[Federal Register Volume 60, Number 3 (Thursday, January 5, 1995)]
[Notices]
[Pages 1805-1807]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-234]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20807; 812-9152]
Putnam Adjustable Rate U.S. Government Fund, et al.; Notice of
Application
December 29, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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Applicants: Putnam Adjustable Rate U.S. Government Fund, Putnam
American Government Income Fund, Putnam Arizona Tax Exempt Income Fund,
Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds, Putnam
Balanced Government Fund, Putnam California Tax Exempt Income Trust,
Putnam California Tax Exempt Money Market Fund, Putnam Capital
Appreciation Fund, Putnam Capital Growth and Income Fund, Putnam
Capital Manager Trust, Putnam Convertible Income-Growth Trust, Putnam
Corporate Asset Trust, Putnam Diversified Equity Trust, Putnam
Diversified Income Trust, Putnam Dividend Growth Fund, Putnam Equity
Funds, Putnam Equity Income Fund, Putnam Europe Growth Fund, Putnam
Federal Income Trust, Putnam Florida Tax Exempt Income Fund, The George
Putnam Fund of Boston, Putnam Global Governmental Income Trust, Putnam
Global Growth Fund, Putnam Growth Fund, The Putnam Fund for Growth and
Income, Putnam Growth and Income Fund II, Putnam Health Sciences Trust,
Putnam High Yield Advantage Fund, Putnam High Yield Trust, Putnam
Income Fund, Putnam Intermediate Tax Exempt Fund, Putnam Investors
Fund, Putnam Managed Income Trust, Putnam Massachusetts Tax Exempt
Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam
Minnesota Tax Exempt Income Fund II, Putnam Money Market Fund, Putnam
Municipal Income Fund, Putnam Natural Resources Fund, Putnam New Jersey
Tax Exempt Income Fund, Putnam New Opportunities Fund, Putnam New York
Tax Exempt Income Trust, Putnam New York Tax Exempt Money Market Fund,
Putnam New York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt
Income Fund II, Putnam OTC Emerging Growth Fund, Putnam Overseas Growth
Fund, Putnam Pennsylvania Tax Exempt Income Fund, Putnam Research
Analysts Fund, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money
Market Fund, Putnam Tax-Free Income Trust, Putnam Total Return Bond
Funds, Putnam U.S. Government Income Trust, Putnam Utilities Growth and
Income Fund, Putnam Vista Fund and Putnam Voyager Fund, (collectively,
the ``Open-End Trusts''), Putnam California Investment Grade Municipal
Trust, Putnam Dividend Income Fund, Putnam High Income Convertible and
Bond Fund, Putnam High Yield Municipal Trust, Putnam Intermediate
Government Income Trust, Putnam Investment Grade Intermediate Municipal
Trust, Putnam Investment Grade Municipal Trust, Putnam Investment Grade
Municipal Trust II, Putnam Investment Grade Municipal Trust III, Putnam
Managed [[Page 1806]] High Yield Trust, Putnam Managed Municipal Income
Trust, Putnam Master Income Trust, Putnam Master Intermediate Income
Trust, Putnam Municipal Opportunities Trust, Putnam New York Investment
Grade Municipal Trust, Putnam Premier Income Trust and Putnam Tax-Free
Health Care Fund (collectively, the ``Closed-End Trusts,'' and together
with the Open-End Trusts, the ``Trusts''), and Putnam Investment
Management, Inc. (the ``Manager'').
Relevant Act Sections: Order requested under section 6(c) of the Act
for an exemption from sections 13(a)(2), 13(a)(3), 18(a), 18(c),
18(f)(1), 22(f), 22(g) and 23(a) of the Act, and rule 2a-7 thereunder,
under sections 6(c) and 17(b) of the Act for an exemption from section
17(a)(1) of the Act, and under section 17(d) of the Act and rule 17d-1
thereunder.
Summary of Application: Applicants request an order that would permit
the Trusts to enter into deferred compensation arrangements with their
trustees.
Filing Date: The application was filed on August 9, 1994 and amended on
December 9, 1994.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on January 23,
1995, and should be accompanied by proof of service on applicants, 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
SEC's Secretary.
