The latest report from your
Fund's management team
- --------------------------------------------------------------------------------
The
Southeastern
Thrift
and Bank
Fund, Inc.
SEMIANNUAL REPORT
June 30, 1999
<PAGE>
-----------------------------------
DIRECTORS
Franklin C. Golden
Robert G. Freedman
Fred G. Steingraber
Donald R. Tomlin
H. Hall Ware III
OFFICERS
Franklin C. Golden
President
James K. Schmidt
Vice President
Robert E. Gramer
Treasurer
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 Stockton LLP
1100 Peachtree Street
Atlanta, Georgia 30309-4530
Listed NASDAQ Symbol: STBF
For Shareholder Assistance
Refer to Page 14
-------------------------------------------------
===============================PRESIDENT'S MESSAGE==============================
DEAR FELLOW SHAREHOLDERS:
As we move ever closer to the year 2000, I would like to share with you below a
message that Edward J. Boudreau, Jr., chairman of John Hancock Advisers, Inc. -
the Fund's investment adviser and administrator - is sending to the company's
shareholders:
"The Year 2000 is fast approaching and people around the world are getting ready
to celebrate this historic transition to a new millennium. At John Hancock
Funds, we share the excitement, but we aren't popping the champagne corks just
yet. Rather, we are staying on the course that we set more than two years ago to
ensure that the transition to a new millennium is a smooth one for our
shareholders.
As many already know, the Year 2000 has created more than the prospect of New
Year's festivities of epic proportions. It has also presented the world with a
challenge: making sure that older computers, and any equipment powered by
computer chips, can properly read and process the date "00" as 2000, not 1900.
Much has been written about how the world will weather the change. Some view it
as a non-event, while others see the potential for disruptions. How much
disruption, and for how long, depends on whom you talk to.
- --------------------------------------------------------------------------------
[A 1" x 1" photo of Franklin C. Golden, President, flush right next to second
paragraph.]
- --------------------------------------------------------------------------------
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an important
issue to be dealt with and we have made it a top priority. Two years ago, John
Hancock Funds put a full-time team of experts on the case and established a
company-wide program to evaluate all computer applications and to modify or
replace those that needed changing.
These modifications and replacements for all mission-critical systems are done
and successfully compliance tested. The rest of 1999 will be spent completing
the few remaining non mission-critical systems, testing with our business
partners and continuing to participate in industry testing. We have also
established additional contingency plans beyond our regular ones to prepare for
any challenges that the Year 2000 might present. In the end, John Hancock will
spend approximately $90-$95 million to ensure we make a successful transition to
the Year 2000.
No one knows how the dawning of the new millennium will unfold. Although we
cannot make any ironclad assurances, we are confident that the steps we have
taken will provide shareholders with as smooth a transition as possible. Once
that occurs, we will happily raise our glasses to toast the New Year, future
prosperity and our hopes to serve you well into the 2000's."
Rest assured that we, your Board of Directors, will also continue to monitor
these events as time progresses.
Very truly yours,
/s/Franklin C. Golden
- ---------------------
FRANKLIN C. GOLDEN, PRESIDENT OF THE SOUTHEASTERN THRIFT AND BANK FUND, INC.
2
<PAGE>
================================================================================
By James K. Schmidt, CFA, Portfolio Management Team Leader, and
Thomas Finucane and Thomas Goggins, Portfolio Managers
The Southeastern
Thrift and Bank Fund, Inc.
Strong U.S. growth propels market; small regional banks lag
-----------------------------------------------------------
Buoyed by a surprisingly strong U.S. economy, solid corporate earnings growth
and less turbulence overseas, the stock market continued to advance over the
last six months. In the first quarter, the move up continued to be dominated by
an increasingly narrow group of large-company stocks. Technology ruled, and
investors' appetite for Internet-related stocks was at near-manic levels.
As with the overall market, financial stocks rebounded from last year's
economic turmoil; however, the largest financial stocks, including the
money-center banks, dominated the sector's advance. The smaller regional banks
and thrifts that are the Fund's focus stayed in the doldrums despite solid
earnings growth. Earlier in the year, investors shunned them in pursuit of the
hot Internet and technology stocks. Later, this interest-rate sensitive group
fell prey to concerns that the Federal Reserve would raise interest rates, which
it did at the end of June.
