SEC Division of Investment Management staff letter: Putnam Tax-Free Health Care Fund

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Securities Exchange Act of 1934 - Rule 14a-8(f)(1) Putnam Tax-Free Health Care Fund August 8, 2005 John W. Gerstmayr, Esquire Ropes & Gray LLP One International Place Boston, MA 02110-2624

Re:

Putnam Tax-Free Health Care Fund File No. 811-6659

Dear Mr. Gerstmayr:

In a letter dated June 6, 2005, you requested our assurance that we would not recommend enforcement action to the Commission if the Putnam Tax-Free Health Care Fund ("Fund") omits from its proxy material a shareholder proposal from Phillip Goldstein (the "Proponent") postmarked April 8, 2005, and received by the Fund on April 13, 2005. The Proposal states:

RESOLVED: The shareholders of Putnam Tax-Free Health Care Fund (the "Fund") request the Board of Trustees to promptly take the steps necessary to open end the Fund or otherwise enable shareholders to realize net asset value ("NAV") for their shares.

In your June 6, 2005, letter, you state that the Fund intends to omit the proposal and supporting material from its proxy statement and form of proxy in reliance upon Rule 14a-8(f)(1) under the Securities Exchange Act of 1934. Rule 14a-8(f)(1) provides that a registrant may exclude a proposal if the proposal or supporting statement is submitted after the registrant's properly determined deadline for such submissions. The Fund's Proxy Statement from its 2004 Annual Meeting of Stockholders stated that stockholder proposals for inclusion in the Fund's proxy statement for the 2005 Annual Meeting of Stockholders must be received by the Fund before April 12, 2005. You state that the Fund calculated the deadline in accordance with Rule 14a-8(e)(2). You state further that the Fund intends to hold its 2005 Meeting on a date that is not more than 30 days from the date of the 2004 Meeting.

There is some basis for your view that the Proposal was not timely submitted. Although the proponent's letter was postmarked April 8, 2005, the Fund represents that it did not receive the letter until April 13, 2005, after the deadline, and the proponent has not submitted any proof that the proposal was received prior to the proxy proposal deadline. See, e.g., American Express Co. , (Dec. 21, 2004) (proposal 1 day late untimely); France Growth Fund, Inc. (March 7, 2001) (proposal untimely when not received until 2 months past the deadline notwithstanding timely date on letter and proponent's unsubstantiated assertion that it was timely mailed). Cf. Rule 14a-8(e)(1) (shareholder should submit proposals by means that establish date of delivery); Staff Legal Bulletin No. 14 (July 13, 2001) (same). Accordingly, we will not recommend enforcement action to the Commission if the Fund omits the Proposal and supporting statement from its 2005 Meeting proxy materials in reliance upon Rule 14a-8(f)(1).

In connection with the foregoing, please see the enclosure, which sets forth a brief discussion of the Division's procedures regarding shareholder proposals. If you have any questions regarding this matter, please telephone me at (202) 551-6941.

Yours very truly,

Linda B. Stirling Senior Counsel Office of Disclosure and Review

Incoming Letter

June 6, 2005

U.S. Securities and Exchange Commission Division of Investment Management 450 Fifth Street, N.W. Washington, DC 20549 Attention: Office of Chief Counsel

Re:

Putnam Tax-Free Health Care Fund Commission File Number 811-06659 Intention to Omit Shareholder Proposal of Opportunity Partners L.P.

Ladies and Gentlemen: We are writing as counsel to Putnam Tax-Free Health Care Fund (the "Fund") pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Fund hereby notifies the U.S. Securities and Exchange Commission (the "Commission") of its intention to exclude from its proxy statement and form of proxy (the "Proxy Materials") for the Fund's 2005 Annual Meeting of Shareholders (the "2005 Annual Meeting") the shareholder proposal and supporting statement (the "Shareholder Proposal") submitted to the Fund by Mr. Phillip Goldstein of Kimball & Winthrop, Inc. on behalf of Opportunity Partners L.P. (the "Proponent"), on the grounds that the Shareholder Proposal was not timely. A copy of the Shareholder Proposal is attached hereto as Exhibit A .

Pursuant to Rule 14a-8(j) under the Exchange Act, the Fund will file its definitive Proxy Materials with the Commission no earlier than August 25, 2005.

