426,917
NET ASSET VALUE PER SHARE
Based on 84,400,000 shares outstanding $10.94
See notes to
financial statements.
10
FINANCIAL STATEMENTS
OPERATIONS
For the year ended
October 31, 2003
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in operat-
ing the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Dividends (including $54,369 received from affiliated issuers) $20,900,657
Interest (including securities lending income of $126,091) 596,456
Total investment income 21,497,113
EXPENSES
Investment management fee 9,124,264
Administration fee 1,983,536
Printing 169,575
Custodian fee 126,890
Registration and filing fee 68,107
Legal fee 67,920
Trustees' fee 54,596
Transfer agent fee 45,985
Miscellaneous 41,517
Auditing fee 36,807
Interest 773
Total expenses 11,719,970
Less expense reductions (396,707)
Net expenses 11,323,263
Net investment income 10,173,850
REALIZED AND UNREALIZED GAIN
Net realized gain on investments 43,579,476
Change in net unrealized appreciation (depreciation)
of investments 136,897,644
Net realized and unrealized gain 180,477,120
Increase in net assets from operations $190,650,970
See notes to
financial statements.
11
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
These Statements
of Changes in
Net Assets show
how the value
of the Fund's
net assets has
changed during
the last two
periods. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses, distri-
butions paid to
shareholders,
if any, and any
increase or
decrease due
to the sale of
common shares.
YEAR YEAR
ENDED ENDED
10-31-02 10-31-03
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income $9,239,742 $10,173,850
Net realized gain 62,746,904 43,579,476
Change in net unrealized
appreciation (depreciation) 12,647,511 136,897,644
Increase in net assets
resulting from operations 84,634,157 190,650,970
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)
NET ASSETS
Beginning of period 823,404,676 805,309,307
End of period 1 $805,309,307 $923,426,917
1 Including accumulated net investment income of $7,842,188 and $8,186,559,
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.
FINANCIAL HIGHLIGHTS
PERIOD ENDED 10-31-99 10-31-00 10-31-01 10-31-02 10-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $11.08 $11.31 $9.53 $9.76 $9.54
Net investment income 1 0.14 0.19 0.15 0.11 0.12
Net realized and unrealized
gain (loss) on investments 0.40 (1.27) 0.86 0.88 2.14
Total from
investment operations 0.54 (1.08) 1.01 0.99 2.26
Less distributions
From net investment income (0.14) (0.15) (0.21) (0.13) (0.12)
From net realized gain (0.17) (0.55) (0.57) (1.08) (0.74)
(0.31) (0.70) (0.78) (1.21) (0.86)
Net asset value,
end of period $11.31 $9.53 $9.76 $9.54 $10.94
Per share market value,
end of period $9.50 $7.81 $7.88 $7.92 $9.65
Total return
at market value 2 (%) (16.44) (10.58) 9.56 3 15.39 3 35.54 3
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $955 $804 $823 $805 $923
Ratio of expenses
to average net assets (%) 1.48 1.47 1.43 1.43 1.43
Ratio of adjusted expenses
to average net assets 4 (%) -- -- 1.45 1.46 1.48
Ratio of net investment income
to average net assets (%) 1.29 2.18 1.51 1.11 1.28
Portfolio turnover (%) 5 13 27 20 4
1 Based on the average of the shares outstanding.
2 Assumes dividend reinvestment.
3 Total returns would have been lower had certain expenses not been reduced
during the periods shown.
4 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 fund are
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
14
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
October 31, 2003, the Fund loaned securities having a market value of
$76,152,148 collateralized by cash in the amount of $77,333,472. 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. During the year
ended October 31, 2003, the tax character of distributions paid was as
follows: ordinary income $9,831,756 and long-term capital gains
$62,701,604.
As of October 31, 2003, the components of distributable earnings on a
tax basis included $10,465,132 of undistributed ordinary income and
$41,425,071 of undistributed long-term gain.
Such distributions and distributable earnings, 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 year 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 expense reductions
related to administration fee amounted to $396,707 for the year ended
October 31, 2003. The Adviser reserves the right to terminate this
limitation in the future with Trustees' approval.
Ms. Maureen Ford Goldfarb 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 pur-
15
poses 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 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
The Fund had no common share transactions during the year ended
October 31, 2003.
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 year ended October 31, 2003, aggregated $27,611,120 and
$91,146,776, respectively. The cost of investments owned on October 31,
2003, including short-term investments, for federal income tax purposes
was $525,715,082. Gross unrealized appreciation and depreciation of
investments aggregated $478,351,489 and $3,626,448, respectively,
resulting in net unrealized appreciation of $474,725,041. The difference
between book basis and tax basis net unrealized appreciation of
investments is attributable primarily to the tax deferral of losses on
certain sales of securities.
