Putnam
Balanced
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
3-31-00
[SCALE LOGO OMITTED]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa
Dear Shareholder:
I am pleased to welcome new shareholders to Putnam Balanced Fund, which
began selling shares to the public on April 4, 2000, and also to welcome
Kevin Cronin to the fund's management team. Kevin joined Putnam in 1997
from MFS Investment Management. At Putnam, he is chief investment
officer of the Mortgage and Asset-Backed team. He has 12 years of
investment experience.
This is the last letter to you and the other shareholders of Putnam
Balanced Fund that I will be signing. After more than 30 years as
Chairman of the Trustees and President of the Putnam Funds, the time has
come for me to step aside. In June, John Hill will become Chairman. John
is currently an independent Trustee and has served on the board for the
past 14 years. In addition, my son, George Putnam, III, will take on the
role of President. I am confident that the leadership of the funds will
be in exceptionally strong hands.
I will become Chairman Emeritus, remain a Putnam shareholder, and stay
in close touch with the funds. It has been my privilege to serve you.
Respectfully yours,
/S/ GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 17, 2000
Report from the Fund Managers
David J. Santos
Manuel Weiss
Kevin Cronin
Shortly after the close of the semiannual period, as financial markets
were becoming increasingly turbulent, Putnam Balanced Fund made its
public debut. The fund, which began operations in January 1995 as a fund
available only to employees of Putnam Investments, was offered to all
investors on April 4, 2000. The sharp stock market volatility in the
weeks that followed served as a timely reminder of the importance of a
balanced approach to investing.
Since its inception, the fund has delivered solid returns while
remaining committed to a disciplined, balanced strategy. It invests in a
combination of stocks and bonds and is designed for investors who seek
the growth potential of stocks but who are also seeking the potential
downside protection offered by bond investments. This balanced approach
- -- typically a 60% allocation to stocks and a 40% position in bonds --
can offset the risk of downturns in the equity market.
Total return for 6 months ended 3/31/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------
30.99% 23.46% -- -- -- -- -- --
- ------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance
calculation methods begins on page 6. The inception date for class B,
class M, and class C shares is 4/4/00. Performance for these share
classes will be included in the fund's annual report for the 12 months
ended 9/30/00.
* GROWTH STOCKS PROVIDE SIGNIFICANT PERFORMANCE BOOST
During the six months ended March 31, 2000, the fund benefited greatly
from a robust environment for growth stocks. Through most of the period,
the technology and biotechnology sectors were among the strongest
performers in the fund's portfolio. In the fixed-income portion of the
portfolio, an emphasis on mortgage-backed securities proved beneficial,
as they outperformed U.S. Treasuries.
[GRAPHIC OMITTED: pie chart PORTFOLIO COMPOSITION]
PORTFOLIO COMPOSITION*
Common stocks 59.4%
U.S. government and agency securities 35.6%
Other 8.5%
Footnote reads:
*Based on net assets as of 3/31/00. Holdings will vary over time.
The greatest portion of the fund's portfolio is invested in the stocks
of large, rapidly growing companies. We target companies across a wide
range of industries that are enjoying rising sales and profits and offer
attractive long-term growth potential. Extraordinary surges in the U.S.
stock market during most of the period contributed significantly to your
fund's returns. At the period's midpoint, the U.S. equity markets closed
a record-breaking calendar year. The Nasdaq Composite Index, a common
measure of technology stocks, rose 85.6% in 1999, the biggest annual
gain for a major market index in U.S. history. In addition, the Dow
Jones Industrial Average and the S&P 500 Index, which measure the
performance of large-company stocks, posted double-digit gains for a
record fifth straight year. Also in 1999, the inclusion of Microsoft and
Intel in the Dow average and the addition of Internet stocks Yahoo! and
America Online to the S&P 500 illustrated the growing influence of
technology in today's economy.
