In re PUTNAM INVESTMENT

 
 
 
 
 
 
 
 
  
 
 
 
 
 
  
 
 
 
 
 
 
 
 
UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

INVESTMENT ADVISERS ACT OF 1940 
Release No. 2370 / March 23, 2005 
INVESTMENT COMPANY ACT OF 1940 
Release No. 26788 / March 23, 2005 
ADMINISTRATIVE PROCEEDING 
File No. 3-11868 
In the Matter of 
PUTNAM INVESTMENT 
MANAGEMENT, LLC, 
Respondent. 
ORDER INSTITUTING 
ADMINISTRATIVE AND CEASE-
AND-DESIST PROCEEDINGS, 
MAKING FINDINGS, AND 
IMPOSING REMEDIAL SANCTIONS 
AND A CEASE-AND-DESIST ORDER 
PURSUANT TO SECTIONS 203(e) 
AND 203(k) OF THE INVESTMENT 
ADVISERS ACT OF 1940 AND 
SECTIONS 9(b) AND 9(f) OF THE 
INVESTMENT COMPANY ACT OF 
1940 
I. 
The Securities and Exchange Commission ("Commission") deems it appropriate 
and in the public interest that public administrative and cease-and-desist proceedings be, 
and hereby are, instituted pursuant to Sections 203(e) and 203(k) of the Investment 
Advisers Act of 1940 ("Advisers Act") and Sections 9(b) and 9(f) of the Investment 
Company Act of 1940 ("Investment Company Act") against Putnam Investment 
Management, LLC ("Putnam" or "Respondent").   
II. 
In anticipation of the institution of these proceedings, Respondent has submitted 
an Offer of Settlement (the "Offer"), which the Commission has determined to accept.  
Solely for the purpose of these proceedings and any other proceedings brought by or on 
behalf of the Commission, or to which the Commission is a party, and without admitting 
or denying the findings herein, except as to the Commission’s jurisdiction over it and the 
subject matter of these proceedings, the Respondent consents to the entry of this Order 

 
   
 
 
  
 
 
 
        
 
 
 
 
 
 
 
 
 
                                                
 
      
  
