<PAGE> 1
The
Southeastern
Thrift
and Bank
Fund, Inc.
SEMI-ANNUAL REPORT
June 30, 1995
<PAGE> 2
DIRECTORS
Victor L. Andrews
Franklin C. Golden
Andrew F. St. Pierre
Fred G. Steingraber
Donald R. Tomlin
H. Hall Ware III
OFFICERS
Victor L. Andrews
Chairman
Franklin C. Golden
President
James B. Little
Treasurer
James K. Schmidt
Vice President
Reinaldo Pascual
Secretary
Robert E. Gramer
Associate Treasurer
William J. Hayes
Associate Treasurer
Arthur J. Holzman, Jr.
Associate Treasurer
William H. King
Associate Treasurer -- Taxation
Avery P. Maher
Assistant Secretary
Susan S. Newton
Portfolio Compliance Officer
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts, 02199-7603
CUSTODIAN, TRANSFER AGENT, DISTRIBUTION DISBURSING AGENT
AND REGISTRAR
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
LEGAL COUNSEL
Kilpatrick & Cody
1100 Peachtree Street
Atlanta, Georgia 30309-4530
Listed: NASDAQ Symbol: STBF
John Hancock Closed-End Funds: 1-800-843-0090
Chairman's Message
DEAR SHAREHOLDERS:
[A 1 1/4" x 1" photo of Dr. Victor L. Andrews, Chairman of the Board of
Directors, flush right, next to second paragraph.]
So far, 1995 has been a splendid year for bank and thrift stocks. The
Southeastern Thrift and Bank Fund has continued to deliver a very attractive
return, as you will see on the following pages. We remain optimistic about the
Fund's long-term prospects because of the positive fundamentals that continue to
dominate the banking and thrift industry, including favorable economics in the
Southeast, low stock valuations, strong earnings and continued merger activity.
We also see opportunities arising from new and proposed regulatory changes.
In order to more fully capitalize on these favorable conditions, your Fund
has proposed several changes to how it conducts business. A proxy statement was
recently mailed to you containing three proposals and a notice of a special
stockholders' meeting on August 31, 1995.
The first proposal gives the Fund a greater ability to invest in banks and
savings and loan institutions outside of the Southeast. It would also allow the
Fund to invest more broadly in other financial service companies, such as
insurance companies and broker/dealers, among others. The second proposal would
give the Fund a perpetual duration. The third proposal says that if the second
proposal is rejected by the stockholders, then the Fund should be converted from
a closed-end investment company to an open-end investment company. The Board of
Directors believes that, if enacted, the first of these proposals can provide
the Fund's investment advisor with greater flexibility and may enhance the
investment opportunities and return of the Fund's portfolio. According to
shareholders' choice, the second or third proposal will enable the Fund to
continue operating beyond June 30, 1997.
In July, your Board of Directors elected Andrew F. St. Pierre as a new
member. Mr. St. Pierre is a Senior Vice President at John Hancock Advisers, Inc.
He currently manages more than $900 million in closed-end funds. We welcome him
and look forward to the benefit of his expertise as a Board member.
If you have any questions on any aspect of this report, or the proxy, please
feel free to call our toll-free line at 800-843-0090.
Very truly yours on behalf of the Directors and Officers of the Fund.
/s/ Victor L. Andrews
- ---------------------
DR. VICTOR L. ANDREWS, CHAIRMAN OF THE BOARD OF DIRECTORS.
2
<PAGE> 3
BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGER
THE SOUTHEASTERN THRIFT
AND BANK FUND, INC.
Bank and thrift stocks rebound; mergers and shareholder
activism complement healthy earnings
After painfully adjusting to rising interest rates during 1994, the stock market
has galloped ahead in 1995. Investors seem to feel both that the Federal Reserve
may indeed have slowed the current expansion enough for the proverbial "soft
landing" and that interest rates will continue to ease during the second half.
This belief drove the Standard & Poor's 500-Stock Index up 20% over the last six
months.
[A 2 3/4" x 3 1/2" photo of James K. Schmidt bottom right. Caption reads: "James
K. Schmidt, Portfolio Manager."]
Bank and thrift stocks mirrored the market trend but with greater variation.
After a steeper sell-off in the fourth quarter of 1994, the financial group
rebounded smartly in the first half of the year, outperforming the overall
market. The Southeastern Thrift and Bank Fund benefited from the resurgence. For
the six months ended June 30, 1995, the Fund had a total return of 27.56% at net
asset value. This result compared favorably to the average open-end financial
services fund's return of 19.44%, according to Lipper Analytical Services.(1)
Why have banks and thrifts appreciated so strongly? As we discussed six
months ago, we believed that the fourth-quarter selloff in banks
[CAPTION]
"...the financial group rebounded smartly in the first half of the year..."
