Putnam Investments, Inc. Profit Sharing Retirement Plan
Financial Statements for the Years Ended December 31, 1998 and 1997 and
Supplemental Schedules as of and for the Year Ended December 31, 1998
and Independent Auditors' Report
PUTNAM INVESTMENTS, INC.
PROFIT SHARING RETIREMENT PLAN
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1997:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-10
SUPPLEMENTAL SCHEDULES AS OF AND FOR THE YEAR ENDED DECEMBER 31,
1998:
Item 27a - Schedule of Assets Held for Investment Purposes 11-12
Item 27d - Schedule of Reportable Transactions 13
Schedules required under the Employee Retirement Income Security
Act of 1974, other than the schedules listed above, are omitted
because of the absence of the conditions under which the schedules
are required.
INDEPENDENT AUDITORS' REPORT
To the Trustees of
Putnam Investments, Inc.
Profit Sharing Retirement Plan:
We have audited the accompanying statements of net assets
available for benefits of Putnam Investments, Inc. Profit Sharing
Retirement Plan (the "Plan") as of December 31, 1998 and 1997, and
the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are
the responsibility of the Plan's Trustees. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the Plan's net assets available for benefits as
of December 31, 1998 and 1997, and the changes in its net assets
available for benefits for the years then ended in conformity with
generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on
the basic financial statements taken as a whole. The supplemental
schedules listed in the Table of Contents are presented for the
purpose of additional analysis and are not a required part of the
basic financial statements, but are supplementary information
required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These schedules are the responsibility of
the Plan's Trustees. Such schedules have been subjected to the
auditing procedures applied in our audit of the basic financial
statements and, in our opinion, are fairly stated in all material
respects when considered in relation to the basic financial
statements taken as a whole.
April 2, 1999
PUTNAM INVESTMENTS, INC.
PROFIT SHARING RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
1998 1997
ASSETS:
Investments, at fair value:
Putnam Voyager Fund $35,623,928 $28,396,873
Putnam Money Market Fund 18,538,532 21,582,741
Putnam New Opportunities Fund 34,385,062 27,000,462
The Putnam Fund for Growth and Income 27,851,669 24,820,174
The George Putnam Fund of Boston 16,368,139 14,246,496
Other equity funds 128,138,106 104,663,031
Bond funds 27,681,830 20,035,438
Marsh & McLennan Companies, Inc.
common stock 4,667,975 2,509,774
Participant loans 6,984,953 5,818,327
Investments, at contract value - Guaranteed Investment Products -
Putnam Fiduciary Trust Co. Stable Value Fund (a Collective
Investment Trust) 17,009,737 12,628,190
Total investments 317,249,931 261,701,506
Contributions receivable 24,167,089 14,890,655
NET ASSETS AVAILABLE FOR BENEFITS $341,417,020 $276,592,161
See notes to financial statements.
PUTNAM INVESTMENTS, INC.
PROFIT SHARING RETIREMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
ADDITIONS:
Investment activity:
Net appreciation in fair value of
investments $21,725,792 $20,561,744
Dividend income 16,831,654 16,629,201
Interest income 1,413,928 1,151,252
Total investment income 39,971,374 38,342,197
Contributions:
Employer 22,844,380 17,656,128
Employee 18,311,896 15,310,699
Total additions 81,127,650 71,309,024
DEDUCTIONS - Benefits paid to participants 16,302,791 11,343,798
NET INCREASE 64,824,859 59,965,226
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 276,592,161 216,626,935
End of year $341,417,020 $276,592,161
See notes to financial statements.
PUTNAM INVESTMENTS, INC.
PROFIT SHARING RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following description of Putnam Investments, Inc. Profit
Sharing Retirement Plan (the "Plan") is provided for general
information purposes only. Participants should refer to the plan
document for a more complete description of the Plan's provisions.
General - The Plan, as amended and restated January 1, 1989, is a
defined contribution plan sponsored by Putnam Investments, Inc.
("Putnam") and its subsidiaries (the "Company") which is a wholly
owned subsidiary of Marsh & McLennan Companies, Inc. ("MMC") for
the benefit of its employees and is intended to qualify as a
profit-sharing plan under Section 401(a) of the Internal Revenue
Code (the "Code") and to constitute a qualified cash or deferred
arrangement under Section 401(k) of the Code. The Plan is subject
to the provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA").
Investment Programs - The Plan allows each participant to elect to
have employer contributions and reallocated forfeitures invested
in one or more of the following authorized investment vehicles:
(1) Any one or a combination of the open-end management investment
companies, excluding tax-exempt income funds, for which a
subsidiary of Putnam acts as an investment adviser.
