<PAGE> 1
THE
SOUTHEASTERN
THRIFT
AND BANK
FUND, INC.
ANNUAL REPORT
December 31, 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
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
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110-1617
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.
The last 12 months were truly sensational for the stock market, which posted
record highs in 1995. The banking industry mirrored the market's trend, as banks
produced record earnings in 1995. We are pleased to report that The Southeastern
Thrift and Bank Fund participated in the rally to an even greater extent than
its peers. For the year ended December 31, 1995, your Fund posted a total return
at net asset value of 47.73%. This compares to the 41.45% total return for the
average open-end financial services fund tracked by Lipper Analytical Services.
Last year's stunning performance will be a tough act to follow, but we remain
optimistic about the Fund's prospects for 1996 and beyond. The reasons have to
do with the banking industry's solid fundamentals and its continuing economic
evolution and capitalization on developing profit opportunities. On the
following pages, portfolio manager Jim Schmidt provides a detailed discussion of
trends in the industry, the Fund's reactions and its investment strategy.
Since our last report, shareholders voted to amend the Fund's charter to
expand its investment horizons beyond the Southeastern United States and into
non-banking financial institutions. Shareholders also approved extending the
life of the Fund indefinitely. These changes will provide the Fund's manager
with greater freedom to take advantage of the changing bank regulatory
environment and the buoyancy of the economy's financial services sector.
In November, your Board of Directors voted to split the shares of the Fund
two for one in an effort to reduce the cost of entry into the Fund and enhance
its liquidity on the secondary market. Shareholders' account values were not
directly or immediately affected by the split.
At the end of 1995, the Board of Directors decided to retain the Fund's net
long-term capital gains in excess of capital losses for the year ended December
31, 1995. The Fund pays capital gains taxes on these net capital gains. As it
has for the last several years, the Board made its decision based on its belief
that the Fund continues to have the ability to earn outstanding returns on this
reinvested capital.
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 stocks outperform in a strong market;
mergers aplenty and earnings on track
After suffering through a difficult 1994, stock and bond investors were treated
like royalty in 1995. With inflation low and the economy growing at a more
moderate but controlled pace, interest rates fell and the stock market took off,
reaching record highs in 1995. For the twelve months ended December 31, 1995,
the Standard & Poor's 500-Stock Index was up 37.53% and the 30-year Treasury
bond returned 32.20%.
As a group, bank and thrift stocks have been one of the leaders of the pack.
After a more pronounced sell-off in late 1994, the financials rebounded sharply
and outperformed the overall market in 1995. The Southeastern Thrift and Bank
Fund participated in the rally to an even greater degree than its peers during
the period. For the year ended December 31, 1995, the Fund had a total return at
net asset value of 47.73%. In comparison, the average open-end financial
services fund returned 41.45%, according to Lipper Analytical Services.
The unprecedented level of merger activity, from the biggest names in the
industry down to
[A 2 3/4" x 3 1/2" photo of James K. Schmidt at centered at bottom of page.
Caption reads: "James K. Schmidt, Portfolio Manager."]
[CAPTION]
"...THE STOCK MARKET TOOK OFF, REACHING RECORD HIGHS IN 1995."
3
<PAGE> 4
The Southeastern Thrift and Bank Fund, Inc.
[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: "Acquired
Bank" the header for the right column is: "Acquiring Bank." The left column
lists four holdings: Allied Bank Capital, Sanford, NC; First City Bancorp,
Murfreesboro, TN; First National Bancorp of GA, Gainesville, GA; Valley Federal
Savings, Sheffield, AL. The right column list four holdings: First Citizens
Bancshares, Raleigh, NC; First American Corp., Nashville, TN; Regions Financial
Corp., Birmingham, AL; Union Planters Corp., Memphis, TN.]
the smallest, has been the driving force behind the bank and thrift rally this
year. Banks also produced record earnings in 1995 and their fundamentals remain
positive. The banking industry is as healthy today as it has been in the last
thirty years. That is reflected in banks' loan quality, capital levels and
earnings capacity. As interest rates eased earlier in 1995 and the pace of
mergers accelerated, investors came to realize that these solid earnings and
takeover prospects could be purchased inexpensively. That drove up the stocks
from their late-1994 lows.