3
<PAGE> 4
The Southeastern Thrift and Bank Fund, Inc.
[Table entitled "Recent Merger Announcements" at the top of the left hand
column. The table has two columns, with four listings in each. Under the
left-hand column, entitled "Acquiring Bank," are the following: Bank of Hampton
Roads, Chesapeake, VA; First Union Corp., Charlotte, NC; First Union Corp.,
Charlotte, NC; Union Planters Corp., Memphis, TN. Under the right-hand column,
entitled "Acquired Bank" are the following: Seaboard Bancorp, Virginia Beach,
VA; United Financial Corp. of SC, Greenwood, SC; RS Financial Corp., Raleigh,
NC; Capital Bancorp, Cape Girardeau, MO.]
and thrifts was a temporary pullback, not the start of a prolonged downturn. In
fact, we saw it as an opportunity to pick up holdings at bargain-basement
prices. Subsequently, in 1995, as investors' rate fears were allayed, bank and
thrift stocks came back into favor. What sparked the rally was a combination of
stronger-than-expected earnings and several headline mergers.
EARNINGS GAINS CONTINUE
Even after record-breaking years in 1992, 1993 and 1994, bank earnings for 1995
look like they might again top the prior mark. According to FDIC data,
commercial bank net interest margins -- the difference between what banks charge
borrowers and pay depositors -- have remained relatively wide. For example,
margins went from 4.40% in 1993 to 4.36% in 1994. That was only a mild squeeze
given the steep, 300-basis point increase in short-term interest rates.
In 1995, bank margins will likely contract another 10 to 20 basis points as
deposits shift from cheaper NOW and money market accounts into more expensive
certificates of deposit (CDs). Thrifts, which rely more on CDs to begin with,
could suffer more compression. However, overall bottom-line earnings for the
group should grow more than they did in 1994 as healthy loan volume, strict cost
controls and sterling loan quality offset the increased cost of funds. Thus, our
1995 forecast calls for bank earnings to increase in the 8% to 10% range, while
thrifts will likely report more moderate gains.
BANK STOCKS STILL OFFER GOOD VALUE
Despite the recent uptick, bank stocks remain inexpensive. The average bank
stock in the Fund is trading at approximately 9.5 times 1995 estimated earnings
versus 15.5 times for the broad market, as measured by the S&P 500 Index. That
means bank stocks are selling at a 40% discount to the market, which is near the
inexpensive end of the historical range. Given our positive long-term outlook
for earnings and consolidation, we think there's still great upside potential in
the stocks.
ONGOING MERGERS AND ACTIVISM
In the first six months of 1995, four of the Fund's holdings announced that
they're going to be acquired. (See Recent Merger Announcements table on this
page.) With the national interstate banking law taking effect
[CAPTION]
"...bank stocks remain inexpensive."
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investment"; the header for the right column is "Recent
performance..and what's behind the numbers." The first listing is "Southern
National" followed by an up arrow and the phrase "Completed merger a positive
for earnings." The second listing is "Allied Bank Capital" followed by an up
arrow and the phrase "Possible takeover candidate." The third listing is
"Trustmark Corp." followed by a sideways arrow and the phrase "Concerns about
frivolous lawsuit." Footnote below reads "See "Schedule of Investments".
Investment holdings are subject to change."
4
<PAGE> 5
The Southeastern Thrift and Bank Fund, Inc.
[Bar chart with heading "Fund Performance" at the top of left hand column. Under
the heading is the footnote: "For the six months ended June 30, 1995." The
chart is scaled in increments of 10% from top to bottom, with 30% at the top and
0% at the bottom. Within the chart there are two solid bars. The first
represents the 27.56% total return for The Southeastern Thrift and Bank Fund.
The second represents the 19.44% total return for the average open-end financial
services fund. Footnote below reads: "The total return for The Southeastern
Thrift and Bank Fund is at net asset value with all distributions reinvested.
The average open-end financial services fund is tracked by Lipper Analytical
Services.(1)"]
on October 1, 1995, consolidation is likely to speed up. The Southeastern region
should remain a hotbed of merger activity due to its favorable demographic and
economic trends. Major out-of-market financial institutions -- up until now
precluded from entering the region -- will now view Southeastern banks and
thrifts as attractive takeover candidates.
