MUTUAL FUND MANAGER PUTNAM PAYS $40 MILLION FINE TO SETTLE SEC ENFORCEMENT ACTION

FOR IMMEDIATE RELEASE
2005-40

FIRM CHARGED WITH HAVING FAILED TO ADEQUATELY DISCLOSE CONFLICTS OF INTEREST RELATING TO ITS USE OF MUTUAL FUND BROKERAGE COMMISSIONS TO PAY FOR "SHELF SPACE" AT BROKERAGE FIRMS

Washington, DC, March 23, 2005--The Securities and Exchange Commission today announced that Putnam Investment Management, LLC (Putnam) will pay $40 million to settle charges related to Putnam's "shelf space" arrangements with broker-dealers. The Commission issued an order that finds Putnam failed to adequately disclose to the Putnam Funds' Board of Trustees and the Putnam Funds' shareholders the conflicts of interest that arose from these arrangements for increased visibility within the broker-dealers' distribution systems. The $40 million penalty will be distributed to the affected Putnam Funds.

The Commission's Order finds that from at least January 1, 2000 through December 31, 2003, Putnam Funds' distributor and affiliate, Putnam Retail Management Limited Partnership (PRM), had entered into arrangements (Preferred Marketing Arrangements) with over 80 broker-dealers whereby the broker-dealers provided services designed to promote the sale of the Putnam Funds. More than sixty broker-dealers received directed brokerage commissions from the Putnam Funds' portfolio transactions. All of these arrangements were based primarily upon negotiated formulas relating to gross or net fund sales and/or the retention of fund assets.

PRM did not use its own assets to pay for the services obtained under these arrangements. Because the financial results of Putnam, PRM and other affiliates were combined within consolidated financial statements, the entire Putnam organization benefited from the use of fund assets to defray such expenses. But Putnam did not adequately disclose this conflict of interest to the Putnam Board and the Putnam Shareholders.

"We are following through on our commitment to take a hard look at the practices of mutual fund advisers who directed the use of fund assets for their own benefit. Financial arrangements that benefit a fund adviser at the potential expense of fund shareholders must be adequately disclosed to the fund's board," said Ari Gabinet, District Administrator of the SEC's Philadelphia Office, which investigated the case.

The Commission's Order finds that Putnam willfully violated Section 206(2) of the Investment Advisers Act of 1940 (Advisers Act) and Section 34(b) of the Investment Company Act of 1940 (Investment Company Act). Section 206(2) prohibits an investment adviser from engaging in any transaction, practice, or course of business that operates as a fraud or deceit upon its client. As a fiduciary, Putnam had a duty to disclose effectively to the Putnam Board any potential conflict of interest created by the use of fund brokerage commissions to satisfy the Preferred Marketing Arrangements. Section 34(b) prohibits any person from making materially misleading statements or omissions in a registration statement. Neither the Putnam Funds' prospectuses nor Statements of Additional Information adequately disclosed that Putnam directed fund brokerage commissions to satisfy the negotiated Preferred Marketing Arrangements.

Putnam has agreed to settle this matter, without admitting or denying the findings in the Commission's Order. The Commission's Order censures Putnam and orders it to cease-and-desist from committing or causing any violations of Section 206(2) of the Advisers Act and Section 34(b) of the Investment Company Act. In addition, Putnam has undertaken to direct a senior level employee to implement and maintain policies and procedures with respect to (1) its Preferred Marketing Arrangements, including, among other things, the selection of broker-dealers that also sell fund shares, and (2) its disclosures to the Putnam Board and Putnam Shareholders. Finally, Putnam will make a nominal disgorgement payment and will pay $40 million in civil penalties. Pursuant to the Fair Funds provision of the Sarbanes-Oxley Act of 2002, Putnam will distribute the penalty to the Putnam Funds in accordance with a distribution plan approved by the Commission.

Administrative Proceeding

Contacts:
Arthur S. Gabinet, District Administrator
Elaine C. Greenberg, Assistant District Administrator
Philadelphia District Office
(215) 597-3100

http://www.sec.gov/news/press/2005-40.htm