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U.S. Securities and Exchange Commission



Washington, D.C., March 3, 2005 - The Securities and Exchange Commission announced today that Professor Peter Tufano, the Independent Assessment Consultant in the Matter of Putnam Investment Management, LLC (Administrative Proceeding File No. 3-11317), has completed his assessment report regarding losses attributable to market timing and excessive short-term trading by Putnam employees. Prof. Tufano's report finds that losses attributable to market timing activities and excessive short-term trading by Putnam employees total $4.4 million, including interest. In addition, Prof. Tufano's report calculates that the costs to Putnam shareholders stemming from the unusually high level of redemptions following public disclosure of allegations with respect to market timing and short-term trading at Putnam total $48.5 million, including interest. While Prof. Tufano's report expresses no view as to what portion of the post-disclosure redemption costs, if any, should be attributed to Putnam's misconduct, Putnam has agreed to compensate shareholders for 100% these costs. As a result, pursuant to the terms of prior Commission Orders in this proceeding, Putnam is required to make a further payment of $43 million in addition to the payments of $5 million in disgorgement and $50 million in civil penalties previously made.

Peter Bresnan, an Associate Director in the Commission's Division of Enforcement, stated that "the Commission staff appreciates the service Prof. Tufano has provided as an independent consultant in the Putnam matter. The staff has reviewed the methodology Prof. Tufano used in arriving at his calculations, and has determined that Prof. Tufano's methodology is acceptable as applied to the facts at issue in the Commission's administrative proceeding with respect to Putnam. We note, however, that it might not be appropriate to apply certain of Prof. Tufano's methods in different factual situations and that we do not endorse Prof. Tufano's methods for calculating losses attributable to market timing and excessive short-term trading as necessarily constituting the best method or the only method for calculating such losses. We look forward to working with Prof. Tufano to see that the funds collected in this case are promptly distributed to Putnam shareholders."

Prof. Tufano is the Sylvan C. Coleman Professor of Financial Management at Harvard Business School as well as a Senior Associate Dean at the school. Prof. Tufano's work as Independent Assessment Consultant was done pursuant to the terms of the November 13, 2003 Order entered in the Matter of Putnam Investment Management, LLC (Administrative Proceeding File No. 3-11317). The Commission's November 13, 2003 Order, to which Putnam consented without admitting or denying the findings therein, reflected a partial settlement of the Commission's claims against Putnam and provided, among other things, that Putnam would pay restitution to Putnam shareholders. In particular, that Order provided that the Independent Assessment Consultant would "calculate the monetary amounts necessary to fairly compensate Putnam funds' shareholders for losses attributable to excessive short-term trading and market timing activity by Putnam employees according to a methodology developed in consultation with Putnam and acceptable to the staff of the Commission and the independent Trustees of the Putnam funds." (Nov. 13, 2003 Order at Section IV.E).

On April 8, 2004, the Commission entered a further Order in the Matter of Putnam Investment Management, LLC (Administrative Proceeding File No. 3-11317). The April 8, 2004 Order required Putnam to pay $5 million in disgorgement plus a civil penalty of $50 million. That Order also made clear that, notwithstanding these payments, Prof. Tufano would continue his work in calculating amounts that would be needed to make restitution pursuant to the November 13, 2003 Order. The April 8, 2004 Order provided that "[i]n the event that the Independent Assessment Consultant determines that full restitution under [the November 13, 2004 Order] would require a payment of more than $10 million, Putnam agrees that it shall make an additional payment of the amount above $10 million." (Apr. 8, 2004 Order at Section IV.B.1.b). Because Prof. Tufano's report calculates the amounts needed to make full restitution to Putnam shareholders from the conduct at issue in the proceeding brought by the Commission to be $53 million, Putnam is required to pay an additional amount of $43 million to satisfy its obligations pursuant to the April 8, 2004 Order. The Commission will cause any new funds paid to it, in addition to the $55 million previously paid in disgorgement and penalty, to be added to the distribution fund for the benefit of Putnam shareholders. In addition to acting as Independent Assessment Consultant, Prof. Tufano has been selected as the Independent Distribution Consultant in the Putnam matter, and he is currently engaged in the process of formulating a plan for the distribution of the funds collected in this proceeding to Putnam shareholders.

Prof. Tufano has also completed an assessment report in connection with a separate action against Putnam brought by the Securities Division for the Commonwealth of Massachusetts.

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Peter H. Bresnan (202) 942-4550
Associate Director, SEC Division of Enforcement

Walter Ricciardi (617) 573-8934
District Administrator, SEC Boston District Office

David P. Bergers (617) 573-8927
Associate District Administrator, SEC Boston District Office

Ian D. Roffman (617) 573-8987
Senior Trial Counsel, SEC Boston District Office


Modified: 03/03/2005