PUTNAM
BALANCED
FUND
SEMIANNUAL REPORT
MARCH 31, 1995
[Scales Logo]
BOSTON * LONDON * TOKYO<PAGE>
FROM THE CHAIRMAN
Dear Shareholder:
We are pleased to report that Putnam Balanced Fund completed its
first reporting period with a total return of 7.76% at net asset
value from the start of operations on January 9, 1995, through
March 31, 1995. The fund was launched in an investment
environment that was hospitable to stock and bond investors
alike.
During the first quarter of 1995, the economy began to show signs
of slowing, inflation remained at a moderate level, and the
Federal Reserve Board took a break from its anti-inflation policy
of periodically raising short-term interest rates. Against this
backdrop, fund managers Brooke Cobb, David Santos, and
Kenneth Taubes diversified the fund s holdings, using an
allocation of 60% equities and 40% fixed income.
> GETTING TO THE CORE
In selecting stocks for the portfolio, Brooke employed a
time-tested approach of integrating fundamental analysis with a
proprietary process designed to identify the best core-growth
stocks. First, he targeted companies with at least a $1 billion
market capitalization, the potential to generate a minimum 10%
earnings growth rate, and ample liquidity. After identifying a
core group of stocks that met these criteria, he measured each
individual stock against another set of standards. These included
stock valuation, dividend yield, earnings, and the financial
strength of the issuing company.
Before a stock is added to the portfolio, its valuation, or
price, must be relatively inexpensive. It must have the potential
to generate dividends because, over time, companies that pay
dividends outperform those that do not. Finally, analysts
projections must indicate that the company is expected to deliver
relatively high earnings for more than one quarter.
<PAGE>
While this approach typically diversifies holdings across a
variety of industries, it is worth noting that, initially, a
substantial portion of the stocks that met Brooke s criteria were
in the technology sector. In fact, as of March 31, 1995, IBM,
Intel, Motorola, and Texas Instruments were among the fund s
larger holdings.
> MANAGING RISK
Brooke believes controlling risk is as important as selecting
stocks. His objective is to have the portfolio s risk level
closely track that of the Standard & Poor s 500 Stock Index. To
manage risk, Brooke spread the initial investments among a
variety of companies and industry sectors. For example, some of
the smaller technology companies in the portfolio increased the
risk level of the fund, but these were offset by large-company
energy stocks such as British Petroleum and Mobil and leading
consumer stocks like Procter & Gamble, Gillette, and Philip
Morris.
> THE SELLING DISCIPLINE
To lock in profits, the fund s selling discipline calls for
reevaluating a stock position under several scenarios: when
analysts projections indicate that the stock may drop in value,
if the risk profile becomes too high, or if a stock s price is
rising too quickly. When one or more of these conditions occurs,
Brooke trims back or eliminates the stock from the portfolio and
reinvests the proceeds in other stocks.
> FIXED-INCOME STRATEGY
In managing the fixed-income portion of the fund, Ken balances
varying maturities, asset classes and security selections. Ken
believes that the most dramatic interest rate increases are
largely behind us, and that maintaining a relatively long
portfolio duration is integral to the fund s successful
performance.<PAGE>
Ken has invested in both U.S. and foreign fixed-income
securities. In the United States he has emphasized corporate
bonds, which have benefited from the economy s strength. In
selecting foreign bonds, he looks for price appreciation in
comparison with the U.S. market. At the end of the period,
foreign countries represented in the portfolio included England,
France, and Germany.
While three months is too brief a period in which to evaluate the
merits of a long-term investment approach, it is heartening to
note that your fund is off to a successful start. We are pleased
that the fund has come out of the starting gate on the plus side
and expect that with its disciplined strategy, the fund has the
potential to provide ample rewards for long-term investors.
Respectfully yours,
/s/ George Putnam
George Putnam
April 19, 1995
The views expressed throughout this report are exclusively those
of Putnam Management. They are not meant as investment advice.
