N-CSR 1 a_georgeputnambalanced.htm THE GEORGE PUTNAM BALANCED FUND a_georgeputnambalanced.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES



Investment Company Act file number: (811-00058)
Exact name of registrant as specified in charter: George Putnam Balanced Fund
Address of principal executive offices: One Post Office Square, Boston, Massachusetts 02109
Name and address of agent for service: Robert T. Burns, Vice President
One Post Office Square
Boston, Massachusetts 02109
Copy to:         Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036
Registrant's telephone number, including area code: (617) 292-1000
Date of fiscal year end: July 31, 2016
Date of reporting period : August 1, 2015 — July 31, 2016



Item 1. Report to Stockholders:

The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940:



George Putnam
Balanced
Fund

Annual report
7 | 31 | 16

Message from the Trustees  1 
About the fund  2 
Interview with your fund’s portfolio managers  4 
Performance snapshot  4 
Your fund’s performance  11 
Your fund’s expenses  14 
Terms and definitions  16 
Other information for shareholders  17 
Important notice regarding Putnam’s privacy policy  18 
Trustee approval of management contract  19 
Financial statements  24 
Federal tax information  70 
About the Trustees  71 
Officers  73 

Consider these risks before investing: Stock and bond prices may fall or fail to rise over time for several reasons, including general financial market conditions, factors related to a specific issuer or industry and, with respect to bond prices, changing market perceptions of the risk of default and changes in government intervention. These factors may also lead to increased volatility and reduced liquidity in the bond markets. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is greater for longer-term bonds, and credit risk is greater for below-investment-grade bonds. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. You can lose money by investing in the fund.


Message from the Trustees

Dear Fellow Shareholder:

Through the first half of 2016, markets around the world have shown great resilience in the face of multiple challenges. Now, as we enter the fall, many additional factors raise new concerns.

Against a backdrop of sluggish growth and following a colorful political campaign, the United States will be electing a new president in a few short weeks. Overseas, challenges are widespread, from sluggish growth in Europe, Japan, and many emerging markets to global fallout from the United Kingdom’s decision to leave the European Union. As non-U.S. central banks consider new actions to boost economic growth, here at home the Federal Reserve seeks stronger economic data before it raises interest rates. The uncertainty caused by these unfolding events could well spur renewed bouts of market volatility.

But we believe that opportunities can emerge despite the markets’ ups and downs. At Putnam, our portfolio managers actively pursue these opportunities. Backed by a network of global analysts, they draw on their long experience and expertise in navigating changing conditions.

We share Putnam’s deep conviction that an active approach based on fundamental research can play a valuable role in your portfolio. In the following pages, you will find an overview of your fund’s performance for the reporting period ended July 31, 2016, as well as an outlook for the coming months.

Now may be a good time for you to consult with your financial advisor, who can help you in determining if your portfolio remains aligned with your long-term goals, time horizon, and tolerance for risk.

As always, thank you for investing with Putnam.





Interview with your fund’s portfolio managers


What was the market environment like during the fund’s 12-month reporting period ended July 31, 2016?

Aaron: Market volatility picked up in the summer of 2015 due to a variety of global macroeconomic factors. The fourth calendar quarter of 2015 saw stocks bounce back from their third-quarter lows, but a variety of headwinds — from China’s economic weakness to depressed commodity markets — made for a relatively difficult backdrop for investors. January 2016 opened with considerable volatility, primarily as concerns over China led investors to wonder whether the risks of a global recession were increasing. In addition, negative interest rates in Europe and Japan became an obstacle to global financial markets. Some of these pressures eased beginning in mid-February, particularly as oil prices began to rise and the U.S. dollar weakened relative to other global currencies.


Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See pages 5 and 11–13 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.

* George Putnam Blended Index is an unmanaged index administered by Putnam Management, 60% of which is the S&P 500 Index and 40% of which is the Bloomberg Barclays U.S. Aggregate Bond Index.

† The fund’s benchmarks (S&P 500 Index and George Putnam Blended Index) were introduced on 12/31/69 and 12/31/78, respectively, and its Lipper group (Balanced Funds) was introduced on 12/31/59; they all post-date the inception of the fund’s class A shares.

4   George Putnam Balanced Fund 

 


The remainder of the period was somewhat calmer by comparison — until, that is, U.K. voters elected in late June to leave the European Union. This surprising event caused some turmoil for U.S. markets, but we do not see it posing a substantial economic or market risk to the United States. Indeed, with the appointment of a new British Prime Minister in July, we became optimistic that the period of fear and uncertainty stemming from “Brexit” may be short-lived.

Do you think Brexit will have an impact on global bond markets?

Paul: Brexit does put additional pressure on the European Central Bank and the Bank of Japan to maintain strong monetary policy support to aid the economy and markets, in our view, and we believe that such pressure could pull down global interest rates. In addition, post-Brexit, the U.S. Federal Reserve has another potential reason to cite for putting interest-rate hikes on hold. We believe that this may mean interest rates stay lower for longer, and it may suggest that investors will continue to search for higher-yielding bond investments.