(2) Prior to January 1997, any one or a combination of contracts
with insurance companies which guarantee principal and interest at
a fixed rate. Subsequent to January 1997, the only guaranteed
investment contract ("GIC") product offered is the PFTC Stable
Value Fund.
(3) MMC common stock (MMC is the parent company of Putnam).
(4) Other investment options approved by the Board of Directors of
Putnam, the Trustees of the Plan (the "Trustees") and the Chief
Executive Officer of MMC. There were no investments in this
option at December 31, 1998 or 1997.
Employer contributions and forfeitures must generally be allocated
with apportionments to be no less than 1% per investment.
Participants may also elect to have their voluntary contributions
invested in any one or more of the authorized investments noted
above in (1), (2), (3) and (4), with apportionments to be at least
1% to any one investment.
With proper notification, participants may elect to change their
investment in either their participation or voluntary accounts up
to once a day. Prior to April 1, 1997, the limit was twice during
a fiscal quarter, not to exceed six investment changes per year.
1. DESCRIPTION OF THE PLAN (CONTINUED)
Contributions - The Plan covers substantially all of the employees
of the Company who have adopted the Plan. Employer contributions
are determined at the discretion of each company's Board of
Directors. Contributions may not exceed the amount permitted as a
deduction under the applicable provisions of the Code. Employer
contributions, by company, for 1998 and 1997 were as follows:
Employer Contributions
1998 1997
Putnam Investments, Inc. $1,912,469 $1,407,250
Putnam Investment Management, Inc. 4,162,998 3,700,099
The Putnam Advisory Company, Inc. and
Subsidiary 966,193 785,833
Putnam Fiduciary Trust Company 12,153,682 8,786,376
Putnam Mutual Funds Corp. and Subsidiary 3,649,038 2,976,570
Total $22,844,380 $17,656,128
Voluntary employee contributions are accepted within certain
limits as defined in the Plan. Participants making contributions
are not allowed to withdraw any appreciation on such contributions
before termination of employment, but may withdraw their
contributions, subject to certain restrictions. Employee
contributions, by company, for 1998 and 1997 were as follows:
Employee Contributions
1998 1997
Putnam Investments, Inc. $1,522,657 $1,238,833
Putnam Investment Management, Inc. 2,761,763 1,833,878
The Putnam Advisory Company, Inc. and
Subsidiary 2,189,109 1,059,251
Putnam Fiduciary Trust Company 9,014,273 9,028,592
Putnam Mutual Funds Corp. and Subsidiary 2,824,094 2,150,145
Total $18,311,896 $15,310,699
Forfeitures - Forfeitures of invested employer contributions are
reallocated among the remaining eligible participants one year
after the fiscal year in which the forfeitures occur.
Reallocation of forfeitures amounted to $920,050 and $1,097,096 in
1998 and 1997, respectively.
Participant Accounts and Vesting - The Plan provides that the
market value of investments in participant accounts shall be
determined each business day. Unrealized appreciation or
depreciation, equal to the difference between actual cost and the
quoted market price of the investments at the applicable valuation
date, is recognized in determining the value of each fund. The
change in unrealized appreciation or depreciation, investment
income received and realized gains or losses on investments sold
or distributed are allocated to participants' accounts based on
each participant's proportionate interest in the investment.
Employer contributions and forfeitures are allocated annually
based on a uniform percentage of eligible earnings per
participant. This percentage was 15% in both 1998 and 1997.
1. DESCRIPTION OF THE PLAN (CONTINUED)
Participant Accounts and Vesting (Continued) - An employee is
eligible to become a participant under the profit-sharing portion
of the Plan upon the completion of twelve months of continuous
service. An employee is eligible to become a participant in the
salary deferral portion of the Plan upon commencement of
employment. A participant must be employed on the last day of the
Plan's fiscal year (December 31) to be eligible for their portion
of the employer's contribution for that year. The vesting of
participants, other than voluntary and rollover contributions, is
as follows:
Vested Interest
Years of continuous service:
Less than two None
Two but less than three 25 %
Three but less than four 50 %
Four but less than five 75 %
Five or more 100 %
If a participant has reached age 60, died or become disabled
100 %
Participants are automatically fully vested in their voluntary and
rollover contributions.
