<PAGE> 1
THE
SOUTHEASTERN
THRIFT
AND BANK
FUND,
INC.
ANNUAL REPORT
DECEMBER 31, 1994
<PAGE> 2
DIRECTORS
Victor L. Andrews
Franklin C. Golden
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
Senior Vice President
Luis A. Agular
Secretary
Robert E. Gramer
Associate Treasurer
William J. Hayes
Associate Treasurer
Arthur J. Holzman, Jr.
Asociate 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
228 Franklin Street
Boston, Massachusetts 02110
SHAREHOLDER INQUIRES
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
1-800-843-0090
LEGAL COUNSEL
Kilpatrick & Cody
1100 Peachtree Street
Atlanta, Georgia 30309-4530
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110-1617
CHAIRMAN'S MESSAGE
DEAR SHAREHOLDERS:
In recent months, there has been a sharp sell-off in the bank sector and
financial stocks have faced market uncertainty. However, I am pleased to
report that The Southeastern Thrift and Bank Fund has continued to
deliver attractive performance. For the 12-month period ending December 31,
1994, your Fund posted a total return of 7.6 percent at net asset value. This
compares to the open-end Lipper financial services peer group average of 4.7
percent for the same time period.
In spite of the recent turbulence, we continue to remain optimistic
about the Fund's prospects for 1995 and beyond. Banking and thrift industry
fundamentals continue to remain attractive: favorable southeast regional
economics, low stock valuations and strong earnings, continued merger
activity and improving asset quality. These long-term industry trends could
be the foundation of higher stock prices over the next several years. On the
following pages, you will find a detailed discussion from portfolio manager
Jim Schmidt of the Fund's performance, including management strategy and the
Fund's reaction to industry trends.
In October, your Trustees voted to change the fiscal year-end of the Fund
from June 30th to the end of the calendar year.
During the second quarter of 1994, the Board of Directors considered
retention of net long-term capital gains in excess of capital losses for the
fiscal year 1994. In light of the Fund's continuing ability to earn
outstanding returns, the Board decided to retain these gains for the Fund and
pay capital gains taxes thereon. This decision does not bind the Board to
continue this policy, but it may choose to do so, especially if attractive
opportunities continue to prevail at satisfactory levels.
Again, it's a pleasure to report the Fund's performance. If you have any
questions or would like updated portfolio information, please feel free to call
our toll-free line at 1-800-843-0090. As always, we appreciate the confidence
you have placed in our management and we hope we're exceeding your
expectations.
Very truly yours on behalf of the Directors and Officers of the Fund,
Dr. Victor L. Andrews
DR. VICTOR L. ANDREWS, CHAIRMAN OF THE BOARD OF DIRECTORS
[PHOTO]
[A 1 1/4" x 1" photo of Dr. Victor L. Andrews, Chairman of the Board of
Directors, flush right, next to second paragraph.]
2
<PAGE> 3
BY JAMES K. SCHMIDT, CFA, SENIOR VICE PRESIDENT AND
PORTFOLIO MANAGER
THE SOUTHEASTERN THRIFT
AND BANK FUND, INC.
Second half of 1994 sends bank stocks on turbulent ride;
strong fundamentals augur well for future performance
1994 was a difficult year for investors. The story was pretty simple; interest
rates rose and stock and bond prices fell. Spurred by concerns over rising
inflation, the Federal Reserve raised short-term interest rates on February 4,
1994, triggering a sell-off across the financial markets. Five more rate hikes
followed, keeping stocks and bonds under pressure.
During the first eight months of 1994, bank and thrift stocks turned in
exceptional performance. Several factors, including strong earnings and the
prospect for nationwide interstate banking, helped the group shine in an
otherwise dreary market. At the end of August, however, bank and thrift stocks
changed direction. Through the end of the year, the S&P Regional Bank Index
dropped 15% and the S&P Savings and Loan Index, 22%.This sell-off coincided
with a pronounced weakness in the bond market and apparently reflected a
belief by momentum investors that the financial sector had peaked. In our
view, the pullback is only temporary. We firmly believe bank stocks have
plenty of room for further gains.
The Southeastern Thrift and Bank Fund managed to post attractive returns for
the year. For the 12 months ended December 31, 1994, the Fund had a total
return of 7.57% at net
"1994 WAS A DIFFICULT YEAR FOR
INVESTORS."