 
Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and 
Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Sections 203(e) 
and 203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the 
Investment Company Act of 1940 (“Order”) as set forth below. 
III. 
On the basis of this Order and Putnam's Offer, the Commission finds
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 that: 
Respondent 
1. Putnam is the registered investment adviser to the over 100 
registered investment companies in the Putnam Fund Complex, which include retail 
mutual funds, registered closed-end funds and open-end mutual funds that underlie 
variable annuities (“Putnam Funds”).  Since 1971, Putnam has been registered with the 
Commission pursuant to Section 203(c) of the Advisers Act.  Putnam is owned by 
Putnam Investment Management Trust, a wholly owned subsidiary of Putnam LLC 
(“Putnam Investments”), a Delaware limited liability company that conducts business as 
Putnam Investments.  Putnam Investments is in turn owned by Putnam Investments Trust, 
a Massachusetts business trust.  Putnam Investments Trust is a subsidiary of Marsh & 
McLennan Companies, Inc., which is a publicly owned holding company traded on the 
New York Stock Exchange, whose operating subsidiaries are international insurance 
brokers, investment managers and management consultants.  Putnam Investments is also 
the parent of Putnam Retail Management Limited Partnership ("PRM"), the Putnam 
Funds' distributor.  As of September 30, 2004, Putnam and its affiliates managed 
approximately $209 billion, of which $140 billion represented mutual fund assets under 
management and $69 billion represented assets under management for institutional 
clients.  Putnam's principal offices are located in Boston, Massachusetts. 
2. During 2000 through November 2003, the chief executive officer of 
Putnam Investments was also the president of Putnam.  Putnam also had separate 
individuals who served as the "head" or "co-heads" of Putnam's operations, one of which 
was referred to within the Putnam organization as the Investment Division.  Putnam 
Investments had numerous direct and indirect subsidiaries, which included PRM, which 
was responsible for retail marketing of the Putnam Funds, the Putnam Fiduciary Trust 
Company, the transfer agent for the funds, as well as Putnam or the Investment Division, 
which performed the investment advisory functions for the Putnam Funds.  The operational 
heads of Putnam, PRM and the other affiliated companies reported to the chief executive 
officer of Putnam Investments.  The financial statements of the subsidiaries were included 
in consolidated financial statements of Putnam Investments Trust, the parent of Putnam 
Investments.  The various subsidiaries also shared administrative, finance and legal 
functions. 
The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on 
any other person or entity in this or any other proceeding. 
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Overview 
3. This matter involves the failure of Putnam to fully and effectively 
disclose material facts, including the conflicts of interests that arose from PRM's 
arrangements with broker-dealers for increased visibility within the broker-dealers' 
distribution systems.  Since at least January 1, 2000 through December 31, 2003, Putnam 
directed brokerage commissions on the Putnam Funds’ portfolio transactions to broker-
dealers for “shelf space” or heightened visibility within their distribution systems.  PRM, 
the Putnam Funds' distributor and an affiliate of Putnam, 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.  
Approximately twenty of those broker-dealers were paid in cash, while over 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.   
4. When Putnam directed fund brokerage commissions to broker-
dealers in connection with the Preferred Marketing Arrangements, its affiliate, PRM, did 
not use its own assets to pay for the services obtained under these arrangements.  Because 
the financial results of these entities along with other affiliates were combined within 
consolidated financial statements, the entire Putnam organization benefited from the use 
of fund assets to defray such expenses.  Putnam did not fully and effectively 
communicate this potential conflict of interest to the Putnam Funds’ Board of Trustees 
(the “Putnam Board” or “Trustees”).  Putnam also did not fully and effectively 
communicate the potential conflict of interest presented for its Equity Trading group, 
which was faced with directing trades to specific broker-dealers designated by PRM 
while at the same time satisfying its best execution obligations. 
5. Nor did Putnam fully and effectively communicate the specific 
terms and details of those Preferred Marketing Arrangements that were being paid for with 
brokerage commissions to the Putnam Board or the Putnam Funds’ shareholders (“Putnam 
Shareholders”).  Instead, Putnam informed the Trustees, and the Statements of Additional 
Information (“SAIs”) and prospectuses for the funds disclosed, that Putnam had a policy of 
considering the sale of fund shares as a factor in selecting broker-dealers to execute fund 
portfolio trades.  Putnam did not fully and effectively advise the Trustees and the Putnam 
Funds' SAIs  and prospectuses did not fully and effectively disclose that PRM, its affiliate, 
had arrangements with those broker-dealers to direct fund brokerage commissions for 
marketing and distribution services pursuant to negotiated formulas with the broker-
dealers. 
PRM Had Preferred Marketing Arrangements with Broker-Dealers 
6. Since at least January 2000 through December 2003, PRM had 
over 80 relationships with certain broker-dealers pursuant to which the Putnam Funds 
received heightened visibility within the broker-dealers’ distribution or sales systems.  
The Putnam Funds' distributor, PRM, negotiated the Preferred Marketing Arrangements 
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on behalf of itself and Putnam.  At all times, PRM entered into these arrangements with 
the knowledge and approval of Putnam and Putnam Investments.     
7. The broker-dealers provided various types of distribution services 
in connection with these arrangements:  participation in meetings with registered 
representatives, primarily for the purpose of providing education and training regarding 
the Putnam Funds; the opportunity for the Putnam Funds to be mentioned in 
communications with a broker-dealer’s customers such as on a broker-dealer’s website; 
and often, placement on a “preferred list” at a broker-dealer. 
8. Various financial terms existed for participation in the broker-
dealers' Preferred Marketing programs based upon the formulas that PRM had 
individually negotiated.  Typically, broker-dealers were paid anywhere from 10 to 35 
basis points (“bps”) on mutual fund gross or net sales and/or 1.5 to 15 bps on aged assets.  
These payments were in addition to existing payments, including dealer concessions, 
shareholder servicing payments, and payments for services that Putnam or an affiliate 
otherwise would provide. 
Putnam Directed Brokerage Commissions to Pay 
for Preferred Marketing Arrangements 
9. Although many broker-dealers sought Preferred Marketing 
payments in the form of cash or "hard dollars", PRM generally negotiated to direct 
brokerage commissions on the Putnam Funds' portfolio transactions.  Putnam and PRM 
referred to these directed fund brokerage commissions as "soft dollars," "fund sales," or 
"commissions for sales."  In the ordinary course, to conduct portfolio transactions in 
connection with the Putnam Funds’ investment program, the Funds pay substantial 
amounts in brokerage commissions for execution services. In addition to the execution 
services, Putnam and its affiliates at times also receive soft dollar and other benefits from 
such commissions, including research and the payment of fund custody expenses.  During 
the relevant period, Putnam directed some commissions to broker-dealers to pay for 
Preferred Marketing Arrangements.   
10. Although PRM or Putnam Investments in some instances used its 
own cash, Putnam, PRM, and Putnam Investments preferred to direct fund brokerage 
commissions to pay for these arrangements.  Putnam's use of brokerage commissions 
directly benefited Putnam Investments and PRM by reducing their out-of-pocket 
expenses.  It was also in Putnam’s financial interest to defray the expenses of an affiliate 
because of the positive impact on the Putnam organization’s operating income.  This 
preference was reflected in an internal presentation PRM created on revenue sharing that 
stated that PRM was "always pushing toward a soft dollar deal" when negotiating these 
arrangements.  The impact of this preference was that PRM had substantially more 
Preferred Marketing Arrangements in soft dollars than in hard dollars.  
11. From at least January 1, 2000 through December 31, 2003, Putnam 
directed fund brokerage commissions to over 60 broker-dealers for the Preferred 
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Marketing Arrangements.
2
  When PRM negotiated to direct brokerage commissions to 
pay for these arrangements, it sometimes negotiated to direct brokerage commissions of 
1.5 times (or some other negotiated multiple or conversion rate) the amounts requested by 
the broker-dealers in hard dollars. 
12. In order for Putnam to properly direct fund brokerage commissions 
for the arrangements, PRM communicated the commission amounts, but not the details of 
the basis point arrangements, for each of the broker-dealers to the Head of Putnam's 
Equity Trading ("Equity Trading").  These amounts, referred to as commission targets 
(“targets"), were primarily based upon the formulas negotiated with the broker-dealers.  
Equity Trading used the targets, subject to its own guidelines, including the requirement 
for the traders to seek best execution, to direct fund brokerage commissions to the broker-
dealers. 
13. Periodically, PRM communicated modified commission target 
amounts for individual brokers to Equity Trading based upon the priorities PRM set for 
these broker-dealers.  These modifications for individual brokers were sometimes 
increases and sometimes decreases to the targets.
3
  At times, PRM requested that Equity 
Trading increase trading with specific broker-dealers in order to more quickly meet target 
commission amounts with broker-dealers and provided suggested priority status among 
the various broker-dealers.  Equity Trading accepted the modifications, subject to 
Putnam's best execution policies. 
14. The management of Equity Trading periodically circulated to the 
traders a list prepared by PRM reflecting the directed brokerage target amounts for each 
broker-dealer, commission amounts paid to each broker-dealer during that year, the 
current balance of the target remaining, and the percentage of completion toward the 
target.  Thus, Putnam's traders were made aware of the targets and placed trades with the 
fund-selling broker-dealers subject to the firm's best execution policies.  In addition to the 
fund sales targets, the traders were also made aware of other brokerage commission 
targets, including those for research. 
15. Putnam had a computerized system that categorized trades based 
upon the percentage of completion of the target.  Six such categories existed, including 
research, proprietary research, fund sales, custody, execution and client-directed.  For 
example, if Putnam placed a trade with a broker-dealer that had both fund sales and 
research targets, the computer would automatically assign the brokerage commission to 
the category for which the target was farthest away from completion.  If a trade or a 
certain portion of a trade was assigned to fund sales, the associated commission was used 
2 
Based upon the Putnam Board’s direction, Putnam ceased directing brokerage to broker-dealers in 
connection with the sale of fund shares as of January 1, 2004. 
3 
Due to declining overall commissions, between 2000 and 2003, the amount of commissions 
directed to fund-selling brokers declined each year and was never more than 12.5% of total available 
brokerage commissions.  In particular, PRM modified the targets substantially downward in 2002 and 
2003, and the Equity Trading department was not able to meet many of the individual targets during that 
time. 
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to pay for a Preferred Marketing arrangement.  In addition to assigning the trades on 
Putnam's internal records, Putnam's trading system also electronically communicated this 
information to the trading desks at the broker-dealers that executed the trades. 
16. Putnam used two methods to direct brokerage commissions for 
Preferred Marketing Arrangements:  by forwarding portfolio transactions directly to a 
broker-dealer with which it had such an arrangement (“distributing broker”); and through 
“step-out” or correspondent arrangements.  Putnam used the latter method in its effort to 
achieve best execution in circumstances in which the distributing broker’s execution 
capability did not satisfy Putnam's trading department's standards. 
PRM's Preferred Marketing Practices Were Not Always Consistent  