With respect to the Fed, we do not think a pause or a slow increase in raising rates constitutes a fundamental change in strategy; rather, it is an acknowledgement that global uncertainties have risen. Through the end of the reporting period, markets have generally behaved well after the initial shock of Brexit has worn off, and if related economic uncertainties continue to diminish, we think the United States will look more secure on its course and the Fed could be prompted by the data to raise interest rates.

How did the fund perform in this environment?

Aaron: Though it turned in positive results for the period, the fund lagged its all-stock primary benchmark, the S&P 500 Index, as well as its custom blended stock/bond index. While the bond component helped buoy fund performance overall, our decision to avoid a number of mega-cap stocks — some of the largest, more stable, and defensive companies available to investors — hurt relative results. In short, we believed these companies were not attractive on their fundamental merits but


This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 7/31/16. See pages 3, 4 and 11–13 for additional fund performance information. Index descriptions can be found on page 16.

George Putnam Balanced Fund   5 

 


were more places for investors to hide during the period.

Similarly, our preference for smaller, growth-oriented biotech stocks over the stocks of larger, more stable pharmaceutical companies proved to be a drag on relative results. In addition, our emphasis on financial stocks that we believed would stand to benefit from rising interest rates detracted from relative returns, as rates actually declined during the period as a result of macroeconomic fears.

What are your thoughts on the fundamentals of the investment-grade corporate bond sector, where the fund has approximately 15% of its assets invested?

Paul: Within U.S. investment grade, we still remain constructive as fundamentals are on track and technicals are robust, in our view. Regarding fundamentals, we think certain “stressed” sectors are in better fundamental condition than during the first calendar quarter of 2016, and company earnings in the second calendar quarter generally exceeded expectations. Looking forward, we expect company profit margins and general corporate indebtedness to remain at their current levels or even to deteriorate marginally from where they stood at the end of July 2016. Regarding supply and demand, new issue supply remains elevated, as issuers take advantage of low rates, M&A continues, and those deals announced in 2015 reach closure and require funding.

While the new issue calendar slowed as the Brexit referendum approached and corporates entered their black-out period before the end of the second calendar quarter, August issuance has pushed summer 2016 issuance to be flat year-over-year. The implications of the Brexit referendum


Allocations are shown as a percentage of the fund’s net assets as of 7/31/16. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.

6   George Putnam Balanced Fund 

 


and the time frame of its effects are still unclear. Nevertheless, we continue to find current spread levels — or the general yield advantage offered by investment-grade bonds over safer Treasuries of similar maturity — to be attractive versus their underlying fundamental risks even in the face of a meaningful rally since mid-February.


What were some of the stocks or related equity strategies that detracted most from relative performance?

Aaron: Bombardier, an out-of-benchmark holding, was the largest detractor from the fund’s relative performance. This company is a leading manufacturer of aircraft and trains. In early 2015, Bombardier announced its need to raise $2 billion to cover the cost of a new fuel-efficient passenger jet airliner, the CSeries, which had been delayed for two years and was over budget. The company also announced the replacement of its chief executive officer and suspended its dividend. Initially, we sensed there could be positive change following these financing and leadership announcements, but we lost confidence during the period that such changes would occur. Consequently, we sold the stock by the end of the period.

Perrigo, an Ireland-based specialty pharmaceutical company, was the second-largest detractor from the fund’s relative performance. The stock’s decline was primarily due to disappointment over the announcement in late 2015 that Perrigo would not be acquired by industry rival Mylan — a potential deal that had been cheered by investors earlier in the


This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 7/31/16. Short-term investments and derivatives, if any, are excluded. Holdings may vary over time.

George Putnam Balanced Fund   7 

 


year. We sold this stock in the second half of the fund’s fiscal period.

Other detractors, as I mentioned, included our decisions to avoid or de-emphasize a number of mega-cap stocks that performed well during the period. We did not own the stock of General Electric [GE], for example, and we held a benchmark-relative underweight to consumer products and health-care giant Johnson & Johnson. In general, risk-averse investors sought safer-seeming stock bets at different points in the fund’s fiscal period, and the share price of mega-cap companies like GE and Johnson & Johnson generally benefited from that shift in investor demand.

What were some of the standout stocks that contributed to the fund’s relative performance?

Aaron: Northrop Grumman, which is one of the largest defense conglomerates in the world, was the top contributor for the period. The company, which specializes in unmanned aerial vehicle manufacturing and defense systems, continued to win franchise programs and saw higher-than-expected earnings, which led to share price appreciation.

L-3 Communications Holdings also was a top contributor to relative results. This aerospace contractor reported solid earnings and expanded its business by penetrating new markets. In addition, the company strengthened its communication systems segment with an acquisition and returned cash to shareholders through share buybacks and dividends, all of which acted as tailwinds for the stock.

A third solid contributor was the stock of Royal Dutch Shell, the Anglo-Dutch multinational oil and gas company. This out-of-benchmark stock rose, particularly


This chart shows how the fund’s top weightings have changed over the past six months. Allocations are shown as a percentage of the fund’s net assets. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.

8   George Putnam Balanced Fund 

 


after early February, when oil prices began to recover from multi-decade lows.

What is your outlook for the U.S. economy and markets?