The past six months have marked the rise of shareholder activism in the bank
and thrift sector. Michael Price of Mutual Shares, whose 6% stake in Chase
Manhattan and pledge to enhance shareholder value sent that stock higher, has
garnered the most attention. Yet, several of the Fund's holdings are involved in
the issue. Compass Bancshares was recently involved in a bitter proxy fight as a
dissident stockholder/ director, Harry Brock, attempted to get the Birmingham,
Alabama bank to consider a premium takeover bid from First Union. Although
management has done an excellent job running the bank, we sided with the
dissident group. We didn't believe that management was looking out for
shareholders' best interests when it dismissed First Union's bid and
subsequently showed interest in a no-premium, "merger-of-equals" with another
Birmingham bank. Though Mr. Brock lost by a narrow margin, this case of
shareholder activism drives home the point that all managements must consider
what's best for shareholders -- and not themselves -- in the merger process.
Another of the Fund's holdings, Bankers First Corp. of Augusta, Georgia, was
also bid up recently in a heated proxy fight. In this case, a large, activist
shareholder, Mid-Atlantic Investors, prevailed in its efforts to force
management to seek bidders for the thrift. Here, the Fund also sided with the
dissidents and has seen its returns on the stock improve markedly.
PORTFOLIO STRATEGY AND PROSPECTS FOR THE FUTURE
Strategically, we continued our focus on smaller, undervalued regional banks and
thrifts in the Southeast, with healthy earnings prospects and the potential to
benefit from ongoing industry consolidation. The Fund continues to be more
heavily weighted to banks, now 61% of the Fund's assets. That's mainly because
of their better rate balance over thrifts, but also because several of the
Fund's thrifts were acquired by banks. Going forward, we plan to pare some of
our larger-capitalization bank holdings and deploy the cash in smaller banks and
recently-converted thrifts.
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
[CAPTION]
"...we continue to see solid, long-term investment value in the bank and thrift
stocks."
5
<PAGE> 6
The Southeastern Thrift and Bank Fund, Inc.
What does the future hold? It's hard to know for sure, but we continue to see
solid, long-term investment value in the bank and thrift stocks. As we mentioned
earlier, the stocks remain inexpensive, while the fundamentals are still
positive. Favorable regional economics should drive earnings up, and continued
merger activity augurs well for stock prices. Given these factors, we're
confident that bank and thrift stocks will be able to generate attractive
returns over the next several years.
6
<PAGE> 7
FINANCIAL STATEMENTS
The Southeastern Thrift and Bank Fund, Inc.
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON JUNE 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE PER SHARE AS OF THAT DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $27,459,307) ...................... $48,653,212
Preferred stocks (cost - $1,054,000) .................... 1,016,500
Short-term investments (cost - $1,454,234) .............. 1,454,234
-----------
51,123,946
Cash ...................................................... 426
Receivable for investments sold ........................... 269,541
Interest receivable ....................................... 1,162
Dividends receivable ...................................... 162,158
Deposit for stock subscriptions ........................... 200,000
-----------
Total Assets ........................... 51,757,233
------------------------------------------------------------
LIABILITIES:
Payable for investments purchased .......................... 1,234,816
Payable to John Hancock Advisers, Inc. ....................
and affiliates - Note B ................................. 29,580
Accounts payable and accrued expenses ..................... 41,081
-----------
Total Liabilities ...................... 1,305,477
------------------------------------------------------------
NET ASSETS:
Capital paid-in ........................................... 26,214,577
Accumulated net realized gain on investments .............. 2,659,376
Net unrealized appreciation of investments ................ 21,156,405
Undistributed net investment income ....................... 421,398
-----------
Net Assets ............................. $50,451,756
============================================================
NET ASSET VALUE PER SHARE:
(based on 1,992,483 shares outstanding - 50 million
shares authorized with $0.001 per share par value) ....... $ 25.32
================================================================================
</TABLE>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS FOR THE PERIOD
STATED.
<TABLE>
STATEMENT OF OPERATIONS
Six months ended June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends ................................................. $ 654,456
Interest .................................................. 52,078
-----------
706,534
-----------
Expenses:
Investment management fee - Note B ...................... 145,852
Administration fee - Note B ............................. 33,658
Directors' fees ......................................... 29,616
Custodian fee ........................................... 22,920
Legal fees .............................................. 18,677
Auditing fee ............................................ 14,203
Printing ................................................ 10,756
Transfer agent fee ...................................... 5,013
Miscellaneous ........................................... 4,441
-----------
Total Expenses ......................... 285,136
------------------------------------------------------------
Net Investment Income .................. 421,398
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold ..................... 2,659,376
Change in net unrealized appreciation/depreciation
of investments .......................................... 7,823,341
-----------
Net Realized and Unrealized
Gain on Investments .................... 10,482,717
------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations .............. $10,904,115
============================================================
</TABLE>
See notes to financial statements.
7
<PAGE> 8
FINANCIAL STATEMENTS
The Southeastern Thrift and Bank Fund, Inc.
