Putnam Diversified Income Trust, et al.; Notice of Application, 66568-66571 [E6-19207]
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shareholder approval requirements of
section 15(a) and rule 18f–2.
8. Applicants assert that many SubAdvisers charge their customers for
advisory services according to a
‘‘posted’’ rate schedule. Applicants state
that while Sub-Advisers are willing to
negotiate fees that are lower than those
posted on the schedule, they are
reluctant to do so where the fees are
disclosed to other prospective and
existing customers. Applicants submit
that the requested relief will encourage
potential Sub-Advisers to negotiate
lower subadvisory fees with Old Mutual
Capital, the benefits of which may be
passed on to the Funds’ shareholders.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Before a Fund may rely on the
requested order, the operation of the
Fund in the manner described in the
application will be approved by a
majority of the Fund’s outstanding
voting securities, as defined in the Act,
or, in the case of a Fund whose public
shareholders purchase shares on the
basis of a prospectus containing the
disclosure contemplated by condition 2
below, by the initial shareholder(s)
before offering shares of that Fund to the
public.
2. The prospectus for each Fund will
disclose the existence, substance and
effect of any order granted pursuant to
the application. In addition, each Fund
will hold itself out to the public as
employing the manager of managers
structure described in the application.
The prospectus will prominently
disclose that Old Mutual Capital has
ultimate responsibility, subject to
oversight by the Board, to oversee the
Sub-Advisers and recommend their
hire, termination and replacement.
3. At all times, at least a majority of
the Board will be Independent Trustees,
and the nomination of new or additional
Independent Trustees, will be at the
discretion of the then-existing
Independent Trustees.
4. Old Mutual Capital will not enter
into a Sub-Advisory Agreement with
any Affiliated Sub-Adviser, without
such agreement, including
compensation to be paid thereunder,
being approved by the shareholders of
the applicable Fund.
5. When a Sub-Adviser change is
proposed for a Fund with an Affiliated
Sub-Adviser, the Board, including a
majority of the Independent Trustees,
will make a separate finding, reflected
in the Board minutes, that such change
is in the best interests of the Fund and
its shareholders and does not involve a
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conflict of interest from which Old
Mutual Capital or the Affiliated SubAdviser derives an inappropriate
advantage.
6. Within 90 days of the hiring of any
new Sub-Adviser, Old Mutual Capital
will furnish the shareholders of the
affected Fund all information about the
new Sub-Adviser that would be
contained in a proxy statement, except
as modified by the order to permit
Aggregate Fee Disclosure. This
information will include Aggregate Fee
Disclosure and any change in such
disclosure caused by the addition of the
new Sub-Adviser. To meet this
condition, Old Mutual Capital will
provide shareholders of the affected
Fund with an information statement
meeting the requirements of Regulation
14C, Schedule 14C, and Item 22 of
Schedule 14A under the Exchange Act,
except as modified by the order to
permit Aggregate Fee Disclosure.
7. Old Mutual Capital will provide
general management services to each
Fund, including overall supervisory
responsibility for the general
management and investment of the
Fund’s assets, and, subject to review
and approval by the Board, will: (a) Set
the Fund’s overall investment strategies;
(b) evaluate, select, and recommend
Sub-Advisers to manage all or a part of
the Fund’s assets; (c) when appropriate,
allocate and reallocate the Fund’s assets
among multiple Sub-Advisers; (d)
monitor and evaluate the performance
of the Sub-Advisers; and (e) implement
procedures reasonably designed to
ensure that the Sub-Advisers comply
with the Fund’s investment objective,
policies and restrictions.
8. No trustee or officer of a Fund or
director or officer of Old Mutual Capital
will own directly or indirectly (other
than through a pooled investment
vehicle that is not controlled by such
person) any interest in a Sub-Adviser,
except for: (a) Ownership of interests in
Old Mutual Capital or any entity that
controls, is controlled by, or is under
common control with Old Mutual
Capital; or (b) ownership of less than
1% of the outstanding securities of any
class of equity or debt of a publicly
traded company that is either a SubAdviser or an entity that controls, is
controlled by, or is under common
control with a Sub-Adviser.
9. Independent legal counsel, as
defined in rule 0–1(a)(6) under the Act,
will be engaged to represent the
Independent Trustees. The selection of
such counsel will be within the
discretion of the then-existing
Independent Trustees.
10. Old Mutual Capital will provide
the Board, no less frequently than
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quarterly, with information about the
profitability of Old Mutual Capital on a
per-Fund basis. The information will
reflect the impact on profitability of the
hiring or termination of any SubAdviser during the applicable quarter.
11. Whenever a Sub-Adviser is hired
or terminated, Old Mutual Capital will
provide the Board with information
showing the expected impact on Old
Mutual Capital’s profitability.
12. Each Fund will disclose in its
registration statement the Aggregate Fee
Disclosure.