With Firm Guidelines
 
17. Putnam had a policy relating to placing portfolio transactions with 
broker-dealers who sold Putnam Funds in recognition of their sales of Putnam Funds’ 
shares.  Its policy, as stated in the SAIs, and later the prospectuses, was that "Consistent 
with the Conduct Rules of the National Association of Securities Dealers, Inc. and 
subject to seeking the most favorable price and execution available and such other 
policies as the Trustees may determine, Putnam Management may consider sales of 
shares of the fund (and, if permitted by law, of the other Putnam funds) as a factor in the 
selection of broker dealers to execute portfolio transactions for the fund." 
18. Internally, PRM's policy was that amounts directed to broker-
dealers in consideration of fund sales were not obligations and therefore, directed 
brokerage arrangements should not be put into writing.  Also, within Putnam, guidance 
was given that agreements for the allocation of commissions could not be made. Putnam 
conveyed this understanding to the Putnam Board and repeatedly assured the Putnam 
Board that there were no agreements for commissions for sales and no firm amounts of 
commissions were promised to broker-dealers, but only that targets were set. 
19. PRM did not follow some of this guidance.  For instance, PRM 
signed an agreement, entitled a "letter of understanding", along with a side letter with a 
broker-dealer regarding PRM's participation in the broker-dealer's preferred sales 
program.  Although the side letter stated that each transaction that generated such 
commissions would be carried out on a best execution basis and that the letter did not 
create any binding legal obligations, through this letter PRM nevertheless agreed to pay 
for its participation in the program with brokerage commissions.  Despite the firm's 
policy, Putnam approved PRM's signing of this letter of understanding. 
20. PRM also provided a few broker-dealers with letters confirming 
the negotiated basis point formulas for directing brokerage commissions.
4
 Again, 
Putnam approved the form of these letters.   
These letters also stated that they did not create any binding legal obligations. 
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Putnam Did Not Fully and Effectively Communicate its 
Directed Brokerage Practices to the Trustees 
21. Putnam did not fully and effectively communicate to the Putnam 
Board that it was directing fund brokerage commissions to over 60 broker-dealers to pay 
for PRM's Preferred Marketing Arrangements.  While Putnam communicated generally to 
the Trustees that broker-dealers were seeking financial support, Putnam did not fully and 
effectively disclose to the Trustees the existence of the arrangements with the broker-
dealers, the terms or details of the arrangements, or the preference to direct brokerage 
commissions, which were fund assets, rather than using PRM's or Putnam Investments' 
assets. 
22. In the process of providing the Board with information relevant to 
the annual review and approval of the management contract for the Putnam Funds, 
Putnam provided a memorandum to the Board describing "fall-out benefits" received by 
both Putnam and its affiliates.  Among other things, the memorandum identified that 
Putnam conducts trading for the Funds, and in connection with that trading, Putnam 
received research related services from broker-dealers in consideration of those 
commissions.  While the memorandum reiterated the policy that Putnam may consider 
sales of fund shares as a factor in placing trades, it did not discuss the Preferred 
Marketing Arrangements nor did it identify the distribution services received with the 
Funds' brokerage commissions.  
23. Putnam told the Brokerage and Custody Committee of the Board of 
Trustees, which was charged with reviewing the breakdown of the brokerage commissions 
on portfolio transactions into the six categories, that Putnam "considered the sale of fund 
shares" when selecting broker-dealers to execute fund portfolio transactions.  Putnam also 
disclosed to the Trustees the amounts of brokerage commissions directed to the top 25 
fund-selling broker-dealers in consideration of fund sales.  Putnam also told the Trustees 
semi-annually that “Putnam Mutual Funds establishes commission targets to recognize the 
efforts of broker dealers based on their respective sales efforts.”  Putnam did not, however, 
fully and effectively disclose that these amounts were actually used to pay for Preferred 
Marketing Arrangements negotiated by PRM.   
Putnam Did Not Fully and Effectively Disclose To The Trustees 

The Potential Conflicts Of Interest
 
24. As a fiduciary, Putnam had a duty to disclose fully and effectively to 
the Putnam Board all potential conflicts of interest created by the use of fund brokerage 
commissions, yet it failed to do so. 
25. The use of brokerage commissions to pay for participation in 
Preferred Marketing Arrangements created two potential conflicts of interest for Putnam.  
The first related to the use of fund assets to satisfy what would otherwise have been 
obligations of PRM.  Because PRM and Putnam were under common control, Putnam 
benefited from the use of fund assets to defray the expenses of its affiliate, PRM.  Yet, 
Putnam failed to fully and effectively disclose this conflict to the Trustees.  
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26. The second potential conflict was the one that Putnam's Equity 
Trading group faced while trying both to satisfy its best execution obligations and to direct 
trades to specific broker-dealers identified by PRM.  Specifically, Equity Trading had to 
determine:  which broker-dealers to place trades with and what commission rates to pay; 
whether to use single stock trades or program trading; whether to reduce the number of 
broker-dealers with which Putnam traded; and whether these relationships affected the 
transaction costs of the directed trades and Equity Trading's objectives to reduce overall 
transaction costs.    
Putnam Did Not Adequately Disclose its Directed 

Brokerage Practices to Putnam Shareholders
 
27. Putnam was primarily responsible for ensuring that the Putnam 
Funds’ Prospectuses and SAIs were in compliance with the requirements of Form N-1A in 
describing Putnam’s trading practices for the Putnam Funds.
5 
28. The information the Commission requires investment companies to 
disclose in prospectuses and SAIs is set forth in Form N-1A.  Specifically, Item 16(c)
6
 of 
the Form N-1A requires a description in the SAI of “how the Fund will select brokers to 
effect securities transactions for the Fund” and requires that “[i]f the Fund will consider the 
receipt of products or services other than brokerage or research services in selecting 
brokers, [the Fund should] specify those products or services.” 
29. From at least January 1, 2000 to December 31, 2003, Putnam 
Funds’ SAIs
7
, disclosed that Putnam may consider sales of shares of the Putnam Funds as a 
factor in the selection of broker-dealers to execute the Putnam Funds’ portfolio 
transactions.  The SAIs did not make the distinction, however, between directing 
commissions in “consideration of fund sales” and paying for negotiated arrangements with 
brokerage commissions.  The SAIs did not adequately disclose to shareholders that PRM 
had entered into arrangements for heightened visibility within broker-dealers’ distribution 
systems for which Putnam, subject to best execution, directed brokerage commissions, the 
amounts of which were primarily determined by negotiated formulas.   
30. As a result of the conduct described above, Putnam willfully
8
: 
5 
The Putnam Funds’ SAIs are incorporated by reference into the prospectuses. 
6 
As of July 4, 2004, the relevant item of the Form N-1A has been changed from Item 16(c) to Item 
15(c). 
7 
For a portion of 2003, the prospectuses also contained this disclosure. 
8 
“Willfully” as used in this Order means intentionally committing the act which constitutes the 
violation. See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 
1965).  There is no requirement that the actor also be aware that he is violating one of the Rules or Act. 
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a.	 Violated Section 206(2) of the Advisers Act, which 
provides that it is “unlawful for any investment adviser, by 
use of the mails or any means or instrumentality of 
interstate commerce, directly or indirectly . . . to engage in 
any transaction, practice, or course of business which 
operates as a fraud or deceit upon any client or prospective 
client.” 
b.	 Violated Section 34(b) of the Investment Company Act, 
which provides in pertinent part that it is “unlawful for any 
person to make any untrue statement of a material fact in 
any registration statement . . . filed or transmitted pursuant 
to” the Investment Company Act and to “omit to state 
therein any fact necessary in order to prevent the statements 
made therein, in the light of the circumstances under which 
they were made, from being materially misleading.” 
Undertakings 
31. 	Putnam undertakes the following: 
a.	 Putnam shall, within 90 days from the date of entry of the 
Order, require a senior level employee to implement and 
maintain the following written compliance policies and 
procedures: 
i.	 Procedures designed to ensure that when the 
Putnam trading desk places trades with a broker-
dealer that also sells fund shares, the person 
responsible for selecting such broker-dealer does 
not take into account the broker-dealer’s promotion 
or sale of Putnam Fund shares, subject to 
modification only in the event that the independent 
members of the Putnam Board determine that such 
modification is in the best interest of the Putnam 
Funds; 
ii.	 Putnam will establish guidelines for entering into 
revenue sharing arrangements
9
 between Putnam or 
PRM and broker-dealers and other intermediaries in 
As used in Paragraph 31(a) herein, "revenue sharing arrangements" are arrangements by which 
payments are made to broker-dealers from the assets of Putnam or PRM relating to the sale of the Putnam 
Funds and/or assets maintained in the Putnam Funds other than (i) dealer concessions, 12b-1 fees, 
shareholder servicing payments, or subaccounting payments or (ii) non-cash compensation arrangements as 
expressly permitted by NASD Rule 2820(g)(4) or Rule 2830(l)(5) (or any successor to either such rule). 
9
 