Distributions are based on the vested portion of the participant's
account valuation as of the liquidation date coinciding with or
following the next valuation date after the individual ceases to
be a participant. Such distributions are made within a reasonable
period after the individual ceases to be a participant, but not
later than sixty days after the close of the fiscal year. The
Plan generally allows terminated participants to maintain their
accounts in the Plan, but such accounts do not share in
contributions and forfeiture reallocations. The value of these
accounts will continue to be determined each business day.
Salary Savings Contributions - It is the intention of the Trustees
that the salary deferral portion of the Plan be qualified under
Section 401(k) of the Code. The terms of the salary savings
agreement provide that the participants' earnings contribution to
the Plan will be deducted from their payroll, and that the
employer shall contribute this amount to the Plan on behalf of the
participants. Investments into the various investment vehicles
are at the discretion of the individual participant. The market
value of assets relating to the salary savings program at December
31, 1998 and 1997 was $62,770,189 and $46,308,861, respectively.
Loans - Upon the approval of the Loan Committee, appointed by the
plan administrator, participants of the Plan may borrow from their
accounts, to alleviate financial need as defined by the Plan, an
amount which, when added to all other loans to the participant,
would not exceed the lesser of (1) a maximum borrowing limit of
$50,000 or (2) 50% of the vested balance of the participant's
account. All loans shall be secured by the participant's account
and will be repaid through payroll deductions according to a fixed
repayment schedule which includes interest at a rate equal to the
prime rate at the time the loan originated. Loans outstanding at
December 31, 1998 and 1997 were $6,984,953 and $5,818,327,
respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting - The accompanying financial statements of
the Plan have been prepared on the accrual basis of accounting.
Investment transactions are recorded on the trade-date basis.
Dividend income is recorded on the ex-dividend date. Interest
income is recorded as earned.
Investment Valuation - Investments in equity securities and mutual
funds are stated at fair value as determined by quoted market
prices based on the last reported sales prices, or the reported
net asset value per share on the last business day of the plan
year. Investments in collective investment trusts are carried at
contract value (cost plus accrued interest), which approximates
fair value. Participant loans are recorded at cost which
approximates market value.
Administrative Expenses - Expenses of the Plan have been paid by
the Company, but such payment is at their discretion.
Benefits - Benefits to participants are recorded when paid.
Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires the Plan's
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
3. INVESTMENTS
Investments that represent 5% or more of total plan assets at
December 31 are as follows:
1998 1997
Putnam Voyager Fund $35,623,928 $28,396,873
Putnam New Opportunities Fund 34,385,062 27,000,462
The Putnam Fund for Growth and Income 27,851,669 24,820,174
Putnam Money Market Fund 18,538,532 21,582,741
The George Putnam Fund of Boston - 14,246,496
The Plan's funds are invested in the following investment vehicles
that represent 5% or more of total plan assets:
Putnam Voyager Fund - Funds are invested primarily in equity
securities of companies which, in the opinion of the Fund's
investment manager, have potential for capital appreciation
significantly greater than that of the market averages.
Putnam New Opportunities Fund - Funds are invested in equity
securities of companies which, in the opinion of the Fund's
investment manager, possess above-average, long-term growth
potential.
The Putnam Fund for Growth and Income - Funds are invested
primarily in equity securities that offer potential for both
capital growth and current income.
Putnam Money Market Fund - Funds are invested in various types of
high quality money market instruments.
The George Putnam Fund of Boston - Funds are invested in a
diversified list of securities including equity securities, fixed-
income securities, and negotiable instruments that offer potential
for both capital growth and current income.
Putnam Fiduciary Trust Co. Stable Value Fund - Collective
investment trust which invests primarily in high quality annuity
(or similar) contracts issued by insurance companies and
certificates of deposit (or similar contracts) issued by banks.
In addition, to provide liquidity, a portion of the Fund's assets
are invested in high quality money market investments. The Fund
is a component of the Guaranteed Investment Products category.
During 1998 and 1997, the Plan's investments (including gains and
losses on investments bought and sold, as well as held during the
year) appreciated in value by $21,725,792 and $20,561,744,
respectively, as follows:
1998 1997
Investments, at fair value, based on quoted market prices:
Putnam sponsored mutual funds* $21,170,241 $19,998,097
MMC common stock* 555,551 563,647
Total $21,725,792 $20,561,744
* Putnam and MMC are parties-in-interest to the Plan.
43,453,582 41,125,485
4. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has
the right under the Plan to discontinue its contributions at any
time and to terminate the Plan subject to the provisions of ERISA.
In the event of plan termination, participants will become 100%
vested in their accounts.
