[Federal Register Volume 66, Number 208 (Friday, October 26, 2001)]
[Notices]
[Pages 54313-54315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27018]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25218; 812-12604]


Putnam American Government Income Fund, et al.; Notice of 
Application

October 22, 2001.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 17(d) of the Investment 
Company Act of 1940 (the ``Act'' and rule 17d-1 under the Act to permit 
certain joint transactions.

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SUMMARY OF APPLICATION: Applicants seek an order to permit certain 
registered management investment companies to pay to an affiliated 
lending agent, and the lending agent to accept, fees based on a share 
of the revenues generated from securities lending transactions.
    Applicants: Putnam American Government Income Fund, Putnam Arizona 
Tax Exempt Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset 
Allocation Funds, Putnam Balanced Retirement Fund, Putnam California 
Investment Grade Municipal Trust, Putnam California Tax Exempt Income 
Fund, Putnam California Tax Exempt Money Market Fund, Putnam Capital 
Appreciation Fund, Putnam Classic Equity Fund, Putnam Convertible 
Income-Growth Trust, Putnam Convertible Opportunities And Income Trust, 
Putnam Diversified Income Trust, Putnam Equity Income Fund, Putnam 
Europe Growth Fund, Putnam Florida Tax Exempt Fund. The Putnam Fund For 
Growth And Income Putnam Funds Trust, The George Putnam Fund Of Boston, 
Putnam Global Equity Fund, Putnam Global Government Income Trust, 
Putnam Global Growth Fund, Putnam Global Natural Resources Fund, The 
Putnam Fund For Growth And Income, Putnam Health Sciences Trust, Putnam 
High Income Convertible And Bond Fund, Putnam High Yield Advantage 
Fund, Putnam High Yield Municipal Trust, Putnam High Yield Trust, 
Putnam Income Fund, Putnam Intermediate U.S. Government Income Trust, 
Putnam International Growth Fund, Putnam Investment Funds, Putnam 
Investment Grade Municipal Trust, Putnam Investors Fund, Putnam Managed 
High Yield Trust, Putnam Managed Municipal Income Trust, Putnam 
Massachusetts Tax Exempt Income Fund, Putnam Master Income Trust, 
Putnam Master Intermediate Income Trust, Putnam Michigan Tax Exempt 
Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam Money 
Market Fund, Putnam Municipal Bond Fund, Putnam Municipal Income Fund, 
Putnam Municipal Opportunities Trust, Putnam New Jersey Tax Exempt 
Income Fund, Putnam New Opportunities Fund, Putnam New York Investment 
Grade Municipal Trust, Putnam New York Tax Exempt Income Fund, Putnam 
New York Tax Exempt Money Market Fund, Putnam New York Tax Exempt 
Opportunities Fund, Putnam Ohio Tax Exempt Income Fund, Putnam OTC & 
Emerging Growth Fund, Putnam Pennsylvania Tax Exempt Income Fund, 
Putnam Preferred Income Fund, Putnam Premier Income Trust, Putnam 
Strategic Income Fund, Putnam Tax Exempt Income Fund, Putnam Tax Exempt 
Money Market Fund, Putnam Tax-Free Health Care Fund, Putnam Tax-Free 
Income Trust, Putnam Tax Smart Funds Trust, Putnam U.S. Government 
Income Fund, Putnam Utilities Growth And Income Fund, Putnam Variable 
Trust, Putnam Vista Fund, Putnam Voyager Fund, and Putnam Voyager Fund 
II (each a ``Fund,'' collectively the ``Funds''), Putnam Investment 
Management, LLC (the ``Adviser'') and Putnam Fiduciary Trust Company 
(``PFTC'').

FILING DATES: The application was filed on August 16, 2001, and amended 
on September 18, 2001.
    Hearing or Notification of Hearing: An order granting the 
application 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 November 15, 2001, 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 may request notification of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street NW, Washington, DC 20549-0609. Applicants, c/o John W. 
Gerstmayr, Esq., Ropes & Gray, One International Place, Boston, 
Massachusetts 02110.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 942-0634, or Nadya B. Royblat, Assistant Director, 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).

Applicants' Representations

    1. The Funds, each a Massachusetts business trust, are registered 
under the Act as management investment companies. Some of the Funds 
consist of multiple investment portfolios. The Adviser serves as 
investment adviser to each Fund. PFTC is the custodian and the 
shareholder servicing and distribution agent for each Fund.

[[Page 54314]]