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respect of the sale of fund shares, which shall not be 
inconsistent with the terms of the Order.  The 
language of the guidelines must be presented to the 
Putnam Board and approved by Putnam’s chief legal 
officer.  The guidelines shall require PRM to use its 
best efforts to enter into written contracts 
memorializing the revenue sharing arrangements 
between PRM and the broker-dealer or other 
intermediary.  The documentation of each revenue 
sharing arrangement in respect of fund sales will set 
forth the payment arrangement and the services that 
the broker-dealer or other intermediary will provide.  
The documentation of each revenue sharing 
arrangement shall also include a request from 
Putnam or PRM that the broker-dealer or other 
intermediary provide point of sale disclosure 
documents consistent with then current legal 
requirements; 
iii.	 All revenue sharing arrangements in respect of the 
sale of fund shares must be approved in writing by 
Putnam’s chief legal officer, or his delegate, and the 
form of such arrangements, or any material 
deviation therefrom, presented to the Putnam Board 
prior to implementation; 
iv.	 Subject to the Putnam Board’s approval, Putnam 
will prepare disclosures for the Putnam Funds to 
include in their prospectuses or SAIs information 
about payments made by Putnam or PRM to broker-
dealers or other intermediaries in respect of the sale 
of fund shares in addition to dealer concessions, 
shareholder servicing payments, and payments for 
services that Putnam or an affiliate otherwise would 
provide, such as sub-accounting, and state that such 
payments are intended to compensate broker-
dealers for various services, including without 
limitation, placement on the broker-dealers’ 
preferred or recommended fund list, access to the 
broker-dealers’ registered representatives, 
assistance in training and education of personnel, 
marketing support, and other specified services; 
v.	 At least once per year, Putnam will make 
presentations to the Communication, Service and 
Marketing Committee of the Putnam Board (or 
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other committee performing similar functions or 
designated by the Putnam Board, or to the Putnam 
Board), including an overview of Putnam's revenue 
sharing arrangements and policies, any material 
changes to such policies, the number and types of 
such arrangements, the types of services received, 
the identity of participating broker-dealers or other 
intermediaries and the total dollar amounts paid to 
such broker-dealers and intermediaries.  Putnam 
shall also provide the Committee with a summary 
quarterly report setting forth amounts paid by 
Putnam for such arrangements and the broker-
dealers and intermediaries that received such 
payments; and 
vi.	 At least once per year, for at least five years, 
Putnam shall provide the Brokerage and Custody 
Committee of the Putnam Board (or other 
committee performing similar functions) with a best 
execution analysis.  In such analysis, Putnam shall 
include lists of:  (a) the top ten executing broker-
dealers used by Putnam; and (b) the top ten selling 
broker-dealers conducting business with PRM. 
b.	 Within 10 days of the date of entry of the Order: 
i.	 Putnam shall develop a Distribution Plan to 
distribute fairly and proportionately to the Putnam 
Funds the total disgorgement and penalty ordered in 
paragraph IV.C. below based upon the amounts of 
brokerage commissions in 2000 through 2003 
categorized for “Fund Sales” attributed to each 
Putnam Fund.  Putnam shall submit the Distribution 
Plan to the Putnam Board and the Commission 
staff.  The Distribution Plan must be acceptable to 
the Commission staff. 
ii.	 Putnam shall provide a written certification to the 
Commission staff of the accuracy of the 
calculations relating to the Distribution Plan. 
c.	 Within 20 days of the date of entry of the Order, Putnam 
shall submit the Distribution Plan for the administration 
and distribution of disgorgement and penalty funds 
pursuant to Rule 1101 of the Commission’s Rules of 
Practice. 
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d.	 Following a Commission order approving the final 
Distribution Plan, as provided in Rule 1104 of the 
Commission’s Rules of Practice, Putnam shall take all 
necessary and appropriate steps to administer the final 
Distribution Plan, including overseeing the actual 
distribution of the monies to the Putnam Funds within 10 
days of the Commission’s approval of the Distribution 
Plan. 
e.	 Within 5 days of the distribution of the monies to the 
Putnam Funds, Putnam shall provide a written certification 
to the Commission staff of the amount paid to each Putnam 
Fund and the date of payment.  
f.	 In In re Putnam Investment Management, LLC, Investment 
Advisers Act Rel. No. 2192, 2003 WL 22683975 (Nov. 13, 
2003), Putnam agreed to various undertakings including 
those requiring it to retain an Independent Compliance 
Consultant to conduct a comprehensive review of Putnam’s 
supervisory, compliance, and other procedures designed to 
prevent and detect breaches of fiduciary duty, breaches of 
the Code of Ethics and federal securities law violations by 
Putnam and its employees.  Putnam further agrees to direct 
the Consultant also to review the completeness of Putnam’s 
then-current disclosures concerning revenue sharing 
arrangements to the Putnam Board and Putnam 
shareholders. 
                                    Extension            of            Time            
g.	 For  good  cause  shown,  the  Commission's  staff  may  extend  
any of the procedural dates set forth above. 
IV. 
In view of the foregoing, the Commission deems it appropriate and in the public 
interest to impose the sanctions specified in the Offer submitted by Putnam. 
Accordingly, it is hereby ORDERED that: 
A.                        	Putnam                        is                        censured.                        
B. Putnam shall cease and desist from committing or causing any 
violations and any future violations of Section 206(2) of the Advisers Act and Section 34(b) 
of the Investment Company Act. 
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C. Putnam shall within 5 days of the entry of the Order, pay 
disgorgement in the amount of $1 (“Disgorgement”) and a civil money penalty in the 
amount of $40 million (“Penalty”), for a total payment of $40,000,001.  Such payment 
shall be:  (1) made by wire transfer, United States postal money order, certified check, 
bank cashier's check or bank money order; (2) made payable to the Securities and 
Exchange Commission; (3) hand-delivered or mailed to the Office of Financial 
Management, Securities and Exchange Commission, Operations Center, 6432 General 
Green Way, Alexandria, Stop 0-3, VA  22312; and (4) submitted in connection with a 
cover letter that identifies Putnam as a Respondent in these proceedings, the file number 
of these proceedings, a copy of which cover letter and wire confirmation, money order or 
check shall be sent to Ari Gabinet, District Administrator, Philadelphia District Office, 
U.S. Securities and Exchange Commission, Mellon Independence Center, 701 Market 
Street, Suite 2000, Philadelphia, PA 19106. 
D. There shall be, pursuant to Section 308(a) of the Sarbanes-Oxley 
Act of 2002, a Fair Fund established for the funds described in Section IV.C.  Regardless 
of whether any such Fair Fund distribution is made, amounts ordered to be paid as civil 
money penalties pursuant to the Order shall be treated as penalties paid to the government 
for all purposes, including all tax purposes.  To preserve the deterrent effect of the civil 
penalty, Putnam agrees that it shall not, after offset or reduction in any Related Investor 
Action based on Putnam’s payment of disgorgement in this action, further benefit by 
offset or reduction of any part of Putnam’s payment of a civil penalty in this action 
("Penalty Offset").  If the court in any Related Investor Action grants such a Penalty 
Offset, Putnam agrees that it shall, within 30 days after entry of a final order granting the 
Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 
Penalty Offset to the United States Treasury or to a Fair Fund, as the Commission directs.  
Such a payment shall not be deemed an additional civil penalty and shall not be deemed 
to change the amount of the civil penalty imposed against Putnam in this proceeding.  For 
purposes of this paragraph, a "Related Investor Action" means a private damages action 
brought against Putnam by or on behalf of one or more investors based on substantially 
the same facts as alleged in the Order instituted by the Commission in this proceeding. 
E. Putnam shall comply with the undertakings enumerated in Section 
III.31 above. 
By the Commission. 
                                                                        Jonathan                                                                        G.                                                                        Katz                                                                        
       Secretary 
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UNITED STATES OF AMERICA 

Before the 


SECURITIES AND EXCHANGE COMMISSION 


INVESTMENT ADVISERS ACT OF 1940 
Release No. 2370 / March 23, 2005 

INVESTMENT COMPANY ACT OF 1940 
Release No. 26788 / March 23, 2005 

ADMINISTRATIVE PROCEEDING 
File No. 3-11868 

In the Matter of 

PUTNAM INVESTMENT 
MANAGEMENT, LLC, 

Respondent. 

