---------------------------
The latest report from your
Fund's management team
---------------------------
--------------------------------------------------------------------------------
The
Southeastern
Thrift
and Bank
Fund, Inc.
SEMIANNUAL REPORT
June 30, 2000
<PAGE>
------------------------------------
DIRECTORS
Franklin C. Golden
Robert G. Freedman
Fred G. Steingraber
Donald R. Tomlin
H. Hall Ware III
OFFICERS
Franklin C. Golden
President
Robert E. Gramer
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 & Stockton LLP
1100 Peachtree Street
Atlanta, Georgia 30309-4530
Listed NASDAQ Symbol: STBF
For Shareholder Assistance
Refer to Page 14
---------------------------------------------
==============================PRESIDENTS'S MESSAGE==============================
DEAR FELLOW SHAREHOLDERS:
A year's worth of interest-rate hikes by the Federal Reserve is starting to have
an effect on the economy and stock market. The result has been strikingly higher
market volatility in the first several months of 2000 and six-month results that
were negative for the three major market indexes.
--------------------------------------------------------------------------------
[A 1" x 1" photo of Franklin C. Golden, President of The Southeastern Thrift and
Bank Fund, Inc., flush right next to second paragraph.]
--------------------------------------------------------------------------------
As we have mentioned in earlier letters, the rising-rate environment
has caused the market to punish bank stocks for a while now - disproportionately
so in our view, since fundamentals for the group remain basically sound. It
didn't help to have all eyes on technology stocks for most of last and early
this year. As a result, the Fund had another disappointing period, returning
-13.38% at net asset value (NAV) in the first half of the year.
Nonetheless, we are maintaining our positive view, recognizing that
sector investing is rotational by nature and requires a longer-term perspective.
In fact, we've seen some encouraging signs this period, as investors began to
believe that the Fed is coming closer to the end of its tightening cycle.
There are other reasons for optimism, too, as portfolio management team
leader Jim Schmidt discusses in his commentary on the following pages. Earnings
growth remains solid for many of our banks and industry consolidation is still a
dominant theme. The Fund has also increased its exposure to the non-bank
financial companies that stand to benefit most from newly passed financial
reform legislation.
Perhaps most important, bank stocks remain too attractively priced to
be overlooked for much longer. In this environment especially, we encourage you
to consider reinvesting your distributions in the Fund if you are not already.
You can do so simply by calling our toll-free shareholder assistance number
found on page 14 of this report. Dividend reinvestment is a good way to compound
your investment returns. This could be particularly true today, with bank stocks
so inexpensive and poised to rebound, and with our fund's market price currently
at a discount to its NAV.
Sincerely,
/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.
Rising interest rates continue to dog regional bank stocks
----------------------------------------------------------
In the first six months of 2000, regional bank stocks continued to buck the
stiff headwinds of rising interest rates and a red-hot technology sector that
held investors' undivided attention early in the year and sent bank stocks down
to historically low levels by early March. Shortly thereafter, the group staged
two brief rallies, first when tech stocks lost their luster and then in May on
the belief that the Federal Reserve was nearing the end of its cycle of
interest-rate hikes. But the group was stopped dead in its tracks again in June
by announcements from a few of the larger regional banks that they expected
earnings shortfalls due to an increase in non-performing loans. Even though bank
fundamentals for the overall group remain sound and the level of problem loans
is still very low, the news shook up investors who began to wonder if this was
just the tip of the iceberg.
Regional bank focus hurts fund
In this difficult environment, regional bank stocks lost ground. For the six
months ended June 30, 2000, The Southeastern Thrift and Bank Fund, Inc. returned
-13.38% at net asset value, compared with the -1.93% return of the average
open-end financial services fund, according to Lipper, Inc.
Our performance versus the Lipper group of financial services funds
suffered from our primary
--------------------------------------------------------------------------------
[A 3" x 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 (l-r): Lisa Welch,
Jim Schmidt and Patricia Ouimet."]