13. The requested order will expire on
the effective date of rule 15a–5 under
the Act, if adopted.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6–19238 Filed 11–14–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–27548; 812–12869]
Putnam Diversified Income Trust, et
al.; Notice of Application
November 7, 2006.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940
(‘‘Act’’) for an exemption from sections
12(d)(1)(A) and (B) of the Act, and
under sections 6(c) and 17(b) of the Act
for an exemption from section 17(a) of
the Act.
AGENCY:
Summary of Application: The order
would permit certain registered openand closed-end management investment
companies to acquire shares of other
registered open-end management
investment companies that are within
the same group of investment
companies and to invest in other
securities and financial instruments.
Applicants: Putnam Diversified
Income Trust (‘‘DIT’’), Putnam High
Income Securities Fund (‘‘HIS’’),
Putnam High Yield Advantage Fund
(‘‘HYA’’), Putnam High Yield Trust
(‘‘HYT’’), Putnam Income Fund (‘‘PIF’’),
Putnam Managed High Yield Trust
(‘‘MHYT’’), Putnam Master Intermediate
Income Trust (‘‘MIIT’’), Putnam Premier
Income Trust (‘‘PIT’’), Putnam Funds
Trust (‘‘PFT’’), and Putnam Variable
Trust (‘‘PVT’’ and together with the
above named entities, the ‘‘Putnam
Funds’’), Putman Investment
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Management, LLC (‘‘Adviser’’), and
Putnam Retail Management Limited
Partnership (‘‘Putnam Retail
Management’’).
Filing Dates: The application was
filed on August 16, 2002 and amended
on October 29, 2003, March 4, 2005 and
November 3, 2006.
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
applicants 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 1, 2006 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
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington DC 20549–1090;
Applicants, c/o Beth S. Mazor, Vice
President, The Putnam Funds, One Post
Office Square, Boston, MA 02109.
FOR FURTHER INFORMATION CONTACT:
Laura J. Riegel, Senior Counsel, at (202)
551–6873 or Stacy L. Fuller, Branch
Chief, at (202) 551–6821 (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
Commission’s Public Reference Branch,
100 F Street NE., Washington, DC
20549–0102 (tel. 202–551–5850).
Applicants’ Representations
1. Each Putnam Fund is organized as
a Massachusetts business trust. DIT,
HYA, HYT, PIF, PFT and PVT are
registered under the Act as open-end
management investment companies
(‘‘open-end Putnam Funds’’). PFT and
PVT currently consist of multiple series.
A series of PFT, Putnam Floating Rate
Income Fund (‘‘Floating Rate Fund’’)
seeks high current income and
preservation of capital by investing,
under normal circumstances, at least
80% of its net assets in incomeproducing floating rate loans and other
floating rate debt securities (‘‘Senior
Loans’’). Each series of PVT is available
for purchase by separate accounts of
insurance companies, including
separate accounts registered under the
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Act (‘‘Registered Separate Accounts’’).1
HIS, MHYT, MIIT, and PIT are
registered under the Act as closed-end
management investment companies
(‘‘closed-end Putnam Funds’’). Shares of
the closed-end Putnam Funds are listed
and traded on a national securities
exchange, as defined in section 2(a)(26)
of the Act. DIT, HYA, HYT, PIF, PVT,
HIS, MHYT, MIIT, and PIT, or certain of
their series, generally seek high current
income by investing in, among other
things, high yield securities such as
Senior Loans.
2. The Adviser, a Delaware limited
liability company, is registered as an
investment adviser under the
Investment Advisers Act of 1940, and
serves as the investment adviser to each
Putnam Fund. Putnam Retail
Management, a broker-dealer registered
under the Securities Exchange Act of
1934 (‘‘Exchange Act’’), acts as principal
underwriter for the open-end Putnam
Funds. The Adviser and Putnam Retail
Management are wholly owned
subsidiaries of Putnam, LLC, which is a
wholly owned subsidiary of Putnam
Investments Trust, a holding company
that is a majority-owned subsidiary of
Marsh & McLennan Companies, Inc.
3. Applicants request relief to permit:
(a) The closed-end Putnam Funds and
certain of the open-end Putnam Funds
or their series (and together with any
existing or future registered open-or
closed-end management investment
company or series thereof advised by
the Adviser or any entity controlling,
controlled by, or under common control
with the Adviser, ‘‘Funds of Funds’’) to
purchase shares of one or more of the
open-end Putnam Funds or their series
(together with any existing or future
registered open-end management
investment company, or series thereof,
advised by the Adviser or any entity
controlling, controlled by or under
common control with the Adviser, and
part of the same ‘‘group of investment
companies,’’ as defined in section
12(d)(1)(G)(ii) of the Act, as the Funds
of Funds, ‘‘Underlying Funds’’) and the
Underlying Funds to sell their shares to,
and redeem their shares from, the Funds
of Funds in excess of the limits set forth
in sections 12(d)(1)(A) and (B) of the
Act; and (b) the Funds of Funds also to
invest in a variety of debt and/or equity
securities or other financial instruments
(‘‘Other Securities’’) in accordance with
their respective investment objectives
and policies.2 Applicants also seek
1 All of the insurance companies that sponsor the
Registered Separate Accounts are and will be
unaffiliated with the Adviser.