ORDER INSTITUTING 
ADMINISTRATIVE AND CEASE-
AND-DESIST PROCEEDINGS, 
MAKING FINDINGS, AND 
IMPOSING REMEDIAL SANCTIONS 
AND A CEASE-AND-DESIST ORDER 
PURSUANT TO SECTIONS 203(e) 
AND 203(k) OF THE INVESTMENT 
ADVISERS ACT OF 1940 AND 
SECTIONS 9(b) AND 9(f) OF THE 
INVESTMENT COMPANY ACT OF 
1940 

I. 

The Securities and Exchange Commission ("Commission") deems it appropriate 
and in the public interest that public administrative and cease-and-desist proceedings be, 
and hereby are, instituted pursuant to Sections 203(e) and 203(k) of the Investment 
Advisers Act of 1940 ("Advisers Act") and Sections 9(b) and 9(f) of the Investment 
Company Act of 1940 ("Investment Company Act") against Putnam Investment 
Management, LLC ("Putnam" or "Respondent").   

II. 

In anticipation of the institution of these proceedings, Respondent has submitted 
an Offer of Settlement (the "Offer"), which the Commission has determined to accept.  
Solely for the purpose of these proceedings and any other proceedings brought by or on 
behalf of the Commission, or to which the Commission is a party, and without admitting 
or denying the findings herein, except as to the Commission’s jurisdiction over it and the 
subject matter of these proceedings, the Respondent consents to the entry of this Order 



 

   
 

 
  
 

 
 

     

 

 

 
 

 

 

 
 

 

                                                 
      

  
 

Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and 
Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Sections 203(e) 
and 203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the 
Investment Company Act of 1940 (“Order”) as set forth below. 

III. 

On the basis of this Order and Putnam's Offer, the Commission finds1 that: 

Respondent 

1. Putnam is the registered investment adviser to the over 100 
registered investment companies in the Putnam Fund Complex, which include retail 
mutual funds, registered closed-end funds and open-end mutual funds that underlie 
variable annuities (“Putnam Funds”).  Since 1971, Putnam has been registered with the 
Commission pursuant to Section 203(c) of the Advisers Act.  Putnam is owned by 
Putnam Investment Management Trust, a wholly owned subsidiary of Putnam LLC 
(“Putnam Investments”), a Delaware limited liability company that conducts business as 
Putnam Investments.  Putnam Investments is in turn owned by Putnam Investments Trust, 
a Massachusetts business trust. Putnam Investments Trust is a subsidiary of Marsh & 
McLennan Companies, Inc., which is a publicly owned holding company traded on the 
New York Stock Exchange, whose operating subsidiaries are international insurance 
brokers, investment managers and management consultants.  Putnam Investments is also 
the parent of Putnam Retail Management Limited Partnership ("PRM"), the Putnam 
Funds' distributor.  As of September 30, 2004, Putnam and its affiliates managed 
approximately $209 billion, of which $140 billion represented mutual fund assets under 
management and $69 billion represented assets under management for institutional 
clients. Putnam's principal offices are located in Boston, Massachusetts. 

2. During 2000 through November 2003, the chief executive officer of 
Putnam Investments was also the president of Putnam.  Putnam also had separate 
individuals who served as the "head" or "co-heads" of Putnam's operations, one of which 
was referred to within the Putnam organization as the Investment Division.  Putnam 
Investments had numerous direct and indirect subsidiaries, which included PRM, which 
was responsible for retail marketing of the Putnam Funds, the Putnam Fiduciary Trust 
Company, the transfer agent for the funds, as well as Putnam or the Investment Division, 
which performed the investment advisory functions for the Putnam Funds.  The operational 
heads of Putnam, PRM and the other affiliated companies reported to the chief executive 
officer of Putnam Investments.  The financial statements of the subsidiaries were included 
in consolidated financial statements of Putnam Investments Trust, the parent of Putnam 
Investments.  The various subsidiaries also shared administrative, finance and legal 
functions. 

The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on 
any other person or entity in this or any other proceeding. 

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Overview 

3. This matter involves the failure of Putnam to fully and effectively 
disclose material facts, including the conflicts of interests that arose from PRM's 
arrangements with broker-dealers for increased visibility within the broker-dealers' 
distribution systems.  Since at least January 1, 2000 through December 31, 2003, Putnam 
directed brokerage commissions on the Putnam Funds’ portfolio transactions to broker-
dealers for “shelf space” or heightened visibility within their distribution systems.  PRM, 
the Putnam Funds' distributor and an affiliate of Putnam, 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.  
Approximately twenty of those broker-dealers were paid in cash, while over 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.   

4. When Putnam directed fund brokerage commissions to broker-
dealers in connection with the Preferred Marketing Arrangements, its affiliate, PRM, did 
not use its own assets to pay for the services obtained under these arrangements.  Because 
the financial results of these entities along with other affiliates were combined within 
consolidated financial statements, the entire Putnam organization benefited from the use 
of fund assets to defray such expenses.  Putnam did not fully and effectively 
communicate this potential conflict of interest to the Putnam Funds’ Board of Trustees 
(the “Putnam Board” or “Trustees”). Putnam also did not fully and effectively 
communicate the potential conflict of interest presented for its Equity Trading group, 
which was faced with directing trades to specific broker-dealers designated by PRM 
while at the same time satisfying its best execution obligations. 

5. Nor did Putnam fully and effectively communicate the specific 
terms and details of those Preferred Marketing Arrangements that were being paid for with 
brokerage commissions to the Putnam Board or the Putnam Funds’ shareholders (“Putnam 
Shareholders”).  Instead, Putnam informed the Trustees, and the Statements of Additional 
Information (“SAIs”) and prospectuses for the funds disclosed, that Putnam had a policy of 
considering the sale of fund shares as a factor in selecting broker-dealers to execute fund 
portfolio trades.  Putnam did not fully and effectively advise the Trustees and the Putnam 
Funds' SAIs  and prospectuses did not fully and effectively disclose that PRM, its affiliate, 
had arrangements with those broker-dealers to direct fund brokerage commissions for 
marketing and distribution services pursuant to negotiated formulas with the broker-
dealers. 

PRM Had Preferred Marketing Arrangements with Broker-Dealers 

6. Since at least January 2000 through December 2003, PRM had 
over 80 relationships with certain broker-dealers pursuant to which the Putnam Funds 
received heightened visibility within the broker-dealers’ distribution or sales systems.  
The Putnam Funds' distributor, PRM, negotiated the Preferred Marketing Arrangements 

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on behalf of itself and Putnam.  At all times, PRM entered into these arrangements with 
the knowledge and approval of Putnam and Putnam Investments.     

7. The broker-dealers provided various types of distribution services 
in connection with these arrangements:  participation in meetings with registered 
representatives, primarily for the purpose of providing education and training regarding 
the Putnam Funds; the opportunity for the Putnam Funds to be mentioned in 
communications with a broker-dealer’s customers such as on a broker-dealer’s website; 
and often, placement on a “preferred list” at a broker-dealer. 