The equity portion of the fund's portfolio took full advantage of these
powerful gains, especially in the technology sector. It is important to
note that in the final weeks of the period, technology stocks became
increasingly volatile and began to suffer sharp declines. Despite this
turbulence and the Nasdaq's eventual 26% drop from its March 10 high, we
believe the outlook remains extremely positive for this sector. We will
continue to view such events as an opportunity to invest in
fundamentally strong companies at attractive valuations.
Putnam Balanced Fund offers the capital appreciation potential of stocks
combined with fixed-income investments, which may offset the risk of
downturns in the equity market.
Notable technology holdings during the period included Brocade
Communications, Metromedia Fiber Network, Cisco Systems, Sun
Microsystems, and VERITAS Software Corp. Brocade makes fiber channel
switches and software for connecting computer storage systems and
servers, turning them into networks that allow users, regardless of
location, to share the same storage devices. Metromedia has built a
fiber-optic communications network in North America and plans to build
networks in 16 cities throughout Europe. Fiber optics allows for
high-speed transmission of data, video, Internet, and multimedia
applications. VERITAS provides services and software to help businesses
manage and store computer data. The company's products also speed data
recovery and guard computer networks against data loss from crashes and
errors. While these holdings and others discussed in this report were
viewed favorably at the end of the fiscal period, all are subject to
review in accordance with the fund's investment strategy and may vary in
the future.
* BIOTECH SURGE KEY TO SEMIANNUAL RETURNS
In a period dominated by new economy stocks such as Internet services,
software, and telecommunications, the health-care sector offered
biotechnology, another new economy industry in which stocks have soared.
The rally of biotech stocks began in mid 1999 and grew steadily as the
year progressed. During the period, investors were attracted to biotech
companies of all sizes and at all stages of growth. The fund took
advantage of this rally with holdings such as PE Biosystems Group, which
manufactures instruments used for gene sequencing and has benefited from
the excitement surrounding genomics -- the study of the structure and
function of human genes that is causing a revolution in the health-care
industry. Although the biotech rally came to an end in the final month
of the period, we believe this sector, like technology, remains
fundamentally strong.
* OFFSETTING RISK WITH HIGH-QUALITY BONDS
A key component of the fund's strategy is its investments in
high-quality fixed-income securities, which are designed to cushion the
blow of downturns in the stock market. Approximately 34% of the
portfolio is invested in government securities, many of which are backed
by the full faith and credit of the U.S. government. The fund typically
divides its assets between U.S. Treasury securities and mortgage-backed
securities issued by government-sponsored agencies (GNMA, FNMA, FHLMC).
It is important to note that prior to the fund's public debut, this
portion of the portfolio also invested in bonds issued by U.S.
corporations, which typically offer more risk. We believe that our shift
to a fixed-income portfolio component strictly comprising high-quality
government securities will allow us to execute the fund's balanced
strategy more effectively.
[GRAPHIC OMITTED: TOP 10 EQUITY HOLDINGS]
TOP 10 EQUITY HOLDINGS
Cisco Systems, Inc.
Communications equipment
General Electric Co.
Conglomerate
Microsoft Corp.
Software
Intel Corp.
Electronics
JDS Uniphase Corp.
Electronics
VERITAS Software Corp.
Software
AT&T Corp.
Cable television
QUALCOMM, Inc.
Communications equipment
The Home Depot, Inc.
Retail
Tyco International, Ltd.
Conglomerate
These holdings represent 19.6% of the fund's net assets as of 3/31/00.
Portfolio holdings will vary over time.
During the period, the strength of the economy had a negative effect on
the bond market as investors became concerned that
stronger-than-expected economic growth could lead to an increase in
inflation. The Federal Reserve Board shared this concern, raising
interest rates five times since June 1999 in an attempt to slow the rate
of growth. The yield on the 10-year Treasury bond, which has become a
benchmark for the bond market, rose from 5.88% on September 30, 1999, to
6.79% on January 20, 2000 -- nearly a full percentage point.