[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 Bankers
First followed by an up arrow and the phrase "Management succumbs to shareholder
pressure and sells out for a healthy premium." The second listing is CCB
Financial followed by an up arrow and the phrase "Excellent fundamentals and
underappreciated franchise value boost stock." The third listing is Southtrust
Corp. followed by a flat arrow and the phrase "Lagged as market digested recent
stock issue and mulled rapid loan growth." Footnote below reads: "See "Schedule
of Investments." Investment holdings are subject to change."]
MERGER MANIA
In 1995, a record fourteen of the Fund's holdings announced their intent to
merge with another institution (see "Recent Merger Announcements"). Although the
Fund is not directly involved in the so-called "blockbuster deals," such as
Fleet-Shawmut or Chase Manhattan-Chemical (where the acquired bank had over $30
billion in assets), these mega-mergers are still important because there had
been so few deals in this size category in the past. In addition, the fight for
First Interstate Bancorp, between a hostile suitor Wells Fargo and "white
knight" First Bank System, could be precedent-setting and could intensify the
consolidation activity. Over the next several years, we expect the merger
activity to filter down to the smaller institutions which predominate in the
Fund.
The astounding size of 1995's crop of mergers is due to the introduction of
national interstate banking, which went into effect in September as the result
of an act of Congress. These mergers have tremendous significance in shaping the
banking industry. Each deal that creates a new, larger bank increases the
pressure on competitors to make acquisitions to achieve similar size. The merger
activity we foresee over the next decade is important to us for two reasons.
First, it will allow us to earn takeover premiums as stocks we own are acquired.
Second, and more subtly, mergers are removing overcapacity from the industry and
allowing everyone left to make more money.
Our basic investment concept in the Fund is to own banks that represent good
value on a stand-alone basis and to regard potential acquisition
[CAPTION]
"THE BANKING INDUSTRY IS AS HEALTHY TODAY AS IT HAS BEEN IN THE LAST THIRTY
YEARS."
4
<PAGE> 5
The Southeastern Thrift and Bank Fund, Inc.
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended December 31, 1995." The chart is
scaled in increments of 25% from bottom to top, with 50% at the top and 0% at
the bottom. Within the chart, there are two solid bars. The first represents the
47.73% total return for The Southeastern Thrift and Bank Fund, Inc. The second
represents the 41.45% 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."]
as "icing on the cake." We pay little attention to takeover rumors and approach
every stock as if we may own it for many years. Nevertheless, we expect many of
the 70-odd banks and thrifts we own today to disappear through merger as the
consolidation process plays out.
INDUSTRY STATUS REPORT
Even after a record-breaking 1995, banks appear poised for another good year
because the industry's fundamentals remain so healthy. The economic outlook
through 1996 calls for slow growth, low inflation and a flat-to-declining
interest rate environment -- nirvana for bank stocks. Banks don't make enough on
loans when the economy "booms" to make up for what they lose when it "busts." As
bank investors, what we would like to see is consistent, slow, plodding growth
forever. That is what we have been getting lately. Even though a recent uptick
in consumer credit delinquencies and losses has caused some nervousness, these
trends are manageable and to be expected. In 1996, we expect banks to generate
more interest revenues from higher loan volumes and stable rates, while expenses
will go down with tighter controls and lower FDIC insurance premiums. That will
more than offset a moderate increase in loan loss provisions from the
unsustainably low level we witnessed in 1995.
In 1996, we expect the average Southeastern regional bank to report a 10%
increase in earnings-per-share over 1995. The thrifts will likely check in with
slower growth. Despite 1995's bank stock rally, the stocks still remain
inexpensive. The stocks in the Fund trade at a median of 10.5 times 1996
earnings versus 16 times for the broad market, as measured by the S&P 500 index.
This discount to market is slightly greater than the thirty-year average and, we
think, unwarranted based on our earnings outlook.