8. Various financial terms existed for participation in the broker-
dealers' Preferred Marketing programs based upon the formulas that PRM had 
individually negotiated. Typically, broker-dealers were paid anywhere from 10 to 35 
basis points (“bps”) on mutual fund gross or net sales and/or 1.5 to 15 bps on aged assets.  
These payments were in addition to existing payments, including dealer concessions, 
shareholder servicing payments, and payments for services that Putnam or an affiliate 
otherwise would provide. 

Putnam Directed Brokerage Commissions to Pay 
for Preferred Marketing Arrangements 

9. Although many broker-dealers sought Preferred Marketing 
payments in the form of cash or "hard dollars", PRM generally negotiated to direct 
brokerage commissions on the Putnam Funds' portfolio transactions. Putnam and PRM 
referred to these directed fund brokerage commissions as "soft dollars," "fund sales," or 
"commissions for sales."  In the ordinary course, to conduct portfolio transactions in 
connection with the Putnam Funds’ investment program, the Funds pay substantial 
amounts in brokerage commissions for execution services. In addition to the execution 
services, Putnam and its affiliates at times also receive soft dollar and other benefits from 
such commissions, including research and the payment of fund custody expenses.  During 
the relevant period, Putnam directed some commissions to broker-dealers to pay for 
Preferred Marketing Arrangements.   

10. Although PRM or Putnam Investments in some instances used its 
own cash, Putnam, PRM, and Putnam Investments preferred to direct fund brokerage 
commissions to pay for these arrangements.  Putnam's use of brokerage commissions 
directly benefited Putnam Investments and PRM by reducing their out-of-pocket 
expenses. It was also in Putnam’s financial interest to defray the expenses of an affiliate 
because of the positive impact on the Putnam organization’s operating income.  This 
preference was reflected in an internal presentation PRM created on revenue sharing that 
stated that PRM was "always pushing toward a soft dollar deal" when negotiating these 
arrangements.  The impact of this preference was that PRM had substantially more 
Preferred Marketing Arrangements in soft dollars than in hard dollars.  

11. From at least January 1, 2000 through December 31, 2003, Putnam 
directed fund brokerage commissions to over 60 broker-dealers for the Preferred 

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Marketing Arrangements.2  When PRM negotiated to direct brokerage commissions to 
pay for these arrangements, it sometimes negotiated to direct brokerage commissions of 
1.5 times (or some other negotiated multiple or conversion rate) the amounts requested by 
the broker-dealers in hard dollars. 

12. In order for Putnam to properly direct fund brokerage commissions 
for the arrangements, PRM communicated the commission amounts, but not the details of 
the basis point arrangements, for each of the broker-dealers to the Head of Putnam's 
Equity Trading ("Equity Trading"). These amounts, referred to as commission targets 
(“targets"), were primarily based upon the formulas negotiated with the broker-dealers.  
Equity Trading used the targets, subject to its own guidelines, including the requirement 
for the traders to seek best execution, to direct fund brokerage commissions to the broker-
dealers. 

13. Periodically, PRM communicated modified commission target 
amounts for individual brokers to Equity Trading based upon the priorities PRM set for 
these broker-dealers.  These modifications for individual brokers were sometimes 
increases and sometimes decreases to the targets.3  At times, PRM requested that Equity 
Trading increase trading with specific broker-dealers in order to more quickly meet target 
commission amounts with broker-dealers and provided suggested priority status among 
the various broker-dealers.  Equity Trading accepted the modifications, subject to 
Putnam's best execution policies. 

14. The management of Equity Trading periodically circulated to the 
traders a list prepared by PRM reflecting the directed brokerage target amounts for each 
broker-dealer, commission amounts paid to each broker-dealer during that year, the 
current balance of the target remaining, and the percentage of completion toward the 
target. Thus, Putnam's traders were made aware of the targets and placed trades with the 
fund-selling broker-dealers subject to the firm's best execution policies.  In addition to the 
fund sales targets, the traders were also made aware of other brokerage commission 
targets, including those for research. 

15. Putnam had a computerized system that categorized trades based 
upon the percentage of completion of the target.  Six such categories existed, including 
research, proprietary research, fund sales, custody, execution and client-directed.  For 
example, if Putnam placed a trade with a broker-dealer that had both fund sales and 
research targets, the computer would automatically assign the brokerage commission to 
the category for which the target was farthest away from completion.  If a trade or a 
certain portion of a trade was assigned to fund sales, the associated commission was used 

2 Based upon the Putnam Board’s direction, Putnam ceased directing brokerage to broker-dealers in 
connection with the sale of fund shares as of January 1, 2004. 

3 Due to declining overall commissions, between 2000 and 2003, the amount of commissions 
directed to fund-selling brokers declined each year and was never more than 12.5% of total available 
brokerage commissions.  In particular, PRM modified the targets substantially downward in 2002 and 
2003, and the Equity Trading department was not able to meet many of the individual targets during that 
time. 

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to pay for a Preferred Marketing arrangement.  In addition to assigning the trades on 
Putnam's internal records, Putnam's trading system also electronically communicated this 
information to the trading desks at the broker-dealers that executed the trades. 

16. Putnam used two methods to direct brokerage commissions for 
Preferred Marketing Arrangements:  by forwarding portfolio transactions directly to a 
broker-dealer with which it had such an arrangement (“distributing broker”); and through 
“step-out” or correspondent arrangements.  Putnam used the latter method in its effort to 
achieve best execution in circumstances in which the distributing broker’s execution 
capability did not satisfy Putnam's trading department's standards. 

PRM's Preferred Marketing Practices Were Not Always Consistent  

With Firm Guidelines
 

17. Putnam had a policy relating to placing portfolio transactions with 
broker-dealers who sold Putnam Funds in recognition of their sales of Putnam Funds’ 
shares. Its policy, as stated in the SAIs, and later the prospectuses, was that "Consistent 
with the Conduct Rules of the National Association of Securities Dealers, Inc. and 
subject to seeking the most favorable price and execution available and such other 
policies as the Trustees may determine, Putnam Management may consider sales of 
shares of the fund (and, if permitted by law, of the other Putnam funds) as a factor in the 
selection of broker dealers to execute portfolio transactions for the fund." 

18. Internally, PRM's policy was that amounts directed to broker-
dealers in consideration of fund sales were not obligations and therefore, directed 
brokerage arrangements should not be put into writing.  Also, within Putnam, guidance 
was given that agreements for the allocation of commissions could not be made. Putnam 
conveyed this understanding to the Putnam Board and repeatedly assured the Putnam 
Board that there were no agreements for commissions for sales and no firm amounts of 
commissions were promised to broker-dealers, but only that targets were set. 

19. PRM did not follow some of this guidance. For instance, PRM 
signed an agreement, entitled a "letter of understanding", along with a side letter with a 
broker-dealer regarding PRM's participation in the broker-dealer's preferred sales 
program.  Although the side letter stated that each transaction that generated such 
commissions would be carried out on a best execution basis and that the letter did not 
create any binding legal obligations, through this letter PRM nevertheless agreed to pay 
for its participation in the program with brokerage commissions.  Despite the firm's 
policy, Putnam approved PRM's signing of this letter of understanding. 

20. PRM also provided a few broker-dealers with letters confirming 
the negotiated basis point formulas for directing brokerage commissions.4  Again, 
Putnam approved the form of these letters.   