5. SUBSEQUENT DISTRIBUTIONS
At December 31, 1998 and 1997, terminated employees had requested
distributions of the vested portion of their accounts totaling
$495,396 and $637,652, respectively. The sources of these
distributions by investment type are as follows:
Source
1998 1997
Mutual funds $387,455 $559,081
Guaranteed Investment Products 107,941 78,571
$495,396 $637,652
6. TAX STATUS OF THE PLAN
The Plan obtained its latest determination letter on March 29,
1996 in which the Internal Revenue Service stated that the Plan,
as then designed, was in compliance with the applicable
requirements of the Code. The plan administrator believes that
the Plan is currently designed and being operated in compliance
with the applicable requirements of the Code. Accordingly, no
provision for income taxes has been included in the Plan's
financial statements.
7. FUND INFORMATION
Investment activity, contributions, and benefits paid to
participants for the years ended December 31 are as follows:
<TABLE><CAPTION>
1998
<S> <C> <C> <C> <C> <C> <C>
Interest
Employer/
Net Appreciation Benefits in Fair Employee Paid Income Contributions
(Depreciation) Value of Dividend to Investment Income Contributions Participants
Participant-Directed:
Putnam Voyager Fund $4,683,297 $2,359,722 $ - $ - $1,688,668 $1,762,911
Putnam Money Market Fund - 904,282 - - 2,519,029 3,271,644
Putnam New Opportunities Fund
5,739,469 1,060,119 - - 1,843,093 1,388,647
The Putnam Fund for Growth and Income
1,282,111 2,572,967 - - 1,028,523 1,214,547
The George Putnam Fund of Boston
62,959 1,543,142 - - 304,053 545,119
Other equity funds 11,764,462 5,870,726 - - 9,706,831 4,873,692
Bond funds (2,362,057) 2,395,070 - - 533,424 80,392
Guaranteed Investment Products - - 876,903 - 330,266 1,580,371
Marsh & McLennan Companies, Inc.
common stock 555,551 101,005 - - 358,009 97,237
Participant loans - - 537,025 - - 688,231
Nonparticipant-Directed:
Putnam Money Market Fund - 24,621 - - - -
Contributions receivable - net - - - 22,844,380 - -
Total $21,725,792 $16,831,654 $1,413,928 $22,844,380 $18,311,896 $16,302,791
1997
Participant-Directed:
Putnam Voyager Fund $4,242,357 $1,668,545 $ - $ - $1,234,222 $1,468,150
Putnam Money Market Fund - 707,265 - - 1,587,964 1,074,153
Putnam New Opportunities Fund 4,409,215 587,356 - - 2,045,480 1,101,709
The Putnam Fund for Growth and Income
1,935,134 3,275,427 - - 1,185,410 2,382,224
The George Putnam Fund of Boston
1,154,853 1,342,723 - - 219,951 200,975
Putnam OTC Emerging Growth Fund
1,138,952 - - - 978,546 422,354
Other equity funds 6,814,649 7,183,192 - - 7,250,224 3,113,570
Bond funds 302,937 1,574,173 - - 561,178 563,159
Guaranteed Investment Products
- - 793,389 - 107,548 539,564
Marsh & McLennan Companies, Inc.
common stock 563,647 49,733 - - 140,177 67,821
Participant loans - - 357,863 - - 410,119
Nonparticipant-Directed:
Putnam Money Market Fund - 240,787 - 3,856,400 - -
Contributions receivable - net
- - - 13,799,728 - -
Total $20,561,744 $16,629,201 $1,151,252 $17,656,128 $15,310,699 $11,343,798
</TABLE>
* * * * * *
PUTNAM INVESTMENTS, INC.