The rise in interest rates dampened the performance of the fund's
investments in U.S. Treasuries because of their relatively long
durations. Duration is a measure of interest-rate sensitivity; a bond
with a longer duration generally will experience a greater price decline
than a bond with a shorter duration.
A positive counterweight during the semiannual period came from the
mortgage-backed securities in the portfolio, which were relatively
unaffected by the rate increases. The fund's emphasis on mortgage-backed
securities was particularly beneficial at the midpoint of the period,
when interest rates were rising sharply.
* BALANCED APPROACH CONTINUES IN FISCAL YEAR'S SECOND HALF
Looking ahead to the second half of fiscal 2000, we believe the fund's
balanced strategy will be especially beneficial if market volatility
continues. We plan to take full advantage of the buying opportunities
offered by declines in the stock market while strategically selecting
fixed-income securities in an effort to reduce the fund's overall risk.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 3/31/00, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Balanced Fund is designed for investors seeking capital growth and
current income by investing in common stocks and in fixed-income
securities.
TOTAL RETURN FOR PERIODS ENDED 3/31/00
Fund's class A shares
(inception: 1/3/95)
NAV POP
- ---------------------------------------------------------------------
6 months 30.99% 23.46%
- ---------------------------------------------------------------------
1 year 32.35 24.76
- ---------------------------------------------------------------------
5 years 191.55 174.78
Annual average 23.86 22.40
- ---------------------------------------------------------------------
Life of fund 214.54 196.41
Annual average 24.44 23.04
- ---------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/00
Lehman Bros.
Intermediate
Russell 1000 Treasury S&P 500 Consumer
Growth Index Bond Index Index price index
- ------------------------------------------------------------------------
6 months 34.06% 1.67% 17.51% 2.03%
- ------------------------------------------------------------------------
1 year 34.12 2.58 17.94 3.69
- ------------------------------------------------------------------------
5 years 298.15 36.57 227.30 13.15
Annual average 31.81 6.43 26.75 2.50
- ------------------------------------------------------------------------
Life of fund 336.06 42.22 259.17 13.98
Annual average 32.39 6.94 27.59 2.52
- ------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A shares reflect
the current maximum initial sales charges of 5.75%. The inception date
for class B, class M, and Class C shares is 4/4/00. Performance for
these share classes will be included in the fund's annual report for the
12 months ended 9/30/00. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost. For a portion of this period, the fund
was offered on a limited basis and had limited assets. Performance data
reflect an expense limitation currently in effect. Without the
limitation, total returns would have been lower.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 3/31/00
Class A
- ------------------------------------------------------------------------
Distributions (number) 1
- ------------------------------------------------------------------------
Income $0.245
- ------------------------------------------------------------------------
Capital gains
Long term 1.185
- ------------------------------------------------------------------------
Short term 0.210
- ------------------------------------------------------------------------
Total $1.640
- ------------------------------------------------------------------------
Share value: NAV POP
- ------------------------------------------------------------------------
9/30/99 $12.63 $13.40
- ------------------------------------------------------------------------
3/31/00 14.67 15.56
- ------------------------------------------------------------------------
The inception date for class B, class M, and class C shares is 4/4/00.
Price and distribution information for these share classes will be
included in the fund's annual report for the 12 months ended 9/30/00.
Terms and definitions
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 in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
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 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B or C shares and assumes redemption at the
end of the period. Your fund's class B CDSC declines from a 5% maximum
during the first year to 1% during the sixth year. After the sixth year,
the CDSC no longer applies. The CDSC for class C shares is 1% for one
year after purchase.
Comparative benchmarks
Lehman Brothers Intermediate Treasury Bond Index* is an unmanaged list
of Treasury bonds that is used as a general gauge of the market for
intermediate-term fixed-income securities.
Standard & Poor's 500 Index* is an unmanaged list of common stocks that
is frequently used as a general measure of stock market performance.