Performance review
As with last year, The Southeastern Thrift and Bank Fund, Inc.'s emphasis on
smaller-cap stocks caused us to produce more modest results than our peers over
the last six months. Other financial services funds tend to have much heavier
concentrations in the largest banks, and also own the non-bank financial
companies that have
- --------------------------------------------------------------------------------
[A 3 1/2" x 2 1/2" photo at bottom right side of page of The Southeastern Thrift
and Bank Fund, Inc. Caption below reads "Fund management team members. Standing
(l-r): "Jay McKelvey, Tom Goggins and Tom Finucane. Seated (I-r): Lisa Welch,
Jim Schmidt and Patricia Ouimet."]
- --------------------------------------------------------------------------------
"The smaller regional banks and thrifts that are the Fund's focus stayed in the
doldrums..."
3
<PAGE>
================================================================================
The Southeastern Thrift and Bank Fund, Inc.
"...underlying trends that have made investing in bank stocks so
success-ful....have remained firmly in place."
- --------------------------------------------------------------------------------
[Table at top left hand column entitled "Top Five Stock Holdings." The first
listing is Regions Financial Corp. 4.3%, the second is CCB Financial Corp. 3.9%,
the third BB&T Corp. 3.7%, the fourth SouthTrust Corp. 3.6% and the fifth First
Tennessee National Corp. 3.4%. A note below the table reads "As a percentage of
net assets on June 30, 1999."]
- --------------------------------------------------------------------------------
dominated performance. For the six months ended June 30, 1999, the Fund remained
essentially flat, posting a total return of -0.04% at net asset value, compared
to the 7.20% return of the average open-end financial services fund, according
to Lipper, Inc.
As long-time shareholders know, the Fund's strategy of buying
attractively valued regional banks with solid fundamentals and the potential to
benefit from merger activity has served us very well over time. This latest
period with its more modest performance (something we expect periodically with
market fluctuations) serves as a good example of why we encourage shareholders
to take a longer-term perspective to sector-specific investing, which is more
susceptible to short-term volatility.
Reasons for optimism
Despite short-term market fluctuations, the underlying trends that have made
investing in bank stocks so successful over the years have
- --------------------------------------------------------------------------------
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Stone Street
Bancorp followed by an up arrow with the phrase "North Carolina S&L sells out to
CCB Financial." The second listing is Colonial BancGroup followed by an up arrow
with the phrase "Rebounds from mortgage banking miscue." The third listing is
First Financial Holdings followed by a down arrow with the phrase "Rising rate
fears hurt stock." A note below the table reads "See `Schedule of Investments.'
Investment holdings are subject to change."]
- --------------------------------------------------------------------------------
remained firmly in place. In our view, that makes the case for financial stock
investing as compelling now as it has ever been. Catalysts include:
oIndustry consolidation: One of the founding principles behind The Southeastern
Thrift and Bank Fund, Inc. was to capitalize on ongoing consolidation in the
banking industry. Indeed, the number of individual institutions has dropped from
around 14,000 in 1985 to just under 9,000 today. The opportunities continue to
abound, since the enduring reason for these mergers - excess capacity in the
U.S. banking system - will serve as a catalyst for this process well into the
21st century.
Earlier this year, the number of bank deals abated, but the pace has
begun to pick up recently. For one thing, Year 2000 pressures have begun to
subside, since by now any mergers won't actually get closed until next year. For
another, a proposed change in the method of accounting for mergers could be
enacted, possibly as early as next year. We believe banks are taking advantage
of the current, and preferred, "pooling" accounting method before it is
eliminated. To date in 1999, four of the Fund's holdings announced mergers,
including First American Corp. in Tennessee.
o Solid fundamentals: The stock market lately has overlooked one very
positive ingredient in the bank equation: earnings growth. In the last two
quarters, bank earnings have been very solid, continuing the 12% to 14% growth
rate we saw in 1998. The strong economy helped banks produce
better-than-expected domestic loan growth and created a pickup in capital
markets activity, which includes trading, loan syndication and investment
banking. The level of non-performing loans remained low, net interest margins
were stable and share buybacks continue
4
<PAGE>
================================================================================
The Southeastern Thrift and Bank Fund, Inc.
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the six months ended June 30, 1999." The chart
is scaled in increments of 1% with -1% at the bottom and 8% at the top. The
first bar represents the -0.04% total return for The Southeastern Thrift and
Bank Fund, Inc. The second bar represents the 7.20% total return for Average
open-end financial services fund. A note below the chart reads "The total return
for Th e 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, Inc."]