Aaron: We believe the U.S. economy is in the later stages of its expansion, and that market volatility may continue to rise as this cycle matures. For the balance of 2016, we think the most likely scenario for U.S. company earnings is modestly accelerating, low- to mid-single-digit earnings growth. Although strength appears to us to have returned to the U.S. dollar post-Brexit, we do not think this will be too much of a headwind for U.S. exporters, for example, and we expect relative stability in the price of oil to continue providing a boost to the energy sector.

The global macroeconomic risks to this view cannot be ignored, however. Indeed, today we see a wider range of potential outcomes for the markets than we have seen in recent history. From our perspective, China’s economic situation poses perhaps one of the more substantial risks to the global economy. We do not think China has shed any of its credit-growth problems, and the risk of policy error in China runs high, in our view. Indeed, the entire non-U.S. political arena has been fraught with a variety of uncertainties, so focusing on what could go wrong has become an important part of our analytical forecasting.

Thank you, Aaron and Paul, for your time and insights today.

The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.

Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.

Portfolio Manager Aaron M. Cooper is Director of Global Equity Research at Putnam. He holds an A.B. from Harvard University. Aaron joined Putnam in 2011 and has been in the investment industry since 1999.

Portfolio Manager Paul D. Scanlon is Co-Head of Fixed Income at Putnam. He has an M.B.A. from the University of Chicago Booth School of Business and a B.A. from Colgate University. Paul joined Putnam in 1999 and has been in the investment industry since 1986.

George Putnam Balanced Fund   9 

 


IN THE NEWS

With central banks exhausting the more traditional methods aimed at stimulating their economies, some are considering more novel strategies. Increasingly, central bankers and economists are discussing the merits of so-called “helicopter money,” which conjures images of money being dropped on the populace from the sky. Considered somewhat radical, the term was adopted in 1969 by economist Milton Friedman, who described the idea of a central bank printing money and injecting the cash directly into the economy, with the aim of boosting consumer demand and spending, and kick-starting a recovery. It differs from traditional stimulus measures, such as the U.S. government selling U.S. Treasury securities to the public in order to finance spending. With interest rates at zero — or even in negative territory — in major world economies like Japan and some European nations, the concept of helicopter money is gaining popularity. Under this strategy, cash could be transferred to people in the form of a government tax break or by simply making a direct deposit into individual bank accounts. Critics of helicopter money, however, say it could cause runaway inflation.

10 George Putnam Balanced Fund 

 


Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended July 31, 2016, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance information as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, R5, R6, and Y shares are not available to all investors. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 7/31/16

  Class A  Class B  Class C  Class M  Class R  Class R5  Class R6  Class Y 
(inception dates)  (11/5/37)  (4/27/92)  (7/26/99)  (12/1/94)  (1/21/03)  (12/2/13)  (12/2/13)  (3/31/94) 
  Before  After          Before  After  Net  Net  Net  Net 
sales  sales  Before  After  Before  After  sales  sales  asset  asset  asset  asset 
charge  charge  CDSC  CDSC  CDSC  CDSC  charge  charge  value  value  value  value 
Annual average                         
(life of fund)  8.61%  8.53%  8.50%  8.50%  7.80%  7.80%  7.89%  7.84%  8.35%  8.69%  8.70%  8.69% 
10 years  44.78  36.46  36.18  36.18  34.47  34.47  37.87  33.05  41.40  48.56  48.92  48.54 
Annual average  3.77  3.16  3.14  3.14  3.01  3.01  3.26  2.90  3.52  4.04  4.06  4.04 
5 years  52.46  43.70  46.72  44.72  46.86  46.86  48.69  43.48  50.48  54.35  54.73  54.33 
Annual average  8.80  7.52  7.97  7.67  7.99  7.99  8.26  7.49  8.52  9.07  9.12  9.07 
3 years  21.82  14.82  19.07  16.07  19.15  19.15  20.04  15.84  20.88  22.82  23.12  22.80 
Annual average  6.80  4.71  5.99  5.09  6.01  6.01  6.28  5.02  6.52  7.09  7.18  7.09 
1 year  2.17  –3.70  1.42  –3.58  1.45  0.45  1.69  –1.87  1.93  2.49  2.58  2.48 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R, R5, R6, and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares, except for class Y shares, for which 12b-1 fees are not applicable. Performance for class R5 and R6 shares prior to their inception is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R5 and R6 shares; had it, returns would have been higher.

For a portion of the periods, the fund had expense limitations, without which returns would have been lower.

Class B share performance reflects conversion to class A shares after eight years.

George Putnam Balanced Fund   11 

 


Comparative index returns For periods ended 7/31/16

    Bloomberg Barclays    Lipper 
    U.S. Aggregate  George Putnam  Balanced Funds 
  S&P 500 Index  Bond Index  Blended Index†  category average‡ 
Annual average (life of fund)  —*  —*  —*  —* 
10 years  110.89%  63.80%  102.40%  68.51% 
Annual average  7.75  5.06  7.31  5.30 
5 years  87.36  19.15  59.12  38.59 
Annual average  13.38  3.57  9.74  6.69 
3 years  37.35  13.25  28.16  17.62 
Annual average  11.16  4.23  8.62  5.53 
1 year  5.61  5.94  6.18  1.90 

Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.

* The fund’s benchmarks (S&P 500 Index and George Putnam Blended Index) were introduced on 12/31/69 and 12/31/78, respectively; the Bloomberg Barclays U.S. Aggregate Bond Index was introduced on 12/31/75; and the fund’s Lipper group (Balanced Funds) was introduced on 12/31/59; they all post-date the inception of the fund’s class A shares.