Russell 1000 Growth Index* contains those Russell 1000 Index securities
with a greater-than-average growth orientation.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take into account brokerage fees or taxes. Securities
in the fund do not match those in indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
A guide to the financial statements
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
<TABLE>
<CAPTION>
The fund's portfolio
March 31, 2000 (Unaudited)
COMMON STOCKS (59.4%) (a)
NUMBER OF SHARES VALUE
<S> <C>
Biotechnology (2.6%)
- ----------------------------------------------------------------------------------------------------------------------------
1,010 Amgen Inc. $ 61,989
313 Genentech, Inc. (NON) 47,576
113 IDEC Pharmaceuticals Corp. (NON) 11,102
681 Immunex Corp. (NON) 43,201
296 Medimmune, Inc. (NON) 51,541
----------------
215,409
Broadcasting (1.7%)
- ----------------------------------------------------------------------------------------------------------------------------
400 CBS Corp. (NON) 22,650
755 Clear Channel Communications, Inc. (NON) 52,142
305 Echostar Communications Corp. Class A (NON) 24,095
382 Univision Communications, Inc. Class A (NON) 43,166
----------------
142,053
Cable Television (1.7%)
- ----------------------------------------------------------------------------------------------------------------------------
1,672 AT&T Corp. (NON) 99,066
895 Comcast Corp. Class A 38,821
----------------
137,887
Chemicals (0.4%)
- ----------------------------------------------------------------------------------------------------------------------------
508 Avery Dennison Corp. 31,020
Communications Equipment (8.0%)
- ----------------------------------------------------------------------------------------------------------------------------
483 Brocade Communications Systems (NON) 86,608
3,857 Cisco Systems, Inc. (NON) 298,193
228 Comverse Technology, Inc. (NON) 43,092
255 Corning Inc. 49,470
203 Juniper Networks, Inc. (NON) 53,503
646 QUALCOMM, Inc. (NON) 96,456
137 Reback Networks, Inc. (NON) 41,091
----------------
668,413
Computers (4.3%)
- ----------------------------------------------------------------------------------------------------------------------------
264 Apple Computer, Inc. (NON) 35,855
107 Ariba, Inc. (NON) 22,430
1,230 Dell Computer Corp. (NON) 66,343
648 EMC Corp. (NON) 81,000
206 Lexmark International Group, Inc. Class A (NON) 21,785
258 Network Appliance, Inc. (NON) 21,350
804 Sun Microsystems, Inc. (NON) 75,337
203 VeriSign, Inc. (NON) 30,349
----------------
354,449
Conglomerates (4.1%)
- ----------------------------------------------------------------------------------------------------------------------------
1,587 General Electric Co. 246,280
1,925 Tyco International, Ltd. 96,009
----------------
342,289
Consumer Goods (0.7%)
- ----------------------------------------------------------------------------------------------------------------------------
653 Colgate-Palmolive Co. 36,813
464 Estee Lauder Cos. Class A 23,229
----------------
60,042
Consumer Services (0.5%)
- ----------------------------------------------------------------------------------------------------------------------------
439 Omnicom Group, Inc. 41,019
Electronics (10.3%)
- ----------------------------------------------------------------------------------------------------------------------------
203 Broadcom Corp. (NON) 49,304
384 DII Group, Inc., (The) (NON) 43,416
1,611 Intel Corp. 212,551
1,043 JDS Uniphase Corp. (NON) 125,747
815 LAM Research Corp. (NON) 36,726
829 LSI Logic Corp. (NON) 60,206
417 Motorola, Inc. 59,370
335 PerkinElmer, Inc. 22,278
170 PMC - Sierra, Inc. (NON) 34,627
159 SDL, Inc. (NON) 33,847
574 Texas Instruments, Inc. 91,840
357 Vitesse Semiconductor Corp. (NON) 34,361
598 Xilinx, Inc. (NON) 49,522
----------------
853,795
Entertainment (0.5%)
- ----------------------------------------------------------------------------------------------------------------------------
802 Viacom, Inc. Class B (NON) 42,306
Financial (1.1%)
- ----------------------------------------------------------------------------------------------------------------------------
307 American Express Co. 45,724
755 Citigroup, Inc. 44,781
----------------
90,505
Insurance (0.7%)
- ----------------------------------------------------------------------------------------------------------------------------
497 American International Group, Inc. 54,422
Media (0.7%)
- ----------------------------------------------------------------------------------------------------------------------------
623 Time Warner, Inc. 62,300
Medical Technology (1.4%)
- ----------------------------------------------------------------------------------------------------------------------------
777 Allergan, Inc. 38,850
804 PE Corp.-PE Biosystems Group 77,586
----------------
116,436
Natural Gas Utilities (0.3%)
- ----------------------------------------------------------------------------------------------------------------------------