- --------------------------------------------------------------------------------
to aid earnings-per-share growth.
o Regulatory reform: Financial reform legislation aimed at repealing
restrictive and obsolete regulations has gotten off to a fast start this year,
with both the House and Senate banking committees already approving different
versions of the bill. Although there are still some significant issues to be
resolved, we believe it is inevitable that some form of financial deregulation
will be enacted, possibly this year. This will set the stage for a new round of
consolidation that will produce cross-ownership between financial services
companies previously separated by product specialization, such as banks,
brokerage firms and insurance companies.
o Compelling valuations: The recent disruption has had a silver lining:
it made attractive bank stocks inexpensive. Currently, bank stocks are selling
at 16 times 1999 earnings, while the S&P 500 Index is selling at 26 times 1999
earnings. That means bank stocks are selling at 60% of the S&P 500's earnings
level. This is cheap from a historical perspective, even though bank earnings
growth is at least as good as, if not better than, the S&P. As value investors,
we'd rather buy good companies with solid fundamentals and prospects at bargain
prices and hold on to them, waiting for the inevitable rebound. During this
period, we pared our stakes in some of the larger money-center banks and
super-regionals that had moved up strongly, including Bank of America and First
Union. In their place, we added to our positions in smaller banks like First
Charter and Capital City Bank Group, where we see good value.
Going forward
With robust U.S. growth, an improving climate overseas and low inflation, the
economic environment remains ripe for further stock market advances. A quickened
merger pace and momentum for financial reform legislation also bode well for
bank stocks. Regardless of market swings, we will continue to apply in-depth
fundamental company analysis and our extensive knowledge of the financial
industry to maintain a portfolio of quality regional bank and thrift stocks that
have the potential to provide superior results over time.
"In the last two quarters, bank earnings have been very solid..."
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the end of
the Fund's period discussed in this report. Of course, the managers' views are
subject to change as market and other conditions warrant.
Sector investing is subject to greater risks than the market as a whole.
5
<PAGE>
=============================FINANCIAL STATEMENTS===============================
The Southeastern Thrift and Bank Fund, Inc.
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on June 30, 1999. You'll also
find the net asset value per share as of that date.
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Notes A & C:
Common stocks (cost - $39,712,459) .......................... $90,021,358
Short-term investments (cost - $27,870) ...................... 27,870
Joint repurchase agreement (cost - $5,025,000) ............... 5,025,000
-------------
95,074,228
Cash .......................................................... 869
Receivable for investments sold ............................... 452,473
Interest receivable ........................................... 1,670
Dividends receivable .......................................... 237,955
-------------
Total Assets ............................. 95,767,195
--------------------------------------------------------
Liabilities:
Payable for investments purchased ............................. 167,750
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ...................................... 56,589
Accounts payable and accrued expenses ......................... 46,142
-------------
Total Liabilities ........................ 270,481
--------------------------------------------------------
Net Assets:
Capital paid-in ............................................... 37,213,160
Accumulated net realized gain on investments .................. 7,231,733
Net unrealized appreciation of investments .................... 50,308,899
Undistributed net investment income ........................... 742,922
-------------
Net Assets ............................... $95,496,714
Net Asset Value Per Share:
(Based on 3,986,504 shares outstanding - 50 million
shares authorized with $0.001 per share par value) ............ $23.96
=============================================================================
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Statement of Operations
Six months ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends ..................................................... $1,061,030
Interest ...................................................... 69,405
-------------
1,130,435
-------------
Expenses:
Investment advisory fee - Note B .............................. 297,072
Administration fee - Note B ................................... 68,555
Directors' fees ............................................... 32,344
Custodian fee ................................................. 23,354
Auditing fee .................................................. 19,445
Miscellaneous ................................................. 8,742
Legal fees .................................................... 8,207
Printing ...................................................... 6,221
Transfer agent fee ............................................ 3,952
-------------
Total Expenses ........................... 467,892
--------------------------------------------------------
Net Investment Income .................... 662,543
--------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold ......................... 5,502,830
Change in net unrealized appreciation/depreciation
of investments ............................................... (6,236,367)
-------------
Net Realized and Unrealized
Loss on Investments ...................... (733,537)
--------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ................ ($70,994)
========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
=============================FINANCIAL STATEMENTS===============================
The Southeastern Thrift and Bank Fund, Inc.