--------------------------------------------------------------------------------
"In this difficult environment, regional bank stocks lost ground."
3
<PAGE>
================================================================================
The Southeastern Thrift and Bank Fund, Inc.
"...12% of the Fund's net assets were invested in financial stocks outside the
banking industry..."
--------------------------------------------------------------------------------
[Table at top left hand column entitled "Top Five Common Stock Holdings." The
first listing is Cullen/Frost Bankers 3.4%, the second is CCB Financial Corp.
3.3%, the third BB&T Corp. 3.0%, the fourth Raymond James Financial 3.0% and the
fifth Colonial BancGroup 2.7%. A note below the table reads "As a percentage of
net assets on June 30, 2000."]
--------------------------------------------------------------------------------
focus on regional banks. The best stocks to own during this period were
securities brokers, money-center banks and the larger diversified financial
firms such as American Express. Furthermore, we did have positions in several
banks whose stock declined due to disappointing earnings. These included some of
our top holdings: First Tennessee, which experienced a severe drop in
mortgage-banking earnings; Centura, which had declines in net interest margins
as loans had to be funded with higher-cost deposits; and Wachovia, one of the
banks that had to bolster their reserve level, and therefore reduce
second-quarter earnings, due to an increase in non-performing loans.
A word about asset quality
Since the early 1990s, banks operating in the United States have benefited from
an expanding economy and a favorable lending environment.
--------------------------------------------------------------------------------
[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 FNB Financial
Services followed by an up arrow with the phrase "Stock surges on takeover
speculation." The second listing is BB&T Corp. followed by a down arrow with the
phrase "Market thinks growth engine is slowing." The third listing is Protective
Life followed by a down arrow with the phrase "slip-up allowed us to pick up
this insurer on the cheap." A note below the table reads "See `Schedule of
Investments.' Investment holdings are subject to change."]
--------------------------------------------------------------------------------
The current level of non-performing assets is only 0.65% of total assets, which
is an extremely low number by historical standards. Therefore, we think there is
a likelihood that we will see a pickup in problem loans if the Fed's
interest-rate hikes have their desired effect of slowing economic growth. We
think the area most likely to experience deteriorating credit quality is
syndicated loans. These are large loans, shared among a consortium of banks,
made to companies that are typically rated below investment grade. In
particular, loans booked in 1997 and early 1998 - when lending terms were more
flexible and the market was more receptive than it is today to considering
marginal credits - are vulnerable. Indeed, a handful of banks have already
recognized problems in their syndicated portfolio. However, we think that the
increase in bad loans across the system will be muted, and that the banking
industry has established adequate loan loss reserves. On an ongoing basis, our
seasoned team of managers and analysts will continue to carefully scrutinize the
credit risks and prospects of our banks.
Good fundamentals
In fact, we remain encouraged by the news we are getting from our companies.
Even with rising rates and an increase in non-performing assets, we still
anticipate average bank earnings growth in 2000 of between 8% and 10% over 1999.
Loan growth remains excellent and revenue growth remains good, especially in the
fee-related line.
Boost in non-bank financials
Over the last six months, we maintained our focus on banks and thrifts in the
Southeast with solid fundamentals that we can buy at bargain prices. We took
profits in some of our larger-
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, 2000." The chart
is scaled in increments of 5% with -15% at the bottom and 0% at the top. The
first bar represents the -13.38% total return for the Southeastern Thrift and
Bank Fund, Inc. The second bar represents the -1.93% total return for Average
open-end financial services fund. A note below the chart 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, Inc."]
--------------------------------------------------------------------------------
sized banks, which rose the most during the brief rallies, and redeployed the
assets into less expensive small and mid-sized bank stocks like Capital City
Bank Group and First Charter Corp. We also continued to use our ability to
invest a portion of the Fund's assets in more diversified financial companies.