[PHOTO]
JAMES K. SCHMIDT, PORTFOLIO MANAGER
[A 2 3/4" x 3 1/2" photo of James K. Schmidt at bottom right. Caption reads:
"James K. Schmidt, Portfolio Manager."]
3
<PAGE> 4
The Southeastern Thrift and Bank Fund, Inc.
"...THE SOUTHEAST HAS WITNESSED MANY
MERGERS..."
[GRAPHIC]
[Chart with the heading "Recent Merger Announcements" at top of left hand
column. The chart has two columns. The header for the left column is:
"Acquiring;" the header for the right column is: "Acquired." The left column
lists four holdings: Southern National Corp., Lumberton, NC; BankSouth Corp.,
Atlanta, GA; CCB Financial Corp., Durham, NC; and Centura Banks, Rocky Mount,
NC. The right column list four holdings: BB&T Financial Corp., Wilson, NC;
Gwinnett Bancshares, Lawrenceville, GA; Security Capital Bancorp., Salisbury,
NC; and First Southern Bancorp, Asheboro, NC.]
asset value. By comparison, the average open-end financial services fund
returned 4.67%, according to Lipper Analytical Services(1). But in the face
of the sharp sell-off in financial stocks, the Fund ended the second half of
the year down. For the six months ended December 31, 1994, the Fund returned
- -5.40% at net asset value versus -5.27% for the average fund.
EARNINGS INCREASE BUT MOMENTUM SLOWS
After banner years in 1992 and 1993, earnings gains were more moderate in 1994
as banks and thrifts confronted rising interest rates. Still, the bulk of the
Fund's holdings have shown good results. Of companies in the Fund that have
reported 1994 earnings so far, the average bank increased income-per-share 9%
over 1993; the average thrift gained 8%.
It appears that the market has overestimated the effect of higher interest
rates on banks' net interest margins - that is, the spread between deposit
rates and lending rates. Because the recent rate hikes have been accompanied
by healthy commercial and consumer loan growth, most banks have been able to
book higher-yielding assets to offset any increase in deposit costs. Thrifts,
on the other hand, haven't been quite as fortunate. While the asset and
liability sides of banks' balance sheets reprice at much the same speed, those
of thrifts don't. As a result, there has been a moderate squeeze on thrift
margins this year. That, coupled with a drop in fees from fewer mortgage
refinancings, has resulted in lower net income growth.
MERGERS GALORE AND TREND LIKELY TO CONTINUE
One of the Fund's core investment themes has been the ongoing consolidation of
the bank and thrift industry. Over the past several years, the Southeast has
witnessed many mergers, which have reduced excess capacity and made the
surviving institutions stronger and more competitive. This past year was a
watershed in the consolidation process as President Clinton signed the
Riegle-Neal Interstate Banking and Branching Efficiency Act into law.
This legislation has two major benefits for banks. First, after September
1, 1995, any healthy bank holding company will be able to acquire any other in
any state, regardless of that state's banking laws. Second, after 1997, banks
will be able to branch across state lines and consolidate multi-state
franchises under a single bank charter. The first provision should accelerate
the process of mergers and acquisitions. Bank and thrift mergers are already
taking place with fre-
[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 Security
Capital followed by an up arrow and the phrase "Merger with CCB Financial."
The second listing is Seacoast Banking followed by an down arrow and the phrase
"Poorly positioned for rising interest rates." The third listing Life Bancorp
followed by a down arrow and the phrase "Recent conversion greeted
unfavorably." Footnote below reads: "See "Schedule of Investments." Investment
holdings are subject to change."]
[GRAPHIC]
See "Schedule of Investments." Investment holdings are subject to change.
4
<PAGE> 5
The Southeastern Thrift and Bank Fund, Inc.
[GRAPHIC]
[Bar chart with heading "Fund Performance" at top of left hand column. Under
the heading is the footnote: "For the year ended December 31, 1994." The chart
is scaled in increments of 4% from bottom to top, with 8% at the top and 0% at
the bottom. Within the chart, there are two solid bars. The first represents
the 7.57% total return for The Southeastern Thrift and Bank Fund, Inc. The
second represents the 4.67% total return for the average open-end financial
services fund. Footnote below reads: "The total return for The Southeastern
Thrift and Bank Fund, Inc. is at net asset value with all distributions
reinvested. The average open-end financial services fund is tracked by Lipper
Analytical Services."]
quency. In fact, 11 of the Fund's holdings announced their intention to be
acquired in 1994. (See Recent Merger Announcements.) The second provision
will be noticed more by customers than investors as it should enable banks to
offer more convenient services.