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- ----------------
<S> <C> <C>
Increase in Net Assets:
From Operations:
Net investment income .............................................................. $1,308,866 $662,543
Net realized gain on investments sold .............................................. 9,550,161 5,502,830
Change in net unrealized appreciation/depreciation of investments .................. (17,458,922) (6,236,367)
-------------- -------------
Net Decrease in Net Assets Resulting from Operations .............................. (6,599,895) (70,994)
-------------- -------------
Distributions to Shareholders:
Dividends from net investment income ($0.3200 and none per share, respectively) .... (1,275,681) -
Distributions from capital gains ($1.9622 and none per share, respectively) ........ (7,822,359) -
-------------- -------------
Total Distributions to Shareholders ............................................... (9,098,040) -
-------------- -------------
Net Assets:
Beginning of period ................................................................ 111,265,643 95,567,708
-------------- -------------
End of period (including undistributed net investment income
of $80,379 and $742,922, respectively) ........................................... $95,567,708 $95,496,714
Analysis of Common Share Transactions:
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ---------- ---------- -------------
Shares outstanding, beginning of period ......... 3,986,504 $37,213,160 3,986,504 $37,213,160
---------- ----------- ----------- -------------
Shares outstanding, end of period................ 3,986,504 $37,213,160 3,986,504 $37,213,160
</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.
7
<PAGE>
=============================FINANCIAL STATEMENTS===============================
The Southeastern Thrift and Bank Fund, Inc.
Financial Highlights
Selected data for each share of common stock outstanding throughout each period
indicated, investment returns, key ratios and supplemental data are listed as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
JUNE 30, DECEMBER 31, -------------------------------------------- JUNE 30, 1999
1994(1) 1994(1,2) 1995(1) 1996 1997 1998 (UNAUDITED)
---------- ------------ ---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period........ $9.040 $10.830 $9.930 $14.380 $17.560 $27.910 $23.970
-------- --------- -------- --------- --------- --------- ---------
Net Investment Income ...................... 0.105 0.075 0.219 0.280 0.316 0.328 0.166
Net Realized and Unrealized Gain (Loss) on
Investments ............................... 2.232(3) (0.670)(3) 4.513(3) 3.295(3) 10.372(3) (1.986) (0.176)
-------- --------- -------- --------- --------- --------- ---------
Total from Investment Operations .......... 2.337 (0.595) 4.732 3.575 10.688 (1.658) (0.010)
-------- --------- -------- --------- --------- --------- ---------
Less Distributions:
Dividends from Net Investment Income ...... (0.103) (0.130) (0.219) (0.274) (0.310) (0.320) -
Distributions from Net Realized Gain on
Investments Sold ......................... (0.444) (0.175) (0.063) (0.121) (0.028) (1.962) -
-------- --------- -------- --------- --------- --------- ---------
Total Distributions ....................... (0.547) (0.305) (0.282) (0.395) (0.338) (2.282) -
-------- --------- -------- --------- --------- --------- ---------
Net Asset Value, End of Period ............. $10.830 $9.930 $14.380 $17.560 $27.910 $23.970 $23.960
======== ========= ======== ========= ========= ========= =========
Per Share Market Value, End of Period ...... $10.625 $9.625 $13.750 $16.375 $30.250 $22.375 $19.438
Total Investment Return at Market Value .... 42.98% (6.53%)(4) 45.66% 21.96% 91.59% (18.37%) (13.13%)(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ... $43,145 $39,548 $57,297 $69,980 $111,266 $95,568 $95,497
Ratio of Expenses to Average Net Assets .... 1.46% 1.46%(5) 1.31% 1.13% 1.06% 0.97% 1.01%(5)
Ratio of Net Investment Income to
Average Net Assets ........................ 1.01% 1.35%(5) 1.73% 1.79% 1.45% 1.22% 1.43%(5)
Portfolio Turnover Rate .................... 23% 7% 14% 13% 16% 9% 5%
</TABLE>
(1) All per share amounts and net asset values have been restated to reflect the
2-for-1 stock split effective November 30, 1995.
(2) Effective October 24, 1994, the fiscal period end changed from June 30 to
December 31.
(3) Net of federal income taxes of $0.26 for June 30, 1994, $0.215 for December
31, 1994, $0.35 for December 31, 1995, $0.48 for December 31, 1996 and $0.64
for December 31, 1997 on net long-term capital gains retained by the Fund.
(4) Not annualized.
(5) Annualized.
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment income, distributions 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.