By the end of June, 12% of the Fund's net assets were invested in financial
stocks outside the banking industry, up from 5% six months earlier. We believe
these stand to be the biggest beneficiaries of the financial reform legislation
that was passed last November. In particular, we bought life insurance companies
such as AFLAC, AXA Financial, Jefferson Pilot and Protective Life, because of
their good prospects and attractive valuation levels.
Mergers slow, but trend continues
Although many banks are selling at inexpensive prices that would make them ripe
for being taken over at a premium, merger activity has been slow in the first
half of 2000. Many banks are resisting being sold at price levels that are lower
today than they were two years ago. What's more, investors still have a bad
taste in their mouths from some of the headline mergers of 1997 and 1998 that
have not lived up to expectations. Eventually, consolidation activity should
pick up again after bank-stock prices start rising and several mergers get
completed successfully.
Bank stocks remain compelling
As investors wait for signals that the Federal Reserve is done raising interest
rates, bank stocks could remain volatile. We are also keeping our eyes on the
potential for further asset-quality announcements that could roil the group.
While these events may color our short-term view, they have not changed our
positive long-term outlook. Despite sporadic credit-quality problems, the
banking industry is basically healthy. Returns on equity are good,
non-performing assets are still at a low level - even taking recent
announcements into account - and although bank earnings growth has slowed from
the unsustainable levels of the past five years, it has been far better than the
performance of the stocks would indicate. This means bank stocks are still very
attractively priced. In addition, the theme of industry consolidation remains
solidly in place, albeit waxing and waning with the market's moves.
--------------------------------------------------------------------------------
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.
"...bank stocks are still very attractively priced."
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, 2000. You'll also
find the net asset value per share as of that date.
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Assets:
Investments at value - Notes A & C:
Common stocks (cost - $41,245,116).......................... $59,365,561
Cash equivalents (cost - $29,392) ........................... 29,392
Joint repurchase agreement (cost - $4,883,000) .............. 4,883,000
--------------
64,277,953
Cash ......................................................... 476
Receivable for investments sold .............................. 468,072
Interest receivable .......................................... 1,879
Dividends receivable ......................................... 246,381
--------------
Total Assets ............... 64,994,761
-------------------------------------------
Liabilities:
Payable for investments purchased ............................ 2,195,655
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .................................... 52,526
Accounts payable and accrued expenses ........................ 58,349
--------------
Total Liabilities .......... 2,306,530
-------------------------------------------
Net Assets:
Capital paid-in .............................................. 37,213,160
Accumulated net realized gain on investments ................. 6,548,534
Net unrealized appreciation of investments ................... 18,120,445
Undistributed net investment income .......................... 806,092
--------------
Net Assets ................. $62,688,231
===========================================
Net Asset Value Per Share:
(Based on 3,986,504 shares outstanding - 50 million
shares authorized with $0.001 per share par value) .......... $15.73
=============================================================================
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, 2000 (Unaudited)
--------------------------------------------------------------------------------
Investment Income:
Dividends .................................................... $995,961
Interest ..................................................... 111,377
---------------
1,107,338
---------------
Expenses:
Investment advisory fee - Note B ............................ 213,332
Administration fee - Note B ................................. 49,231
Directors' fees ............................................. 32,118
Custodian fee ............................................... 22,035
Auditing fee ................................................ 18,276