† George Putnam Blended Index is an unmanaged index administered by Putnam Management, 60% of which is the S&P 500 Index and 40% of which is the Bloomberg Barclays U.S. Aggregate Bond Index.

‡ Over the 1-year, 3-year, 5-year, and 10-year periods ended 7/31/16, there were 638, 596, 536, and 398 funds, respectively, in this Lipper category.


Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would have been valued at $13,618 and $13,447, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,650 after sales charge) would have been valued at $13,305. A $10,000 investment in the fund’s class R, R5, R6, and Y shares would have been valued at $14,140, $14,856, $14,892 and $14,854, respectively.

12    George Putnam Balanced Fund 

 


Fund price and distribution information For the 12-month period ended 7/31/16

Distributions  Class A  Class B  Class C  Class M  Class R  Class R5  Class R6  Class Y 
Number  4 4  4  4 4  4  4  4 
Income  $0.201  $0.077  $0.083  $0.120  $0.151  $0.245  $0.259  $0.242 
Capital gains  — —  —  — —  —  —  — 
Total  $0.201  $0.077  $0.083  $0.120  $0.151  $0.245  $0.259  $0.242 
  Before  After  Net  Net  Before  After  Net  Net  Net  Net 
  sales  sales  asset  asset  sales  sales  asset  asset  asset  asset 
Share value  charge  charge  value  value  charge  charge  value  value  value  value 
7/31/15  $17.22  $18.27  $17.02  $17.10  $16.99  $17.61  $17.16  $17.28  $17.28  $17.28 
7/31/16  17.38  18.44  17.18  17.26  17.15  17.77  17.33  17.45  17.45  17.45 
  Before  After  Net  Net  Before  After  Net  Net  Net  Net 
  sales  sales  asset  asset  sales  sales  asset  asset  asset  asset 
Current rate  charge  charge  value  value  charge  charge  value  value  value  value 
Current                     
dividend rate 1  1.20%  1.13%  0.51%  0.51%  0.75%  0.72%  0.99%  1.44%  1.47%  1.42% 
Current 30-day                     
SEC yield 2  N/A  0.98  0.30  0.30  N/A  0.53  0.82  1.30  1.40  1.29 

The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.

1 Most recent distribution, including any return of capital and excluding capital gains, annualized and divided by share price before or after sales charge at period-end.

2 Based only on investment income and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.

Fund performance as of most recent calendar quarter
Total return for periods ended 6/30/16

  Class A  Class B  Class C  Class M  Class R  Class R5  Class R6  Class Y 
(inception dates)  (11/5/37)  (4/27/92)  (7/26/99)  (12/1/94)  (1/21/03)  (12/2/13)  (12/2/13)  (3/31/94) 
  Before  After          Before  After  Net  Net  Net  Net 
sales  sales  Before  After  Before  After  sales  sales  asset  asset  asset  asset 
charge  charge  CDSC  CDSC  CDSC  CDSC  charge  charge  value  value  value  value 
Annual average                         
(life of fund)  8.59%  8.50%  8.47%  8.47%  7.77%  7.77%  7.86%  7.81%  8.32%  8.66%  8.67%  8.66% 
10 years  42.11  33.94  33.63  33.63  31.90  31.90  35.30  30.56  38.71  45.75  46.10  45.72 
Annual average  3.58  2.97  2.94  2.94  2.81  2.81  3.07  2.70  3.33  3.84  3.86  3.84 
5 years  45.86  37.48  40.47  38.47  40.55  40.55  42.25  37.27  43.95  47.73  48.09  47.71 
Annual average  7.84  6.57  7.03  6.73  7.04  7.04  7.30  6.54  7.56  8.12  8.17  8.11 
3 years  22.43  15.39  19.72  16.72  19.73  19.73  20.63  16.41  21.48  23.36  23.66  23.34 
Annual average  6.98  4.89  6.18  5.29  6.19  6.19  6.45  5.19  6.70  7.25  7.33  7.24 
1 year  0.58  –5.21  –0.18  –5.15  –0.20  –1.20  0.08  –3.42  0.27  0.84  0.87  0.82 

See the discussion following the fund performance table on page 11 for information about the calculation of fund performance.

George Putnam Balanced Fund    13 

 


Your fund’s expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund’s expenses were limited; had expenses not been limited, they would have been higher. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.

Expense ratios

  Class A  Class B  Class C  Class M  Class R  Class R5  Class R6  Class Y 
Total annual operating expenses for                 
the fiscal year ended 7/31/15  1.01%*  1.76%*  1.76%*  1.51%*  1.26%*  0.72%  0.62%  0.76%* 
Annualized expense ratio for the                 
six-month period ended 7/31/16†  1.01%  1.76%  1.76%  1.51%  1.26%  0.74%  0.64%  0.76% 

Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.

Expenses are shown as a percentage of average net assets.

* Restated to reflect current fees resulting from a change to the fund’s investor servicing arrangements effective September 1, 2016.

† Expense ratios for each class are for the fund’s most recent fiscal half year. As a result of this, ratios may differ from expense ratios based on one-year data in the financial highlights.