Although the described holdings were viewed favorably as of March
31, 1995, there is no guarantee the fund will continue to hold
these securities in the future.<PAGE>
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund s
performance. Total return shows how the value of the fund s
shares changed over time, assuming you held the shares through
the entire period and reinvested all distributions back into the
fund. For comparative purposes, we show how the fund performed
relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIOD ENDED 3/31/95
STANDARD LEHMAN BROS.CONSUMER
FUND & POOR S GOVT./CORP. PRICE
NAV POP 500 INDEX BOND INDEX INDEX
Life of fund
(since 1/9/95) 7.76% 1.55% 9.34% 4.98% 1.14%
Fund performance data do not take into account any adjustment for
taxes payable on reinvested distributions. POP assumes maximum
5.75% sales charge. Performance data represent past results and
an expense limitation currently in effect. Without the expense
limitation, the fund s total return would have been lower.
Investment returns and principal value will fluctuate so an
investor s shares, when sold, may be worth more or less than
their original cost. The short-term results of a relatively new
fund are not necessarily indicative of its long-term prospects.
<PAGE>
TERMS AND DEFINITIONS
NET ASSET VALUE (NAV) is the value of all your fund s assets,
minus any liabilities, divided by the number of outstanding
shares, not including any initial or contingent deferred sales
charge.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share
plus the maximum sales charge levied at the time of purchase. POP
performance figures shown here assume the maximum 5.75% sales
charge.
COMPARATIVE BENCHMARKS
STANDARD & POOR S 500 INDEX is an unmanaged list of common stocks
that is frequently used as a general measure of stock market
performance. The index assumes reinvestment of all distributions
and does not take into account brokerage commissions or other
costs. The fund s portfolio contains securities that do not match
those in the index.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is an unmanaged
list of publicly issued U.S. Treasury obligations and corporate
debt securities.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of
inflation; it does not represent an investment return.
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
March 31, 1995 (Unaudited)
COMMON STOCKS (55.7%)*
Number of Shares Value
AEROSPACE AND DEFENSE(1.3%)
200 Boeing Co. $10,775
200 McDonnell Douglas Corp. 11,150
21,925
BASIC INDUSTRIAL PRODUCTS(2.1%)
300 Caterpillar Inc. 16,687
100 Deere (John) & Co. 8,125
300 Magna International, Inc.
Class A 11,437
36,249
BUILDING AND CONSTRUCTION(0.9%)
300 Fluor Corp. 14,475
CHEMICALS(0.7%)
200 du Pont (E.I.) de Nemours
& Co., Ltd. 12,100
CONGLOMERATES(2.1%)
300 Allied-Signal Inc. 11,775
200 Emerson Electric Co. 13,300
200 General Electric Co. 10,825
35,900
CONSUMER DURABLE GOODS(0.9%)
500 Black & Decker
Manufacturing Co. 14,437
CONSUMER NON DURABLES(5.9%)
200 Duracell International, Inc. 8,950
300 Eastman Kodak Co. 15,937
100 Gillette Co. (The) 8,162
300 Philip Morris Cos., Inc. 19,575
200 Premark International, Inc. 8,825
200 Procter & Gamble Co. 13,250
200 Reebok International Ltd. 7,125
200 Scott Paper Co. 17,875
99,699
CONSUMER SERVICES(2.3%)