PORTFOLIO TACTICS AND OUTLOOK
In its overall strategy, the Fund continues to favor undervalued regional banks
and thrifts that have solid earnings prospects and potential to benefit from a
consolidation. A majority of the Fund's assets were invested in banks, at 68% of
net assets, with another 32% invested in thrifts. Given the large number of
takeovers, the Fund's portfolio activity has centered on the sale of the
larger-capitalization acquirers' stocks and reinvestment of proceeds into
smaller-cap banks. We favor purchases of stock in recently converted savings and
loans, such as Piedmont Bancorp and CCF Holding, because they are the least
expensive financial sector right now. We like these thrift conversions even more
when the
[CAPTION]
"IN 1995, A RECORD FOURTEEN OF THE FUND'S HOLDINGS ANNOUNCED THEIR INTENT TO
MERGE..."
5
<PAGE> 6
The Southeastern Thrift and Bank Fund, Inc.
- --------------------------------------------------
TOP FIVE COMMON
STOCK HOLDINGS
1. CCB FINANCIAL CORP. 4.8%
2. SOUTHERN NATIONAL CORP. 4.3%
3. BANK SOUTH CORP. 3.8%
4. UNION PLANTERS CORP. 3.4%
5. CAPITAL BANCORP 3.3%
As a percentage of net assets on December 31, 1995
- --------------------------------------------------
Fund has deposits in them, as it does with CCF Holding, and thus had the right
to buy shares on the deal.
After a shareholder vote in August, the Fund widened its investment
parameters to include non-bank financial service companies and a larger
non-Southeast bank/thrift weighting. In 1996, we are contemplating investments
in such non-bank entities as regional brokers or insurance companies which would
benefit from proposed deregulation.
Looking ahead, we continue to see tremendous long-term value for bank and
thrift stocks. The economic environment is right. The stocks remain inexpensive,
trading at just 65% of the market multiple. And the fundamentals are positive
for the industry's continued health. Even with the inevitable short-term swings,
the long-term prognosis is positive: Rising earnings and continued merger
activity both bode well for stock prices and attractive returns over the next
several years.
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio manager through the end of
the Fund's period discussed in this report. Of course, the manager's views are
subject to change as market and other conditions warrant.
[CAPTION]
"EVEN AFTER A RECORD-BREAKING 1995, BANKS APPEAR POISED FOR ANOTHER GOOD
YEAR..."
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 DECEMBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE PER SHARE AS OF THAT DATE.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value - Notes A & C:
Common stocks (cost - $28,477,998)............................. $56,817,756
Preferred stocks (cost - $1,154,000)........................... 1,276,250
Short-term investments (cost - $30,698)........................ 30,698
Joint repurchase agreement (cost - $12,000).................... 12,000
-----------
58,136,704
Cash............................................................ 85
Receivable for investments sold................................. 1,409
Interest receivable............................................. 452
Dividends receivable............................................ 171,749
Deposit for stock subscription.................................. 600,000
-----------
Total Assets.................................. 58,910,399
------------------------------------------------------------
LIABILITIES:
Federal income tax payable - Note A............................. 1,411,141
Dividend payable................................................ 74,693
Payable to John Hancock Advisers, Inc. - Note B................. 39,873
Accounts payable and accrued expenses........................... 87,416
-----------
Total Liabilities............................. 1,613,123
------------------------------------------------------------
NET ASSETS:
Capital paid-in................................................. 28,835,268
Net unrealized appreciation of investments...................... 28,462,008
-----------
Net Assets.................................... $57,297,276
============================================================
NET ASSET VALUE PER SHARE:
(based on 3,984,966 shares outstanding - 50 million
shares authorized with $0.001 per share par value).............. $ 14.38
================================================================================
</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.