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 2/1/16 to 7/31/16. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

  Class A  Class B  Class C  Class M  Class R  Class R5  Class R6  Class Y 
Expenses paid per $1,000*†  $5.27  $9.17  $9.17  $7.87  $6.57  $3.87  $3.34  $3.97 
Ending value (after expenses)  $1,099.40  $1,095.10  $1,096.10  $1,097.40  $1,098.50  $1,101.10  $1,101.40  $1,101.70 

* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 7/31/16. The expense ratio may differ for each share class.

† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.

14    George Putnam Balanced Fund 

 


Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 7/31/16, use the following calculation method. To find the value of your investment on 2/1/16, call Putnam at 1-800-225-1581.


Compare expenses using the SEC’s method

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return . You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.

  Class A  Class B  Class C  Class M  Class R  Class R5  Class R6  Class Y 
Expenses paid per $1,000*†  $5.07  $8.82  $8.82  $7.57  $6.32  $3.72  $3.22  $3.82 
Ending value (after expenses)  $1,019.84  $1,016.11  $1,016.11  $1,017.35  $1,018.60  $1,021.18  $1,021.68  $1,021.08 

* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 7/31/16. The expense ratio may differ for each share class.

† Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period; and then dividing that result by the number of days in the year.

George Putnam Balanced Fund    15 

 


Terms and definitions

Important terms

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.

Before sales charge , or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.

After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge 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 generally 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 over time 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.

Current rate is the annual rate of return earned from dividends or interest of an investment. Current rate is expressed as a percentage of the price of a security, fund share, or principal investment.

Share classes

Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class B shares are not subject to an initial sales charge and may be subject to a CDSC.

Class C shares are not subject to an initial sales charge and are subject to a CDSC 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 CDSC.

Class R shares are not subject to an initial sales charge or CDSC and are only available to employer-sponsored retirement plans.

Class R5 and R6 shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are only available to employer-sponsored retirement plans.

Class Y shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.

Comparative indexes

Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.

BofA Merrill Lynch U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.

George Putnam Blended Index is an unmanaged index administered by Putnam Management, LLC, 60% of which is the S&P 500 Index and 40% of which is the Bloomberg Barclays U.S. Aggregate Bond Index.

S&P 500 Index is an unmanaged index of common stock performance.

Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.

Lipper is a third-party industry-ranking entity that ranks mutual funds. Its rankings

16   George Putnam Balanced Fund 

 


do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.

Other information for shareholders

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2016, are available in the Individual Investors section of putnam.com, and on the Securities and Exchange Commission (SEC) website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Form N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the Public Reference Room.

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of July 31, 2016, Putnam employees had approximately $495,000,000 and the Trustees had approximately $131,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.

George Putnam Balanced Fund    17 

 


Important notice regarding Putnam’s privacy policy

In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ names, addresses, Social Security numbers, and dates of birth. Using this information, we are able to maintain accurate records of accounts and transactions.

It is our policy to protect the confidentiality of our shareholder information, whether or not a shareholder currently owns shares of our funds. In particular, it is our policy not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use.

Under certain circumstances, we must share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. Finally, it is our policy to share account information with your financial representative, if you’ve listed one on your Putnam account.

18   George Putnam Balanced Fund 

 


Trustee approval of management contract

General conclusions

The Board of Trustees of The Putnam Funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Investment Management, LLC (“Putnam Management”) and the sub-management contract with respect to your fund between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”). The Board, with the assistance of its Contract Committee, requests and evaluates all information it deems reasonably necessary under the circumstances in connection with its annual contract review. The Contract Committee consists solely of Trustees who are not “interested persons” (as this term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of The Putnam Funds (“Independent Trustees”).

At the outset of the review process, members of the Board’s independent staff and independent legal counsel discussed with representatives of Putnam Management the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review, identifying possible changes in these materials that might be necessary or desirable for the coming year. Following these discussions and in consultation with the Contract Committee, the Independent Trustees’ independent legal counsel requested that Putnam Management and its affiliates furnish specified information, together with any additional information that Putnam Management considered relevant, to the Contract Committee. Over the course of several months ending in June 2016, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided, as well as supplemental information provided in response to an additional request made by the Contract Committee. Throughout this process, the Contract Committee was assisted by the members of the Board’s independent staff and by independent legal counsel for The Putnam Funds and the Independent Trustees.

In May 2016, the Contract Committee met in executive session to discuss and consider its recommendations with respect to the continuance of the contracts. At the Trustees’ June 24, 2016 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial, performance and other data that the Contract Committee considered in the course of its review. The Contract Committee then presented its written report, which summarized the key factors that the Committee had considered and set forth its recommendations. The Contract Committee then recommended, and the Independent Trustees approved, the continuance of your fund’s management and sub-management contracts, effective July 1, 2016. (Because PIL is an affiliate of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL, the Trustees have not attempted to evaluate PIL as a separate entity, and all subsequent references to Putnam Management below should be deemed to include reference to PIL as necessary or appropriate in the context.) The Independent Trustees’ approval was based on the following conclusions: • That the fee schedule in effect for your fund represented reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds, the costs incurred by Putnam Management in providing services to the

George Putnam Balanced Fund    19 

 


fund, and the continued application of certain reductions and waivers noted below; and • That the fee schedule in effect for your fund represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels.

