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Retail Giant Wal-Mart Drops Putnam Funds From 401(k) Plan

Nov 22, 2003 | Wall Street Journal

Wal-Mart Stores Inc., the nation's largest private-sector employer, is eliminating two Putnam funds from its employee 401(k) plan more unwelcome news for a mutual-fund firm that has been jolted by allegations of improper trading.

The funds affected include the Putnam New Opportunities Fund and the Putnam International Growth Fund.

Sharon Weber, a spokeswoman for Wal-Mart, declined to say why the investment options were being dropped, but noted that the Bentonville, Ark.-based company's retirement-plans committee monitors all funds to determine what will be of greatest benefit to employees.

As of Jan. 31, 2002, Wal-Mart's 401(k) plan had $1.56 billion in assets and 532,729 participants with account balances, according to regulatory filings.

The retail giant employs about 1.2 million people worldwide, Weber said.

Wal-Mart employees were notified of the decision earlier this week.

Wal-Mart joins an expanding list of corporations, including Revlon Inc. and Interpublic Group of Cos., that have severed some ties to Putnam, a unit of Marsh & McLennan Cos.

State pension funds and individual investors have also pulled out money in the past few weeks.

"We're disappointed about (companies') decision and hope that we'll have the opportunity to manage investments for them in the future," said Laura McNamara, a spokeswoman for Putnam Investments.

Wal-Mart, with revenue of $254.52 billion for the year ended Jan. 31, 2003, has about 4,000 Wal-Mart stores, Wal-Mart Superstores, ASDA in Britain and Sam's Club warehouse stores.

It has stores in Canada, Puerto Rico and Argentina, and franchised stores in Brazil, China, Mexico. The company also operates in Asia and Europe.

Weber couldn't immediately say whether Wal-Mart had found replacements for the Putnam funds.

Currently, 401(k) participants have about 15 investment options from a "good variety" of fund families to choose from, she noted.

The company automatically contributes each year to the 401(k) plan of all eligible employees, said Weber. Employees become eligible after working 1,000 hours.

Putnam had assets of $256 billion as of Nov. 14, according to the most recently available data.

This makes it the nation's fifth-largest mutual-fund firm, even after a drop of $21 billion, or 8 percent, in the first two weeks after Putnam became the first to be formally charged in the ongoing probe into market timing, or rapid in-and-out trading.

On Oct. 28, the Securities and Exchange Commission and Massachusetts regulators accused Putnam and two of its fund managers of committing civil fraud.

The SEC has since settled charges, but is requiring that Putnam put in controls to prevent market timing, and that the firm pay a yet unspecified fine.

Putnam has denied committing fraud, but has pledged full restitution to any investors hurt by improper trading activities.

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