These letters also stated that they did not create any binding legal obligations. 

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Putnam Did Not Fully and Effectively Communicate its 
Directed Brokerage Practices to the Trustees 

21. Putnam did not fully and effectively communicate to the Putnam 
Board that it was directing fund brokerage commissions to over 60 broker-dealers to pay 
for PRM's Preferred Marketing Arrangements.  While Putnam communicated generally to 
the Trustees that broker-dealers were seeking financial support, Putnam did not fully and 
effectively disclose to the Trustees the existence of the arrangements with the broker-
dealers, the terms or details of the arrangements, or the preference to direct brokerage 
commissions, which were fund assets, rather than using PRM's or Putnam Investments' 
assets. 

22. In the process of providing the Board with information relevant to 
the annual review and approval of the management contract for the Putnam Funds, 
Putnam provided a memorandum to the Board describing "fall-out benefits" received by 
both Putnam and its affiliates. Among other things, the memorandum identified that 
Putnam conducts trading for the Funds, and in connection with that trading, Putnam 
received research related services from broker-dealers in consideration of those 
commissions.  While the memorandum reiterated the policy that Putnam may consider 
sales of fund shares as a factor in placing trades, it did not discuss the Preferred 
Marketing Arrangements nor did it identify the distribution services received with the 
Funds' brokerage commissions.  

23. Putnam told the Brokerage and Custody Committee of the Board of 
Trustees, which was charged with reviewing the breakdown of the brokerage commissions 
on portfolio transactions into the six categories, that Putnam "considered the sale of fund 
shares" when selecting broker-dealers to execute fund portfolio transactions.  Putnam also 
disclosed to the Trustees the amounts of brokerage commissions directed to the top 25 
fund-selling broker-dealers in consideration of fund sales.  Putnam also told the Trustees 
semi-annually that “Putnam Mutual Funds establishes commission targets to recognize the 
efforts of broker dealers based on their respective sales efforts.”  Putnam did not, however, 
fully and effectively disclose that these amounts were actually used to pay for Preferred 
Marketing Arrangements negotiated by PRM.   

Putnam Did Not Fully and Effectively Disclose To The Trustees 

The Potential Conflicts Of Interest
 

24. As a fiduciary, Putnam had a duty to disclose fully and effectively to 
the Putnam Board all potential conflicts of interest created by the use of fund brokerage 
commissions, yet it failed to do so. 

25. The use of brokerage commissions to pay for participation in 
Preferred Marketing Arrangements created two potential conflicts of interest for Putnam.  
The first related to the use of fund assets to satisfy what would otherwise have been 
obligations of PRM.  Because PRM and Putnam were under common control, Putnam 
benefited from the use of fund assets to defray the expenses of its affiliate, PRM.  Yet, 
Putnam failed to fully and effectively disclose this conflict to the Trustees.  

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26. The second potential conflict was the one that Putnam's Equity 
Trading group faced while trying both to satisfy its best execution obligations and to direct 
trades to specific broker-dealers identified by PRM.  Specifically, Equity Trading had to 
determine:  which broker-dealers to place trades with and what commission rates to pay; 
whether to use single stock trades or program trading; whether to reduce the number of 
broker-dealers with which Putnam traded; and whether these relationships affected the 
transaction costs of the directed trades and Equity Trading's objectives to reduce overall 
transaction costs.    

Putnam Did Not Adequately Disclose its Directed 

Brokerage Practices to Putnam Shareholders
 

27. Putnam was primarily responsible for ensuring that the Putnam 
Funds’ Prospectuses and SAIs were in compliance with the requirements of Form N-1A in 
describing Putnam’s trading practices for the Putnam Funds.5 

28. The information the Commission requires investment companies to 
disclose in prospectuses and SAIs is set forth in Form N-1A.  Specifically, Item 16(c)6 of 
the Form N-1A requires a description in the SAI of “how the Fund will select brokers to 
effect securities transactions for the Fund” and requires that “[i]f the Fund will consider the 
receipt of products or services other than brokerage or research services in selecting 
brokers, [the Fund should] specify those products or services.” 

29. From at least January 1, 2000 to December 31, 2003, Putnam 
Funds’ SAIs7, disclosed that Putnam may consider sales of shares of the Putnam Funds as a 
factor in the selection of broker-dealers to execute the Putnam Funds’ portfolio 
transactions.  The SAIs did not make the distinction, however, between directing 
commissions in “consideration of fund sales” and paying for negotiated arrangements with 
brokerage commissions.  The SAIs did not adequately disclose to shareholders that PRM 
had entered into arrangements for heightened visibility within broker-dealers’ distribution 
systems for which Putnam, subject to best execution, directed brokerage commissions, the 
amounts of which were primarily determined by negotiated formulas.   

30. As a result of the conduct described above, Putnam willfully8: 

5 The Putnam Funds’ SAIs are incorporated by reference into the prospectuses. 

6 As of July 4, 2004, the relevant item of the Form N-1A has been changed from Item 16(c) to Item 
15(c). 

7 For a portion of 2003, the prospectuses also contained this disclosure. 

8 “Willfully” as used in this Order means intentionally committing the act which constitutes the 
violation. See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 
1965).  There is no requirement that the actor also be aware that he is violating one of the Rules or Act. 

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a.	 Violated Section 206(2) of the Advisers Act, which 
provides that it is “unlawful for any investment adviser, by 
use of the mails or any means or instrumentality of 
interstate commerce, directly or indirectly . . . to engage in 
any transaction, practice, or course of business which 
operates as a fraud or deceit upon any client or prospective 
client.” 

b.	 Violated Section 34(b) of the Investment Company Act, 
which provides in pertinent part that it is “unlawful for any 
person to make any untrue statement of a material fact in 
any registration statement . . . filed or transmitted pursuant 
to” the Investment Company Act and to “omit to state 
therein any fact necessary in order to prevent the statements 
made therein, in the light of the circumstances under which 
they were made, from being materially misleading.” 

Undertakings 

31. 	 Putnam undertakes the following: 

a.	 Putnam shall, within 90 days from the date of entry of the 
Order, require a senior level employee to implement and 
maintain the following written compliance policies and 
procedures: 

i.	 Procedures designed to ensure that when the 
Putnam trading desk places trades with a broker-
dealer that also sells fund shares, the person 
responsible for selecting such broker-dealer does 
not take into account the broker-dealer’s promotion 
or sale of Putnam Fund shares, subject to 
modification only in the event that the independent 
members of the Putnam Board determine that such 
modification is in the best interest of the Putnam 
Funds; 

ii.	 Putnam will establish guidelines for entering into 
revenue sharing arrangements9 between Putnam or 
PRM and broker-dealers and other intermediaries in 

As used in Paragraph 31(a) herein, "revenue sharing arrangements" are arrangements by which 
payments are made to broker-dealers from the assets of Putnam or PRM relating to the sale of the Putnam 
Funds and/or assets maintained in the Putnam Funds other than (i) dealer concessions, 12b-1 fees, 
shareholder servicing payments, or subaccounting payments or (ii) non-cash compensation arrangements as 
expressly permitted by NASD Rule 2820(g)(4) or Rule 2830(l)(5) (or any successor to either such rule). 