2 Other Securities do not and will not include
shares of any registered investment companies that
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relief to permit the Underlying Funds
that are or become affiliated persons of
a Fund of Funds to sell shares to, and
redeem shares from, the Fund of Funds.
The Funds of Funds and the Underlying
Funds are referred to together as the
‘‘Funds’’.3
4. Applicants believe that it may be
more efficient for Funds of Funds to
gain exposure to particular investment
styles and/or asset classes by investing
in one or more Underlying Funds.
Applicants state that an investment by
a Fund of Funds in an Underlying Fund
may enable the Fund of Funds to obtain
exposure to the investment style or asset
class on a significantly more diversified
basis than would be possible through a
direct investment in such securities. For
example, applicants note that Senior
Loans often have significant investment
minimums and, therefore, Funds of
Funds that invest in Senior Loans
through the Floating Rate Fund may
diversify their investments in Senior
Loans to a greater extent than would be
possible if each Fund of Funds invested
directly in such Senior Loans.
Applicants expect that smaller Funds of
Funds, in particular, will benefit from
the requested relief because of the
greater administrative ease, reduced
transaction costs, and more efficient
portfolio construction and risk
management associated with
investments in Underlying Funds,
including the Floating Rate Fund.
Applicants’ Legal Analysis
A. Section 12(d)(1) of the Act
1. Section 12(d)(1)(A) provides that no
registered investment company may
acquire securities of another investment
company if such securities represent
more than 3% of the acquired
company’s outstanding voting stock,
more than 5% of the acquiring
company’s total assets, or if such
securities, together with the securities of
other investment companies, represent
more than 10% of the acquiring
company’s total assets. Section
12(d)(1)(B) provides that no registered
open-end investment company, its
principal underwriter or any broker or
dealer may sell the company’s securities
to another investment company if the
are not part of the same group of investment
companies as the Funds of Funds.
3 The Adviser currently intends that the open-end
and closed-end Putman Funds, including two series
of PVT but excluding PFT, will operate as Funds
of Funds, and that the Floating Rate Fund will
operate as an Underlying Fund under the requested
order. Each Fund that currently intends to rely on
the requested order is named as an applicant. Any
Fund that relies on the order in the future will do
so only in accordance with the terms and
conditions contained in the application, as
amended.
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sale will cause the acquiring company
to own more than 3% of the acquired
company’s voting stock or cause more
than 10% of the acquired company’s
voting stock to be owned by investment
companies.
2. Section 12(d)(1)(G) of the Act
provides, in relevant part, that section
12(d)(1) will not apply to the securities
of a registered open-end investment
company purchased by another
registered open-end investment
company, if: (a) The acquiring company
and the acquired company are part of
the same group of investment
companies; (b) the acquiring company
holds only securities of acquired
companies that are part of the same
group of investment companies,
government securities and short-term
paper; (c) the aggregate sales loads and
distribution-related fees of the acquiring
company and the acquired company are
not excessive under rules adopted
pursuant to section 22(b) or section
22(c) of the Act by a securities
association registered under section 15A
of the Exchange Act or by the
Commission; and (d) the acquired
company has a policy that prohibits it
from acquiring securities of registered
open-end management investment
companies or registered unit investment
trusts in reliance on section 12(d)(1)(F)
or (G) of the Act. Section 12(d)(1)(G)(ii)
defines a ‘‘group of investment
companies’’ as ‘‘any 2 or more registered
investment companies that hold
themselves out to investors as related
for purposes of investment and investor
services.’’ Applicants state that they
may not rely on section 12(d)(1)(G)
because certain of the Funds of Funds
are closed-end management investment
companies (‘‘closed-end Funds of
Funds’’) and because all of the Funds of
Funds may invest in Other Securities as
well as in the Underlying Funds.
3. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction from any provision of
section 12(d)(1), if the exemption is
consistent with the public interest and
the protection of investors. Applicants
seek an exemption under section
12(d)(1)(J) to permit (a) The Funds of
Funds to acquire shares of Underlying
Funds, and Underlying Funds to sell
their shares to Funds of Funds, beyond
the limits in sections 12(d)(1)(A) and (B)
and (b) the Funds of Funds to invest in
Other Securities.
4. Applicants state that the proposed
arrangement will not raise the policy
concerns underlying sections
12(d)(1)(A) and (B), including undue
influence by a fund of funds over
underlying funds, excessive layering of
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fees, and overly complex fund
structures. Accordingly, applicants
believe that the requested exemption is
consistent with the public interest and
the protection of investors.