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the management arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that some aspects of the arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of fee arrangements in previous years. For example, with some minor exceptions, the funds’ current fee arrangements under the management contracts were first implemented at the beginning of 2010 following extensive review by the Contract Committee and discussions with representatives of Putnam Management, as well as approval by shareholders.

Management fee schedules and total expenses

The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints. The Trustees also reviewed the total expenses of each Putnam fund, recognizing that in most cases management fees represented the major, but not the sole, determinant of total costs to shareholders. (In a few instances, funds have implemented so-called “all-in” management fees covering substantially all routine fund operating costs.) In reviewing fees and expenses, the Trustees generally focus their attention on material changes in circumstances — for example, changes in assets under management, changes in a fund’s investment style, changes in Putnam Management’s operating costs or profitability, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not indicate that changes to the management fee structure for your fund would be appropriate at this time.

Under its management contract, your fund has the benefit of breakpoints in its management fee schedule that provide shareholders with economies of scale in the form of reduced fee rates as assets under management in the Putnam family of funds increase. The Trustees concluded that the fee schedule in effect for your fund represented an appropriate sharing of economies of scale between fund shareholders and Putnam Management.

As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. In order to support the effort to have fund expenses meet competitive standards, the Trustees and Putnam Management have implemented certain expense limitations that were in effect during your fund’s fiscal year ending in 2015. These expense limitations were: (i) a contractual expense limitation applicable to specified retail open-end funds, including your fund, of 32 basis points on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to specified open-end funds, including your fund, of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses,

20   George Putnam Balanced Fund 

 


interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses). These expense limitations attempt to maintain competitive expense levels for the funds. Most funds, including your fund, had sufficiently low expenses that these expense limitations were not operative during their fiscal years ending in 2015. Putnam Management has agreed to maintain these expense limitations until at least November 30, 2017 and to reduce the contractual expense limitation on investor servicing fees and expenses from 32 basis points to 25 basis points effective September 1, 2016. Putnam Management’s support for these expense limitation arrangements was an important factor in the Trustees’ decision to approve the continuance of your fund’s management and sub-management contracts.

The Trustees reviewed comparative fee and expense information for a custom group of competitive funds selected by Lipper Inc. (“Lipper”). This comparative information included your fund’s percentile ranking for effective management fees and total expenses (excluding any applicable 12b-1 fee), which provides a general indication of your fund’s relative standing. In the custom peer group, your fund ranked in the first quintile in effective management fees (determined for your fund and the other funds in the custom peer group based on fund asset size and the applicable contractual management fee schedule) and in the first quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2015. The first quintile represents the least expensive funds and the fifth quintile the most expensive funds. The fee and expense data reported by Lipper as of December 31, 2015 reflected the most recent fiscal year-end data available in Lipper’s database at that time.

In connection with their review of fund management fees and total expenses, the Trustees also reviewed the costs of the services provided and the profits realized by Putnam Management and its affiliates from their contractual relationships with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management, investor servicing and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of Putnam Management’s revenues, expenses and profitability, allocated on a fund-by-fund basis, with respect to the funds’ management, distribution, and investor servicing contracts. For each fund, the analysis presented information about revenues, expenses and profitability for each of the agreements separately and for the agreements taken together on a combined basis. The Trustees concluded that, at current asset levels, the fee schedules in place represented reasonable compensation for the services being provided and represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the Putnam funds at that time.

The information examined by the Trustees as part of their annual contract review for the Putnam funds included information regarding fees charged by Putnam Management and its affiliates to institutional clients such as defined benefit pension plans, college endowments, sub-advised third-party mutual funds, and the like. This information included comparisons of those fees with fees charged to the Putnam funds, as well as an assessment of the differences in the services provided to these different types of clients. The Trustees observed that the differences in fee rates between these clients and the Putnam funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients may reflect, among other things, historical competitive forces operating in separate markets. The Trustees considered the fact that in many cases fee rates across

George Putnam Balanced Fund   21 

 


different asset classes are higher on average for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to its other clients. The Trustees did not rely on these comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of the Putnam funds’ investment process and performance by the work of the investment oversight committees of the Trustees, which meet on a regular basis with the funds’ portfolio teams and with the Chief Investment Officer and other senior members of Putnam Management’s Investment Division throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — based on the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to them, and in general Putnam Management’s ability to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.

The Trustees considered that 2015 was a year of mixed performance results for the Putnam funds, with generally strong results for the international equity, global sector and global asset allocation funds, but generally disappointing results for the U.S. and small-cap equity, Spectrum and fixed income funds. They noted that the longer-term performance of the Putnam funds generally continued to be strong, exemplified by the fact that the Putnam funds were ranked by the Barron’s/Lipper Fund Families survey as the 18th-best performing mutual fund complex out of 58 complexes for the five-year period ended December 31, 2015. They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2015 and considered information provided by Putnam Management regarding the factors contributing to the underperformance and actions being taken to improve the performance of these particular funds. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these efforts and to evaluate whether additional actions to address areas of underperformance are warranted.