THE "D" WORD
Over the past year, the financial press has been full of headlines about
derivatives. Derivatives are complex financial instruments whose value is tied
to - or "derived" from - a different security, index, interest rate or
currency. The Fund has no direct exposure to derivatives. Any risk lies in
the banks and thrifts in which the Fund invests. The most common form of
derivative found at our banks and thrifts is collateralized mortgage
obligations (CMOs). As their name suggests, CMOs derive their value from
underlying pools of home mortgages. Their prices and yields can vary widely
with interest rates. Thus, we carefully query managements about the degree of
their portfolios' volatility. Unless we're satisfied that management
understands what it owns, we won't buy the stock.
PORTFOLIO STRATEGY AND OUTLOOK
Our fundamental strategy hasn't changed. We continue to focus on Southeastern
banks and thrifts with good earnings prospects and the potential to benefit
from industry consolidation. In 1994, our portfolio composition changed
slightly as we shifted toward banks for two reasons. First, several of
our thrifts were purchased by banks; in exchange, we received stock in those
banks. Second, we sold some of our thrifts, mainly because of their
interest-rate sensitivity. At the start of 1994, banks were 47% of the Fund's
assets; thrifts were 53%. By year-end, banks stood at 57%; thrifts at 43%. In
spite of recent turbulence, we're still optimistic about the long-term story
for Southeastern banks and thrifts. We've experienced numerous declines of this
magnitude since the Fund started in 1989 and have always recovered. The
fundamentals for banks and thrifts are still strong. Earnings are expected to
grow 8% to 10% next year. Valuations are extremely low with bank stocks selling
at a 45% discount to the market. Finally, Southeastern thrifts and banks are
likely to be among the biggest beneficiaries of increased merger activity,
thanks to favorable regional economics and numerous acquisition candidates. All
of those factors suggest that the long-term trend for bank and thrift stocks is
still up.
"...THE LONG-TERM TREND FOR BANK AND
THRIFT STOCKS IS STILL UP."
- --------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance would
be lower.
5
<PAGE> 6
Financial Statements
The Southeastern Thrift and Bank Fund, Inc.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
- -------------------------------------------------------------------------------------------
ASSETS:
<S> <C>
Investments at value - Notes A & C:
Common stocks (cost - $25,757,966) ....................................... $39,230,030
Preferred stocks (cost - $1,054,000) ..................................... 915,000
Short-term investments (cost - $30,662) ................................. 30,662
-----------
40,175,692
Cash ....................................................................... 351,482
Receivable for investments sold ........................................... 14,478
Interest receivable ....................................................... 367
Dividends receivable ....................................................... 136,646
-----------
Total Assets 40,678,665
---------------------------------------------------------------------
LIABILITIES:
Dividend payable ........................................................... 188,467
Federal income tax payable - Note A ....................................... 848,364
Payable to John Hancock Advisers, Inc. - Note B ........................... 27,722
Accounts payable and accrued expenses ..................................... 66,471
-----------
Total Liabilities ..................................... 1,131,024
---------------------------------------------------------------------
NET ASSETS:
Capital paid-in - Note E ................................................... 26,214,577
Net unrealized appreciation of investments ................................. 13,333,064
-----------
Net Assets $39,547,641
=====================================================================
NET ASSET VALUE PER SHARE:
(based on 1,992,483 shares outstanding - 50 million
shares authorized with $0.001 per share par value) . . . $ 19.85
=====================================================================
</TABLE>
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET ON
DECEMBER 31, 1994. YOU WILL ALSO FIND THE NET ASSET VALUE PER SHARE AS OF
DECEMBER 31, 1994.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 7
Financial Statements
The Southeastern Thrift and Bank Fund, Inc.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------------------------------------
FISCAL PERIOD YEAR ENDED
ENDED DECEMBER 31, JUNE 30,
1994 (a) 1994
----------- ----------
INVESTMENT INCOME:
<S> <C> <C>
Dividends ....................................................... $ 614,399 $ 956,932
Interest ....................................................... 3,855 19,612
----------- ----------
618,254 976,544
----------- ----------
Expenses:
Investment management fee - Note B ........................... 143,143 257,230
Director's fees ............................................... 39,199 63,504
Administration fee - Note B ................................... 33,033 59,361
Auditing fee ................................................. 26,906 26,432
Custodian fee ................................................. 26,832 41,262
Legal fees ................................................... 20,578 22,337
Printing ..................................................... 11,968 19,750