5. Applicants contend that the
proposed arrangement will not result in
undue influence by a Fund of Funds
over an Underlying Fund because the
Fund of Funds and the Underlying
Fund will be advised by the Adviser or
an entity controlling, controlled by, or
under common control with the
Adviser, and will be part of the same
group of investment companies.
Applicants state that the Commission,
and Congress in the enactment of
section 12(d)(1)(G), have recognized that
fund of funds arrangements that involve
funds in the same group of investment
companies may not present the same
concerns regarding control of one fund
by another.4
6. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. With respect
to investment advisory fees, applicants
state that, before approving any
investment advisory contract under
section 15 of the Act, the board of
trustees of each Fund of Funds,
including a majority of the trustees who
are not ‘‘interested persons’’ (as defined
in section 2(a)(19) of the Act) of the
Fund of Funds, will find that advisory
fees, if any, charged under the advisory
contract are based on services provided
that are in addition to, rather than
duplicative of, services provided
pursuant to any Underlying Fund’s
advisory contract.
7. With respect to Registered Separate
Accounts that invest in a Fund of
Funds, applicants represent that no
sales load will be charged at the Fund
of Funds level or at the Underlying
Fund level. Other sales charges and
services fees, as defined in rule 2830 of
the Conduct Rules of the National
Association of Securities Dealers, Inc.
(‘‘NASD Conduct Rule 2830’’) will only
be charged at the Fund of Funds level
or at the Underlying Fund level, not
both. With respect to other investments
in a Fund of Funds, any sales charges
and/or service fees charged with respect
to shares of a Fund of Funds will not
exceed the limits applicable to a fund of
funds set forth in NASD Conduct Rule
2830. Applicants state that, although
investors may incur brokerage
4 Applicants state, among other things, that the
closed-end Funds of Funds and the Floating Rate
Fund have the same board of trustees, transfer
agent, and custodian; that each Fund has Putnam
in its name; and that the Floating Rate Fund
includes information on the closed-end Funds of
Funds in its Form N–1A disclosure concerning its
family of investment companies.
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commissions in connection with market
purchases of the closed-end Funds of
Funds’ shares, these commissions will
not differ from commissions otherwise
incurred in connection with the
purchase or sale of comparable
securities.
8. Applicants contend that the
proposed arrangement will not create an
overly complex fund structure.
Applicants state that no Underlying
Fund will acquire securities of any
investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits of section
12(d)(1)(A), except to the extent that
such Underlying Fund acquires, or is
deemed to have acquired, the securities
pursuant to exemptive relief from the
Commission permitting such
Underlying Fund to (a) Acquire
securities of one or more affiliated
investment companies or companies
relying on section 3(c)(1) or 3(c)(7) for
short-term cash management purposes,
or (b) engage in interfund borrowing and
lending transactions.
B. Section 17(a) of the Act
1. Section 17(a) of the Act generally
prohibits purchases and sales of
securities, on a principal basis, between
a registered investment company and
any affiliated person of the company,
and affiliated persons of such persons.
Section 2(a)(3) of the Act defines an
‘‘affiliated person’’ of another person to
include, among other things, any person
directly or indirectly owning,
controlling or holding with power to
vote 5% or more of the other’s
outstanding voting securities; any
person 5% or more of whose
outstanding voting securities are
directly or indirectly owned, controlled
or held with power to vote by the other
person; any person directly or indirectly
controlling, controlled by, or under
common control with the other person;
and any investment adviser to an
investment company. Applicants state
that an Underlying Fund might be
deemed to be an affiliated person of a
Fund of Funds if the Fund of Funds
acquires 5% or more of the Underlying
Fund’s outstanding voting securities.
Applicants also state that, because the
Funds of Funds and Underlying Funds
will be advised by the Adviser, or a
control affiliate of the Adviser, and may
have the same officers and/or board of
trustees, they may be deemed to be
under common control and, therefore,
affiliated persons of each other.
Accordingly, section 17(a) could
prevent an Underlying Fund from
selling shares to, and redeeming shares
from, a Fund of Funds.
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2. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) The terms of the proposed
transaction, including the consideration
to be paid or received, are fair and
reasonable and do not involve
overreaching on the part of any person
concerned, (b) the proposed transaction
is consistent with the policies of each
registered investment company
involved, and (c) the proposed
transaction is consistent with the
general purposes of the Act. Section 6(c)
of the Act permits the Commission to
exempt any person or transaction, or
any class or classes of persons or
transactions from any provision of the
Act 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.
3. Applicants seek an exemption
under sections 6(c) and 17(b) to allow
the proposed transactions. Applicants
state that the transactions satisfy the
standards for relief under sections 6(c)
and 17(b). Specifically, applicants state
that the terms of the transactions are fair
and reasonable and do not involve
overreaching. Applicants note that sales
and redemptions of shares of the
Underlying Funds will be at the net
asset values of such Underlying Funds.
