Putnam Universe Bond Plus MAPs Fund - MRRS Decision

Headnote

MRRS -- exemption granted from mutual fund conflict of interest investment restrictions to permit pooled fund to purchase securities of a pooled fund managed by affiliate.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 111(2)(b), 111(3), 113.

July 27, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(THE "JURISDICTIONS")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

PUTNAM UNIVERSE BOND PLUS MAPs FUND

(THE "TOP FUND")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in the Jurisdictions has received an application from the Top Fund for a decision under the securities legislation of the Jurisdictions (the "Legislation") for an exemption from the restrictions contained in the Legislation which prohibits a mutual fund from knowingly making or holding an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial securityholder (the "Requested Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by Putnam Investments Inc. on behalf of the Top Fund:

Manager

1. Putnam Investments Inc. (the "Manager") is a corporation incorporated under the Business Corporations Act (Ontario) with its head office in Toronto, Ontario.

2. The Manager is registered with the:

(a) Ontario Securities Commission ("Commission") under the Securities Act (Ontario) as an adviser in the categories of investment counsel and portfolio manager and as a dealer in the category of limited market dealer;

(b) with the Commission under the Commodity Futures Act (Ontario) (the "CFA") as an adviser in the categories of commodity trading manager and commodity trading counsel; and

(c) with the Alberta Securities Commission under the Securities Act (Alberta) as an adviser in the categories of investment counsel and portfolio manager.

3. The Manager will act as manager and portfolio manager of the Top Fund and will be responsible for carrying on the business and affairs of the Top Fund under the terms of a trust agreement dated December 5, 1998, as amended from time to time.

Sub-Adviser

4. The Putnam Advisory Company, LLC (the "Sub-Adviser"), an affiliate of the Manager, is a limited liability company organized under the laws of the state of Delaware, with its principal place of business located in Boston, Massachusetts, United States.

5. The Sub-Adviser:

(a) is registered with the U.S. Securities and Exchange Commission as an investment adviser;

(b) is exempt from registration under the Commodity Exchange Act (U.S.) as a commodity trading adviser with the U.S. Commodity Futures Trading Commission; and

(c) obtained an exemption from the Commission from the requirements of paragraph 22(1)(b) of the CFA in respect of advising certain mutual funds in Ontario, including the Putnam Canadian Global Trust funds, a family of pooled funds created under the laws of Ontario that are managed by the Manager (the "Putnam Pooled Funds").

6. The Sub-Adviser is the sub-adviser for the Top Fund under the terms of a master investment management agreement dated June 28, 2006, as amended.

7. The Sub-Adviser is the portfolio manager for the Multi-Strategy Alpha Port (MAPs) TM Fund, Ltd. (the "Underlying Fund") under the terms of an investment management agreement dated on or about July 1, 2006.

Underlying Fund

8. The Underlying Fund is an exempted company incorporated with limited liability in the Cayman Islands on June 20, 2006 under the Companies Law (2004 Revision) of the Cayman Islands.

9. The Underlying Fund's investment objective is to earn positive absolute returns over a full market cycle by using various hedging techniques to isolate the "alpha" or "value add" of certain active strategies, and to combine the returns in a single portfolio that is independent of market direction. The Underlying Fund seeks to outperform the BBA USD 1 Month LIBOR over rolling three-year periods by a margin of 2.5% to 3.5% (before fees) per annum with target annualized volatility, under normal circumstances, of between 2% and 4%.

10. The Underlying Fund will be sold primarily in the United States to "qualified purchasers" and "accredited investors" (as such terms are defined under U.S. securities legislation) who are tax-exempt or otherwise not subject to tax in the United States. Under certain circumstances, the Underlying Fund may also be sold outside the United States in accordance with local securities laws.

11. The Underlying Fund is not a reporting issuer in any of the Jurisdictions and is not in default under relevant securities legislation of the Jurisdictions.

Top Fund

12. The Top Fund was created under the laws of Ontario in June 2007 under the provisions of the Putnam Pooled Funds' trust agreement dated December 5, 1998, as amended.

13. The Top Fund has been created by the Manager in order to offer a Canadian mutual fund to "non-taxable" Canadian institutional investors that is indirectly exposed to the investment portfolio of the Underlying Fund and its investment strategies through, primarily, direct investments by the Top Fund in shares of the Underlying Fund (the "Fund-on-Fund Structure").

14. The investment objective of the Top Fund is to seek a blended return equivalent to the return of the Underlying Fund and the return of the Scotia Capital Universe Index (the "Target Index") through, primarily, the Fund-on-Fund Structure and otherwise by maintaining a long position in the Target Index through the use of derivative instruments. In this manner, the Top Fund seeks to obtain the "alpha" return on its investment in the Underlying Fund plus the "beta" return on its investment in the Target Index.

15. The Top Fund will be sold in Canada's private placement markets in accordance with National Instrument 45-105 Prospectus and Registration Exemptions ("NI 45-106"). The Top Fund will not be a reporting issuer in any Jurisdiction and is not in default under relevant securities legislation of the Jurisdictions.

Fund-on-Fund Structure

16. In connection with the Fund-on-Fund Structure, the Manager shall ensure that:

(a) the arrangements between or in respect of the Top Fund and the Underlying Fund are such as to avoid the duplication of management fees or incentive fees;

(b) no sales or redemption fees are payable by the Top Fund in relation to its purchases or redemptions of securities of the Underlying Fund;

(c) the Manager will not vote the securities of the Underlying Fund held by the Top Fund at any meeting of holders of such securities;

(d) investors in the Top Fund will receive a copy of the offering memorandum of the Underlying Fund prior to subscribing for units of the Top Fund; and

(e) investors in the Top Fund will be provided with the annual and interim financial statements of the Underlying Fund.

Generally

17. In the absence of the Requested Relief, the Top Fund would be precluded from implementing the Fund-on-Fund Structure due to the investment restriction contained in the Legislation.

18. The Fund-on-Fund Structure represents the business judgement of responsible persons uninfluenced by considerations other than the best interests of the Top Fund.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

1. units of the Top Fund are sold solely in Canada's private placement markets in accordance with NI 45-106;

2. the offering memorandum pertaining to the Underlying Fund is provided to Top Fund investors prior to subscribing for units of the Top Fund;

3. the annual and interim financial statements of the Underlying Fund are provided to investors in the Top Fund;

4. the arrangements between, or in respect of, the Top Fund and the Underlying Fund are such as to avoid the duplication of management fees or incentive fees;

5. no sales fees or redemption fees are payable by the Top Fund in relation to its purchases or redemptions of securities of the Underlying Fund; and

6. the Manager does not vote the securities of the Underlying Fund held by the Top Fund at any meeting of holders of such securities.