8
<PAGE>
=============================FINANCIAL STATEMENTS===============================
The Southeastern Thrift and Bank Fund, Inc.
Schedule of Investments
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Fund on June 30, 1999. It's divided into two main categories: common 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. Short-term investments,
which represent the Fund's "cash" position, are listed last.
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
COMMON STOCKS
Banks, Savings and Loans - Southeastern (by state)
Alabama (14.72%)
Colonial BancGroup, Inc. .................................. 186,112 $2,593,936
Compass Bancshares, Inc. .................................. 59,975 1,634,319
First Southern Bancshares ................................. 50,917 585,546
Peoples Banctrust Co., Inc. ............................... 44,000 748,000
Regions Financial Corp. ................................... 107,272 4,123,267
Security Federal Bancorp., Inc. ........................... 33,600 537,600
Southern Banc Co., Inc. ................................... 32,900 405,081
SouthTrust Corp. .......................................... 89,395 3,430,533
----------
14,058,282
----------
Florida (5.73%)
American Bancshares, Inc.* ................................ 40,500 344,250
Capital City Bank Group, Inc. ............................. 35,350 883,750
Commercial Bankshares, Inc. ............................... 25,908 560,261
Community Savings Bankshares, Inc. ........................ 64,000 808,000
Gateway American Bancshares, Inc. ......................... 100,000 500,000
Pointe Financial Corp.* ................................... 32,500 347,344
Republic Security Financial Corp. ......................... 81,910 685,996
Seacoast Banking Corp. (Class A) .......................... 44,000 1,342,000
----------
5,471,601
----------
Georgia (11.49%)
ABC Bancorp. .............................................. 17,500 231,875
CCF Holding Co. ........................................... 36,047 639,834
Century South Banks, Inc. ................................. 14,500 326,250
Eagle Bancshares, Inc. .................................... 40,000 830,000
First Liberty Financial Corp. ............................. 97,975 3,073,966
Flag Financial Corp. ...................................... 102,750 1,027,500
Premier Bancshares, Inc. .................................. 101,400 1,856,888
SunTrust Banks, Inc. ...................................... 42,942 2,981,785
----------
10,968,098
----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
Louisiana (2.73%)
ISB Financial Corp. ....................................... 22,000 $473,000
Teche Holding Co. ......................................... 25,000 428,125
Whitney Holding Corp. ..................................... 43,000 1,709,250
----------
2,610,375
----------
Mississippi (4.78%)
BancorpSouth, Inc. ........................................ 64,900 1,176,312
Hancock Holding Co. ....................................... 18,165 815,154
Lamar Capital Corp. ....................................... 40,000 380,000
People Holding Co. (The) .................................. 23,400 760,500
Trustmark Corp. ........................................... 62,500 1,429,687
----------
4,561,653
----------
North Carolina (21.95%)
Bank of America Corp. ..................................... 30,424 2,230,459
BB&T Corp. ................................................ 97,428 3,574,390
CCB Financial Corp. ....................................... 71,214 3,765,440
Centura Banks, Inc. ....................................... 56,087 3,161,905
First Charter Corp. ....................................... 11,000 272,250
First Citizens BancShares, Inc. (Class A) ................. 17,556 1,417,647
First Savings Bancorp., Inc. .............................. 9,910 198,200
First Union Corp. ......................................... 36,322 1,707,134
FNB Financial Service Corp. ............................... 27,250 415,563
Haywood Bancshares, Inc. .................................. 53,400 780,975
LSB Bancshares, Inc. ...................................... 37,752 717,288
Mutual Community Savings Bank* ............................ 17,070 153,630
Piedmont Bancorp., Inc. ................................... 19,000 163,875
Rowan Bankcorp., Inc.* .................................... 15,000 322,500
South Street Financial Corp. .............................. 40,000 285,000
Stone Street Bancorp., Inc. ............................... 40,000 800,000
Wachovia Corp. ............................................ 11,673 998,771
----------