ADDRESSES Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, One Post Office Square, Boston, Massachusetts 02111.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Staff Attorney, at
(202) 942-0574, or Robert A. Robertson, Branch Chief, at (202) 942-0564
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicant's Representations
1. Each Open-End Trust is a registered open-end management
investment company organized as a Massachusetts business trust. Certain
of the Open-End Trusts consist of more than one series of shares. Each
Closed-End Trust is a registered closed-end management investment
company organized as a Massachusetts business trust and each consists
of only a single series of shares. The Manager serves as the investment
adviser for the Trusts. Putnam Mutual Funds Corp. serves as the Open-
End Trusts' principal underwriter. Applicants request that the proposed
relief apply to the Trusts and all subsequently registered investment
companies advised by the Manager (such registered investment companies,
together with the Trusts, being referred to collectively as the
``Funds''). Any relief granted from section 13(a)(3) of the Act would
extend only to existing Trusts.
2. Each Trust has a board of trustees, a majority of whom are not
interested persons of the Manager or any of the Trusts. Each trustee of
the Trusts receives an annual retainer fee and an additional fee for
each trustees' meeting attended. Trustees who are not interested
persons of the Manager or any of the Trusts and who serve on committees
of the trustees receive additional fees for attendance at committee
meetings. The proposed deferred fee arrangements would be implemented
by means of a fee deferral plan (the ``Plan''), which would permit
individual trustees to elect to defer receipt of all or a portion of
their fees. This would enable these trustees to defer payment of income
taxes on such fees.
3. Under the Plan, the deferred trustee's fees will be credited to
a book entry account established by each participating Fund (the
``Deferred Fee Account''), as of the date the fees would have been paid
to a trustee. The value of the Deferred Fee Account will be
periodically adjusted by treating the Deferred Fee Account as though an
equivalent dollar amount had been invested and reinvested in certain
designated securities (the ``Underlying Securities''). The Underlying
Securities for a Deferred Fee Account will be shares of the Funds that
a participating trustee designates. Each Deferred Fee Account shall be
credited or charged with book adjustments representing all interest,
dividends and other earnings and all gains and losses that would have
been realized had such account been invested in such Underlying
Securities.
4. The Fund's obligation to make payments from a Deferred Fee
Account will be a general obligation of the Fund and payments made
pursuant to the Plan will be made from each Fund's general assets and
property. With respect to the obligations created under the Plan, the
relationship of a trustee to the Fund will be only that of a general
unsecured creditor. The Fund will be under no obligation to the trustee
to purchase, hold or dispose of any investments but, if the Trust
chooses to purchase investments to cover its obligations under the
Plan, then any and all such investments will continue to be a part of
the general assets and property of the Trust.
5. As a matter of prudent risk management, each Fund intends to,
and with respect to any money market Fund that values its assets by the
amortized cost method will, purchase and maintain Underlying Securities
in an amount equal to the deemed investments of the Deferred Fee
Accounts. The Plan will not obligate any Fund to retain the services of
a trustee, nor will it obligate any Fund to pay any (or any particular
level of) trustee's fees to any trustee.
Applicants' Legal Analysis
1. Applicants request an order that would exempt the Funds under
section 6(c) of the Act from sections 13(a)(2), 18(a), 18(c), 18(f)(1),
22(f), 22(g) and 23(a) of the Act, the rule 2a-7 thereunder, under
sections 6(c) and 17(b) of the Act from section 17(a)(1) of the Act,
and under section 17(d) of the Act and rule 17d-1 thereunder to permit
the Funds to enter into the deferred fee arrangements. The existing
Trusts also request an exemption under section 6(c) from section
13(a)(3) of the Act. The finding required by section 17(b)(2) for the
existing Trusts is predicated on the assumption that relief is granted
from section 13(a)(3).
2. Sections 18(a) and 18(c) restrict the ability of a registered
closed-end investment company to issue senior securities. Section
18(f)(1) generally prohibits a registered open-end investment company
from issuing senior securities. Section 13(a)(2) requires that a
registered investment company obtain shareholder authorization before
issuing any senior security not contemplated by the recitals of policy
in its registration statement. Applicants state that the Plan possesses
none of the characteristics of senior securities that led Congress to
enact these sections. The Plan would not induce speculative investments
or provide opportunities for manipulative allocation of any Fund's
expenses or [[Page 1807]] profits, affect control of any Fund, confuse
investors or convey a false impression as to the safety of their
investments, or be inconsistent with the theory of mutuality of risk.