STATEMENT OF OPERATIONS
Year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (including $27,607 received from
affiliated issuers)............................................ $ 1,444,479
Interest........................................................ 87,665
-----------
1,532,144
-----------
Expenses:
Investment management fee - Note B............................. 327,859
Administration fee - Note B.................................... 75,660
Director's fees................................................ 61,147
Custodian fee.................................................. 45,748
Legal fees..................................................... 44,814
Auditing fee................................................... 33,025
Miscellaneous.................................................. 32,672
Printing....................................................... 30,470
Transfer agent fee............................................. 8,440
-----------
Total Expenses................................ 659,835
------------------------------------------------------------
Net Investment Income......................... 872,309
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold (net of Federal
income taxes of $1,411,141 on long term capital
gains retained) - Note A....................................... 2,872,899
Change in net unrealized appreciation/depreciation
of investments................................................. 15,128,944
-----------
Net Realized and Unrealized
Gain on Investments........................... 18,001,843
------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations..................... $18,874,152
============================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
FINANCIAL STATEMENTS
================================================================================
The Southeastern Thrift and Bank Fund, Inc.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL PERIOD
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1994(a) 1994
----------- ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............................................................ $ 872,309 $ 296,315 $ 400,347
Net realized gain on investments sold............................................ 2,872,899 1,714,433 3,332,715
Change in net unrealized appreciation/depreciation of investments................ 15,128,944 (4,391,932) 5,565,359
----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations................. 18,874,152 (2,381,184) 9,298,421
----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ($0.2189, $0.1300 and $0.1027 per share,
respectively).................................................................. (872,309) (518,046) (409,057)
Distributions from capital gains ($0.0633, $0.1752 and $0.4438 per share,
respectively).................................................................. (252,208) (697,927) (1,768,528)
----------- ----------- -----------
Total Distributions to Shareholders........................................... (1,124,517) (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 none, none and
$212,790, respectively)......................................................... $57,297,276 $39,547,641 $43,144,798
=========== =========== ===========
</TABLE>
ANALYSIS OF COMMON SHARE ACTIVITY:
<TABLE>
<CAPTION>
YEAR ENDED FISCAL PERIOD ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994(a) 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
$1,411,141, $848,364 and $1,038,612,
respectively) -
Note A................................ -- 2,620,691 -- 1,575,534 -- 1,928,851
Reclassification of Capital Accounts... -- -- -- (8,932) -- --
Shares issued in stock split - Note A.. 1,992,483 -- -- -- -- --
--------- ----------- --------- ----------- --------- -----------
Shares outstanding, end of period...... 3,984,966 $28,835,268 1,992,483 $26,214,577 1,992,483 $24,647,975
========= =========== ========= =========== ========= ===========
<FN>
(a) Effective October 24, 1994, the fiscal period 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.
FINANCIAL HIGHLIGHTS (a)
Selected data for each share of common stock outstanding throughout the period
indicated, investment returns, key ratios and supplemental data are listed as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL
YEAR ENDED PERIOD ENDED YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, -----------------------------------------
1995 1994(b) 1994 1993 1992 1991
------------ ------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period.................... $ 9.930 $10.830 $ 9.040 $ 6.430 $ 3.860 $ 3.870
------- ------- ------- ------- ------- -------
Net Investment Income................................... 0.219 0.075 0.105 0.055 0.050 0.065
Net Realized and Unrealized Gain (Loss) on Investments.. 4.513(c) (0.670)(c) 2.232(c) 2.555 2.580 --
------- ------- ------- ------- ------- -------
Total from Investment Operations..................... 4.732 (0.595) 2.337 2.610 2.630 0.065
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income................... (0.219) (0.130) (0.103) -- (0.050) (0.085)
Distributions from Net Realized Gain on Investments
Sold ................................................ (0.063) (0.175) (0.444) -- -- --
Distributions from Paid-in-Capital..................... -- -- -- -- (0.010) --
------- ------- ------- ------- ------- -------
Total Distributions.................................. (0.282) (0.305) (0.547) -- (0.060) (0.085)
------- ------- ------- ------- ------- -------
Plus Increase from Repurchase of Capital Shares......... -- -- -- -- -- 0.01
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.......................... $14.380 $ 9.930 $10.830 $ 9.040 $ 6.430 $ 3.860
======= ======= ======= ======= ======= =======
Per Share Market Value, End of Period................... $ 13.75 $ 9.625 $10.625 $ 7.875 $ 5.500 $ 3.125
Total Investment Return at Market Value................. 45.66% (6.53%) 42.98% 43.18% 78.15% (1.48%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)............... $57,297 $39,548 $43,145 $36,024 $25,623 $15,371
Ratio of Expenses to Average Net Assets................. 1.31% 1.46%* 1.46% 1.69% 2.17% 2.76%
Ratio of Net Investment Income to Average Net Assets.... 1.73% 1.35%* 1.01% 0.71% 1.06% 1.84%
Portfolio Turnover Rate................................. 14% 7% 23% 42% 42% 18%
<FN>
* On an annualized basis.