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS FISCAL PERIOD
ENDED ENDED
JUNE 30, 1995 DECEMBER 31, YEAR ENDED
(UNAUDITED) 1994(a) JUNE 30, 1994
------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........................................... $ 421,398 $ 296,315 $ 400,347
Net realized gain on investments sold ........................... 2,659,376 1,714,433 3,332,715
Change in net unrealized appreciation/depreciation of investments 7,823,341 (4,391,932) 5,565,359
----------- ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 10,904,115 (2,381,184) 9,298,421
----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (none, $0.2600 and $0.2053
per share, respectively) ...................................... -- (518,046) (409,057)
Distributions from capital gains (none, $0.3503 and $0.8876 per
share, respectively) ........................................ -- (697,927) (1,768,528)
----------- ------------ ------------
Total Distributions to Shareholders ........................... -- (1,215,973) (2,177,585)
----------- ------------ ------------
NET ASSETS:
Beginning of period ............................................. 39,547,641 43,144,798 36,023,962
----------- ------------ ------------
End of period (including undistributed net investment income of
$421,398, none and $212,790 respectively) ..................... $50,451,756 $ 39,547,641 $ 43,144,798
=========== ============ ============
</TABLE>
ANALYSIS OF COMMON SHARE ACTIVITY:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 FISCAL PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994(a) YEAR ENDED JUNE 30, 1994
----------------------- ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding, beginning of
period ............................ 1,992,483 $26,214,577 1,992,483 $ 24,647,975 1,992,483 $22,719,124
Reclassification of net long-term
capital gains (net of Federal income
taxes of none, $848,364 and
$1,038,612, respectively) - Note A . -- -- -- 1,575,534 -- 1,928,851
Reclassification of Capital Accounts
- Note A ........................... -- -- -- (8,932) -- --
--------- ----------- --------- ------------ --------- -----------
1,992,483 $26,214,577 1,992,483 $ 26,214,577 1,992,483 $24,647,975
========= =========== ========= ============ ========= ===========
<FN>
(a) Effective October 24, 1994, the fiscal period end changed from June 30 to
December 31.
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES AND DISTRIBUTIONS PAID
TO SHAREHOLDERS.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
The Southeastern Thrift and Bank Fund, Inc.
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for each share of common stock outstanding throughout the period
indicated, investment returns, key ratios and supplemental data are listed as
follows:
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE
PERIOD
AUGUST
24, 1989
SIX MONTHS FISCAL (COMMENCEMENT
ENDED PERIOD OF
JUNE 30, ENDED YEAR ENDED JUNE 30, OPERATIONS)
1995 DECEMBER 31, ----------------------------------------- TO JUNE 30,
(UNAUDITED) 1994(a) 1994 1993 1992 1991 1990
----------- ------------ ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of
period ........................... $ 19.85 $ 21.65 $ 18.08 $ 12.86 $ 7.71 $ 7.73 $ 11.16(c)
------- -------- ------- ------- ------- ------- -------
Net Investment Income .............. 0.21 0.15 0.21 0.11 0.10 0.13 0.18
Net Realized and Unrealized Gain
(Loss) on Investments ........... 5.26 (1.34)(b) 4.45(b) 5.11 5.16 -- (3.50)
------- -------- ------- ------- ------- ------ ------
Total from Investment Operations 5.47 (1.19) 4.66 5.22 5.26 0.13 (3.32)
------- -------- ------- ------- ------- ------ ------
Less Distributions:
Dividends from Net Investment
Income ......................... -- (0.26) (0.20) -- (0.10) (0.17) (0.13)
Distributions from Net Realized
Gain on Investments Sold ...... -- (035) (0.89) -- -- -- --
Distributions from Paid-in-Capital -- -- -- -- (0.01) -- --
------- -------- ------- ------- ------ ----- ------
Total Distributions ............. -- (0.61) (1.09) -- (0.11) (0.17) (0.13)
------- -------- ------- ------- ------ ------ ------
Plus Increase from Repurchase of
Capital Shares .................. -- -- -- -- -- 0.02 0.02
------- -------- ------- ------- ------ ------ ------
Net Asset Value, End of Period ..... $ 25.32 $ 19.85 $ 21.65 $ 18.08 $ 12.86 $ 7.71 $ 7.73
======== ======== ======= ======= ======= ======= =======
Per Share Market Value, End of
Period .......................... $ 23.50 $ 19.25 $ 21.25 $ 15.75 $ 11.00 $ 6.25 $ 6.50
Total Investment Return at
Market Value .................... 22.08%(d) (6.53%)(d) 42.98% 43.18% 78.15% (1.48%) (39.13%)(d)
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (000's
omitted) ........................ $50,452 $ 39,548 $43,145 $36,024 $25,623 $15,371 $15,605
Ratio of Expenses to Average Net
Assets .......................... 1.27%* 1.46%* 1.46% 1.69% 2.17% 2.76% 1.73%*
Ratio of Net Investment Income to
Average Net Assets .............. 1.88%* 1.35%* 1.01% 0.71% 1.06% 1.84% 2.22%*
Portfolio Turnover Rate ............ 11% 7% 23% 42% 42% 18% 16%
<FN>
(a) Effective October 24, 1994, the fiscal period end changed from June 30 to
December 31.