200 CBS Inc. 12,800
400 Marriott International, Inc. 13,900
600 Tele-Communications Inc.
Class A 12,600
39,300
ENVIRONMENTAL CONTROL(0.8%)
400 Browning-Ferris
Industries, Inc. 13,600
COMMON STOCKS (continued)
Number of Shares Value
FOOD AND BEVERAGES(3.3%)
300 Coca-Cola Co. $16,950
400 ConAgra, Inc. 13,250
400 PepsiCo, Inc. 15,600
400 Sara Lee Corp. 10,450
56,250
HEALTH CARE(6.6%)
200 Amgen, Inc. 13,475
200 Columbia/HCA
Healthcare Corp. 8,600
500 Humana, Inc. 12,813
300 Johnson & Johnson 17,850
200 Pfizer, Inc. 17,150
300 Smithkline Beecham PLC ADR 11,250
300 U.S. Healthcare Inc. 13,275
200 United Healthcare Corp. 9,350
100 Warner-Lambert Co. 7,825
111,588
INSURANCE AND FINANCE(6.5%)
100 American International
Group, Inc. 10,425
300 BankAmerica Corp. 14,475
200 Barnett Banks, Inc. 9,100
100 CIGNA Corp. 7,475
400 Citicorp 17,000
300 Dean Witter, Discover & Co. 12,225
100 Federal National Mortgage
Association 8,138
300 First Bank System, Inc. 12,113
100 First USA, Inc. 4,175
400 Travelers, Inc. 15,450
110,576
OIL AND GAS(2.9%)
200 British Petroleum Co., PLC 16,775
400 Enron Corp. 13,200
200 Mobil Corp. 18,525
48,500
RETAIL(4.5%)
600 Federated Department Stores 13,275
300 Lowe s Cos., Inc. 10,350
500 Office Depot, Inc. 12,188
200 Pep Boys-Manny Moe & Jack 6,200
400 Rite Aid Corp. 9,800
300 Tandy Corp. 14,325
200 Walgreen Co. 9,625
75,763
COMMON STOCKS (continued)
Number of Shares Value
TECHNOLOGY AND COMPUTER SERVICES(11.9%)
200 Applied Materials, Inc. $11,025
200 Automatic Data
Processing, Inc. 12,600
200 Cisco Systems, Inc. 7,625
300 Computer Associates
International, Inc. 17,812
300 Computer Sciences Corp. 14,812
300 DSC Communications Corp. 9,768
300 General Instrument Corp. 10,425
200 IBM Corp. 16,375
100 Intel Corp. 8,488
200 LSI Logic Corp. 10,500
300 Motorola, Inc. 16,388
300 Oracle Systems Corp. 9,375
200 Scientific Atlanta, Inc. 4,675
300 Silicon Graphics, Inc. 10,650
200 Texas Instruments, Inc. 17,700
200 Xerox Corp. 23,475
201,693
TELECOMMUNICATIONS(2.0%)
400 American Telephone &
Telegraph Co. 20,700
200 Ericsson (L. M.) Telephone
Co. ADR, Class B 12,363
33,063
TRANSPORTATION(1.0%)
200 Burlington Northern Inc. 11,875
100 Conrail Inc. 5,613
17,488
TOTAL COMMON STOCKS
(cost $858,950) $ 942,606
U.S. GOVERNMENT AND AGENCY OBLIGATIONS(32.9%)*
Principal Amount Value
$180,000 U.S. Treasury Bonds
8 1/8s, 2019 $ 190,519
63,000 U.S. Treasury Notes
7 7/8s, 2004 65,717
194,000 U.S. Treasury Notes
7 3/8s, 1996 195,576
105,000 U.S. Treasury Notes
7 1/4s, 2004 105,033
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS (cost $551,072) $ 556,845
FOREIGN BONDS AND NOTES(3.9%)*
PRINCIPAL AMOUNT Value
FRF 70,000 France (Government of)
OAT deb. 8 1/2s, 2003 $15,089
DEM 5,100 Treuhand- Obligationen
(Government Guarantee)
6 3/8s, 2099 5,100
DEM 35,000 Treuhandanstalt
(Government
Guarantee) 7 1/8s, 2003 25,397
GBP 14,000 United Kingdom
Treasury notes 7s, 2001 20,974
TOTAL FOREIGN BONDS AND NOTES
(cost $66,705) $ 66,560
CORPORATE BONDS AND NOTES(1.1%)*
PRINCIPAL AMOUNT Value
$ 10,000 Citizens Utilities Co.,
7.68s, 2034 $ 10,438
8,000 General Motors Acceptance
Corp. med. term notes
6.7s, 1997 7,885
TOTAL CORPORATE BONDS AND NOTES
(cost $18,174) $ 18,323
SHORT-TERM INVESTMENTS(4.1%)*
(cost $69,723)
PRINCIPAL AMOUNT Value
$ 70,000 Federal Home Loan
Mortgage Association
5.94s, April 25, 1995 $ 69,723
TOTAL INVESTMENTS
(cost $1,564,624)*** $ 1,654,057
NOTES
* Percentages indicated are based on net assets of $1,693,467,
which correspond to a net asset value per share of $9.17.
Non-income-producing security.
*** The aggregate identified cost on a tax basis is $1,564,687,
resulting in gross unrealized appreciation and depreciation of
$96,577 and $7,207, respectively, or net unrealized appreciation
of $89,370.