In addition, applicants represent that
the proposed transactions will be
consistent with the policies of each
Fund involved, and the general
purposes of the Act.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. With respect to Registered Separate
Accounts that invest in a Fund of
Funds, no sales load will be charged at
the Fund of Funds level or at the
Underlying Fund level. Other sales
charges and service fees, as defined in
NASD Conduct Rule 2830, if any, will
only be charged at the Fund of Funds
level or at the Underlying Fund level,
not both. With respect to other
investments in a Fund of Funds, any
sales charges and/or service fees
charged with respect to shares of a Fund
of Funds will not exceed the limits
applicable to a fund of funds set forth
in NASD Conduct Rule 2830.
2. Before approving any advisory
contract under section 15 of the Act, the
board of trustees of a Fund of Funds,
including a majority of the trustees who
are not interested persons, as defined in
section 2(a)(19) of the Act, of the Fund
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of Funds, will find that advisory fees, if
any, charged under the contract are
based on services provided that are in
addition to, rather than duplicative of,
services provided pursuant to any
Underlying Fund’s advisory contract.
Such finding, and the basis upon which
it was made, will be recorded fully in
the minute books of the Fund of Funds.
3. Each Fund of Funds and each
Underlying Fund will be part of the
same ‘‘group of investment companies,’’
as defined in section 12(d)(1)(G)(ii) of
the Act.
4. No Underlying Fund will acquire
securities of any investment company or
company relying on section 3(c)(1) or
3(c)(7) of the Act in excess of the limits
contained in section 12(d)(1)(A) of the
Act, except to the extent that such
Underlying Fund acquires, or is deemed
to have acquired, the securities pursuant
to exemptive relief from the
Commission permitting such
Underlying Fund to (a) Acquire
securities of one or more affiliated
investment companies or companies
relying on section 3(c)(1) or 3(c)(7) of
the Act for short-term cash management
purposes, or (b) engage in interfund
borrowing and lending transactions.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6–19207 Filed 11–14–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54706; File No. SR–
NASDAQ–2006–036]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Exempt
Certain Cross Transactions From
NASDAQ Rule 3350(a)
November 3, 2006.
Pursuant to Section 19(b)(1) under the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 25, 2006, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’), filed
with the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by Nasdaq. On
October 31, 2006, Nasdaq filed
Amendment No. 1 to the proposed rule
1 15
2 17
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CFR 240.19b–4.
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66571
change.3 Nasdaq has designated the
proposed rule change, as amended, as
constituting a non-controversial rule
change under Rule 19b–4(f)(6) under the
Act,4 which renders the proposal, as
amended, effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to exempt all
transactions executed in the Nasdaq
Crossing Network pursuant to NASDAQ
Rule 4770 from the price test set forth
in NASDAQ Rule 3350(a). Nasdaq plans
to implement the proposed rule change,
as amended, on November 6, 2006.
The text of the proposed rule change
is below. Proposed new language is
underlined; proposed deletions are in
brackets.5
*
*
*
*
*
3350 Short Sale Rule
(a)–(b) No Change.
(c)(1)–(10) No Change.
(11) Short sales of securities in the
Nasdaq Crossing Network pursuant to
NASDAQ Rule 4770 provided that:
(a) Such short sales involve securities
that comprise the S&P 500 Index;
(b) Such short sales involve securities
that qualify as ‘‘actively-traded
securities’’ under Regulation M; or
(c) Such short sales are part of a
basket transaction of 20 or more
securities in which the subject security
does not comprise more than five
percent of the value of the basket
traded.
(d)–(l) No Change.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. Nasdaq has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
3 Amendment No. 1 was a partial amendment in
which Nasdaq made certain technical changes
following discussions with Commission staff.
4 17 CFR 240.19b–4(f)(6).
5 Changes are marked to the rule text that appears
in the electronic NASDAQ Manual found at https://
www.nasdaqtrader.com.
E:\FR\FM\15NON1.SGM
15NON1
]]>Agencies
[Federal Register Volume 71, Number 220 (Wednesday, November 15, 2006)]
[Notices]
[Pages 66568-66571]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-19207]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-27548; 812-12869]
Putnam Diversified Income Trust, et al.; Notice of Application
November 7, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under section 12(d)(1)(J) of
the Investment Company Act of 1940 (``Act'') for an exemption from
sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and
17(b) of the Act for an exemption from section 17(a) of the Act.
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Summary of Application: The order would permit certain registered
open- and closed-end management investment companies to acquire shares
of other registered open-end management investment companies that are
within the same group of investment companies and to invest in other
securities and financial instruments.