(a) All per share amounts and net asset values have been restated to reflect the
2 for 1 stock split effective November 30, 1995.
(b) Effective October 24, 1994, the fiscal period end changed from June 30 to
December 31.
(c) Net of Federal income taxes of $0.35 for December 31, 1995, $0.215 for
December 31, 1994 and $0.260 for June 30, 1994 on net long-term capital
gains retained by the Fund.
</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.
SCHEDULE OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Fund on December 31, 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>
<CAPTION>
NUMBER OF MARKET
ISSUER SHARES VALUE
- ------ --------- ------
<S> <C> <C>
COMMON STOCKS
BANKS, SAVINGS AND LOANS - SOUTHEASTERN (BY STATE)
ALABAMA
Colonial BancGroup, Inc. (Class A) ...... 49,278 $ 1,589,215
Compass Bancshares, Inc. ................ 26,500 874,500
First Southern Bancshares ............... 51,917* 791,734
Peoples Banctrust Co., Inc. ............. 22,000 431,750
Security Federal Bancorp, Inc. + ........ 33,600* 386,400
Southern Banc Co., Inc. ................. 36,900* 475,087
Southtrust Corp. ........................ 47,000 1,204,375
Valley Federal Savings Bank + ........... 18,011 630,385
-----------
6,383,446
-----------
FLORIDA
Barnett Banks, Inc. ..................... 10,000 590,000
Commercial Bankshares, Inc. ............. 20,000* 280,000
Community Savings, FA ................... 26,666 453,322
Fidelity Federal Savings Bank
of Florida ............................. 550 8,937
First Financial Bancorp, Inc. - Perry ... 33,275 673,819
First Financial Bancshares - Polk ....... 48,000 729,000
First Palm Beach Bancorp ................ 25,000 528,125
Home Financial Corp. .................... 20,000* 310,000
Seacoast Banking Corp. of Florida
(Class A) .............................. 30,000 652,500
-----------
4,225,703
-----------
GEORGIA
Bankers First Corp. ..................... 55,000 1,533,125
Bank South Corp. ........................ 71,250* 2,164,219
CCF Holding Co. ......................... 35,000* 446,250
Central & Southern Holding Co. .......... 68,600 617,400
Eagle Bancshares, Inc. .................. 40,000 760,000
First Liberty Financial Corp. ........... 29,100 618,375
First National Bancorp .................. 40,000 1,280,000
Flag Financial Corp. .................... 67,500 953,437
-----------
8,372,806
-----------
LOUISIANA
Premier Bancorp, Inc. ................... 25,000* 584,375
Teche Holding Co. ....................... 25,000* 343,750
Whitney Holding Corp. ................... 33,500 1,038,500
-----------
1,966,625
-----------
MISSISSIPPI
Bancorpsouth, Inc. ...................... 21,500 $ 435,375
Hancock Holding Co. ..................... 17,100 641,250
Peoples Holding Company (The) ........... 10,400 478,400
Trustmark Corp. ......................... 28,500 648,375
-----------