Legal fees .................................................. 14,098
Miscellaneous ............................................... 11,417
Printing .................................................... 9,525
Transfer agent fee .......................................... 4,170
---------------
Total Expenses ............. 374,202
-------------------------------------------
Net Investment Income ...... 733,136
-------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold ........................ 1,790,167
Change in net unrealized appreciation/depreciation
of investments .............................................. (12,213,261)
---------------
Net Realized and Unrealized
Loss on Investments ........ (10,423,094)
-------------------------------------------
Net Decrease in Net Assets
Resulting from Operations .. ($9,689,958)
===========================================
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, 2000
DECEMBER 31, 1999 (UNAUDITED)
----------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ............................................................. $1,387,854 $733,136
Net realized gain on investments sold ............................................. 12,290,751 1,790,167
Change in net unrealized appreciation/depreciation of investments ................. (26,211,560) (12,213,261)
-------------- --------------
Net Decrease in Net Assets Resulting from Operations ............................. (12,532,955) (9,689,958)
-------------- --------------
Distributions to Shareholders:
Dividends from net investment income ($0.3500 and none per share, respectively) ... (1,395,277) -
Distributions from capital gains ($2.3232 and none per share, respectively) ....... (9,261,287) -
-------------- --------------
Total Distributions to Shareholders .............................................. (10,656,564) -
-------------- --------------
Net Assets:
Beginning of period ............................................................... 95,567,708 72,378,189
-------------- --------------
End of period (including undistributed net investment income
of $72,956 and $806,092, respectively) .......................................... $72,378,189 $62,688,231
============== ==============
Analysis of Common Share Transactions:
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 2000
DECEMBER 31, 1999 (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
========== =========== ========== ============
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:
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
--------------------------------------------------------- JUNE 30, 2000
1995(1) 1996 1997 1998 1999 (UNAUDITED)
-------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period ................... $9.930 $14.380 $17.560 $27.910 $23.970 $18.160
-------- --------- --------- --------- --------- ---------
Net Investment Income .................................. 0.219 0.280 0.316 0.328 0.348 0.184
Net Realized and Unrealized Gain (Loss) on Investments . 4.513(2) 3.295(2) 10.372(2) (1.986) (3.485) (2.614)
-------- --------- --------- --------- --------- ---------
Total from Investment Operations ...................... 4.732 3.575 10.688 (1.658) (3.137) (2.430)
-------- --------- --------- --------- --------- ---------
Less Distributions:
Dividends from Net Investment Income .................. (0.219) (0.274) (0.310) (0.320) (0.350) -
Distributions from Net Realized Gain on
Investments Sold ..................................... (0.063) (0.121) (0.028) (1.962) (2.323) -
-------- --------- --------- --------- --------- ---------
Total Distributions ................................... (0.282) (0.395) (0.338) (2.282) (2.673) -
-------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period ......................... $14.380 $17.560 $27.910 $23.970 $18.160 $15.730
======== ========= ========= ========= ========= =========
Per Share Market Value, End of Period .................. $13.750 $16.375 $30.250 $22.375 $15.500 $13.125
Total Investment Return at Market Value ................ 45.66% 21.96% 91.59% (18.37%) (18.94%) (15.32%)(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ............... $57,297 $69,980 $111,266 $95,568 $72,378 $62,688
Ratio of Expenses to Average Net Assets ................ 1.31% 1.13% 1.06% 0.97% 1.05% 1.15%(4)
Ratio of Net Investment Income to Average Net Assets ... 1.73% 1.79% 1.45% 1.22% 1.52% 2.25%(4)
Portfolio Turnover Rate ................................ 14% 13% 16% 9% 14% 11%
(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) Net of federal income taxes of $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.
(3) Not annualized.