ADR after the name of a foreign security stands for American
Depository Receipt, representing ownership of foreign securities
on deposit with a domestic custodian bank.
FORWARD CURRENCY CONTRACTS OUTSTANDING
at March 31, 1995 (Aggregate Face Value $60,151)
Market Aggregate Delivery Unrealized
Value Face Value Date Appreciation
Deutschemarks
(Sell) $ 33,266 $ 43,940 6/13/95 $ 10,674
French Francs
(Sell) 16,211 16,211 6/13/95
$10,674
The accompanying notes are an integral part of these financial
statements.<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995 (Unaudited)
ASSETS
Investments in securities, at value
(identified cost $1,564,624) (Note 1) $1,654,057
Cash 4,985
Dividends, interest and other receivables 15,907
Receivable for securities sold 52,764
Receivable for open forward currency contracts 10,674
Receivable from Manager (Note 3) 8,567
Unamortized organization expenses (Note 1) 6,115
TOTAL ASSETS 1,753,069
LIABILITIES
Payable for securities purchased 42,019
Payable for organization expenses (Note 1) 6,425
Payable for investor servicing
and custodian fees (Note 3) 6,888
Payable for administrative services (Note 3) 10
Payable for compensation of Trustees (Note 3) 24
Other accrued expenses 4,236
TOTAL LIABILITIES 59,602
NET ASSETS $1,693,467
REPRESENTED BY
Paid-in capital (Notes 1, 2 and 5) $1,571,087
Undistributed net investment income (Note 1) 12,277
Accumulated net realized gain
on investment transactions (Note 1) 9,996
Net unrealized appreciation of investments
and forward currency contracts 100,107
TOTAL REPRESENTING NET ASSETS APPLICABLE TO
CAPTIAL SHARES OUTSTANDING $1,693,467
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price per share
($1,693,467 divided by 184,665 shares) $9.17
Offering price per share (100/94.25 of $9.17)* $9.73
*On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales the offering price is reduced.
The accompanying notes are an integral part of these financial
statements.<PAGE>
STATEMENT OF OPERATIONS
For the period January 9, 1995 (commencement of operations)
to March 31, 1995 (Unaudited)
INVESTMENT INCOME
Dividends (net of foreign tax of $30)
$3,915
Interest 11,263
TOTAL INVESTMENT INCOME 15,178
EXPENSES:
Compensation of Manager (Note 3)
2,515
Investor servicing and custodian fees (Note 3)
6,888
Compensation of Trustees (Note 3)
24
Reports to shareholders
72
Auditing
2,893
Legal
723
Postage
12
Registration fees
535
Administrative services (Note 3)
10
Amortization of organization expense (Note 1)
310
Fees waived by Manager (Note 3) (11,081)
TOTAL EXPENSES 2,901
NET INVESTMENT INCOME 12,277
Net realized gain on investments (Notes 1 and 4) 9,996
Net unrealized appreciation of investments
and forward currency contracts during the period 100,107
NET GAIN ON INVESTMENT TRANSACTIONS 110,103
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $122,380
The accompanying notes are an integral part of these financial
statements.<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
JANUARY 9, 1995
(COMMENCEMENT
OF OPERATIONS) TO
MARCH 31, 1995*
INCREASE IN NET ASSETS
Operations:
Net investment income $12,277
Net realized gain on investments 9,996
Net unrealized appreciation of investments 100,107
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
122,380
Increase from capital share transactions (Note 5) 71,087
TOTAL INCREASE IN NET ASSETS 193,467
NET ASSETS:
Beginning of period
$1,500,000
End of period (including undistributed
net investment income of $12,277) $1,693,467
*Unaudited.
The accompanying notes are an integral part of these financial
statements.<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
JANUARY 9, 1995
(COMMENCEMENT
OF OPERATIONS) to
MARCH 31, 1995*
NET ASSET VALUE, BEGINNING OF PERIOD $8.51
INVESTMENT OPERATIONS
Net investment income .06(a)
Net realized and unrealized
gain on investments .60
TOTAL FROM INVESTMENT OPERATIONS .66(a)
LESS DISTRIBUTIONS FROM:
Net investment income
Net realized gain on investments
TOTAL DISTRIBUTIONS
NET ASSET VALUE, END OF PERIOD $9.17
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(b)7.76(c)
NET ASSETS, END OF PERIOD (in thousands) $1,693
Ratio of expenses to average net assets (%) .18(a)(c)
Ratio of net investment income
to average net assets (%) .77(a)(c)
Portfolio turnover (%) 35.35(c)
*Unaudited.