(b) Net of Federal income taxes of $0.43 for December 31, 1994 and $0.52 for
June 30, 1994 on net long-term capital gains retained by the Fund.
(c) Initial price to commence operations, net of offering expenses.
(d) Not annualized.
* On an annualized basis.
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: NET INVESTMENT INCOME, DIVIDENDS AND
GAINS (LOSSES) OF THE FUND. IT SHOWS HOW THE FUND'S NET ASSET VALUE FOR A SHARE
HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. IT ALSO SHOWS THE TOTAL
INVESTMENT RETURN FOR EACH PERIOD BASED ON THE MARKET VALUE OF FUND SHARES.
ADDITIONALLY, IMPORTANT RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE
FINANCIAL STATEMENTS ARE EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
The Southeastern Thrift and Bank Fund, Inc.
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
FUND ON JUNE 30, 1995. IT'S DIVIDED INTO THREE MAIN CATEGORIES: COMMON STOCKS,
PREFERRED STOCKS AND SHORT-TERM INVESTMENTS. THE STOCKS ARE FURTHER BROKEN DOWN
BY LOCATION. UNDER EACH LOCATION IS A LIST OF THE STOCKS OWNED BY THE FUND.
- -------------------------------------------------------------------------------
<TABLE>
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
<CAPTION>
NUMBER OF MARKET
ISSUER SHARES VALUE
- ------ --------- ------
COMMON STOCKS
BANKS, SAVINGS AND LOANS - SOUTHEASTERN (BY STATE)
<S> <C> <C>
ALABAMA
Colonial BancGroup, Inc. (Class A) ........... 49,278 $ 1,355,145
Compass Bancshares, Inc. ..................... 36,500 1,053,937
First Southern Bancshares .................... 51,917* 668,431
Peoples Banctrust Co., Inc. .................. 22,000 357,500
Security Federal Bancorp, Inc. **+ ........... 33,600* 428,400
Southtrust Corp. ............................. 47,000 1,086,875
Valley Federal Savings Bank .................. 18,011 486,297
-----------
5,436,585
-----------
FLORIDA
Barnett Banks, Inc. .......................... 10,000 512,500
Community Savings, FA ........................ 26,666 396,657
Fidelity Federal Savings Bank of
Florida .................................... 500 6,125
First Financial Bancorp, Inc. - Perry ........ 33,275 607,269
First Financial Bancshares - Polk ............ 48,000 588,000
First Palm Beach Bancorp ..................... 25,000 559,375
Home Financial Corp. ......................... 20,000* 285,000
Seacoast Banking Corp. of Florida
(Class A) .................................. 30,000 555,000
-----------
3,509,926
-----------
GEORGIA
Bankers First Corp. .......................... 55,000 1,608,750
Bank South Corp. ............................. 71,250* 1,585,312
Central & Southern Holding Co. ............... 36,100 263,981
Eagle Bancshares, Inc. ....................... 20,000 575,000
First Liberty Financial Corp. ................ 29,100 480,150
First National Bancorp ....................... 40,000 860,000
Flag Financial Corp. ......................... 67,500 793,125
-----------
6,166,318
-----------
LOUISIANA
Premier Bancorp, Inc. ** ..................... 25,000* 450,000
Teche Holding Co. ............................ 25,000* 303,125
Whitney Holding Corp. ........................ 33,500 896,125
-----------
1,649,250
-----------
MISSISSIPPI
Bancorpsouth, Inc. ........................... 10,750 416,563
Hancock Holding Co. .......................... 17,100 525,825
Peoples Holding Company (The) ................ 10,400 $ 428,025
Trustmark Corp. .............................. 28,500 502,312
-----------
1,872,725
-----------
NORTH CAROLINA
Allied Bank Capital, Inc. .................... 32,864 706,576
CCB Financial Corp. .......................... 50,007 2,087,792
Centura Banks, Inc. .......................... 42,837 1,194,081
First Citizens BancShares, (Class A) ......... 12,223 605,039
First Savings Bank of Moore, N.C ............. 9,910 178,380
Haywood Savings Bank, Inc. ................... 53,400 881,100
LSB Bancshares, Inc. ......................... 26,562 517,959
Mutual Community Savings Bank** .............. 17,070 187,770
Rowan Savings Bank SSB, Inc.** ............... 20,000 300,000
RS Financial Corp. ........................... 35,500 1,366,750
Southern National Corp. ...................... 93,935 2,254,440
-----------
10,279,887
-----------
SOUTH CAROLINA
American Federal Savings Bank - FSB .......... 50,000 687,500
Palfed, Inc.** ............................... 94,960 1,056,430
Plantation Financial Corp.** ................. 5,000 57,500
United Financial Corp. of
South Carolina, Inc. ....................... 117,000 2,369,250
-----------
4,170,680
-----------
TENNESSEE
First City Bancorp, Inc. ..................... 22,000 316,250
First Tennessee National Corp. ............... 23,620 1,095,378
Union Planters Corp. ......................... 80,876 2,163,433
-----------
3,575,061
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
The Southeastern Thrift and Bank Fund, Inc.