PROFIT SHARING RETIREMENT PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
(a) (b) Identity of Issue (c) Number of Shares (d) Cost (e) Current Value
MUTUAL FUNDS: *Putnam Capital Appreciation Fund 393,025.851 $7,267,133 $8,905,966
*Putnam American Gov't Income Trust 154,080.408 1,385,027 1,385,183
*Putnam Growth Opportunities 150,870.045 2,421,411 2,975,157
*Putnam Diversified Equity Trust 50,700.847 618,605 672,800
*Putnam High Quality Bond Fund 23,685.817 238,375 241,358
*Putnam Research Fund 100,490.778 1,353,985 1,523,440
*Putnam Global Governmental Income Trust 137,591.962 1,997,871 1,779,064
*Putnam Voyager Fund II 200,536.560 3,409,822 4,552,180
*Putnam International Growth & Income 100,258.770 1,082,149 1,110,867
*Putnam Emerging Markets Trust 226,497.933 2,180,384 1,594,545
*Putnam International Voyager Trust 170,955.353 2,037,652 2,340,379
*Putnam Europe Growth Fund 228,819.531 4,064,422 4,976,825
*Putnam Strategic Income Trust 8,323.031 68,856 64,670
*Putnam Asia Pacific Growth Fund 284,313.079 3,370,510 2,621,367
*Putnam High Yield Total Return 62,140.258 518,950 467,916
*Putnam Global Growth & Income 5,127.884 67,866 66,765
*Putnam Global Natural Resources Fund 88,006.691 1,520,903 1,404,587
*Putnam New Value Fund 285,191.996 3,767,528 3,838,684
*Putnam Int'l New Opportunities Fund 552,388.854 6,366,935 7,131,340
*Putnam Money Market Fund 18,538.532 18,538,532 18,538,532
*Putnam Health Sciences Trust 147,020.203 6,734,199 9,413,704
*Putnam Utilities Growth and Income Fund 98,469.772 1,126,122 1,379,562
*Putnam Capital Opportunities Fund 65,601.759 514,608 531,374
*Putnam High Yield Trust II 362,245.524 2,838,635 2,840,005
*The George Putnam Fund of Boston 905,317.405 13,687,633 16,368,139
*The Putnam Fund for Growth and Income 1,357,293.795 22,568,382 27,851,669
*Putnam Global Growth Fund 704,332.723 6,691,938 8,902,766
*Putnam Income Fund 459,158.551 3,193,986 3,181,969
*Putnam New Opportunities Fund 581,418.025 20,422,724 34,385,062
*Putnam Voyager Fund 1,598,919.585 22,891,361 35,623,928
*Putnam Vista Fund 1,089,027.113 10,672,388 14,418,719
*Putnam U.S. Government Income Trust 148,748.180 1,965,494 1,951,576
*Putnam Asset Allocation Fund - Growth 120,252.659 1,377,519 1,646,259
*Putnam Asset Allocation Fund - Balanced 184,159.882 1,964,620 2,211,760
*Putnam Asset Allocation Fund - Conserv. 38,324.853 394,718 398,195
*Putnam Diversified Income Trust 165,731.668 2,016,792 1,907,572
*Putnam OTC Emerging Growth Fund 864,689.685 11,588,310 15,028,330
*Putnam International Growth Fund 410,145.800 6,469,671 7,907,611
*Putnam Investors Fund 901,880.799 9,459,409 13,401,949
*Putnam Intermediate U.S. Gov Income Fund 185,157.008 222,113 925,785
*Putnam Equity Income Trust 294,785.392 4,407,795 4,598,652
*Putnam High Yield Trust 424,966.511 4,602,387 4,598,138
*Putnam Growth and Income Fund II 330,352.539 4,226,405 4,611,721
*Putnam Balanced Retirement Fund 34,364.909 370,797 370,797
*Putnam Convertible Income-Growth Trust 253,251.672 4,892,822 4,920,680
*Putnam High Yield Advantage Trust 369,158.829 3,023,411 3,019,719
Total Mutual Funds 231,301,155 288,587,266
GUARANTEED INVESTMENT PRODUCTS -
*Putnam Fiduciary Trust Co. Stable
Value Fund, 6.06% 17,009,737 17,009,737 17,009,737
*MARSH & McLENNAN COMPANIES, INC.
COMMON STOCK 79,880 3,491,825 4,667,975
*PARTICIPANT LOANS (Various maturities
from 1999 to 2009 at interest rates ranging
from 7.5% to 12.75%) $6,984,953 6,984,953 6,984,953
TOTAL ASSETS HELD FOR INVESTMENT
PURPOSES $258,787,670 $317,249,931
</TABLE>
*Party-in-interest.
(Note - The Putnam mutual funds are sponsored by Putnam
Investments, Inc., a party-in-interest to the Plan.)
PUTNAM INVESTMENTS, INC.
PROFIT SHARING RETIREMENT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C>
(f) Current Value
(a) Identity of (b) Description (c) Purchase (d) Selling (e) Cost of of Asset on
Party Involved of Asset Price Price Transaction Asset Date (g) Net Gain
Series of Transactions
Putnam Investments Putnam Money Market Fund $38,546,586 $ - $38,546,586 $38,546,586
Putnam Investments Putnam Money Market Fund - 37,518,237 37,518,237 37,518,237
</TABLE>
