John A. Hill
The Putnam Funds
One Post Office Square
Boston, MA 02109


October 24, 2002

Jonathan G. Katz,
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

Re: Comments on proposed Disclosure of Proxy Voting Policies and Votes by Registered Investment Companies (File No. S7-36-02)

Dear Sir:

I am writing on behalf of the Trustees of the Putnam Funds to provide our comments on the Commission's proposed rules requiring registered investment companies to disclose their proxy voting policies and voting records.

The Trustees of the Putnam Funds have long exercised control of the voting of proxies by the Putnam Funds through their Board Policy Committee which develops specific proxy voting guidelines for approval by the Board, oversees the voting process and resolves issues which may need to be handled on a case by case basis. We are assisted in this process by the Funds' independent administrative staff, independent legal counsel and outside vendors who provide assistance on proxy issues. When necessary, we also receive assistance from the Fund's investment adviser in matters involving investment judgments.

Our board agrees with the general goals of the Commission outlined in its proposed rulemaking and supports the disclosure of both fund proxy voting policies and voting records by registered investment companies. At the same time, we strongly urge the Commission to implement these new disclosure requirements in a manner that is sensitive to the potentially large administrative burdens and expenses associated with such compliance, which, of course, are ultimately reflected in fees and expenses paid by fund shareholders.

We believe that the Commission's proposals, as currently framed, seriously underestimate the potential costs of compliance, materially overestimate the importance of disclosure to shareholders and, consequently, fail to strike an appropriate balance between benefits and costs. Our experience suggests that few shareholders are genuinely interested in receiving this kind of information. As an organization with 110 mutual funds and nearly 14 million shareholder accounts, it is significant that we can find no evidence that any shareholder has ever requested information about the Funds' proxy voting process or its votes. The only people who seem interested in such information appear to be various special interest groups who are not our shareholders and, importantly, would not have to bear the costs of the SEC proposal. This reality is particularly compelling when viewed within the context of the costs of extra staff, software, legal advice, added pages to semi-annual reports, postage, etc. required for effective compliance with the current SEC proposal. Furthermore, while we agree that the voting of proxies is an essential responsibility, and may on some occasions provide opportunities to promote good corporate governance that can enhance shareholder value, these opportunities pale in significance to the myriad of considerations related to investment decisions being made on a daily basis by the portfolio managers of a fund. Seen from this perspective, proxy voting is a matter of limited relevance and materiality to an investor's decision to invest in a fund.

For these reasons, we urge the Commission to redesign its disclosure requirements to reflect a more realistic assessment of the needs and interests of most investors. Specifically, we do not believe that investors need a "toll-free telephone number" to request this information and do not need to receive it in "three business days" as proposed by the Commission. We do not believe that proxy voting policies need to be included in the Statement of Additional Information, as also proposed. Finally, we do not believe that investors need to receive explanations of any particular proxy vote - whether or not inconsistent with stated proxy voting policies, which are of necessity only general principles - any more than they need to receive explanations of any particular investment decision. While these elements of the Commission's proposed rules may not seem overly burdensome at first glance, each of them adds to the substantial and growing burden of compliance requirements already imposed on mutual fund organizations.

Based on these and other considerations, we respectfully recommend that the Commission revise its proposals as follows:

  • Proxy voting policies should be filed as an exhibit to a fund's registration statement.

  • Fund voting records should be filed with the Commission in conjunction with the filing of each semi-annual report.

  • Funds should have the option to make the foregoing information available to their shareholders in one of two ways: either by posting it on their website or by furnishing it to a shareholder within a reasonable time following receipt of a request. (In this regard, we disagree with the Commission's conclusion that website disclosure by itself would not be adequate. We believe that posting on a website -- should an organization choose that option -- would provide adequate disclosure in that virtually all shareholders have access to website information either in their homes or through a local public library.)

We believe that these measures would fully satisfy the Commission's stated goals and at the same time significantly reduce costs to shareholders. We oppose any more detailed disclosure requirements as being unnecessarily burdensome and expensive.

One final comment that we believe warrants consideration by the SEC and other regulatory bodies. Mutual funds own only 21% of public corporations. If the benefits of proxy voting disclosure are as large as deemed to be by the SEC, why should mutual fund shareholders be the only ones to bear the costs of such disclosure? What about pension funds, insurance companies and hedge funds which collectively own far greater percentages of public corporations and thus could have even greater impact?

Thank you for your consideration of our comments.

Very truly yours,


John A. Hill,
Chairman of the Trustees