Applicants: Putnam Diversified Income Trust (``DIT''), Putnam High
Income Securities Fund (``HIS''), Putnam High Yield Advantage Fund
(``HYA''), Putnam High Yield Trust (``HYT''), Putnam Income Fund
(``PIF''), Putnam Managed High Yield Trust (``MHYT''), Putnam Master
Intermediate Income Trust (``MIIT''), Putnam Premier Income Trust
(``PIT''), Putnam Funds Trust (``PFT''), and Putnam Variable Trust
(``PVT'' and together with the above named entities, the ``Putnam
Funds''), Putman Investment
[[Page 66569]]
Management, LLC (``Adviser''), and Putnam Retail Management Limited
Partnership (``Putnam Retail Management'').
Filing Dates: The application was filed on August 16, 2002 and
amended on October 29, 2003, March 4, 2005 and November 3, 2006.
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 applicants 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 1, 2006 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 Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington DC 20549-1090; Applicants, c/o Beth S. Mazor,
Vice President, The Putnam Funds, One Post Office Square, Boston, MA
02109.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873 or Stacy L. Fuller, Branch Chief, at (202) 551-6821
(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
Commission's Public Reference Branch, 100 F Street NE., Washington, DC
20549-0102 (tel. 202-551-5850).
Applicants' Representations
1. Each Putnam Fund is organized as a Massachusetts business trust.
DIT, HYA, HYT, PIF, PFT and PVT are registered under the Act as open-
end management investment companies (``open-end Putnam Funds''). PFT
and PVT currently consist of multiple series. A series of PFT, Putnam
Floating Rate Income Fund (``Floating Rate Fund'') seeks high current
income and preservation of capital by investing, under normal
circumstances, at least 80% of its net assets in income-producing
floating rate loans and other floating rate debt securities (``Senior
Loans''). Each series of PVT is available for purchase by separate
accounts of insurance companies, including separate accounts registered
under the Act (``Registered Separate Accounts'').\1\ HIS, MHYT, MIIT,
and PIT are registered under the Act as closed-end management
investment companies (``closed-end Putnam Funds''). Shares of the
closed-end Putnam Funds are listed and traded on a national securities
exchange, as defined in section 2(a)(26) of the Act. DIT, HYA, HYT,
PIF, PVT, HIS, MHYT, MIIT, and PIT, or certain of their series,
generally seek high current income by investing in, among other things,
high yield securities such as Senior Loans.
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\1\ All of the insurance companies that sponsor the Registered
Separate Accounts are and will be unaffiliated with the Adviser.
---------------------------------------------------------------------------
2. The Adviser, a Delaware limited liability company, is registered
as an investment adviser under the Investment Advisers Act of 1940, and
serves as the investment adviser to each Putnam Fund. Putnam Retail
Management, a broker-dealer registered under the Securities Exchange
Act of 1934 (``Exchange Act''), acts as principal underwriter for the
open-end Putnam Funds. The Adviser and Putnam Retail Management are
wholly owned subsidiaries of Putnam, LLC, which is a wholly owned
subsidiary of Putnam Investments Trust, a holding company that is a
majority-owned subsidiary of Marsh & McLennan Companies, Inc.
3. Applicants request relief to permit: (a) The closed-end Putnam
Funds and certain of the open-end Putnam Funds or their series (and
together with any existing or future registered open-or closed-end
management investment company or series thereof advised by the Adviser
or any entity controlling, controlled by, or under common control with
the Adviser, ``Funds of Funds'') to purchase shares of one or more of
the open-end Putnam Funds or their series (together with any existing
or future registered open-end management investment company, or series
thereof, advised by the Adviser or any entity controlling, controlled
by or under common control with the Adviser, and part of the same
``group of investment companies,'' as defined in section
12(d)(1)(G)(ii) of the Act, as the Funds of Funds, ``Underlying
Funds'') and the Underlying Funds to sell their shares to, and redeem
their shares from, the Funds of Funds in excess of the limits set forth
in sections 12(d)(1)(A) and (B) of the Act; and (b) the Funds of Funds
also to invest in a variety of debt and/or equity securities or other
financial instruments (``Other Securities'') in accordance with their
respective investment objectives and policies.\2\ Applicants also seek
relief to permit the Underlying Funds that are or become affiliated
persons of a Fund of Funds to sell shares to, and redeem shares from,
the Fund of Funds. The Funds of Funds and the Underlying Funds are
referred to together as the ``Funds''.\3\
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\2\ Other Securities do not and will not include shares of any
registered investment companies that are not part of the same group
of investment companies as the Funds of Funds.
\3\ The Adviser currently intends that the open-end and closed-
end Putman Funds, including two series of PVT but excluding PFT,
will operate as Funds of Funds, and that the Floating Rate Fund will
operate as an Underlying Fund under the requested order. Each Fund
that currently intends to rely on the requested order is named as an
applicant. Any Fund that relies on the order in the future will do
so only in accordance with the terms and conditions contained in the
application, as amended.