Miscellaneous ................................................. 8,622 20,834
Organization expense - Note A ................................. 7,092 59,875
Transfer agent fee ........................................... 4,566 5,612
----------- ----------
Total Expenses ........................... 321,939 576,197
------------------------------------------------------------------------------------
Net Investment Income ................... 296,315 400,347
------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments sold (net of Federal income
taxes of $848,364 and $1,038,612, respectively, on long
term capital gains retained) - Note A ......................... 1,714,433 3,332,715
Change in net unrealized appreciation/depreciation of
investments ................................................... ( 4,391,932) 5,565,359
----------- ----------
Net Realized and Unrealized Gain (Loss)
on Investments ......................... ( 2,677,499) 8,898,074
------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations ............. ($2,381,184) $9,298,421
====================================================================================
</TABLE>
(a) Effective October 24, 1994, the fiscal period end changed from June 30 to
December 31.
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.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
Financial Statements
The Southeastern Thrift and Bank Fund, Inc.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
FISCAL PERIOD
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
------------ ---------------------------
1994 (a) 1994 1993
------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C> <C>
Net investment income ............................... $ 296,315 $ 400,347 $ 221,500
Net realized gain on investments sold ............... 1,714,433 3,332,715 3,718,143
Change in net unrealized appreciation/depreciation
of investments ................................... ( 4,391,932) 5,565,359 6,460,934
----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations ................................. ( 2,381,184) 9,298,421 10,400,577
----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ($0.2600
and $0.2053 per share, respectively) ............. ( 518,046) ( 409,057) ----
Distributions from capital gains ($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 ................................. 43,144,798 36,023,962 25,623,385
=========== =========== ===========
End of period (including undistributed net
investment income of none, $212,790 and
$221,500, respectively) ........................... $39,547,641 $43,144,798 $36,023,962
=========== =========== ===========
ANALYSIS OF COMMON SHARE ACTIVITY:
<CAPTION>
FISCAL PERIOD ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
-------------------------- -------------------------------------------------------
1994 (a) 1994 1993
-------------------------- ----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding, beginning of
period ................................. 1,992,483 $24,647,975 1,992,483 $22,719,124 1,992,483 $22,719,124
Reclassification of net long-term
capital gains (net of Federal income
taxes of $848,364, $1,038,612 and
none, respectively) - Note A ........... ---- 1,575,534 ---- 1,928,851 ---- ----
Reclassification of Capital Accounts
- Note E ............................... ---- ( 8,932) ---- ---- ---- ----
--------- ----------- --------- ----------- --------- -----------
Shares outstanding, end of period ........ 1,992,483 $26,214,577 1,992,483 $24,647,975 1,992,483 $22,719,124
========= =========== ========= =========== ========= ===========
</TABLE>
(a) Effective October 24, 1994, the fiscal period end changed from June 30 to
December 31.
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAVE 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 andBank Fund, Inc.
<TABLE>
<CAPTION>
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:
- ----------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
AUGUST 24, 1989
FISCAL (COMMENCEMENT OF
PERIOD ENDED YEAR ENDED JUNE 30, OPERATIONS) TO
DECEMBER 31, ---------------------------------------- JUNE 30,
1994(a) 1994 1993 1992 1991 1990
------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of period ..... $ 21.65 $ 18.08 $ 12.86 $ 7.71 $ 7.73 $ 11.16*
------- ------- ------- ------- ------- -------
Net Investment Income ................... 0.15 0.21 0.11 0.10 0.13 0.18
Net Realized and Unrealized Gain
(Loss) on Investments ................. (1.34)(b) 4.45(b) 5.11 5.16 ---- (3.50)
------- ------- ------- ------- ------- -------
Total from Investment Operations ..... (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 ................. (0.35) (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 ........... $ 19.85 $ 21.65 $ 18.08 $ 12.86 $ 7.71 $ 7.73
======= ======= ======= ======= ======= =======
Per Share Market Value, End of Period ... $ 19.25 $ 21.25 $ 15.75 $ 11.00 $ 6.25 $ 6.50
Total Investment Return at Market Value .. (6.53%)(c) 42.98% 43.18% 78.15% (1.48%) (39.13%)(c)
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (000's
omitted) ............................. $39,548 $43,145 $36,024 $25,623 $15,371 $15,605
Ratio of Expenses to Average Net
Assets ............................... 1.46%(d) 1.46% 1.69% 2.17% 2.76% 1.73%(d)
Ratio of Net Investment Income to
Average Net Assets ..................... 1.35%(d) 1.01% 0.71% 1.06% 1.84% 2.22%(d)
Portfolio Turnover Rate ................. 7% 23% 42% 42% 18% 16%
</TABLE>
* Initial price to commence operations, net of offering expenses.
