[Federal Register Volume 68, Number 228 (Wednesday, November 26, 2003)]
[Notices]
[Pages 66505-66506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29574]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26258; 812-12920]


John Hancock Bank and Thrift Opportunity Fund; Notice of 
Application

November 20, 2003.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
section 19(b) of the Act and rule 19b-1 under the Act.

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Summary of Application: John Hancock Bank and Thrift Opportunity Fund 
(the ``Applicant'') requests an order to permit it to make periodic 
distributions of long-term capital gains, as often as monthly, so long 
as it maintains in effect a distribution policy calling for periodic 
distributions of a fixed percentage of net asset value or a fixed 
dollar amount each taxable year (``Distribution Plan'').

Filing Dates: The application was filed on January 17, 2003, and 
amended on November 10, 2003.

Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving Applicant with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on December 15, 2003 and should be accompanied by proof of 
service on Applicant, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicant, c/o Susan S. Newton, John Hancock Advisers, LLC, 
101 Huntington Avenue, Boston, MA 02199-7603.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 942-0581, or Mary Kay Frech, Branch Chief, at (202) 
942-0564 (Office of Investment Company Regulation, Division of 
Investment Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street NW., Washington, 
DC 20549-0102 (tel. 202-942-8090).

Applicant's Representations

    1. Applicant is organized as a Massachusetts business trust and is 
registered under the Act as a closed-end diversified management 
investment company. Applicant's investment objective is long-term 
capital appreciation through investment of at least 80% of its net 
assets in securities of U.S. regional banks and thrifts and holding 
companies that primarily own or receive a substantial portion of their 
income from regional banks or thrifts. Applicant's shares are listed 
and traded on the New York Stock Exchange. John Hancock Advisers, LLC, 
an investment adviser registered under the Investment Advisers Act of 
1940, serves as investment adviser to the Applicant.
    2. On May 20, 2003, the Applicant's board of trustees (the 
``Board''), including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Trustees''), of the Applicant, adopted a Distribution 
Plan, pursuant to which the Applicant would make quarterly 
distributions of an amount equal to at least 2.5% of the Applicant's 
net asset value determined as of December 31st of the prior calendar 
year, for a total distribution of at least 10% annually. Applicant 
believes that the discount at which the Applicant's shares trade may be 
reduced if the Applicant implemented the Distribution Plan.
    3. Applicant requests relief to permit it, so long as it maintains 
in effect a Distribution Plan, to make periodic long-term capital gains 
distributions, as often as monthly, on its outstanding common stock.

Applicant's Legal Analysis

    1. Section 19(b) of the Act provides that a registered investment 
company may not, in contravention of such rules, regulations, or orders 
as the Commission may prescribe, distribute long-term capital gains 
more often than once every twelve months. Rule 19b-1(a) under the Act 
permits a registered investment company, with respect to any one 
taxable year, to make one capital gains distribution, as defined in 
section 852(b)(3)(C) of the Internal Revenue Code of 1986, as amended 
(the ``Code''). Rule 19b-1(a) also permits a supplemental distribution 
to be made pursuant to section 855 of the Code not exceeding 10% of the 
total amount distributed for the year. Rule 19b-1(f) permits one 
additional long-term capital gains distribution to be made to avoid the 
excise tax under section 4982 of the Code.
    2. Applicant asserts that rule 19b-1 under the Act, by limiting the 
number of net long-term capital gains distributions that it may make 
with respect to any one year, would prevent the normal and efficient 
operation of the Distribution Plan whenever the Applicant's realized 
net long-term capital gains in any year exceed the total of the fixed 
regular periodic distributions that may include such capital gains 
under the rule. Applicant states that rule 19b-1 thus may force the 
fixed regular periodic distributions to be funded with returns of 
capital (to the extent net investment income and realized short-term 
capital gains are insufficient to fund the distribution), even though 
realized net long-term capital gains otherwise would be available. 
Applicant further asserts that, to distribute all of its long-term 
capital gains within the limits in rule 19b-1, the Applicant may be 
required to make total distributions in excess of the annual amount 
called for by the Distribution Plan or retain and pay taxes on the 
excess amount. Applicant asserts that the application of rule 19b-1 to 
the Applicant's Distribution Plan may create pressure to limit the 
realization of long-term capital gains based on considerations 
unrelated to investment goals.
    3. The Applicant submits that one of the concerns leading to the 
enactment of section 19(b) and the adoption of the