NOTE E
Transactions in securities of affiliated issuers
Affiliated issuers, as defined by the Investment Company Act of 1940,
are those in which the Fund's holdings of an issuer represent 5% or more
of the outstanding voting securities of the issuer. A summary of the
Fund's transactions in the securities of these issuers during the year
ended October 31, 2003, is set forth below.
BEGINNING ENDING
SHARE SHARE REALIZED DIVIDEND ENDING
AFFILIATE AMOUNT AMOUNT GAIN INCOME VALUE
FNB Bankshares (ME)
Common stock
bought: none 20,780 20,780 -- $24,936 $1,090,950
sold: none
MVBI Capital Trust (MO)
Preferred stock
bought: none 40,000 -- 1 -- 29,433 --
sold: none
Totals $54,369 $1,090,950
1 Security was fully called on 7-31-03. No gain or loss was recognized on the call.
16
NOTE F
Reclassification of accounts
During the year ended October 31, 2003, the Fund reclassified amounts to
reflect an increase in accumulated net realized gain on investments of
$1,020, an increase in accumulated net investment income of $2,277 and a
decrease in capital paid-in of $3,297. This represents the amounts
necessary to report these balances on a tax basis, excluding certain
temporary differences, as of October 31, 2003. Additional adjustments
may be needed in subsequent reporting periods. These reclassifications,
which have no impact on the net asset value of the Fund, are primarily
attributable to certain differences in the computation of distributable
income and capital gains under federal tax rules versus accounting
principles generally accepted in the United States of America and book
and tax differences in accounting for deferred compensation. The
calculation of net investment income per share in the Fund's Financial
Highlights excludes these adjustments.
17
AUDITORS'
REPORT
Report of
Deloitte & Touche
LLP, Independent
Auditors
The Board of Directors and Shareholders,
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of John Hancock Bank and Thrift
Opportunity Fund (the "Fund") as of October 31, 2003, and the related
statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
October 31, 2003 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
Fund at October 31, 2003, the results of its operations, the changes in
its net assets, and its financial highlights for the respective stated
periods in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 5, 2003
18
TAX
INFORMATION
Unaudited
For federal income tax purposes, the following information is furnished
with respect to the dividends of the Fund, if any, paid during its
taxable year ended October 31, 2003.
The Fund designated distributions to shareholders of $62,701,604 as
capital gain dividends.
With respect to distributions paid by the Fund for the fiscal year ended
October 31, 2003, 100% of the distributions qualify for the
dividends-received deduction available for corporations.
The Fund hereby designates the maximum amount allowable of its net
taxable income as qualified dividend income as provided in the Jobs and
Growth Tax Relief Reconciliation Act of 2003. This amount will be
reflected on Form 1099-DIV for the calendar year 2003.
Shareholders will be mailed a 2003 U.S. Treasury Department Form
1099-DIV in January 2004. This will reflect the total of all
distributions that are taxable for the calendar year 2003.
19
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.
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 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
20
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 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).
21
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.
22
SHAREHOLDER
MEETINGS
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.
On April 3, 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. Proxies covering 81,709,995 shares of
beneficial interest were voted at the meeting. 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 Ford Goldfarb 68,870,675 12,839,320
The shareholders also ratified the Trustees' selection of Deloitte &
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.
23
TRUSTEES
& OFFICERS
This chart provides information about the Trustees and Officers who
oversee your John Hancock fund. Officers elected by the Trustees manage
the day-to-day operations of the Fund and execute policies formulated by
the Trustees.
INDEPENDENT TRUSTEES
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
James F. Carlin, Born: 1940 1994 30
Director and Treasurer, Alpha Analytical Inc. (analytical laboratory) (since
1985); Part Owner and Treasurer, Lawrence Carlin Insurance Agency, Inc. (since
1995); Part Owner and Vice President, Mone Lawrence Carlin Insurance
Agency, Inc. (since 1996); Director and Treasurer, Rizzo Associates (until 2000);
Chairman and CEO, Carlin Consolidated, Inc. (management/investments)
(since 1987); Director and Partner, Proctor Carlin & Co., Inc. (until 1999); Trustee,
Massachusetts Health and Education Tax Exempt Trust (since 1993); Director
of the following: Uno Restaurant Corp. (until 2001), Arbella Mutual (insurance)
(until 2000), HealthPlan Services, Inc. (until 1999), Flagship Healthcare, Inc.