(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) Not annualized.
(d) On an annualized basis.
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE 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.
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
December 31, 1994
- ------------------------------------------------------------------
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 $ 973,241
Compass Bancshares, Inc. ................. 41,500 913,000
Peoples Banctrust Co., Inc. ............... 11,000 346,500
Southtrust Corp. ......................... 47,000 846,000
Valley Federal Savings Bank ............... 18,011 549,336
----------
3,628,077
----------
FLORIDA
Barnett Banks, Inc. ....................... 20,000* 767,500
Community Savings, FA ..................... 20,666* 293,326
F & C Bancshares, Inc. ..................... 17,500 336,875
Fidelity Federal Savings Bank of Florida ... 500 5,500
First Financial Bancorp, Inc. ............. 30,250 544,500
First Financial Bancshares - Polk ......... 24,000 474,000
First Palm Beach Bancorp ** ............... 25,000 415,625
Seacoast Banking Corp. of Florida (Class A). 30,000 502,500
----------
3,339,826
----------
GEORGIA
Bankers First Corp. ....................... 55,000 1,003,750
Central & Southern Holding Co.** ........... 36,100 230,138
Eagle Bancshares, Inc. ..................... 20,000 405,000
First Liberty Financial Corp. ............. 29,100 378,300
First National Bancorp ..................... 35,000 665,000
Flag Financial Corp. ..................... 67,500 582,187
Gwinnett Bancshares, Inc. ................. 75,000 2,081,250
----------
5,345,625
----------
MISSISSIPPI
Bancorpsouth, Inc. ......................... 5,750 192,625
Grenada Sunburst Systems Corp. ............. 23,000 687,125
Hancock Holding Co. ....................... 15,000 450,000
Peoples Holding Company (The) ............. 10,400 405,600
Trustmark Corp. ......................... 28,500 498,750
----------
2,234,100
----------
</TABLE>
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
FUND ON DECEMBER 31, 1994. 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>
<CAPTION>
NUMBER OF MARKET
ISSUER SHARES VALUE
- ------ ------ -----
<S> <C> <C>
NORTH CAROLINA
Allied Bank Capital, Inc.** ................. 32,864 $ 451,880
BB&T Financial Corp. ....................... 11,831 331,268
CCB Financial Corp. ....................... 17,507 608,368
Centura Banks, Inc. ....................... 29,337 715,089
First Citizens BancShares, (Class A) ....... 12,223* 531,701
First Savings Bank of Moore, N.C. ........... 4,910 78,560
First Southern Bancorp, Inc. ............... 12,000 297,000
Haywood Savings Bank, Inc. ................. 53,400 801,000
LSB Bancshares, Inc. ........................ 26,562 478,116
Mutual Community Savings Bank** ............. 17,070 179,235
Rowan Savings Bank SSB, Inc.** ............. 20,000 280,000
RS Financial Corp. .......................... 35,500 834,250
Security Capital Bancorp .................... 65,000 1,137,500
Southern National Corp. .................... 51,746 989,642
----------
7,713,609
----------
SOUTH CAROLINA
American Federal Savings Bank - FSB ......... 30,000 322,500
Palfed, Inc.** ............................. 94,960 676,590
Plantation Financial Corp.** ............... 5,000 55,000
United Financial Corp. of South Carolina,
Inc. ...................................... 117,000 1,579,500
----------
2,633,590
----------
TENNESSEE
First City Bancorp, Inc. .................... 22,000 231,000
First Tennessee National Corp. ............. 23,620 962,515
Union Planters Corp. ....................... 92,457* 1,930,040
----------
3,123,555
----------
</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
CENIT Bancorp, Inc. ................................... 37,500 $ 768,750
Commerce Bank ......................................... 13,230 481,241
FFVA Financial Corp. .................................. 25,000* 481,250
F & M National Corp. .................................. 25,625 406,797
Life Bancorp, Inc. .................................... 60,000* 555,000