2,203,400
-----------
NORTH CAROLINA
Allied Bank Capital, Inc. ............... 32,864 854,464
CCB Financial Corp. ..................... 50,007 2,775,388
Centura Banks, Inc. ..................... 42,837 1,504,650
First Citizens BancShares, (Class A) .... 12,223 673,793
First Savings Bank of Moore
County, Inc. ........................... 9,910 176,522
First Union Corp. ....................... 24,491* 1,362,312
Haywood Bancshares, Inc. ................ 53,400 934,500
LSB Bancshares, Inc. .................... 26,562 524,600
Mutual Community Savings Bank** ......... 17,070 221,910
Piedmont Bancorp. Inc. ** ............... 20,000* 250,000
Rowan Savings Bank SSB, Inc.** .......... 20,000 300,000
RS Financial Corp. ...................... 35,500 1,411,125
Southern National Corp. ................. 93,935 2,465,794
-----------
13,455,058
-----------
SOUTH CAROLINA
American Federal Savings
Bank - FSB ............................. 50,000 762,500
Palfed, Inc.** .......................... 94,960 1,127,650
Plantation Financial Corp.** ............ 7,000 70,000
-----------
1,960,150
-----------
</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>
TENNESSEE
First City Bancorp, Inc. ................ 22,000 $ 558,250
First Tennessee National Corp. .......... 23,620 1,429,010
Union Planters Corp. .................... 60,876 1,940,422
-----------
3,927,682
-----------
VIRGINIA
Commonwealth Bankshares, Inc. ** ........ 20,000* 200,000
F & M National Corp. .................... 25,625 512,500
FFVA Financial Corp. .................... 33,000 907,500
Piedmont BancGroup, Inc. ** ............ 25,000 650,000
Premier Bankshares Corp. ................ 30,000 615,000
Salem Bank & Trust N.A .................. 21,000* 273,000
Seaboard Bancorp., Inc.** + ............ 280,000 437,500
TeleBanc Financial Corp.** .............. 20,000 150,000
-----------
3,745,500
-----------
TOTAL BANKS, SAVINGS AND
LOANS - SOUTHEASTERN ............ 46,240,370
-----------
OTHER REGIONS
American National Bancorp, Inc. .........
(Maryland) ............................. 87,300 851,175
Capital Bancorp, Inc. (Missouri) ........ 51,000 1,887,000
CB Bancshares, Inc. (Hawaii) ............ 6,477 187,833
Equitable Federal Savings Bank
(Maryland) ** .......................... 17,000 425,000
First Commercial Corp. (Arkansas) ....... 46,344 1,529,347
First Fidelity Bancorp (New Jersey) ..... 20,000* 1,507,500
First of America Bank Corp. (Michigan) .. 11,263* 499,796
Fourth Financial Corp. (Kansas) ......... 16,800* 687,750
Mercantile Bancorp (Missouri) ........... 17,910* 823,860
Pocahontas Federal Savings
& Loan Assn. (Arkansas) ................ 15,000 238,125
Provident Bancorp, Inc. (Ohio) .......... 20,000 940,000
Riggs National Corp. ....................
(Washington D.C.) ** ................... 30,000 390,000
Simmons First National Corp. ............