[[Page 66506]]

rule was that shareholders might be unable to distinguish between 
frequent distributions of capital gains and dividends from investment 
income. The Applicant states that the proposed Distribution Plan, 
including the fact that the distributions called for by the 
Distribution Plan will include returns of capital to the extent that 
the Applicant's net investment income and net realized capital gains 
are insufficient to meet the minimum percentage dividend, will be fully 
described in each of the Applicant's periodic reports to shareholders. 
The Applicant states that, in accordance with rule 19a-1 under the Act, 
a statement showing the source of the distribution would accompany each 
distribution (or the confirmation of the reinvestment thereof under the 
Applicant's dividend reinvestment plan). The Applicant states that the 
amount and source of each distribution received during the calendar 
year will be included with the Applicant's IRS Form 1099-DIV reports of 
distributions during the year, which will be sent to each shareholder 
who received distributions (including shareholders who have sold shares 
during the year). The Applicant states that this information also will 
be included in the Applicant's annual report to shareholders.
    4. Another concern underlying section 19(b) and rule 19b-1 is that 
frequent capital gains distributions could facilitate improper 
distribution practices, including, in particular, the practice of 
urging an investor to purchase fund shares on the basis of an upcoming 
distribution (``selling the dividend''), where the dividend results in 
an immediate corresponding reduction in NAV and would be, in effect, a 
return of the investor's capital. Applicant submits that this concern 
does not apply to closed-end investment companies, such as the 
Applicant, which do not continuously distribute their shares. In 
addition, the Applicant states that any rights offering will be timed 
so that shares issuable upon exercise of the rights will be issued only 
in the 15-day period immediately following the record date for the 
declaration of a monthly dividend, or in the six-week period 
immediately following the record date of a quarterly dividend. Thus, 
the Applicant states that, in a rights offering, the abuse of selling 
the dividend could not occur as a matter of timing. Any rights offering 
also will comply with all relevant Commission and staff guidelines. In 
determining compliance with these guidelines, the Board will consider, 
among other things, the brokerage commissions that would be paid in 
connection with the offering. Any offering by the Applicant of 
transferable rights will comply with any applicable National 
Association of Securities Dealers, Inc. rules regarding the fairness of 
compensation.
    5. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction or class or classes of any persons, 
securities or transactions from any provision of the Act, or from any 
rule thereunder, if such exemption is necessary or appropriate in the 
public interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act. For 
the reasons stated above, the Applicant believes that the requested 
relief satisfies this standard.

Applicant's Condition

    The Applicant agrees that any order granting the requested relief 
shall terminate upon the effective date of a registration statement 
under the Securities Act of 1933 for any future public offering by the 
Applicant of its shares other than:
    (i) a rights offering to holders of the Applicant's common stock, 
in which (a) shares are issued only within the 15-day period 
immediately following the record date of a monthly dividend, or within 
the six-week period following the record date of a quarterly dividend, 
(b) the prospectus for such rights offering makes it clear that 
shareholders exercising rights will not be entitled to receive such 
dividend, and (c) the Applicant has not engaged in more than one rights 
offering during any given calendar year; or
    (ii) an offering in connection with a merger, consolidation, 
acquisition, spin-off or reorganization of the Applicant; unless the 
Applicant has received from the staff of the Commission written 
assurance that the order will remain in effect.

    For the Commission, by the Division of Investment Management, 
under delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-29574 Filed 11-25-03; 8:45 am]
BILLING CODE 8010-01-P