Applicants also request relief for any other registered management 
investment companies and series thereof that in the future are advised 
by the Adviser, or an entity controlling, controlled by, or under 
common control with, the Adviser (``Future Funds''). The Funds and the 
Future Funds are collectively referred to as the ``Funds''.\1\
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    \1\ All existing entities that currently intend to rely on the 
requested relief have been named as applicants. Any existing or 
future entity that will rely on the relief in the future will comply 
with the terms and conditions contained in the application.
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    2. Each Fund is authorized to lend its portfolio securities. The 
Funds currently participate in a securities lending program using 
unaffiliated third-party lending agents. The Funds seek to participate 
from time to time as a lender in a securities lending program 
administered by PFTC as lending agent (the ``Program''). Under the 
Program, PFTC enters into securities lending agreements on behalf of a 
Fund with certain unaffiliated borrowers that wish to borrow securities 
owned by the Fund and that have been pre-approved by that Fund or the 
Adviser (each a ``Borrower''). Applicants represent that the duties 
performed by PFTC as lending agent will not exceed those set forth in 
Norwest Bank, N.A. (pub. avail. May 25, 1995).
    3. Securities lending collateral will take different forms. With 
respect to loans that are collateralized by cash, the Borrower will be 
entitled to receive a fee based on the amount of cash collateral. The 
Fund is compensated on the spread between the net amount earned on the 
investment of cash collateral and the Borrower's fee. In the case of 
collateral other than cash, the Fund will receive a loan fee paid by 
the Borrower equal to a percentage of the market value of the loaned 
securities specified in the loan program. Applicants seek relief to 
permit Funds to pay, and PFTC to accept, fees based on a share of the 
revenues generated from securities lending transactions pursuant to the 
Program.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
any affiliated person of or principal underwriter for a registered 
investment company or an affiliated person of such person or principal 
underwriter, acting as principal, from effecting any transaction in 
connection with any joint enterprise or other joint arrangement or 
profit sharing plan, in which the investment company participates. Rule 
17d-1 permits the Commission to approve a proposed joint transaction 
covered by the terms of section 17(d). In determining whether to 
approve a transaction, the Commission is to consider whether the 
proposed transaction is consistent with the provisions, policies, and 
purposes of the Act, and the extent to which the participant of the 
investment companies is on a basis different from or less advantageous 
than that of the other participants.
    2. Section 2(a)(3) of the Act defines an affiliated person to 
include any person directly or indirectly controlling, controlled by, 
or under common control with, the other person and, if the other person 
is an investment company, its investment adviser. The Adviser is an 
affiliated person of each Fund. Because PFTC and the Adviser are under 
the common control of Putnam Investments, LLC, PFTC is an affiliated 
person of an affiliated person of each Fund. Accordingly, applicants 
request an order under section 17(d) and rule 17d-1 under the act to 
the extent necessary to permit each Fund to pay, and PFTC to accept, 
fees based on a share of the revenues generated from securities lending 
transactions.
    3. Applicants propose that each Fund adopt the following procedures 
to ensure that the proposed fee arrangement and the other terms 
governing the relationship with PFTC, as lending agent, will meet the 
standards of rule 17d-1:
    (a) In connection with the approval of PFTC as lending agent for a 
Fund and implementation of the proposed fee arrangement, a majority of 
the board of trustees of the Fund (``Board'') (including a majority of 
the trustees who are not ``interested persons'' within the meaning of 
section 2(a)(19) of the Act (the ``Disinterested Trustees'') will 
determine that (i) the contract with PFTC is in the best interests of 
the Fund and its shareholders; (ii) the services to be performed by 
PFTC are required for the Fund; (iii) the nature and quality of the 
services provided by PFTC are at least equal to those provided by other 
offering the same or similar services; and (iv) the fees charged by 
PFTC are fair and reasonable in light of the usual and customary 
charges imposed by others for services of the same nature and quality.
    (b) Each Fund's contract with PFTC for lending agent services will 
be reviewed at least annually and will be approved for continuation 
only if a majority of the Board of the Fund (including a majority of 
the Disinterested Trustees) make the findings referred to in paragraph 
(a) above.
    (c) In connection with the initial implementation of the proposed 
fee arrangement whereby PFTC will be compensated as lending agent based 
on a percentage of the revenue generated by a Fund's participation in 
the Program, the Board of the Fund will obtain competing quotes with 
respect to lending agencies fees from at least three independent 
lending agents to assist the Board in making the findings referred to 
in paragraph (a) above.
    (d) The Board of each Fund, including a majority of the 
Disinterested Trustees, will (i) determine quarterly the loan 
transactions during the prior quarter were affected in compliance with 
the conditions and procedures set forth in the application; and (ii) 
review no less frequently than annually the conditions and procedures 
set forth in the application for continuing appropriateness.
    (e) Each Fund will (i) maintain and preserve permanently in an 
easily accessible place a written copy of the procedures and conditions 
(and any modifications) described in the application; and (ii) maintain 
and preserve for a period not less than six years from the end of the 
fiscal year in which any loan transaction pursuant to the Program 
occurred, the first two years in an easily accessible place, a written 
record of each such loan transaction setting forth a description of the 
security loaned, the identity of the Borrower, the terms of the loan 
transaction, and the information or materials upon which the 
determination was made that each loan was made in accordance with the 
procedures set forth above and the conditions to the application.

Applicants' Conditions

    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:
    1. The securities lending program of each Fund will comply with all 
present and future applicable guidelines of the Commission and staff 
regarding securities lending arrangements.
    2. The approval of a Fund's Board, including a majority of 
Disinterested Trustees, shall be required for the initial and 
subsequent approvals of PFTC's service as lending agent for the Fund 
pursuant to the Program, for the institution of all procedures relating 
to the Program as it relates to the Fund, and for any periodic review 
of loan transactions for which PFTC acted as lending agent pursuant to 
the Program.


[[Page 54315]]


    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland.
Deputy Secretary.
[FR Doc. 01-27018 Filed 10-25-01; 8:45 am]
BILLING CODE 8010-01-M