PUTNAM INVESTMENTS, INC. PROFIT SHARING
RETIREMENT PLAN
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 AND
SUPPLEMENTAL SCHEDULES AS OF AND FOR THE
YEAR ENDED DECEMBER 31, 1997
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, 1997 AND
1996:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-11
SUPPLEMENTAL SCHEDULES AS OF AND FOR THE YEAR ENDED DECEMBER 31,
1997:
Item 27a - Schedule of Assets Held for Investment Purposes 12-13
Item 27d - Schedule of Reportable Transactions 14
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, 1997
and 1996, 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, 1997 and 1996, 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.
March 27, 1998
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. and its subsidiaries (the "Company") 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 Investments, Inc. 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 GIC product
offered is the PFTC Stable Value Fund.
(3) Marsh & McLennan Companies, Inc. common stock (Marsh &
McLennan Companies, Inc. is the parent Company of Putnam
Investments, Inc.).
(4) Other investment options approved by the Board of Directors of
Putnam Investments, Inc., the Trustees of the Plan, and the Chief
Executive Officer of Marsh & McLennan Companies, Inc. There were
no investments in this option at December 31, 1997 or 1996.
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 1997 and 1996
were as follows:
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 1997 and 1996 were as
follows:
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 $1,097,096 in 1997 and
$163,450 in 1996.
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 1997 and 1996.
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:
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 of the Plan (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 participant. The market value of
assets relating to the salary savings program at December 31,
1997 and 1996 was $46,308,861 and $33,210,484, 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 consistent with area lending
institutions' personal loan rates from January 1, 1997 through
March 31, 1997. Effective April 1, 1997, the interest rate
charged is equal to the prime rate at the time the loan
originated. Loans outstanding at December 31, 1997 and 1996
were $5,818,327 and $2,700,345, 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 insurance contracts are stated 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 revenues
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:
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.
3. INVESTMENTS (CONTINUED)
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.
PUTNAM OTC EMERGING GROWTH FUND - Funds are invested primarily
in equity securities of small- to medium-sized "emerging
growth" companies traded in the over-the-counter ("OTC")
market, which in the opinion of the Fund's investment manager
have potential for capital appreciation significantly greater
than that of the market averages.
During 1997 and 1996, the Plan's investments (including gains
and losses on investments bought and sold, as well as held
during the year) appreciated in value by $20,561,744 and
$10,817,549, respectively, as follows:
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, 1997 and 1996, terminated employees had
requested distributions of the vested portion of their accounts
totaling $637,652 and $1,757,531, respectively. The sources of
these distributions by investment type are as follows:
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 income, contributions, and benefits paid to participants for the
years ended December 31, 1997 and 1996 are as follows:
7. FUND INFORMATION (CONTINUED)
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