Piedmont BancGroup, Inc. .............................. 25,000* 468,750
Premier Bankshares Corp. .............................. 30,000 495,000
Seaboard Bancorp., Inc.** + .......................... 280,000 280,000
TeleBanc Financial Corp.** .......................... 20,000 112,500
-----------
4,049,288
-----------
TOTAL BANKS, SAVINGS AND
LOANS - SOUTHEASTERN 32,067,670
-----------
OTHER REGIONS
American National Savings Bank (Maryland) ............. 45,000 416,250
CB Bancshares, Inc. (Hawaii) .......................... 6,477 191,072
Capital Bancorp, Inc., (Missouri) ..................... 41,000 881,500
Central Mortgage Bancshares, Inc. (Missouri) .......... 30,000 525,000
Equitable Federal Savings Bank (Maryland) ............. 17,000* 271,734
First Commercial Corp. (Arkansas) ..................... 43,313 993,480
Independent Bancorp of Arizona (Arizona)** ............ 25,455 575,919
Oklahoma Savings, Inc. (Oklahoma)** .................. 20,000* 510,000
Pocahontas Federal Savings & Loan Assn. (Arkansas) .... 15,000 166,875
Provident Bancorp, Inc. (Ohio) ........................ 20,000 680,000
Riggs National Corp. (Washington D.C.)** .............. 20,000 167,500
Roosevelt Financial Group, Inc. (Missouri) ............ 39,627 594,405
Simmons First National Corp. (Class A) (Arkansas) ..... 20,000 460,000
Whitney Holding Corp. (Louisiana) ..................... 33,500 728,625
-----------
TOTAL OTHER REGIONS 7,162,360
-----------
TOTAL COMMON STOCKS
(Cost $25,757,966) 99.20% 39,230,030
------ -----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
ISSUER SHARES VALUE
- ------ ------ -----
<S> <C> <C>
PREFERRED STOCKS
Carolina First Corp., 7.32% (South Carolina) .......... 10,000 $ 255,000
Roosevelt Financial Group, Inc., 6.5%, Ser F
(Missouri) .......................................... 12,000 660,000
-----------
TOTAL PREFERRED STOCKS
(Cost $1,054,000) 2.31% 915,000
------ -----------
PAR VALUE
---------
SHORT TERM INVESTMENT
CASH EQUIVALENTS
Deposits in Mutual Banks .............................. $30,662 30,662
-----------
TOTAL SHORT TERM INVESTMENT 0.08% 30,662
------ -----------
TOTAL INVESTMENTS 101.59% $40,175,692
====== ===========
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the fiscal period ended December 31, 1994.
** 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 December 31, 1994
were as follows:
<TABLE>
<CAPTION>
AFFILIATE COST DIVIDEND INCOME
----------------- ------- ---------------
<S> <C> <C>
Seaboard Bancorp, Inc. $266,400 ----
</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.
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 Securities in the Fund's portfolio are valued on the
basis of market value quotations, valuations provided by pricing services which
do not exclusively rely on quoted prices or, lacking either of the
aforementioned methods, at fair value as determined in good faith in accordance
with consistently applied procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost which
approximates market value.
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.
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.
ORGANIZATION COSTS The Fund amortized organization costs over sixty months
from the period of time from the Fund's commencement of operations.
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 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.
12
<PAGE> 13
Notes to Financial Statements
The Southeastern Thrift and Bank Fund, Inc.
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
fiscal period ended December 31, 1994, aggregated $2,989,234 and $4,777,225,
respectively. There were no purchases or sales of obligations of the U.S.
government and its agencies during the fiscal period ended December 31, 1994.
The cost of investments owned at December 31, 1994 (excluding deposits in
mutual savings banks) for Federal income tax purposes was $26,811,966. Gross
unrealized appreciation and depreciation of investments aggregated $14,004,318
and $671,254, respectively, resulting in net unrealized appreciation of
$13,333,064.