313 Enron Corp. 23,436
Pharmaceuticals (2.4%)
- ----------------------------------------------------------------------------------------------------------------------------
1,194 Bristol-Myers Squibb Co. 68,954
228 Forest Laboratories, Inc. (NON) 19,266
82 Johnson & Johnson 5,745
942 Schering-Plough Corp. 34,619
760 Warner-Lambert Co. 74,100
----------------
202,684
Retail (3.5%)
- ----------------------------------------------------------------------------------------------------------------------------
1,491 Home Depot, Inc. (The) 96,170
697 Intimate Brands, Inc. 28,577
343 Kohls Corp. (NON) 35,158
859 Tandy Corp. 43,594
1,620 Wal-Mart Stores, Inc. 89,910
----------------
293,409
Semiconductor (1.4%)
- ----------------------------------------------------------------------------------------------------------------------------
780 Applied Materials, Inc. (NON) 73,515
494 Teradyne, Inc. (NON) 40,632
----------------
114,147
Software (6.9%)
- ----------------------------------------------------------------------------------------------------------------------------
354 I2 Technologies, Inc. (NON) 43,232
278 BEA Systems, Inc. (NON) 20,398
113 Micromuse, Inc. (NON) 15,686
2,207 Microsoft Corp. (NON) 234,490
1,095 Oracle Corp. (NON) 85,478
278 Portal Software, Inc. (NON) 15,829
277 Siebel Systems, Inc. (NON) 33,084
952 VERITAS Software Corp. (NON) 124,712
----------------
572,909
Technology Services (1.7%)
- ----------------------------------------------------------------------------------------------------------------------------
1,301 America Online, Inc. (NON) 87,492
170 InfoSpace.com, Inc. (NON) 24,724
152 Yahoo! Inc. (NON) 26,049
----------------
138,265
Telecommunications (4.3%)
- ----------------------------------------------------------------------------------------------------------------------------
365 Covad Communications Group 144A (NON) 26,463
393 Level 3 Communications, Inc. (NON) 41,560
596 McLeod, Inc. Class A (NON) 50,548
450 Metromedia Fiber Network, Inc. Class A (NON) 43,538
500 NEXTEL Communications, Inc. Class A (NON) 74,125
1,106 Sprint PCS (NON) 72,236
380 VoiceStream Wireless Corp. (NON) 48,949
----------------
357,419
Transaction Processing (0.2%)
- ----------------------------------------------------------------------------------------------------------------------------
285 CheckFree Holdings Corp. (NON) 20,093
----------------
Total Common Stocks (cost $3,863,869) $ 4,934,707
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (35.6%) (a)
PRINCIPAL AMOUNT VALUE
U.S. Government Agency Mortgage Obligations (15.8%)
- ----------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation
$ 25,000 6 7/8s, January 15, 2005 $ 24,766
24,903 6s, February 1, 2029 22,677
Federal National Mortgage Association
Pass-Through Certificates
10,000 7 1/4s, January 15, 2010 10,067
16,464 7s, February 1, 2012 16,171
325,000 6 5/8s, September 15, 2009 312,559
325,000 6 1/2s, August 15, 2004 317,941
10,000 5 1/8s, February 13, 2004 9,348
Government National Mortgage Association
150,000 7s, TBA, April 1, 2030 145,337
175,000 6 1/2s, TBA, April 1, 2030 165,074
175,000 6s, TBA, April 1, 2030 160,125
Government National Mortgage Association
Pass-Through Certificates
34,514 8s, October 15, 2026 34,902
22,473 7s, May 15, 2023 21,876
74,219 6 1/2s, with due dates from
September 15, 2024 to February 15, 2029 69,998
----------------
1,310,841
U.S. Treasury Obligations (19.8%)
- ----------------------------------------------------------------------------------------------------------------------------
360,000 U.S. Treasury Bonds 6 1/8s, August 15, 2029 366,919
U.S. Treasury Notes
505,000 6 1/8s, December 31, 2001 501,687
355,000 6s, August 15, 2009 350,506
433,000 5 7/8s, November 15, 2004 425,150
----------------
1,644,262
----------------
Total U.S. Government and Agency Obligations
(cost $2,943,627) $ 2,955,103
PREFERRED STOCKS (--%) * (cost $16)
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------------
250 TCR Holding Corp. Class E zero % pfd. $ 3
SHORT-TERM INVESTMENTS (8.5%) (a)
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
$300,000 Interest in $754,202,000 joint repurchase
agreement dated March 31, 2000 with
Morgan (J.P.) & Co., Inc. due April 3, 2000
with respect to various U.S. Treasury
obligations -- maturity value of $300,152
for an effective yield of 6.09% $ 300,000
406,000 Interest in $556,447,000 joint repurchase
agreement dated March 31, 2000 with
Morgan Stanley & Co. Inc. due April 3, 2000
with respect to various U.S. Treasury
obligations -- maturity value of $406,204
for an effective yield of 6.02% 406,000
----------------
Total Short-Term Investments (cost $706,000) $ 706,000
- ----------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $7,513,512) (b) $ 8,595,813
- ----------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $8,310,996.