Rule 14a-8(e)(1) states that the deadline for submitting shareholder proposals for an annual meeting may be found in the company's proxy statement for the prior year. The Fund's proxy statement dated August 9, 2004 included the following statement under the heading "Date for receipt of shareholders' proposals for the next annual meeting":

It is currently anticipated that your fund's next annual meeting of shareholders will be held in October 2005. Shareholder proposals to be included in the proxy statement for that meeting must be received by your fund before April 12, 2005.

Thus, in order to comply with the Fund's deadline for inclusion in the Proxy Materials, a proposal must have been received, at the latest, on Monday April 11, 2005. The Shareholder Proposal from the Proponent was sent via regular mail, postmarked Friday April 8, 2005, one business day before the deadline, but was not received at the offices of the Fund until Wednesday April 13, 2005. Thus the Shareholder Proposal was received two days after the deadline for inclusion in the Proxy Materials. A copy of the envelope in which the Shareholder Proposal was delivered is attached hereto as Exhibit B.

In no-action letters, the Commission Staff has strictly construed the deadline for receipt of shareholder proposals under Rule 14a-8, permitting companies to omit from proxy materials those proposals received after the deadline, even if by only one or two days. See, e.g., Datastream Systems, Inc. (March 9, 2005); American Express Company (December 21, 2004); International Business Machines Corporation (December 19, 2004); Thomas Industries Inc. (December 18, 2002). Furthermore, the Commission Staff has recommended that shareholders submit proposals "well in advance of the deadline," a recommendatin that the Proponent failed to heed. See Division of Corporate Finance, Staff Legal Bulletin No. 14 (July 13, 2001). Both of these observations reinforce that it is appropriate for the Fund to adhere strictly to its submission deadline in seeking to omit the Shareholder Proposal from the Proxy Materials.

We note in particular that the Shareholder Proposal was sent via regular mail, and not by means that would permit the Proponent to prove the date of delivery. Exchange Act Rule 14a-8(e) specifically requires that "[i]n order to avoid controversy, shareholders should submit their proposals by means, including electronic means, that permit them to prove the date of delivery."

Rule 14a-8(f) requires that a company notify the proposing shareholder of any deficiencies in the proposal within 14 days of receipt. However, this requirement does not apply to a deficiency that cannot be remedied, such as when the proponent fails "to submit a proposal by the company's properly determined deadline." Nevertheless, the Fund sent a letter to the Proponent on April 27, 2005, a copy of which is attached hereto as Exhibit C, notifying the Proponent of the Fund's intent to omit the Shareholder Proposal from the Proxy Materials. An electronic response from Mr. Phillip Goldstein, presumably on behalf of the Proponent, was received by the Fund's counsel on April 29, 2005, and a copy is attached hereto as Exhibit D.

Rule 14a-8(e)(2) sets forth the methodology for properly determining the deadline for shareholder proposals as follows: A shareholder proposal pursuant to Rule 14a-8 must be received at the company's principal executive offices not less than 120 calendar days before the date of the company's proxy statement released to shareholders in connection with the previous year's annual meeting. The release date for the Fund's 2004 proxy statement was August 9, 2004. For a shareholder proposal to be received not less than 120 days prior to this date in 2005, it would have to be received on or before April 11, 2005. Thus the deadline in the Fund's 2004 proxy statement was calculated in accordance with the requirements of Rule 14a-8(e)(2) described above.

Rule 14a-8(e)(2) provides for alternative methods of calculating the deadline for shareholder proposal submissions if the company did not hold an annual meeting the previous year or if the date of the current year's annual meeting has been changed by more than 30 days from the date of the previous year's meeting. The Fund's previous Annual Meeting of Shareholders was held on October 14, 2004. Although the date for the 2005 Annual Meeting has not been set definitively, the Fund expects it to be held on October 28, 2005, and in no event later than November 13, 2005. Thus the current situation does not implicate the alternative methods of calculation set out in Rule 14a-8(e)(2).

For the reasons outlined above, the Fund believes that the Shareholder Proposal does not meet the timeliness requirements of Rule 14a-8(e)(1), and intends to omit the Shareholder Proposal from the Proxy Materials. We request the assurance of the Commission Staff that it would not recommend enforcement action if the Fund omits the Proponent's Shareholder Proposal.

Should the Commission Staff require any additional information, please contact the undersigned at 617-951-7393. Should the Commission Staff disagree with the Fund's proposed course of action, we would appreciate the opportunity to confer with the Commission Staff before it issues a response to this letter.

Very truly yours,

John W. Gerstmayr

Attachments

cc: Opportunity Partners L.P.

http://www.sec.gov/divisions/investment/noaction/putnam080805.htm

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Modified: 09/07/2002