<TABLE>
<CAPTION>
NUMBER OF MARKET
ISSUER SHARES VALUE
- ------ ---------- -----------
<S> <C> <C>
VIRGINIA
FFVA Financial Corp. ........................ 33,000 $ 915,750
F & M National Corp. ........................ 25,625 422,813
Piedmont BancGroup, Inc. .................... 25,000 637,500
Premier Bankshares Corp. .................... 30,000 513,750
Salem Bank & Trust N.A. ** .................. 20,000* 227,500
Seaboard Bancorp., Inc.**+ .................. 280,000 367,500
TeleBanc Financial Corp.** .................. 20,000 120,000
-----------
3,204,813
-----------
TOTAL BANKS, SAVINGS AND
LOANS - SOUTHEASTERN ............... 39,865,245
-----------
OTHER REGIONS
American National Savings Bank
(Maryland) ................................ 45,000 765,000
CB Bancshares, Inc. (Hawaii) ................ 6,477 197,549
Capital Bancorp, Inc., (Missouri) ........... 51,000 1,530,000
Equitable Federal Savings Bank
(Maryland) ** ............................. 17,000 353,812
First Commercial Corp. (Arkansas) ........... 43,312 1,104,456
First Fidelity Bancorp (New Jersery) ........ 20,000* 1,180,000
First of America Bank Corp. .................
(Michigan) ................................ 11,263* 418,139
Fourth Financial Corp. (Kansas) ............. 16,800* 562,800
Mercantile Bancorp ( Missouri) .............. 17,910* 803,711
Pocahontas Federal Savings & Loan
Assn. (Arkansas) .......................... 30,000 333,750
Provident Bancorp, Inc. (Ohio) .............. 20,000 692,500
Riggs National Corp. ........................
(Washington D.C.) ** ...................... 30,000 296,250
Simmons First National Corp. ................
(Class A) (Arkansas) ...................... 20,000 550,000
-----------
TOTAL OTHER REGIONS ............... 8,787,967
-----------
TOTAL COMMON STOCKS
(Cost $27,459,307) ............... 96.44% 48,653,212
---------- -----------
PREFERRED STOCKS
Carolina First Corp., 7.32%
(South Carolina) .......................... 10,000 $ 280,000
Roosevelt Financial Group, Inc., 6.5%,
Ser F (Missouri) .......................... 12,000 736,500
-----------
TOTAL PREFERRED STOCKS
(Cost $1,054,000) ............... 2.01% 1,016,500
---------- -----------
<CAPTION>
PAR VALUE
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS
CASH EQUIVALENTS
Deposits in Mutual Banks .............. $ 34,715 34,715
------------
SHORT-TERM NOTE
Federal Home Loan Bank Co. ............
6.10% 07-03-95 ...................... $1,420,000 1,419,519
------------
TOTAL SHORT TERM INVESTMENTS ......... 2.88% 1,454,234
---------- ------------
TOTAL INVESTMENTS ......... 101.33% $ 51,123,946
========== ============
<FN>
* Securities, other than short-term investments, newly added to the portfolio
during the six months ended June 30, 1995.
** Non-income producing security.
+ Denotes an affiliated company in which the Fund has ownership of at least 5%
of the voting securities. Investments in affiliates at June 30, 1995 were as
follows:
</TABLE>
<TABLE>
<CAPTION>
AFFILIATE COST DIVIDEND INCOME
- ------------------------------ ------- ---------------
<S> <C> <C>
Seaboard Bancorp $266,400 --
Security Federal Bancorp, Inc. $390,600 --
</TABLE>
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.