(b) The aggregate identified cost on a tax basis is $7,516,940 resulting in gross unrealized appreciation and
depreciation of $1,205,644 and $126,771 respectively, or net unrealized appreciation of $1,078,873.
(NON) Non-income-producing security.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional
buyers.
TBA after the name of a security represents to be announced securities (Note 1).
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 2000 (Unaudited)
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $7,513,512) (Note 1) $8,595,813
- ----------------------------------------------------------------------------------------------
Cash 169
- ----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 31,312
- ----------------------------------------------------------------------------------------------
Receivable for securities sold 665,122
- ----------------------------------------------------------------------------------------------
Receivable from manager (Note 2) 8,895
- ----------------------------------------------------------------------------------------------
Total assets 9,301,311
Liabilities
- ----------------------------------------------------------------------------------------------
Payable for securities purchased 957,235
- ----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,463
- ----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 2,522
- ----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 10
- ----------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 6,425
- ----------------------------------------------------------------------------------------------
Other accrued expenses 22,660
- ----------------------------------------------------------------------------------------------
Total liabilities 990,315
- ----------------------------------------------------------------------------------------------
Net assets $8,310,996
Represented by
- ----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $6,469,424
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 25,786
- ----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 733,638
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 1,082,148
- ----------------------------------------------------------------------------------------------
Total - Representing net assets applicable to
capital shares outstanding $8,310,996
Computation of net asset value and offering price
- ----------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($8,310,996 divided by 566,429 shares) $14.67
- ----------------------------------------------------------------------------------------------
Offering price (100/94.25 of $14.67)* $15.56
- ----------------------------------------------------------------------------------------------
* 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended March 31, 2000 (Unaudited)
<S> <C>
Investment income:
- ----------------------------------------------------------------------------------------------
Dividends $ 4,472
- ----------------------------------------------------------------------------------------------
Interest income (net of foreign tax of $41) 59,665
- ----------------------------------------------------------------------------------------------
Total investment income 64,137
Expenses:
- ----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 16,454
- ----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,977
- ----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 1,170
- ----------------------------------------------------------------------------------------------
Administrative services (Note 2) 20
- ----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 319
- ----------------------------------------------------------------------------------------------
Reports to shareholders 4,583
- ----------------------------------------------------------------------------------------------
Auditing 17,052
- ----------------------------------------------------------------------------------------------
Legal 2,230
- ----------------------------------------------------------------------------------------------
Postage 79
- ----------------------------------------------------------------------------------------------
Other 19
- ----------------------------------------------------------------------------------------------
Fees waived by Manager (Note 2) (27,869)
- ----------------------------------------------------------------------------------------------
Total expenses 18,034
- ----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,101)
- ----------------------------------------------------------------------------------------------
Net expenses 16,933
- ----------------------------------------------------------------------------------------------
Net investment income 47,204
- ----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 759,848
- ----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in foreign currencies
during the period (153)
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 560,938