(4) 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, 2000 (Unaudited)
--------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Fund on June 30, 2000. 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.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- --------
COMMON STOCKS
Banks, Savings and Loans - Southeastern (by state)
Alabama (14.32%)
Alabama National Bancorp. ........................ 45,000 $891,563
AmSouth Bancorp. ................................. 91,188 1,436,211
Colonial BancGroup, Inc. ......................... 184,612 1,661,508
Compass Bancshares, Inc. ......................... 48,525 827,958
Peoples Banctrust, Co., Inc. ..................... 53,000 609,500
Regions Financial Corp. .......................... 73,772 1,466,218
Security Federal Bancorp., Inc. .................. 33,600 344,400
Southern Banc Co., Inc. .......................... 32,900 308,438
SouthTrust Corp. ................................. 63,395 1,434,312
----------
8,980,108
----------
Florida (7.37%)
Capital City Bank Group, Inc. .................... 61,350 1,196,325
Commercial Bankshares, Inc. ...................... 28,753 510,366
Community Savings Bankshares, Inc. ............... 54,000 614,250
Gateway American Bancshares, Inc. ................ 100,000 225,000
Pointe Financial Corp. ........................... 19,000 172,188
Republic Security Financial Corp. ................ 102,910 514,550
Seacoast Banking Corp. (Class A) ................. 51,500 1,390,500
----------
4,623,179
----------
Georgia (5.79%)
ABC Bancorp. ..................................... 24,500 235,812
CCF Holding Co. .................................. 26,047 322,332
Century South Banks, Inc. ........................ 59,284 1,148,627
Eagle Bancshares, Inc. ........................... 30,500 346,937
Flag Financial Corp. ............................. 109,750 487,016
SunTrust Banks, Inc. ............................. 23,792 1,086,997
----------
3,627,721
----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- --------
Louisiana (2.85%)
IBERIABANK Corp. ................................. 22,000 $338,250
Whitney Holding Corp. ............................ 42,300 1,446,131
----------
1,784,381
----------
Mississippi (5.34%)
BancorpSouth, Inc. ............................... 59,500 836,719
Hancock Holding Co. .............................. 19,165 651,610
Lamar Capital Corp. .............................. 54,000 442,125
Peoples Holding Co. (The) ........................ 23,400 468,000
Trustmark Corp. .................................. 54,500 950,344
----------
3,348,798
----------
North Carolina (19.93%)
Bank of America Corp. ............................ 24,424 1,050,232
BB&T Corp. ....................................... 78,304 1,869,508
CCB Financial Corp. .............................. 55,914 2,068,818
Centura Banks, Inc. .............................. 45,162 1,532,685
First Charter Corp. .............................. 31,000 488,250
First Citizens BancShares, Inc. (Class A) ........ 17,556 1,044,582
First Savings Bancorp., Inc. ..................... 9,910 161,038
First Union Corp. ................................ 32,822 814,396
FNB Financial Services Corp. ..................... 35,500 461,500
LSB Bancshares, Inc. ............................. 56,512 692,272
Mutual Community Savings Bank .................... 17,070 157,898
Rowan Bankcorp, Inc.* ............................ 15,000 240,000
South Street Financial Corp. ..................... 95,000 653,125
Wachovia Corp. ................................... 23,173 1,257,135
----------
12,491,439
----------
South Carolina (2.94%)
First Financial Holdings, Inc. ................... 103,500 1,423,125
Plantation Financial Corp. ....................... 28,000 420,000
----------
1,843,125
----------
Tennessee (3.35%)
First Tennessee National Corp. ................... 83,580 1,384,294
National Commerce Bancorp. ....................... 44,574 715,970
----------
2,100,264
----------
Virginia (4.98%)
Century Bancshares, Inc.* ........................ 11,576 68,009
Commonwealth Bankshares, Inc. .................... 39,653 237,918
Community Bankshares, Inc. ....................... 3,000 54,000
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
=============================FINANCIAL STATEMENTS===============================
The Southeastern Thrift and Bank Fund, Inc.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- --------
Virginia (continued)
F & M National Corp. .............................. 30,664 $643,944
First Virginia Banks, Inc. ........................ 26,975 939,067
Guaranty Financial Corp. .......................... 32,500 249,844
Marathon Financial Corp. .......................... 11,500 60,734
Rockingham Heritage Bank* ......................... 36,120 293,475
Salem Bank & Trust ................................ 30,779 423,211
Shore Financial Corp. ............................. 21,000 152,250
----------
3,122,452
----------
TOTAL BANKS, SAVINGS AND
LOANS - SOUTHEASTERN (66.87%) 41,921,467
-------- ----------
ISSUER, DESCRIPTION, STATE
--------------------------
Banks and Thrifts - Other Regions (15.79%)
Bank of the Ozarks, Inc. (AR) .................... 35,000 573,125
CB Bancshares, Inc. (HI) ......................... 8,477 208,746
Cullen/Frost Bankers, Inc. (TX) .................. 80,950 2,129,997
Equitable Bank* (MD) ............................. 35,700 465,216
Firstar Corp. (WI) ............................... 19,291 406,317
Local Financial Corp.* (OK) ...................... 90,000 750,937
Mercantile Bankshares Corp. (MD) ................. 37,500 1,117,969
One Valley Bancorp., Inc. (WV) ................... 16,000 500,000
Prosperity Banchares, Inc. (TX) .................. 23,000 370,875
Provident Financial Group, Inc. (OH) ............. 19,000 452,437
SFC Acquisition Corp.* (AR) (r) .................. 50,000 510,937
Simmons First National Corp.