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
The Southeastern Thrift and Bank Fund, Inc.
(UNAUDITED)
NOTE A --
The Southeastern Thrift and Bank Fund, Inc. (the "Fund") is a diversified
closed-end management investment company registered under the Investment Company
Act of 1940. The Fund's primary investment objective is long-term capital
appreciation. Its secondary investment objective is current income.
In accordance with the Fund's articles of incorporation, the Board of
Directors has extended the life of the Fund to June 30, 1997. Prior to such
date, the shareholders will be entitled to vote on the Fund's dissolution,
extension for a set duration or indefinitely as a closed-end investment company,
or to convert to another type of fund such as an open-end investment company.
Effective October 24, 1994, the Board of Directors voted to change the fiscal
year end of the Fund from June 30 to December 31.
ACCOUNTING POLICIES
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Investments in listed securities are valued at the last
sales price on the exchange on which such securities are primarily traded.
Listed securities for which no sales are reported and securities traded in the
over-the-counter market are valued at the average of the most recent bid and
asked prices. Investment securities for which no current market quotations are
available are valued at fair market value as determined in good faith under the
direction of the Fund's Board of Directors. Short-term investments which mature
in less than 61 days when acquired by the Fund are valued at amortized cost.
Short-term investments which mature in more than 60 days are valued at current
market value until the sixtieth day prior to maturity at which time they are
valued at amortized cost.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded using specific lot basis. Dividend income is recorded
on the ex-dividend date and interest income, including, where applicable,
amortization of discount on short-term investments, is recorded on the accrual
basis.
DISTRIBUTIONS TO SHAREHOLDERS Net investment income and capital gains
distributions are generally distributed annually and are recorded on the
ex-dividend date. Such distributions are determined in conformity with income
tax regulations. Due to permanent book/tax differences in accounting for certain
transactions, this has the potential for treating certain distributions as
return of capital as opposed to distributions of net investment income or
realized capital gains. The Fund has adjusted for the cumulative effect of such
permanent book/tax differences through December 31, 1994, which has no effect on
the Fund's net assets, net investment income or net realized gains.
The Fund has the option and has chosen to retain and pay the applicable
Federal income tax on $2,423,898 and $2,967,463 of its net long-term capital
gains for the fiscal periods ended December 31, 1994 and June 30, 1994,
respectively.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and will
not be subject to Federal income tax on taxable income which is distributed to
shareholders.
NOTE B --
INVESTMENT ADVISORY AND
ADMINISTRATION FEES AND
TRANSACTIONS WITH AFFILIATES
John Hancock Advisers, Inc. (The "Adviser") is the Fund's investment adviser and
administrator in accordance with the agreements described below.
The Fund operates under an investment advisory agreement which calls for the
Adviser to furnish office space, furnishings and equipment and to provide the
services of persons to manage the investment and reinvestment of the Fund's
assets and to continuously review, supervise and administer the Fund's
investment program. In return, the Fund has agreed to pay the Adviser a monthly
advisory fee at an annual rate of 0.65% of the Fund's average net assets, or a
flat annual fee of $50,000, whichever is higher. In addition, if total Fund
expenses exceed 2% of the Fund's average net assets in any one
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
The Southeastern Thrift and Bank Fund, Inc.
year, the Fund may require the Adviser to reimburse the Fund for such excess,
subject to a minimum fee of $50,000.
The Fund has also entered into an administration agreement with the Adviser
pursuant to which the Adviser provides certain administrative services required
by the Fund. In return, the Fund has agreed to pay a monthly administration fee
at an annual rate of 0.15% of the Fund's average net assets, or a flat annual
fee of $22,000, whichever is higher.
The Fund does not pay remuneration to its officers nor to any director who
may be employed by an affiliate of the Fund. Certain officers of the Fund are
officers of the Adviser.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended June 30, 1995, aggregated $4,826,923 and $5,784,958, respectively. There
were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended June 30, 1995.
The cost of investments owned at June 30, 1995 (excluding deposits in mutual
savings banks) for Federal income tax purposes was $29,932,826. Gross unrealized
appreciation and depreciation of investments aggregated $21,241,167 and $84,762,
respectively, resulting in net unrealized appreciation of $21,156,405.
NOTE D --
SHARES REPURCHASED AND TENDER OFFERS
The Fund from time-to-time may, but is not required to, make open market
repurchases of its shares in order to attempt to reduce or eliminate the amount
of any market value discount or to increase the net asset value of its shares,
or both. In addition, the Board currently intends each quarter during periods
when the Fund's shares are trading at a discount from the net asset value to
consider the making of tender offers. The Board may at any time, however, decide
that the Fund should not make share repurchases or tender offers.