- ----------------------------------------------------------------------------------------------
Net gain on investments 1,320,633
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,367,837
- ----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
2000* 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- -------------------------------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------------------------------
Net investment income $ 47,204 $ 76,507
- -------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 759,848 428,223
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 560,785 141,449
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,367,837 646,179
Distributions to shareholders:
- -------------------------------------------------------------------------------------------------------
From net investment income (79,280) (58,592)
- -------------------------------------------------------------------------------------------------------
From net realized gain on investments (451,413) (357,149)
- -------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 3,507,292 588,681
- -------------------------------------------------------------------------------------------------------
Total increase in net assets 4,344,436 819,119
Net assets
- -------------------------------------------------------------------------------------------------------
Beginning of period 3,966,560 3,147,441
- -------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $25,786 and $57,862, respectively) $8,310,996 $3,966,560
- -------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Jan. 3, 1995+
operating performance (Unaudited) Year ended September 30 to Sept. 30
- --------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.63 $11.92 $11.90 $11.03 $10.56 $8.50
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .12(d) .25(d) .22 .25 .29 .23
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.57 2.02 1.05 2.16 1.18 1.83
- --------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.69 2.27 1.27 2.41 1.47 2.06
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net
investment income (.25) (.22) (.25) (.27) (.35) --
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.40) (1.34) (1.00) (1.27) (.65) --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.65) (1.56) (1.25) (1.54) (1.00) --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.67 $12.63 $11.92 $11.90 $11.03 $10.56
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 30.99* 20.25 12.18 24.58 15.01 24.24*
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $8,311 $3,967 $3,147 $2,769 $2,246 $1,951
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(c) .36* .78 .77 .71 .73 .54*
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(a) .93* 2.05 1.82 2.29 2.72 2.44*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 109.05* 123.90 139.55 151.15 170.75 95.15*
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses of the fund for
the periods ended March 31, 2000, September 30, 1999, 1998, 1997, 1996 and 1995 reflect a reduction of $0.07, $0.19,
$0.13, $0.12, $0.15, and $0.23 per share, respectively.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Per share net investment income has been determined on the basis of weighted average number of shares outstanding
during the period.
</TABLE>
Notes to financial statements
March 31, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam Balanced Fund (the "fund") is one of 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. Effective April 4, 2000, Putnam Balanced Fund began
offering class B, class C and class M shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
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. Short-term investments having remaining maturities of 60 days or
less are stated at amortized cost, which approximates market value.
Other investments, including restricted securities, 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 and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc. 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.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management 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). Gains or losses on securities sold are determined
on the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such gains and losses are included with the net
realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net realized
exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies and the difference between the amount
of investment income and foreign withholding taxes recorded on the
fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized appreciation and depreciation of assets and
liabilities in foreign currencies arise from changes in the value of
open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange
rate. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political
developments, and currency fluctuations, not present with domestic
investments.