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4. Applicants believe that it may be more efficient for Funds of
Funds to gain exposure to particular investment styles and/or asset
classes by investing in one or more Underlying Funds. Applicants state
that an investment by a Fund of Funds in an Underlying Fund may enable
the Fund of Funds to obtain exposure to the investment style or asset
class on a significantly more diversified basis than would be possible
through a direct investment in such securities. For example, applicants
note that Senior Loans often have significant investment minimums and,
therefore, Funds of Funds that invest in Senior Loans through the
Floating Rate Fund may diversify their investments in Senior Loans to a
greater extent than would be possible if each Fund of Funds invested
directly in such Senior Loans. Applicants expect that smaller Funds of
Funds, in particular, will benefit from the requested relief because of
the greater administrative ease, reduced transaction costs, and more
efficient portfolio construction and risk management associated with
investments in Underlying Funds, including the Floating Rate Fund.
Applicants' Legal Analysis
A. Section 12(d)(1) of the Act
1. Section 12(d)(1)(A) provides that no registered investment
company may acquire securities of another investment company if such
securities represent more than 3% of the acquired company's outstanding
voting stock, more than 5% of the acquiring company's total assets, or
if such securities, together with the securities of other investment
companies, represent more than 10% of the acquiring company's total
assets. Section 12(d)(1)(B) provides that no registered open-end
investment company, its principal underwriter or any broker or dealer
may sell the company's securities to another investment company if the
[[Page 66570]]
sale will cause the acquiring company to own more than 3% of the
acquired company's voting stock or cause more than 10% of the acquired
company's voting stock to be owned by investment companies.
2. Section 12(d)(1)(G) of the Act provides, in relevant part, that
section 12(d)(1) will not apply to the securities of a registered open-
end investment company purchased by another registered open-end
investment company, if: (a) The acquiring company and the acquired
company are part of the same group of investment companies; (b) the
acquiring company holds only securities of acquired companies that are
part of the same group of investment companies, government securities
and short-term paper; (c) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) of the Act by a securities association registered under section
15A of the Exchange Act or by the Commission; and (d) the acquired
company has a policy that prohibits it from acquiring securities of
registered open-end management investment companies or registered unit
investment trusts in reliance on section 12(d)(1)(F) or (G) of the Act.
Section 12(d)(1)(G)(ii) defines a ``group of investment companies'' as
``any 2 or more registered investment companies that hold themselves
out to investors as related for purposes of investment and investor
services.'' Applicants state that they may not rely on section
12(d)(1)(G) because certain of the Funds of Funds are closed-end
management investment companies (``closed-end Funds of Funds'') and
because all of the Funds of Funds may invest in Other Securities as
well as in the Underlying Funds.
3. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or transaction from any provision of
section 12(d)(1), if the exemption is consistent with the public
interest and the protection of investors. Applicants seek an exemption
under section 12(d)(1)(J) to permit (a) The Funds of Funds to acquire
shares of Underlying Funds, and Underlying Funds to sell their shares
to Funds of Funds, beyond the limits in sections 12(d)(1)(A) and (B)
and (b) the Funds of Funds to invest in Other Securities.
4. Applicants state that the proposed arrangement will not raise
the policy concerns underlying sections 12(d)(1)(A) and (B), including
undue influence by a fund of funds over underlying funds, excessive
layering of fees, and overly complex fund structures. Accordingly,
applicants believe that the requested exemption is consistent with the
public interest and the protection of investors.
5. Applicants contend that the proposed arrangement will not result
in undue influence by a Fund of Funds over an Underlying Fund because
the Fund of Funds and the Underlying Fund will be advised by the
Adviser or an entity controlling, controlled by, or under common
control with the Adviser, and will be part of the same group of
investment companies. Applicants state that the Commission, and
Congress in the enactment of section 12(d)(1)(G), have recognized that
fund of funds arrangements that involve funds in the same group of
investment companies may not present the same concerns regarding
control of one fund by another.\4\
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\4\ Applicants state, among other things, that the closed-end
Funds of Funds and the Floating Rate Fund have the same board of
trustees, transfer agent, and custodian; that each Fund has Putnam
in its name; and that the Floating Rate Fund includes information on
the closed-end Funds of Funds in its Form N-1A disclosure concerning
its family of investment companies.
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6. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. With respect to investment advisory
fees, applicants state that, before approving any investment advisory
contract under section 15 of the Act, the board of trustees of each
Fund of Funds, including a majority of the trustees who are not
``interested persons'' (as defined in section 2(a)(19) of the Act) of
the Fund of Funds, will find that advisory fees, if any, charged under
the advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided pursuant to
any Underlying Fund's advisory contract.
7. With respect to Registered Separate Accounts that invest in a
Fund of Funds, applicants represent that no sales load will be charged
at the Fund of Funds level or at the Underlying Fund level. Other sales
charges and services fees, as defined in rule 2830 of the Conduct Rules
of the National Association of Securities Dealers, Inc. (``NASD Conduct
Rule 2830'') will only be charged at the Fund of Funds level or at the
Underlying Fund level, not both. With respect to other investments in a
Fund of Funds, any sales charges and/or service fees charged with
respect to shares of a Fund of Funds will not exceed the limits
applicable to a fund of funds set forth in NASD Conduct Rule 2830.