(until 1999), Carlin Insurance Agency, Inc. (until 1999); Chairman,
Massachusetts Board of Higher Education (until 1999).
William H. Cunningham, Born: 1944 1995 30
Former Chancellor, University of Texas System and former President of the
University of Texas, Austin, Texas; Chairman and CEO, IBT Technologies
(until 2001); Director of the following: The University of Texas Investment
Management Company (until 2000), Hire.com (since 2000), STC Broadcasting,
Inc. and Sunrise Television Corp. (until 2001), Symtx, Inc. (since 2001), Adorno/
Rogers Technology, Inc. (since 2001), Pinnacle Foods Corporation (since 2001),
rateGenius (since 2001), LaQuinta Motor Inns, Inc. (hotel management company)
(until 1998), Jefferson-Pilot Corporation (diversified life insurance company)
(since 1985), New Century Equity Holdings (formerly Billing Concepts) (until 2001),
eCertain (until 2001), ClassMap.com (until 2001), Agile Ventures (until 2001),
LBJ Foundation (until 2000), Golfsmith International, Inc. (until 2000), Metamor
Worldwide (until 2000), AskRed.com (until 2001), Southwest Airlines (since 2000)
and Introgen (since 2000); Advisory Director, Q Investments (since 2000); Advisory
Director, Chase Bank (formerly Texas Commerce Bank -- Austin) (since 1988),
LIN Television (since 2002) and WilTel Communications (since 2002).
Ronald R. Dion, Born: 1946 1998 30
Chairman and Chief Executive Officer, R.M. Bradley & Co., Inc.; Director,
The New England Council and Massachusetts Roundtable; Trustee, North
Shore Medical Center; Director, BJ's Wholesale Club, Inc. and a corporator
of the Eastern Bank; Trustee, Emmanuel College.
24
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
Charles L. Ladner,2 Born: 1938 1994 30
Chairman and Trustee, Dunwoody Village, Inc. (retirement services);
Senior Vice President and Chief Financial Officer, UGI Corporation
(Public Utility Holding Company) (retired 1998); Vice President and
Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas
Partners, L.P. (until 1997) (gas distribution); Director, EnergyNorth, Inc.
(until 1995); Director, Parks and History Association (since 2001).
John A. Moore,2 Born: 1939 2002 29
President and Chief Executive Officer, Institute for Evaluating Health
Risks (nonprofit institution) (until 2001); Chief Scientist, Sciences
International (health research) (since 1998); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
Patti McGill Peterson,2 Born: 1943 2002 29
Executive Director, Council for International Exchange of Scholars (since
1998); Vice President, Institute of International Education (since 1998);
Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until
1997); President Emerita of Wells College and St. Lawrence University;
Director, Niagara Mohawk Power Corporation (electric utility).
Steven Pruchansky, Born: 1944 1994 30
Chairman and Chief Executive Officer, Greenscapes of Southwest
Florida, Inc. (since 2000); Director and President, Greenscapes of
Southwest Florida, Inc. (until 2000); Managing Director, JonJames, LLC
(real estate) (since 2001); Director, First Signature Bank & Trust Company
(until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell
Building Corp. (until 1991).
Norman H. Smith, Born: 1933 1994 30
Lieutenant General, United States Marine Corps; Deputy Chief of Staff for
Manpower and Reserve Affairs, Headquarters Marine Corps; Commanding
General III Marine Expeditionary Force/3rd Marine Division (retired 1991).
John P. Toolan,2 Born: 1930 1994 30
Director, The Smith Barney Muni Bond Funds, The Smith Barney Tax-Free
Money Funds, Inc., Vantage Money Market Funds (mutual funds), The
Inefficient-Market Fund, Inc. (closed-end investment company); Chairman,
Smith Barney Trust Company of Florida (retired 1991); Director, Smith
Barney, Inc., Mutual Management Company and Smith Barney Advisers, Inc.
(investment advisers) (retired 1991); Senior Executive Vice President, Director
and member of the Executive Committee, Smith Barney, Harris Upham & Co.,
Incorporated (investment bankers) (until 1991).