13
<PAGE> 14
SUPPLEMENTAL INFORMATION
The Southeastern Thrift and Bank Fund, Inc.
INVESTMENT POLICIES
On May 9, 1995, the Directors considered the definition of a Southeastern
institution and determined that Louisiana is generally accepted as part of the
Southeastern region of the United States. The Directors therefore voted to
clarify the Fund's investment policies to include Louisiana as part of the
southeast. Therefore Southeastern institutions are those located in the states
of Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South
Carolina, Tennessee, and Virginia.
REPURCHASE AGREEMENTS
A repurchase agreement is a contract under which the Fund would acquire a
security for a relatively short period (usually not more than 7 days) subject to
the obligation of the seller to repurchase and the Fund to resell such security
at a fixed time and price (representing the Fund's cost plus interest). The Fund
will enter into repurchase agreements only with member banks of the Federal
Reserve System and with "primary dealers" in U.S. Government securities. The
Adviser will continuously monitor the creditworthiness of the parties with whom
the Fund enters into repurchase agreements.
Repurchase transactions must be fully collateralized at all times, but they
involve some credit risk to the Fund if the other party defaults on its
obligations and the Fund is delayed or prevented from liquidating the
collateral. The Fund has established a procedure providing that the securities
serving as collateral for each repurchase agreement must be delivered to the
Fund's custodian either physically or in book-entry form and that the collateral
must be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller on a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities and could experience losses, including the
possible decline in the value of the underlying securities during the period
while the Fund seeks to enforce it rights thereto, possible subnormal levels of
income and lack of access to income during this period, and expense of enforcing
its rights.
DIVIDEND REINVESTMENT PLAN
The Fund offers its registered stockholders an automatic Dividend Reinvestment
Plan (the "Plan") which enables each participating stockholder to have all
dividends (indicates income dividends and/or capital gains distributions)
payable in cash reinvested by the Plan Agent in shares of the Fund's Common
Stock. However, stockholders may elect not to enter into, or may terminate at
any time without penalty, their participation in the Plan by notifying State
Street Bank and Trust Company (the "Plan Agent") in writing. Stockholders who do
not participate will receive all dividends in cash.
In the case of stockholders such as banks, brokers or nominees who hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of record ownership of shares. These record stockholders
will receive dividends under the Plan on behalf of participating beneficial
owners and cash on behalf of non-participating beneficial owners. These
recordholders will then credit the beneficial owners' accounts with the
appropriate stock or cash distribution.
Whenever the market price of the Fund's stock equals or exceeds net asset
value per share, participating stockholders will be issued stock valued at the
greater of (i) net asset value per share or (ii) 95% of the market price. If the
net asset value per share of the Fund's stock exceeds the market price per share
on the record date, the Plan Agent shall make open market purchases of the
Fund's stock for each participating stockholder's account. These purchases may
begin no sooner than five business days prior to the payment date for the
dividend and will end up to thirty days after the payment date. If shares cannot
be purchased within thirty days after the payment date the balance of shares
will be purchased from the Fund at the average price of shares purchased on the
open market. Each participating stockholder will be charged a pro rata share of
brokerage commissions on all open market purchases.
The shares issued to participating stockholders, including fractional shares,
will be held by the Plan Agent in the name of the stockholder. The Plan Agent
will confirm each acquisition made for the account of the participating
stockholder as soon as practicable after the payment date of the distribution.
14
<PAGE> 15
Supplemental Information
The Southeastern Thrift and Bank Fund, Inc.
The reinvestment of dividends does not in any way relieve participating
stockholders of any Federal, state or local income tax which may be due with
respect to each dividend. Dividends reinvested in shares will be treated on your
Federal income tax return as though you had received a dividend in cash in an
amount equal to the fair market value of the shares received, as determined by
the prices for shares of the Fund on the NASDAQ National Market System as of the
dividend payment date. Distributions from the Fund's long-term capital gains
will be taxable to you as long-term capital gains. The confirmation referred to
above will contain all the information you will require for determining the cost
basis of shares acquired and should be retained for that purpose. At year end,
each account will be supplied with detailed information necessary to determine
total tax liability for the calendar year.
Additional information may be obtained from the Customer Service Department,
The Southeastern Thrift and Bank Fund, Inc., 101 Huntington Avenue, Boston,
Massachusetts 02199-7603; (800) 225-5291.
15
<PAGE> 16
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 Huntington Avenue Boston, MA 02199-7603 PAID
So. Hackensack
Permit No. 750
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below reads
"A Global Investment Management Firm."]
[A recycled logo in lower left hand corner with caption "Printed on Recycled
Paper."]
JHD PTOSA 6/95