Applicants state that, although investors may incur brokerage
commissions in connection with market purchases of the closed-end Funds
of Funds' shares, these commissions will not differ from commissions
otherwise incurred in connection with the purchase or sale of
comparable securities.
8. Applicants contend that the proposed arrangement will not create
an overly complex fund structure. Applicants state that no Underlying
Fund will acquire securities of any investment company or company
relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the
limits of section 12(d)(1)(A), except to the extent that such
Underlying Fund acquires, or is deemed to have acquired, the securities
pursuant to exemptive relief from the Commission permitting such
Underlying Fund to (a) Acquire securities of one or more affiliated
investment companies or companies relying on section 3(c)(1) or 3(c)(7)
for short-term cash management purposes, or (b) engage in interfund
borrowing and lending transactions.
B. Section 17(a) of the Act
1. Section 17(a) of the Act generally prohibits purchases and sales
of securities, on a principal basis, between a registered investment
company and any affiliated person of the company, and affiliated
persons of such persons. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include, among other things,
any person directly or indirectly owning, controlling or holding with
power to vote 5% or more of the other's outstanding voting securities;
any person 5% or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held with power to vote by
the other person; any person directly or indirectly controlling,
controlled by, or under common control with the other person; and any
investment adviser to an investment company. Applicants state that an
Underlying Fund might be deemed to be an affiliated person of a Fund of
Funds if the Fund of Funds acquires 5% or more of the Underlying Fund's
outstanding voting securities. Applicants also state that, because the
Funds of Funds and Underlying Funds will be advised by the Adviser, or
a control affiliate of the Adviser, and may have the same officers and/
or board of trustees, they may be deemed to be under common control
and, therefore, affiliated persons of each other. Accordingly, section
17(a) could prevent an Underlying Fund from selling shares to, and
redeeming shares from, a Fund of Funds.
[[Page 66571]]
2. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (a) The terms of the proposed transaction, including the
consideration to be paid or received, are fair and reasonable and do
not involve overreaching on the part of any person concerned, (b) the
proposed transaction is consistent with the policies of each registered
investment company involved, and (c) the proposed transaction is
consistent with the general purposes of the Act. Section 6(c) of the
Act permits the Commission to exempt any person or transaction, or any
class or classes of persons or transactions from any provision of the
Act 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.
3. Applicants seek an exemption under sections 6(c) and 17(b) to
allow the proposed transactions. Applicants state that the transactions
satisfy the standards for relief under sections 6(c) and 17(b).
Specifically, applicants state that the terms of the transactions are
fair and reasonable and do not involve overreaching. Applicants note
that sales and redemptions of shares of the Underlying Funds will be at
the net asset values of such Underlying Funds. In addition, applicants
represent that the proposed transactions will be consistent with the
policies of each Fund involved, and the general purposes of the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. With respect to Registered Separate Accounts that invest in a
Fund of Funds, no sales load will be charged at the Fund of Funds level
or at the Underlying Fund level. Other sales charges and service fees,
as defined in NASD Conduct Rule 2830, if any, will only be charged at
the Fund of Funds level or at the Underlying Fund level, not both. With
respect to other investments in a Fund of Funds, any sales charges and/
or service fees charged with respect to shares of a Fund of Funds will
not exceed the limits applicable to a fund of funds set forth in NASD
Conduct Rule 2830.
2. Before approving any advisory contract under section 15 of the
Act, the board of trustees of a Fund of Funds, including a majority of
the trustees who are not interested persons, as defined in section
2(a)(19) of the Act, of the Fund of Funds, will find that advisory
fees, if any, charged under the contract are based on services provided
that are in addition to, rather than duplicative of, services provided
pursuant to any Underlying Fund's advisory contract. Such finding, and
the basis upon which it was made, will be recorded fully in the minute
books of the Fund of Funds.
3. Each Fund of Funds and each Underlying Fund will be part of the
same ``group of investment companies,'' as defined in section
12(d)(1)(G)(ii) of the Act.
4. No Underlying Fund will acquire securities of any investment
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in
excess of the limits contained in section 12(d)(1)(A) of the Act,
except to the extent that such Underlying Fund acquires, or is deemed
to have acquired, the securities pursuant to exemptive relief from the
Commission permitting such Underlying Fund to (a) Acquire securities of
one or more affiliated investment companies or companies relying on
section 3(c)(1) or 3(c)(7) of the Act for short-term cash management
purposes, or (b) engage in interfund borrowing and lending
transactions.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6-19207 Filed 11-14-06; 8:45 am]
BILLING CODE 8011-01-P