Per share net investment income for the period March 31, 1995,
has been determined on the basis of the weighted average number
of shares outstanding during the period.
(a)Reflects an expense limitation in effect during the period
(See Note 3). As a result of such limitation, expenses for the
fund reflect a reduction of $0.05 per share.
(b)Total investment return assumes dividend reinvestment and does
not reflect the effects of
sales charges.
(c)Not annualized.<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1995 (Unaudited)
NOTE 1
SIGNIGICANT ACCOUNTING POLICIES
The fund is a series of Putnam Investment Funds (the Trust )
which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment
company. The objective of the fund is to seek capital growth and
current income by investing primarily in equity securities and
fixed-income securities.
The following is a summary of significant accounting policies
followed by the fund in the preparation of its financial
statements. The policies are in conformity with generally
accepted accounting principles.
A) SECURITY VALUATION Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sale price, or, if no sales are reported
as in the case of some securities traded over-the-counter
the last reported bid price, except that certain U.S. government
obligations are stated at the mean between the bid and asked
prices. Market quotations are not considered to be readily
available for long term corporate bonds and notes; such
investments are stated at fair market value on the basis of
valuations furnished by a pricing service, approved by the
Trustees. Short-term investments having remaining maturities of
60 days or less are stated at amortized cost, which approximates
market value, and other investments are stated at fair market
value following procedures approved by the Trustees.
B) JOINT TRADING ACCOUNT Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the fund may transfer
uninvested cash balances into a joint trading account, along with
the cash of other registered investment companies managed by
Putnam Investment Management, Inc. (Putnam Management), the
fund s Manager, a wholly-owned subsidiary of Putnam Investments,
Inc., and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money
market instruments.
C) REPURCHASE AGREEMENTS The fund, or any joint trading account,
through its custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price,
including accrued interest. The fund s Manager is responsible for
determining that the value of these underlying securities is at
all times at least equal to the resale price, including accrued
interest.
D) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security
transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the
accrual basis and dividend income is recorded on the ex-dividend
date.
E) FORWARD CURRENCY CONTRACTS The fund may engage in forward
currency contracts, which are agreements between two parties to
buy and sell currencies at a set price on a future date, to
protect against a decline in value relative to the U.S. dollar of
the currencies in which its portfolio securities are denominated
or quoted (or an increase in the value of a currency in which
securities a fund intends to buy are denominated when a fund
holds cash reserves and short-term investments). The market
value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily and the
change in market value is recorded as an unrealized gain or loss.
When the contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at
the time it was opened and value at the time it was closed. The
fund could be exposed to risk if the value of the currency
changes unfavorably. In addition, the fund could be exposed to
risks if the counterparties to the contracts are unable to meet
the terms of their contracts or if the fund is unable to enter a
closing position. The maximum potential loss from forward
currency contracts is the aggregate face value in U.S. dollars at
the time the contract was opened; however, management believes
the likelihood of such a loss to be remote.
F) FEDERAL TAXES It is the policy of the fund to distribute all
of its income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the
fund to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Internal Revenue Code of
1986. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation on securities
held and excise tax on income and capital gains.
G) DISTRIBUTIONS TO SHAREDHOLERS Distributions to shareholders
will be recorded by the fund on the ex-dividend date. The fund
will distribute any net investment income at least quarterly and
any net realized gains at least annually. The amount and
character of income and gains to be distributed will be
determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These
differences include treatment of post-October losses, payment
in-kind and market discount. Reclassifications will be made to
the fund s capital accounts to reflect income and gains available
for distribution (or available capital loss carryovers) under
income tax regulations.
H) EXPENSES OF THE TRUST Expenses directly charged or
attributable to the fund will be paid from the assets of the
fund. Generally, expenses of the Trust will be allocated and
charged to the assets of each fund on a basis that the Trustees
deem fair and equitable, which may be based on the relative
assets of each fund or the nature of the services performed and
relative applicability to each fund.
I) UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by the
fund in connection with its organization, its registration with
the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $6,425.
These expenses are being amortized on a straight line basis over
a five-year period.
NOTE 2
INITIAL CAPITALIZATION
AND OFFERING PRICE
OF SHARES
The Trust was established as a Massachusetts business trust under
the laws of Massachusetts on October 31, 1994.
During the period October 31, 1994 to January 9, 1995, the fund
had no operations other than those related to organizational
matters, including the initial capital contribution of $20,000
and the issuance of 2,353 shares to Putnam Mutual Funds Corp., a
wholly-owned subsidiary of Putnam Investments, Inc., on December
13, 1994.
On January 3, 1995, Putnam Mutual Funds Corp. made a subsequent
capital contribution of $1,480,000 and received 174,118 shares.
There were no additional transactions until regular investment
operations commenced on January 9, 1995.
At March 31, 1995, Putnam Investment Management, Inc. owned
176,471 shares of the fund (95.6% of shares outstanding), valued
at $1,618,239.
NOTE 3
MANAGEMENT FEE,
ADMINISTRATIVE
SERVICES, AND
OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment
advisory services is paid quarterly based on the average net
assets of the fund for the quarter. Such fee is based on the
following annual rates: 0.65% of the first $500 million of
average net assets, 0.55% of the next $500 million, 0.50% of the
next $500 million, 0.45% of the next $5 billion, 0.425% of the
next $5 billion, 0.405% of the next $5 billion, 0.39% of the next
$5 billion, and 0.38% thereafter.
Through December 31, 1995, the fund s Manager has agreed to limit
the fund s expenses to the extent that expenses (exclusive of
brokerage, interest, taxes, deferred organizational and
extraordinary expenses and distribution fees) exceed an annual
rate of 0.70% of the fund s average net assets.
The fund also reimburses the Manager for the compensation and
related expenses of certain officers of the fund and their staff
who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the
Trustees.
Trustees of the fund receive an annual Trustee s fee of $100 and
an additional fee for each Trustees meeting attended. Trustees
who are not interested persons of the Manager and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings.
Custodial functions for the fund s assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided
by Putnam Investor Services, a division of PFTC.
Investor servicing and custodian fees reported in the Statement
of Operations for the period January 9, 1995 (commencement of
operations) to March 31, 1995 have been reduced by credits
allowed by PFTC.
The fund has adopted a distribution plan with pursuant to Rule
12b-1 under the Investment Company Act of 1940, although the fund
is not currently making any payments pursuant to this plan. The
purpose of the plan is to compensate Putnam Mutual Funds Corp., a
wholly-owned subsidiary of Putnam Investments, Inc., for services
provided and expenses incurred by it in distributing shares of
the fund. The Trustees have approved payment by the fund to
Putnam Mutual Funds Corp. at an annual rate of up to 0.35% of the
fund s average net assets.
During the period January 9, 1995 (commencement of operations) to
March 31, 1995, Putnam Mutual Funds Corp., acting as the
underwriter, received no net commissions from the sale of shares
of the fund.
NOTE 4
PURCHASES AND
SALES OF SECURITIES
During the period January 9, 1995 (commencement of operations) to
March 31, 1995, purchases and sales of investment securities
other than short-term investments aggregated $2,023,523 and
$536,022, respectively. There were no purchases and sales of
U.S. government obligations. In determining the net gain or loss
on securities sold, the cost of securities has been determined on
the identified cost basis.
NOTE 5
CAPITAL SHARES
For the period January 9, 1995 (commencement of operations) to
March 31, 1995, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares
were as follows:
JANUARY 9, 1995
(COMMENCEMENT
OF OPERATIONS) TO
MARCH 31, 1995
SHARES AMOUNT
Shares sold 8,194 $71,087
Shares repurchased
NET INCREASE 8,194 $71,087<PAGE>
FUND INFORMATION
INVESTMENT
MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust
Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brooke Cobb
Vice President and Fund Manager
Dave Santos
Vice President and Fund Manager
Kenneth J. Taubes
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam
Balanced Fund. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives
details of sales charges, investment objectives, and operating
policies of the fund. For more information or to request a
prospectus, call toll free 1-800-225-1581.