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respect of the sale of fund shares, which shall not be 
inconsistent with the terms of the Order.  The 
language of the guidelines must be presented to the 
Putnam Board and approved by Putnam’s chief legal 
officer.  The guidelines shall require PRM to use its 
best efforts to enter into written contracts 
memorializing the revenue sharing arrangements 
between PRM and the broker-dealer or other 
intermediary.  The documentation of each revenue 
sharing arrangement in respect of fund sales will set 
forth the payment arrangement and the services that 
the broker-dealer or other intermediary will provide.  
The documentation of each revenue sharing 
arrangement shall also include a request from 
Putnam or PRM that the broker-dealer or other 
intermediary provide point of sale disclosure 
documents consistent with then current legal 
requirements; 

iii.	 All revenue sharing arrangements in respect of the 
sale of fund shares must be approved in writing by 
Putnam’s chief legal officer, or his delegate, and the 
form of such arrangements, or any material 
deviation therefrom, presented to the Putnam Board 
prior to implementation; 

iv.	 Subject to the Putnam Board’s approval, Putnam 
will prepare disclosures for the Putnam Funds to 
include in their prospectuses or SAIs information 
about payments made by Putnam or PRM to broker-
dealers or other intermediaries in respect of the sale 
of fund shares in addition to dealer concessions, 
shareholder servicing payments, and payments for 
services that Putnam or an affiliate otherwise would 
provide, such as sub-accounting, and state that such 
payments are intended to compensate broker-
dealers for various services, including without 
limitation, placement on the broker-dealers’ 
preferred or recommended fund list, access to the 
broker-dealers’ registered representatives, 
assistance in training and education of personnel, 
marketing support, and other specified services; 

v.	 At least once per year, Putnam will make 
presentations to the Communication, Service and 
Marketing Committee of the Putnam Board (or 

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other committee performing similar functions or 
designated by the Putnam Board, or to the Putnam 
Board), including an overview of Putnam's revenue 
sharing arrangements and policies, any material 
changes to such policies, the number and types of 
such arrangements, the types of services received, 
the identity of participating broker-dealers or other 
intermediaries and the total dollar amounts paid to 
such broker-dealers and intermediaries.  Putnam 
shall also provide the Committee with a summary 
quarterly report setting forth amounts paid by 
Putnam for such arrangements and the broker-
dealers and intermediaries that received such 
payments; and 

vi.	 At least once per year, for at least five years, 
Putnam shall provide the Brokerage and Custody 
Committee of the Putnam Board (or other 
committee performing similar functions) with a best 
execution analysis.  In such analysis, Putnam shall 
include lists of:  (a) the top ten executing broker-
dealers used by Putnam; and (b) the top ten selling 
broker-dealers conducting business with PRM. 

b.	 Within 10 days of the date of entry of the Order: 

i.	 Putnam shall develop a Distribution Plan to 
distribute fairly and proportionately to the Putnam 
Funds the total disgorgement and penalty ordered in 
paragraph IV.C. below based upon the amounts of 
brokerage commissions in 2000 through 2003 
categorized for “Fund Sales” attributed to each 
Putnam Fund.  Putnam shall submit the Distribution 
Plan to the Putnam Board and the Commission 
staff. The Distribution Plan must be acceptable to 
the Commission staff. 

ii.	 Putnam shall provide a written certification to the 
Commission staff of the accuracy of the 
calculations relating to the Distribution Plan. 

c.	 Within 20 days of the date of entry of the Order, Putnam 
shall submit the Distribution Plan for the administration 
and distribution of disgorgement and penalty funds 
pursuant to Rule 1101 of the Commission’s Rules of 
Practice. 

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d.	 Following a Commission order approving the final 
Distribution Plan, as provided in Rule 1104 of the 
Commission’s Rules of Practice, Putnam shall take all 
necessary and appropriate steps to administer the final 
Distribution Plan, including overseeing the actual 
distribution of the monies to the Putnam Funds within 10 
days of the Commission’s approval of the Distribution 
Plan. 

e.	 Within 5 days of the distribution of the monies to the 
Putnam Funds, Putnam shall provide a written certification 
to the Commission staff of the amount paid to each Putnam 
Fund and the date of payment.  

f.	 In In re Putnam Investment Management, LLC, Investment 
Advisers Act Rel. No. 2192, 2003 WL 22683975 (Nov. 13, 
2003), Putnam agreed to various undertakings including 
those requiring it to retain an Independent Compliance 
Consultant to conduct a comprehensive review of Putnam’s 
supervisory, compliance, and other procedures designed to 
prevent and detect breaches of fiduciary duty, breaches of 
the Code of Ethics and federal securities law violations by 
Putnam and its employees.  Putnam further agrees to direct 
the Consultant also to review the completeness of Putnam’s 
then-current disclosures concerning revenue sharing 
arrangements to the Putnam Board and Putnam 
shareholders. 

   Extension of Time 

g.	 For good cause shown, the Commission's staff may extend 
any of the procedural dates set forth above. 

IV. 

In view of the foregoing, the Commission deems it appropriate and in the public 
interest to impose the sanctions specified in the Offer submitted by Putnam. 

Accordingly, it is hereby ORDERED that: 

A. 	Putnam is censured. 

B. Putnam shall cease and desist from committing or causing any 
violations and any future violations of Section 206(2) of the Advisers Act and Section 34(b) 
of the Investment Company Act. 

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C. Putnam shall within 5 days of the entry of the Order, pay 
disgorgement in the amount of $1 (“Disgorgement”) and a civil money penalty in the 
amount of $40 million (“Penalty”), for a total payment of $40,000,001.  Such payment 
shall be: (1) made by wire transfer, United States postal money order, certified check, 
bank cashier's check or bank money order; (2) made payable to the Securities and 
Exchange Commission; (3) hand-delivered or mailed to the Office of Financial 
Management, Securities and Exchange Commission, Operations Center, 6432 General 
Green Way, Alexandria, Stop 0-3, VA  22312; and (4) submitted in connection with a 
cover letter that identifies Putnam as a Respondent in these proceedings, the file number 
of these proceedings, a copy of which cover letter and wire confirmation, money order or 
check shall be sent to Ari Gabinet, District Administrator, Philadelphia District Office, 
U.S. Securities and Exchange Commission, Mellon Independence Center, 701 Market 
Street, Suite 2000, Philadelphia, PA 19106. 

D. There shall be, pursuant to Section 308(a) of the Sarbanes-Oxley 
Act of 2002, a Fair Fund established for the funds described in Section IV.C.  Regardless 
of whether any such Fair Fund distribution is made, amounts ordered to be paid as civil 
money penalties pursuant to the Order shall be treated as penalties paid to the government 
for all purposes, including all tax purposes. To preserve the deterrent effect of the civil 
penalty, Putnam agrees that it shall not, after offset or reduction in any Related Investor 
Action based on Putnam’s payment of disgorgement in this action, further benefit by 
offset or reduction of any part of Putnam’s payment of a civil penalty in this action 
("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty 
Offset, Putnam agrees that it shall, within 30 days after entry of a final order granting the 
Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 
Penalty Offset to the United States Treasury or to a Fair Fund, as the Commission directs.  
Such a payment shall not be deemed an additional civil penalty and shall not be deemed 
to change the amount of the civil penalty imposed against Putnam in this proceeding.  For 
purposes of this paragraph, a "Related Investor Action" means a private damages action 
brought against Putnam by or on behalf of one or more investors based on substantially 
the same facts as alleged in the Order instituted by the Commission in this proceeding. 

E. Putnam shall comply with the undertakings enumerated in Section 
III.31 above. 

By the Commission. 

 Jonathan G. Katz 
       Secretary  

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