25
INTERESTED TRUSTEES 3
NAME, AGE NUMBER OF
POSITION(S) HELD WITH FUND TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
John M. DeCiccio, Born: 1948 2001 51
Trustee
Executive Vice President and Chief Investment Officer, John Hancock
Financial Services, Inc.; Director, Executive Vice President and Chief
Investment Officer, John Hancock Life Insurance Company; Chairman of
the Committee of Finance of John Hancock Life Insurance Company;
Director, John Hancock Subsidiaries, LLC (Subsidiaries, LLC), Hancock
Natural Resource Group, Independence Investment LLC, Declaration
Management Research LLC, John Hancock Advisers, LLC (the "Adviser"),
The Berkeley Financial Group, LLC ("The Berkeley Group"), John Hancock
Funds, LLC ("John Hancock Funds") and Massachusetts Business Development
Corporation; Director, John Hancock Insurance Agency, Inc. ("Insurance
Agency, Inc.") (until 1999).
NAME, AGE NUMBER OF
POSITION(S) HELD WITH FUND TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
Maureen Ford Goldfarb, Born: 1955 2000 51
Trustee, Chairman, President and Chief Executive Officer
Executive Vice President, John Hancock Financial Services, Inc., John
Hancock Life Insurance Company; Chairman, Director, President and
Chief Executive Officer, the Adviser and The Berkeley Group; Chairman,
Director, President and Chief Executive Officer, John Hancock Funds;
Chairman, Director, President and Chief Executive Officer, Sovereign Asset
Management Corporation ("SAMCorp."); Director, Independence
Investment LLC, Subsidiaries, LLC and Signature Services; Investment
Company Institute Board of Governors (since 2002); Senior Vice President,
MassMutual Insurance Co. (until 1999).
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME, AGE
POSITION(S) HELD WITH FUND OFFICER
PRINCIPAL OCCUPATION(S) AND OF FUND
DIRECTORSHIPS DURING PAST 5 YEARS SINCE
Richard A. Brown, Born: 1949 2000
Senior Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, the Adviser, John Hancock
Funds and The Berkeley Group; Second Vice President and Senior Associate Controller,
Corporate Tax Department, John Hancock Financial Services, Inc. (until 2001).
Thomas H. Connors, Born: 1959 1994
Vice President and Compliance Officer
Vice President and Compliance Officer, the Adviser and each of the John Hancock funds;
Vice President, John Hancock Funds.
26
NAME, AGE
POSITION(S) HELD WITH FUND OFFICER
PRINCIPAL OCCUPATION(S) AND OF FUND
DIRECTORSHIPS DURING PAST 5 YEARS SINCE
William H. King, Born: 1952 1994
Vice President and Treasurer
Vice President and Assistant Treasurer, the Adviser; Vice President and Treasurer of each
of the John Hancock funds; Assistant Treasurer of each of the John Hancock funds (until 2001).
Susan S. Newton, Born: 1950 1994
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Vice President,
Signature Services (until 2000); Director, Senior Vice President and Secretary, NM Capital.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston, Massachusetts 02199.
The Statement of Additional Information of the Fund includes additional
information about members of the Board of Trustees of the Fund and is
available, without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his or
her successor is elected.
2 Member of Audit Committee.
3 Interested Trustees hold positions with the Fund's investment adviser,
underwriter and certain other affiliates.
27
28
FOR YOUR
INFORMATION
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
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, Massachusetts 02116-5022
STOCK SYMBOL
Listed New York Stock Exchange: BTO
For shareholder assistance
refer to page 22
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
The Fund's voting policies and procedures are available without
charge, upon request:
By phone 1-800-225-5291
On the Fund's Web site www.jhfunds.com/proxy
On the SEC's Web site www.sec.gov
29
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P900A 10/03
12/03
ITEM 2. CODE OF ETHICS.
As of the end of the period, October 31, 2003, the registrant has adopted a code
of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief
Executive Officer, Chief Financial Officer and Treasurer (respectively, the
principal executive officer, the principal financial officer and the principal
accounting officer, the "Senior Financial Officers"). A copy of the code of
ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Charles L. Ladner is the audit committee financial expert and is "independent",
pursuant to general instructions on Form N-CSR Item 3.
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.
See attached Exhibit "Proxy Voting Policies and Procedures".
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 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 changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a)(1) Code of Ethics for Senior Financial Officers is attached.
(a)(2) 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.
(b)(1) 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. 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.
(c)(1) Proxy Voting Policies and Procedures are attached.
(d)(1) Contact person at the registrant
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:
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Maureen Ford Goldfarb
Chairman, President and Chief Executive Officer
Date: December 18, 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:
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Maureen Ford Goldfarb
Chairman, President and Chief Executive Officer
Date: December 18, 2003
By:
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Richard A. Brown
Senior Vice President and Chief Financial Officer
Date: December 18, 2003