20,965,027
----------
South Carolina (2.72%)
Carolina First Corp. ...................................... 12,093 294,767
First Financial Holdings, Inc. ............................ 103,500 1,940,625
Heritage Bancorp., Inc.* .................................. 2,172 37,467
Plantation Financial Corp. ................................ 20,000 320,000
----------
2,592,859
----------
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
=============================FINANCIAL STATEMENTS===============================
The Southeastern Thrift and Bank Fund, Inc.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
Tennessee (8.16%)
First American Corp. ...................................... 71,858 $2,986,598
First Tennessee National Corp. ............................ 85,480 3,274,952
National Commerce Bancorp. ................................ 31,000 678,125
Union Planters Corp. ...................................... 19,079 852,593
----------
7,792,268
----------
Virginia (4.19%)
Commonwealth Bankshares, Inc.* ............................ 36,403 364,030
Community Bankshares, Inc. ................................ 3,000 75,000
F & M National Corp. ...................................... 29,308 972,659
First Virginia Banks, Inc. ................................ 28,725 1,411,116
Guaranty Financial Corp. .................................. 20,000 227,500
Heritage Bancorp., Inc. ................................... 15,000 59,063
Marathon Financial Corp. .................................. 11,500 80,500
Rockingham Heritage Bank* ................................. 29,400 271,950
Salem Bank & Trust ........................................ 26,394 425,603
Shore Financial Corp.* .................................... 12,750 114,750
----------
4,002,171
----------
TOTAL BANKS, SAVINGS AND
LOANS - SOUTHEASTERN (76.47%) 73,022,334
------- -----------
ISSUER, DESCRIPTION, STATE
- --------------------------
Banks and Thrifts - Other Regions (14.72%)
Associated Banc-Corp. (WI) ................................ 11,250 466,875
Bank of the Ozarks, Inc. (AR) ............................. 28,500 516,563
CB Bancshares, Inc. (HI) .................................. 10,977 348,520
Century Bancshares, Inc.* (DC) ............................ 11,025 66,150
Cullen/Frost Bankers, Inc. (TX) ........................... 115,300 3,177,956
Equitable Federal Savings Bank* (MD) ...................... 34,000 629,000
Local Financial Corp.* (OK) ............................... 90,000 900,000
Mercantile Bancorp., Inc. (MO) ............................ 12,117 692,184
Mercantile Bankshares Corp. (MD) .......................... 37,500 1,326,562
North Central Bancshares, Inc. (IA) ....................... 17,000 284,750
One Valley Bancorp., Inc. (WV) ............................ 28,300 1,061,250
Prosperity Banchares, Inc. (TX) ........................... 32,750 478,969
Provident Financial Group, Inc. (OH) ...................... 19,500 853,125
Riggs National Corp. (DC) ................................. 11,500 236,469
SFC Acquisition Corp.* (AR) (r) .......................... 50,000 550,000
Simmons First National Corp. (Class A) (AR) ............... 30,000 963,750
Summit Bancshares, Inc. (TX) .............................. 59,500 1,033,812
Superior Financial Corp.* (AR) ............................ 11,250 123,750
Texas Regional Bancshares, Inc.
(Class A) (TX) ........................................... 12,750 346,641
----------
TOTAL BANKS AND
THRIFTS - OTHER REGIONS (14.72%) 14,056,326
------- ----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C>
Other (3.08%)
Household International, Inc. ............................. 14,000 $663,250
Raymond James Financial, Inc. ............................. 95,225 2,279,448
----------
2,942,698
----------
TOTAL COMMON STOCKS
(Cost $39,712,459) (94.27%) 90,021,358
------- -----------
INTEREST PAR VALUE
RATE (000s OMITTED)
----------- --------------
SHORT-TERM INVESTMENTS
Cash Equivalents
Deposits in Mutual Banks .................... $28 27,870
----------
Joint Repurchase Agreement
Investment in a joint repurchase
agreement transaction with
SBC Warburg, Inc. - Dated
06-30-99, due 07-01-99
(Secured by U.S. Treasury
Bonds, 8.875% due 08-15-17
and 11.250% due 02-15-15)
- Note A .................................. 4.800% 5,025 5,025,000
----------
TOTAL SHORT-TERM INVESTMENTS (5.29%) 5,052,870
------- ----------
TOTAL INVESTMENTS (99.56%) 95,074,228
------- ----------
OTHER ASSETS AND LIABILITIES, NET (0.44%) 422,486
------- ----------
TOTAL NET ASSETS (100.00%) $95,496,714
======== ===========
</TABLE>
* Non-income producing security.