(Class A) (AR) .................................. 32,000 716,000
Summit Bancshares, Inc. (TX) ..................... 66,000 1,138,500
Superior Financial Corp.* (AR) ................... 24,750 252,914
Texas Regional Bancshares, Inc.
(Class A) (TX) .................................. 12,000 304,500
----------
9,898,470
----------
Other (12.04%)
AFLAC, Inc. ...................................... 20,000 918,750
AXA Financial, Inc. .............................. 15,000 510,000
Fannie Mae ....................................... 20,000 1,043,750
Household International, Inc. .................... 14,000 581,875
Jefferson Pilot Corp. ............................ 10,000 564,375
Lehman Brothers Holdings, Inc. ................... 5,000 472,812
Protective Life Corp. ............................ 34,500 918,562
Raymond James Financial, Inc. .................... 82,800 1,863,000
Schwab (Charles) Corp. (The) ..................... 20,000 672,500
----------
7,545,624
----------
TOTAL COMMON STOCKS
(Cost $41,245,116) (94.70%) 59,365,561
--------- ----------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
------------------- -------- ------------- ------
SHORT-TERM INVESTMENTS
Cash Equivalents
Deposits in Mutual Banks ...... $29 $29,392
----------
Joint Repurchase Agreement
Investment in a joint repurchase
agreement transaction with
UBS Warburg, Inc. - Dated
06-30-00, due 07-03-00
(Secured by U.S. Treasury
Bond, 9.125% due 05-15-18
and 8.125% due 05-15-21)
- Note A ..................... 6.550% 4,883 4,883,000
----------
TOTAL SHORT-TERM INVESTMENTS (7.84%) 4,912,392
-------- ----------
TOTAL INVESTMENTS (102.54%) 64,277,953
-------- ----------
OTHER ASSETS AND LIABILITIES, NET (2.54%) (1,589,722)
-------- ----------
TOTAL NET ASSETS (100.00%) $62,688,231
======== ===========
* Non-income producing security.
(r) The security listed below is a direct placement 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, 2000
----------- ----------- ---------- -------------
SFC Acquisition Corp. 03-30-98 $500,000 0.82% $510,937
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
</TABLE>
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.
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 on a 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 is generally distributed
semiannually and capital gains 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, 1999, which
have no effect on the Fund's net assets, net investment income or net realized
gains.
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. Therefore, no federal income tax provision is required.
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.
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 2.00% of
11
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
The Southeastern Thrift and Bank Fund, Inc.
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 or directors
of the Fund are officers or affiliates 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, 2000, aggregated $6,830,727 and $7,342,004, respectively. There
were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended June 30, 2000.
The cost of investments owned at June 30, 2000 (excluding deposits in
mutual savings banks) for federal income tax purposes was $46,193,479. Gross
unrealized appreciation and depreciation of investments aggregated $21,235,601
and $3,151,127, respectively, resulting in net unrealized appreciation of
$18,084,474.
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 purpose. At year
13
<PAGE>
================================================================================
The Southeastern Thrift and Bank Fund, Inc.
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).
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>
================================================================================
[LOGO] JOHN HANCOCK FUNDS ------------------
A Global Investment Management Firm Bulk Rate
U.S. Postage
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 PAID
S. Hackensack, NJ
Permit No. 750
------------------
[LOGO] Printed on Recycled Paper PT0SA 6/00
8/00
