Putnam Investments, weary of serving as an example of all that's gone awry in the mutual fund industry, said Tuesday it will cut costs and provide investors with more user-friendly documentation regarding its fee structure.

The sixth-largest fund company, a unit of insurance giant Marsh & McLennan, voluntarily reduced fees so that all of its funds will be below their category average.

"Putnam is determined to earn back the trust and confidence of the marketplace," Putnam Chief Executive Ed Haldeman said in a statement. The firm now manages $161.5 billion in assets, a result of steady outflows in the past four months. Assets dropped 12% in November, and 1% in December -- although given the market's rise last month, net outflows were more like $6 billion, according to AMG Data.

Putnam has been battling securities fraud charges since October. In November, the firm fired its chief executive and later dismissed 15 other employees, including six portfolio managers, for market timing.

Putnam has also instituted a raft of new controls aimed at protecting shareholders from the frequent in-and-out trading that allows market timers to skim fund profits at the expense of longer-term investors. The firm has already instituted a 2% redemption fee on all sales within five days of purchase.

In addition to bringing expense ratios on all funds to the industry average or below, Putnam will reduce the front-end sales charge on all class A shares. The reduction will apply to equity fund purchases below $500,000 and fixed income fund purchases below $250,000.

For the six Putnam international and global funds that were named in the market timing charges, the firm will cap the expense ratios at Sept. 30, 2003 levels. This should compensate for the reduced asset levels that occurred after that date as a result of the market timing.

Putnam will also reduce the maximum allowable purchase of B class shares on any one day from $250,000 to less than $100,000 per trade -- a measure in line with current regulatory recommendations.

The firm also said it will improve its disclosure and explanation about fund fees, fund risk, portfolio manager compensation, employee ownership of Putnam funds and sales charge discounts.

While Putnam's efforts toward fee reduction were entirely voluntary, New York State Attorney General Eliot Spitzer has made it clear that he will push for greater regulation in this area. As part of its settlement with Spitzer on similar charges, Alliance Capital agreed to lower its mutual fund fees.