(r) The security listed below is a direct placement security and is
restricted as to resale. The Fund has limited rights to registration
under the Securities Act of 1933 with respect to restricted securities
(not including Rule 144A securities). In certain circumstances the Fund
may bear a portion of the cost of such registrations; otherwise, such
costs would be borne by the issuer. Additional information on this
restricted security is as follows:
MARKET
VALUE AS A MARKET
PERCENTAGE VALUE
ACQUISITION ACQUISITION OF FUND'S AS OF
DATE COST NET ASSETS JUNE 30, 1999
------- ------- ------------- -------------
SFC Acquisition Corp. 03-30-98 $500,000 0.58% $550,000
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.
10
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
The Southeastern Thrift and Bank Fund, Inc.
(UNAUDITED)
NOTE A -
The Southeastern Thrift and Bank Fund, Inc. (the "Fund") is a diversified
closed-end management investment company registered under the Investment Company
Act of 1940. The Fund's primary investment objective is long-term capital
appreciation. Its secondary investment objective is current income.
Southeastern institutions are those located in the states of Alabama,
Florida, Georgia, North Carolina, South Carolina, Tennessee, Virginia,
Mississippi and Louisiana. The Fund intends to seek the securities of small to
medium-size institutions. The Fund considers small to medium-sized savings and
banking institutions to be those with market capitalizations of up to $10
billion. The Fund intends also to invest in holding companies the principal
revenues of which are derived from institutions of that size. The Fund may also
invest in larger institutions than those with market capitalizations of up to
$10 billion that the Investment Adviser believes represent fundamental
investment value and potential for future growth.
ACCOUNTING POLICIES
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Investments in listed securities are valued at the last
sales price on the exchange on which such securities are primarily traded.
Listed securities for which no sales are reported and securities traded in the
over-the-counter market are valued at the average of the most recent bid and
asked prices. Investment securities for which no current market quotations are
available are valued at fair market value as determined in good faith under the
direction of the Fund's Board of Directors. Short-term investments which mature
in less than 61 days when acquired by the Fund are valued at amortized cost.
Short-term investments which mature in more than 60 days are valued at current
market value until the sixtieth day prior to maturity, at which time they are
valued at amortized cost.
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,
Inc., may participate in a joint repurchase agreement. 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 distributions are generally
distributed semiannually and capital gains distributions are generally
distributed annually. Both 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, 1998, which has no effect on the Fund's net assets, net
investment income or net realized gains.
On July 27, 1999, the Fund declared a semi-annual income dividend in
the amount of $0.18 per share. The dividend was paid on August 17, 1999, to
shareholders of record on August 6, 1999. The ex-dividend date was August 4,
1999.
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.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
11
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
The Southeastern Thrift and Bank Fund, Inc.
NOTE B -
INVESTMENT ADVISORY AND ADMINISTRATION FEES AND
TRANSACTIONS WITH AFFILIATES
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 June 30, 1999, aggregated $4,774,291 and $9,264,702, respectively. There
were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended June 30, 1999.
The cost of investments owned at June 30, 1999 (excluding deposits in
mutual savings banks) for federal income tax purposes was $44,737,459. Gross
unrealized appreciation and depreciation of investments aggregated $51,105,384
and $796,485, respectively, resulting in net unrealized appreciation of
$50,308,899.
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.
12
<PAGE>
================================================================================
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 seven 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 its 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 (including 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 information you will require for determining the cost
basis of shares acquired and should be retained for that
13
<PAGE>
================================================================================
The Southeastern Thrift and Bank Fund, Inc.
purpose. At year end, each account will be supplied with detailed information
necessary to determine total tax liability for the calendar year.
All correspondence or additional information concerning the Plan should
be directed to the Plan Agent, State Street Bank and Trust Company, P.O. Box
8209, Boston, Massachusetts 02266-8209 (telephone 1-800-426-5523).
YEAR 2000 COMPLIANCE
The Adviser and the Fund's service providers are taking steps to address any
year 2000-related computer problems. However, there is some risk that these
problems could disrupt the issuers in which the Fund invests, the Fund's
operations or financial markets generally.
SHAREHOLDER COMMUNICATION AND ASSISTANCE
If you have any questions concerning The Southeastern Thrift and Bank Fund,
Inc., we will be pleased to assist you. If you hold shares in your own name and
not with a brokerage firm, please address all notices, correspondence, questions
or other communications regarding the Fund to the transfer agent at:
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
Telephone: (800) 426-5523
If your shares are held with a brokerage firm, you should contact that
firm, bank or other nominee for assistance.
14
<PAGE>
======================================NOTES=====================================
The Southeastern Thrift and Bank Fund, Inc.
15
<PAGE>
================================================================================
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