(Class A) (Arkansas) ................... 20,000 610,000
-----------
TOTAL OTHER REGIONS ............ 10,577,386
-----------
TOTAL COMMON STOCKS
(Cost $28,477,998) ............ 99.16% 56,817,756
----------- -----------
PREFERRED STOCKS
Carolina First Corp., 7.32%
(South Carolina) ....................... 10,000 $ 322,500
Republic Security Financial Corp.,
7.00% Ser C (Florida) .................. 10,000* 113,750
Roosevelt Financial Group, Inc.,
6.5%, Ser F (Missouri) ................. 12,000 840,000
-----------
TOTAL PREFERRED STOCKS
(Cost $1,154,000) ............ 2.23% 1,276,250
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST
RATE PAR VALUE
-------- ---------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
CASH EQUIVALENTS
Deposits in Mutual Banks ......... $ 30,698 30,698
-----------
JOINT REPURCHASE AGREEMENT
Investment in a joint repurchase
agreement transaction with
SBC Capital Markets, Inc. -
Dated 12-29-95, due 01-02-96
(secured by U.S. Treasury Bond,
11.625% due 11-15-04 and
14.00% due 11-15-11) -
Note A........................... 5.90% 12,000 12,000
-----------
TOTAL SHORT TERM INVESTMENTS .. 0.07% 42,698
---------- -----------
TOTAL INVESTMENTS ..... 101.46% $58,136,704
========== ===========
<FN>
* Securities, other than short-term investments, newly added to the portfolio
during the year ended December 31, 1995
** Non-income producing security.
</TABLE>
<TABLE>
+ Denotes an affiliated company in which the Fund has ownership of at east 5%
of the voting securities. Investments in affiliates at December 31, 1995 were
as follows:
<CAPTION>
AFFILIATE COST DIVIDEND INCOME
--------------------- ------- ---------------
<S> <C> <C>
Seaboard Bancorp $266,400 -----
Security Federal Bancorp++ 390,600 $16,800
Valley Federal Savings Bank 314,066 10,807
<FN>
++Entire position held at December 31, 1995 was purchased in 1995.
</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.
On August 31, 1995 the Fund's shareholders approved an amendment to the
Fund's Articles of Incorporation to continue as a closed-end fund perpetually.
On November 13, 1995, the Board of Directors of the Fund voted to split the
shares of the Fund two for one, effective November 30, 1995.
All per share amounts and net asset values have been restated to reflect the
stock split.
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 mean between 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.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account, on the Fund's behalf. The Adviser is responsible for ensuring
that the agreement is fully collateralized at all times.
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, 1995, 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 $4,031,832, $2,423,898 and $2,967,463 of its net long-term
capital gains for the fiscal periods ended December 31, 1995, 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.
12
<PAGE> 13
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.
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 December 31, 1995, aggregated $6,790,100 and $8,254,118, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended December 31, 1995.
The cost of investments owned at December 31, 1995 (excluding deposits in
mutual savings banks) for Federal income tax purposes was $29,643,998. Gross
unrealized appreciation and depreciation of investments aggregated $28,502,608
and $40,600, respectively, resulting in net unrealized appreciation of
$28,462,008.
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
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, 1995, the related statement of operations for the
year then ended, the statements of changes in net assets for the fiscal periods
ended December 31, 1995 and 1994, and June 30, 1994, and the financial
highlights for the fiscal periods ended December 31, 1995 and 1994 and for each
of the years in the four-year period ended June 30, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with 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 misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1995 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, 1995, 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 7, 1996
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, 1995.
For the fiscal period ended December 31, 1995, 98.07% of the ordinary income
distributions qualify for the dividends received deduction available to
corporations.
Shareholders will receive a 1995 U.S. Treasury Department Form 1099-DIV in
January of 1996. This will reflect the total of all distributions which are
taxable for the calendar year 1995.
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,
1995.
Within 60 days of the Fund's fiscal year end, the Fund will mail to its
shareholders of record on December 31, 1995 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 1995 taxable income as long-term
capital gains ($1.0118 per share), and will show their portion of the tax paid
by the Fund on these gains ($0.3541 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 ($0.6577 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, 1996) and the IRS in the
manner required by the instructions of Form 2439. A trustee
14
<PAGE> 15
The Southeastern Thrift and Bank Fund, Inc.
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.
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.
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
16
<PAGE> 17
SUPPLEMENTAL INFORMATION
The Southeastern Thrift and Bank Fund, Inc.
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
SUPPLEMENTAL INFORMATION
The Southeastern Thrift and Bank Fund, Inc.
On August 31, 1995, the Annual Meeting of the Southeastern Thrift and Bank
Fund, Inc. (the "Fund") was held to approve amendments to the Fund's investment
policies and investment restrictions.
Specifically, shareholders first approved an amendment to allow the Fund to
invest in issuers in the financial services industry. The shareholder votes
tallied were 1,169,287 FOR, 41,712 AGAINST, 11,456 ABSTAINING and 33,976 Dealer
Non-Vote.
The shareholders next approved an amendment to the Fund's Articles of
Incorporation to allow the Fund to continue as a closed-end fund perpetually.
The shareholder votes tallied were 1,045,438 FOR, 192,171 AGAINST and 18,823
ABSTAINING.
18
<PAGE> 19
NOTES
The Southeastern Thrift and Bank Fund, Inc.
19
<PAGE> 20
[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" by 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."]
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Recycled Paper."]