F) TBA purchase commitments The fund may enter into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed unit
price at a future date beyond customary settlement time. Although the
unit price has been established, the principal value has not been
finalized. However, the amount of the commitments will not fluctuate
more than .01% from the principal amount. The fund holds, and maintains
until settlement date, cash or high-grade debt obligations in an amount
sufficient to meet the purchase price, or the fund may enter into
offsetting contracts for the forward sale of other securities it owns.
Income on the securities will not be earned until settlement date. TBA
purchase commitments may be considered securities in themselves, and
involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the
risk of decline in the value of the fund's other assets. Unsettled TBA
purchase commitments are valued at the current market value of the
underlying securities, according to the procedures described under
"Security valuation" above.
Although the fund will generally enter into TBA purchase commitments
with the intention of acquiring securities for their portfolio or for
delivery pursuant to options contracts it has entered into, the fund may
dispose of a commitment prior to settlement if Putnam Management deems
it appropriate to do so.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended March 31, 2000, the fund had no borrowings against the line of
credit.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable 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, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax
regulations, which may differ from generally accepted accounting
principles. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
J) Expenses of the trust Expenses directly charged or attributable to
any fund will be paid from the assets of that fund. Generally, expenses
of the trust will be allocated among 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.
K) 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 were $6,425. The expenses have been fully
amortized on a projected net asset basis over a five year period as of
March 31, 2000.
Note 2
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. 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.
Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through September 30, 2000, to
the extent that expenses of the fund (exclusive of brokerage
commissions, interest, taxes, deferred organizational and extraordinary
expense, credits from Putnam Fiduciary Trust Company (PFTC), a
subsidiary of Putnam Investments, Inc. and payments under the Trust's
distribution plan) would exceed an annual rate of 0.70% of the fund's
average net assets.
The fund reimburses Putnam Management an allocated amount 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.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended March 31, 2000, fund expenses were reduced by
$1,101 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized
in connection with the expense-offset arrangements in an
income-producing asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $100
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. 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 Plan provides for 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. Currently, no payments are being made
on the plan.
For the six months ended March 31, 2000, Putnam Mutual Funds, Corp.,
acting as underwriter received no monies in contingent deferred sales
charges from redemptions of class A shares acquired through an exchanges
from another fund. For the six months ended March 31, 2000, Putnam
Mutual Funds Corp., acting as underwriter received no monies on class A
redemptions.
Note 3
Purchases and sales of securities
During the six months ended March 31, 2000, cost of purchases and
proceeds from sales of investment securities other than U.S. government
obligations and short-term investments aggregated $5,208,050 and
$3,473,193, respectively. Purchases and sales of U.S. government
obligations aggregated $2,789,987 and $1,855,076, respectively.
Note 4
Capital shares
At March 31, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended March 31, 2000
- ---------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------
Shares sold 241,236 $3,376,302
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 41,331 530,693
- ---------------------------------------------------------------------------
282,567 3,906,995
Shares
repurchased (30,280) (399,703)
- ---------------------------------------------------------------------------
Net increase 252,287 $3,507,292
- ---------------------------------------------------------------------------
Year ended September 30, 1999
- ---------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------
Shares sold 17,014 $208,524
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 35,933 415,741
- ---------------------------------------------------------------------------
52,947 624,265
Shares
repurchased (2,849) (35,584)
- ---------------------------------------------------------------------------
Net increase 50,098 $588,681
- ---------------------------------------------------------------------------
At March 31, 2000, Putnam Management owned 477,750 shares of the fund
(84.2% of shares outstanding) valued at $7,008,593.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund **
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although the funds seek to preserve
your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
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
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
C. Beth Cotner
Vice President
David J. Santos
Vice President and Fund Manager
Manuel Weiss
Vice President and Fund Manager
Kevin Cronin
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
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, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board,
or any other agency; and involve risk, including the possible loss of
the principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA072-60357 318 5/00