All liabilities created under the Plan would be offset by equal amounts
of assets that would not otherwise exist if the fees were paid on a
current basis.
3. Section 22(f) prohibits undisclosed restrictions on
transferability or negotiability of redeemable securities issued by
open-end investment companies. The Plan would set forth all such
restrictions, which would be included primarily to benefit the
participating trustees and would not adversely affect the interests of
the trustee, the Fund or of any shareholder.
4. Sections 22(g) and 23(a) prohibit registered open-end investment
companies and closed-end investment companies, respectively, from
issuing any of their securities for services or for property other than
cash or securities. These provisions prevent the dilution of equity and
voting power that may result when securities are issued for
consideration that is not readily valued. Applicants believe that the
Plan merely would provide for deferral of payment of such fees and thus
should be viewed as being issued not in return for services but in
return for a Fund not being required to pay such fees on a current
basis.
5. Section 13(a)(3) provides that no registered investment company
shall, unless authorized by the vote of a majority of its outstanding
voting securities, deviate from any investment policy that is
changeable only if authorized by shareholder vote. Certain of the
Trusts have a fundamental investment restriction specifically or
effectively prohibiting them from investing in securities of other
investment companies, except in connection with a merger, consolidation
or acquisition of assets. Applicants believe that it is appropriate to
exempt applicants as necessary from section 13(a)(3) so as to enable
the existing Trusts to invest in Underlying Securities without a
shareholder vote. Applicants will provide notice to shareholders in the
statement of additional information of the deferred fee arrangement
with the trustees. The value of the Underlying Securities will be de
minimis in relation to the total net assets of the respective Fund, and
will at all times equal the value of the Fund's obligations to pay
deferred fees. Because investment companies that might exist in the
future could establish fundamental policies that would accommodate
purchases of shares of investment companies in connection with the
deferred fee arrangement, the relief requested from section 13(a)(3)
would extend to existing Trusts only.
6. Rule 2a-7 imposes certain restrictions on the investments of
``money market funds,'' as defined under the rule, that would prohibit
a Fund that is a money market fund from investing in the shares of any
other Fund. Applicants believe that the requested exemption would
permit the Funds to achieve an exact matching of Underlying Securities
with the deemed investments of the Deferred Fee Accounts, thereby
ensuring that the deferred fees would not affect net asset value.
7. Section 17(a)(1) generally prohibits an affiliated person of a
registered investment company from selling any security to such
registered investment company, except in limited circumstances. Funds
that are advised by the same entity may be ``affiliated persons'' under
section 2(a)(3)(C) of the Act. Applicants believe that an exemption
from this provision would not implicate Congress' concerns in enacting
section 17(a)(1) but would facilitate the matching of each Fund's
liability for deferred trustees' fees with the Underlying Securities
that would determine the amount of such Fund's liability. Applicants
assert that the proposed transaction satisfies the criteria of sections
6(c) and 17(b).
8. Section 17(d) and rule 17d-1 generally prohibit a registered
investment company's joint or joint and several participation with an
affiliated person in a transaction in connection with any joint
enterprise or other joint arrangement without SEC approval. Under the
Plan, participating trustees will not receive a benefit that otherwise
would inure to a Fund or its shareholders. When all payments have been
made to a participating trustee, the participating trustee will be no
better off (apart from the effect of tax deferral) than if he or she
had received trustees fees on a current basis and invested them in
Underlying Securities.
Applicants' Conditions
Applicants agree that the order granting the requested relief shall
be subject to the following conditions:
1. With respect to the requested relief from rule 2a-7, any money
market Fund that values its assets by the amortized cost method or the
penny-rounding method will buy and hold Underlying Securities that
determine the performance of Deferred Fee Accounts to achieve an exact
match between such Fund's liability to pay deferred fees and the assets
that offset that liability.
2. If a Fund purchases Underlying Securities issued by an
affiliated Fund, the purchasing Fund will vote such shares in
proportion to the votes of all other holders of shares of such
affiliated Fund.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-234 Filed 1-4-95; 8:45 am]
BILLING CODE 8010-01-M