Putnam Funds

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

Re: Comments on Proposed Definition of "Financial Expert" (File No. S7-40-02)

Dear Sir:

I am writing to comment on the Commission's proposed rule defining "financial expert" pursuant to Section 407 of the Sarbanes-Oxley Act.

I am the Chairman of the Trustees of the Putnam Funds, a family of over 100 registered investment companies with net assets aggregating over $170 billion. The Trustees of the Putnam Funds currently comprise 12 individuals representing a broad diversity of experience and skills. Over the years, our independent nominating committee has selected new members of the board based on a variety of factors that we consider important to the effective oversight of the interests of Fund shareholders. Our board members have included current or former college presidents, business school professors, government officials, chief executive officers, investment bankers, investment managers and lawyers, among others. Virtually all of our board members have had significant experience in financial matters, including financial management responsibilities requiring a thorough understanding of financial statements and accounting principles. Several of our board members have served as principal financial or accounting officers of public companies.

In reviewing my 20 years experience as a Trustee of this board, I cannot think of a single situation where having a board member with actual experience in preparing mutual fund financial statements would have materially enhanced the effectiveness of the board in dealing with a significant matter. I think it would be unfortunate, therefore, if the Commission by its rules were to begin promoting the election of mutual fund trustees simply for the purpose of adding narrow technical skills to mutual fund boards.

This conclusion is based in part on the fact that mutual fund accounting is largely a straightforward exercise involving few, if any, subjective decisions regarding accounting principles. The recent history of the mutual fund industry reveals only isolated incidents of accounting problems, mostly having to do with the valuation of assets - an area where accounting practitioners bring little to the table.

Our board currently uses two auditing firms with broad experience in the mutual fund industry. Between these, we believe that we have ample access to independent advice on accounting matters. Should an occasion arise where we feel the need for additional expertise, we would have the option of engaging a variety of consultants and advisors, depending on the nature of the matter.

For these reasons, I urge the Commission to reconsider and revise its proposed rule in a fashion that would provide maximum flexibility to a board of trustees in determining whether a board member qualifies as a "financial expert". Sarbanes-Oxley directs the Commission "to consider" various attributes in formulating its definition. It does not mandate - as the Commission's proposed rule would do - that each and every one of these attributes are essential to the conclusion that someone is a "financial expert". Treating the suggested factors listed in Section 301 as mandates results in an overly narrow rule that not only requires both "education" and "experience" in the actual preparation of financial statements, but also seems to require that this education and experience be directly related to the issuer's particular industry.

The practical result of such a narrowly- drawn definition will be that the overwhelming majority of mutual fund boards will simply be forced to disclose that they have no "financial expert" as defined by the Commission, but have plenty of "financial expertise". In the absence of any evidence of accounting problems in the mutual fund industry, I do not think it serves any purpose to force disclosures that could have the potential effect of undermining public confidence in mutual fund governance. Rather, the Commission should be trying to build public confidence around an industry where corporate governance has worked effectively for many years to protect shareholder interests.

Very truly yours,

John A. Hill
Chairman of the Trustees
The Putnam Funds
One Post Office Square
Boston, MA 02109