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. 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.
NOTE E -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the fiscal period ended December 31, 1994, the Fund has reclassified
amounts to reflect an increase in undistributed net investment income of
$8,941, a decrease in accumulated net realized gain of $9 and a decrease in
capital paid-in of $8,932. This represents the amount necessary to report
these balances on a tax basis, excluding certain temporary differences, as of
December 31, 1994. 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 generally accepted accounting principles.
13
<PAGE> 14
The Southeastern Thrift and Bank Fund, Inc.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
The Southeastern Thrift and Bank Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of The Southeastern Thrift and Bank
Fund, Inc. (the "Fund") as of December 31, 1994, the related statements of
operations for the six month period then ended and the year ended June 30,
1994, the statements of changes in net assets for the six month period ended
December 31, 1994 and the years ended June 30, 1994 and 1993, and the financial
highlights for the six month period ended December 31, 1994 and for each of the
years in the five-year period ended June 30, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsiblity is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 mistatement. 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 December 31, 1994 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
December 31, 1994, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
February 6, 1995
14
<PAGE> 15
Supplemental Information
The Southeastern Thrift and Bank Fund, Inc.
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished with
respect to the distributions of the Fund during its fiscal period ended
December 31, 1994.
For the fiscal period ended December 31, 1994, 97.48% of the ordinary
income distributions qualify qualifies for the dividends received deduction
available to corporations.
Shareholders will receive a 1994 U.S. Treasury Department Form 1099-DIV in
January of 1995. This will reflect the total of all distributions which are
taxable for the calendar year 1994.
The Fund has chosen to retain (and pay federal corporate income tax on) a
portion of net long-term capital gains for its fiscal period ended December 31,
1994.
Within 60 days of the Fund's fiscal year end, the Fund will mail to its
shareholders of record on December 31, 1994 a designation, on Internal Revenue
Service (IRS) Form 2439, of that portion of the undistributed capital gains
for the year to be included in a shareholder's 1994 taxable income as
long-term capital gains ($1.2165 per share), and will show their portion of the
tax paid by the Fund on these gains ($0.4258 per share), which may be credited
against any federal income tax due. These gains will not be reported to
shareholders on Form 1099-DIV, the form on which the Fund would ordinarily
report income taxable to a shareholder.
To reflect the Fund's retention of capital gains and payment of the
related tax and their pass through to shareholders as described above,
shareholders are entitled to increase the adjusted tax basis of their shares
($0.7907 per share) in the Fund as provided in Internal Revenue Code (IRC)
section 852(b)(3).
Trustees for Individual Retirement Accounts (IRAs) and organizations which
are exempt from federal income tax under IRC section 501(a) (and to which IRC
section 511 does not apply) should claim a refund by filing Form 990-T with
the IRS. Record owners who are not the actual owners (nominees) will also be
required to report the amounts shown on Form 2439 to the actual owners within
90 days of the Fund's fiscal year (on or before March 31, 1995) and the IRS in
the manner required by the instructions of Form 2439. A trustee or custodian
of an IRA should not send a copy of Form 2439 to the owner of the IRA.
State tax consequences may differ from those described above and may vary
from state to state. Therefore, shareholders should consult their state tax
advisers for specific information regarding their particular situations.
Non-resident aliens may also have different tax consequences and should
consult their tax adviser.
15
<PAGE> 16
Supplemental Information
The Southeastern Thrift and Bank Fund, Inc.
INVESTMENT POLICIES
On July 28, 1994, the Directors considered the definition of a Southeastern
institution and determined that Mississippi 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 Mississippi as part
of the southeast. Therefore Southeastern institutions are those located in
the states of Alabama, Florida, Georgia, 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.
16
<PAGE> 17
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.
17
<PAGE> 18
Notes
The Southeastern Thrift and Bank Fund, Inc.
18
<PAGE> 19
Notes
The Southeastern Thrift and Bank Fund, Inc.
19
<PAGE> 20
[LOGO] JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
101 Huntington Avenue Boston, MA 02199-7603
Back Cover
[A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the page.
A box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line reads: "A
Global Investment Management Firm."]
[A recycled logo in lower left hand corner with the caption "Printed on Recycled
Paper."]