For purposes of evaluating investment performance, the Trustees generally focus on a competitive industry ranking of each fund’s total net return over a one-year, three-year and five-year period. For a number of Putnam funds with relatively unique investment mandates for which meaningful competitive performance rankings are not considered to be available, the Trustees evaluated performance based on their total gross and net returns and, in most cases, comparisons of those returns with the returns of selected investment benchmarks. In the case of your fund, the Trustees considered that its class A share cumulative total return performance at net asset value was in the following quartiles of its Lipper peer group (Lipper Balanced Funds) for the one-year, three-year and five-year periods ended December 31, 2015 (the first quartile representing the best-­performing funds and the fourth quartile the worst-performing funds):

One-year period  2nd 
Three-year period  1st 
Five-year period  1st 

Over the one-year, three-year and five-year periods ended December 31, 2015, there were 645, 603 and 552 funds, respectively, in your fund’s Lipper peer group. (When considering

22    George Putnam Balanced Fund 

 


performance information, shareholders should be mindful that past performance is not a guarantee of future results.) The Trustees also considered Putnam Management’s continued efforts to support fund performance through initiatives including structuring compensation for portfolio managers and research analysts to enhance accountability for fund performance, emphasizing accountability in the portfolio management process, and affirming its commitment to a fundamental-driven approach to investing. The Trustees noted further that Putnam Management continued to strengthen its fundamental research capabilities by adding new investment personnel.

Brokerage and soft-dollar allocations; investor servicing

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage allocation and the use of soft dollars, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that are expected to be useful to Putnam Management in managing the assets of the fund and of other clients. Subject to policies established by the Trustees, soft dollars generated by these means are used primarily to acquire brokerage and research services (including third-party research and market data) that enhance Putnam Management’s investment capabilities and supplement Putnam Management’s internal research efforts. However, the Trustees noted that a portion of available soft dollars continues to be used to pay fund expenses. The Trustees indicated their continued intent to monitor regulatory and industry developments in this area with the assistance of their Brokerage Committee and also indicated their continued intent to monitor the allocation of the Putnam funds’ brokerage in order to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.

Putnam Management may also receive benefits from payments that the funds make to Putnam Management’s affiliates for investor or distribution services. In conjunction with the annual review of your fund’s management and sub-­management contracts, the Trustees reviewed your fund’s investor servicing agreement with Putnam Investor Services, Inc. (“PSERV”) and its distributor’s contracts and distribution plans with Putnam Retail Management Limited Partnership (“PRM”), both of which are affiliates of Putnam Management. The Trustees concluded that the fees payable by the funds to PSERV and PRM, as applicable, for such services are reasonable in relation to the nature and quality of such services, the fees paid by competitive funds, and the costs incurred by PSERV and PRM, as applicable, in providing such services.

George Putnam Balanced Fund   23 

 


Financial statements

These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, 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 non-investment 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 liquidation preference of preferred shares.)

Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal year.

Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, 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 highlights table also includes the current reporting period.

24   George Putnam Balanced Fund 

 


Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
George Putnam Balanced Fund:

In our opinion, the accompanying statement of assets and liabilities, including the portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of George Putnam Balanced Fund (the “fund”) at July 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at July 31, 2016 by correspondence with the custodian, brokers, transfer agent and the application of alternative auditing procedures where securities purchased had not been received, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
September 12, 2016

George Putnam Balanced Fund   25 

 


The fund’s portfolio 7/31/16

COMMON STOCKS (60.4%)*  Shares  Value 
Basic materials (2.2%)     
Air Products & Chemicals, Inc.  8,979  $1,341,642 
Albemarle Corp.  15,161  1,276,101 
Alcoa, Inc.  33,371  354,400 
ArcelorMittal SA (France) †  53,011  340,722 
Axalta Coating Systems, Ltd. †  49,056  1,400,549 
Barrick Gold Corp. (Canada)  12,698  277,578 
Chemtura Corp. †  25,731  722,784 
Dow Chemical Co. (The)  32,421  1,740,035 
E.I. du Pont de Nemours & Co.  25,318  1,751,246 
Ingevity Corp. †  5,576  213,394 
Martin Marietta Materials, Inc.  3,573  724,068 
Monsanto Co.  31,083  3,318,732 
Newmont Mining Corp.  26,019  1,144,836 
Nucor Corp.  11,332  607,848 
PPG Industries, Inc.  15,322  1,604,367 
Praxair, Inc.  8,177  952,948 
Sealed Air Corp.  31,861  1,503,202 
Sherwin-Williams Co. (The)  20,348  6,098,906 
Smurfit Kappa Group PLC (Ireland)  22,130  514,003 
Steel Dynamics, Inc.  5,134  137,694 
Symrise AG (Germany)  9,303  655,664 
W.R. Grace & Co.  4,562  341,557 
Yara International ASA (Norway)  10,051  326,768 
 27,349,044 
Capital goods (3.0%)   
Ball Corp.  19,922  1,407,888 
General Dynamics Corp.  60,838  8,936,494 
Honeywell International, Inc.  36,759  4,276,174 
KION Group AG (Germany)  16,340  895,686 
Manitowoc Foodservice, Inc. †  58,537  1,073,569 
Northrop Grumman Corp.  49,629  10,751,130 
Pentair PLC  34,155  2,179,772 
Raytheon Co.  11,513  1,606,409 
Rockwell Collins, Inc.  19,656  1,663,291 
Stericycle, Inc. †  9,434  851,607 
Triumph Group, Inc.  27,221  839,223 
United Technologies Corp.  20,642  2,222,111 
 36,703,354 
Communication services (3.4%)   
American Tower Corp. R   49,161  5,691,369 
AT&T, Inc.  323,892  14,021,285 
Charter Communications, Inc. Class A †  22,647  5,319,101 
Comcast Corp. Class A  106,228  7,143,833 
DISH Network Corp. Class A †  16,497  881,270 
Equinix, Inc. R   5,798  2,161,900 
Level 3 Communications, Inc. †  81,781  4,138,119 
Zayo Group Holdings, Inc. †  71,363  2,019,573 
    41,376,450 

 

26    George Putnam Balanced Fund 

 


COMMON STOCKS (60.4%)* cont.  Shares  Value 
Communications equipment (0.7%)     
Cisco Systems, Inc.  281,097  $8,581,891 
 8,581,891 
Computers (2.6%)   
Apple, Inc.  229,145  23,879,200 
Castlight Health, Inc. Class B †  252,121  940,411 
EMC Corp.  141,912  4,013,271 
HP, Inc.  206,102  2,887,489 
ServiceNow, Inc. †  4,970  372,352 
 32,092,723 
Conglomerates (1.1%)   
Danaher Corp.  52,593  4,283,174 
Siemens AG (Germany)  14,821  1,609,267 
Tyco International PLC  166,489  7,586,904 
 13,479,345 
Consumer cyclicals (6.8%)   
Advance Auto Parts, Inc.  8,876  1,507,677 
Amazon.com, Inc. †  20,396  15,476,689 
AutoZone, Inc. †  1,249  1,016,649 
Brunswick Corp.  20,096  997,164 
CaesarStone Sdot-Yam, Ltd. (Israel) †  39,081  1,465,147 
CBS Corp. Class B (non-voting shares)  29,921  1,562,475 
Criteo SA ADR (France) †  17,045  753,219 
Ctrip.com International, Ltd. ADR (China) †  56,226  2,455,389 
Dollar General Corp.  33,253  3,150,389 
Five Below, Inc. †  31,901  1,627,270 
GNC Holdings, Inc. Class A  5,555  113,378 
Hanesbrands, Inc.  117,211  3,124,845 
Hilton Worldwide Holdings, Inc.  115,945  2,688,765 
Home Depot, Inc. (The)  50,841  7,028,260 
Johnson Controls, Inc.  100,840  4,630,573 
Live Nation Entertainment, Inc. †  97,048  2,661,056 
MasterCard, Inc. Class A  39,748  3,785,600 
NIKE, Inc. Class B  65,139  3,615,215 
Penn National Gaming, Inc. †  125,722  1,888,344 
Priceline Group, Inc. (The) †  3,571  4,823,743 
RE/MAX Holdings, Inc. Class A  66,662  2,887,798 
Rollins, Inc.  59,023  1,663,268 
Time Warner, Inc.  39,455  3,024,226 
TJX Cos., Inc. (The)  52,518  4,291,771 
Vulcan Materials Co.  4,344  538,569 
Wal-Mart Stores, Inc.  24,984  1,823,082 
Walt Disney Co. (The)  23,818  2,285,337 
Wynn Resorts, Ltd.  20,476  2,005,624 
 82,891,522 
Consumer staples (6.9%)   
Bright Horizons Family Solutions, Inc. †  23,655  1,586,541 
Chipotle Mexican Grill, Inc. †  2,277  965,425 
Colgate-Palmolive Co.  44,736  3,329,700 
Costco Wholesale Corp.  31,705  5,301,710 
Coty, Inc. Class A  59,356  1,594,896 

 

George Putnam Balanced Fund    27 

 


COMMON STOCKS (60.4%)* cont.  Shares  Value 
Consumer staples cont.     
CVS Health Corp.  52,718  $4,888,013 
Delivery Hero Holding GmbH (acquired 6/12/15 cost $446,716)     
(Private) (Germany) † ΔΔ  F   58  365,234 
Dr. Pepper Snapple Group, Inc.  50,944  5,018,493 
Edgewell Personal Care Co. †  28,641  2,423,315 
Hain Celestial Group, Inc. (The) †  11,763  620,969 
JM Smucker Co. (The)  31,208  4,811,025 
Kraft Heinz Co. (The)  59,426  5,133,812 
Kroger Co. (The)  81,106  2,773,014 
LKQ Corp. †  24,810  853,216 
Mead Johnson Nutrition Co.  21,749  1,940,011 
Molson Coors Brewing Co. Class B  27,929  2,853,227 
Monster Beverage Corp. †  27,234  4,374,597 
Nomad Foods, Ltd. (United Kingdom) †  61,142  541,107 
PepsiCo, Inc.  144,389  15,726,850 
Philip Morris International, Inc.  49,052  4,917,954 
Procter & Gamble Co. (The)  49,848  4,266,490 
Restaurant Brands International LP (Units) (Canada)  158  7,079 
Restaurant Brands International, Inc. (Canada)  38,688  1,730,514 
Walgreens Boots Alliance, Inc.  73,945  5,860,141 
Yum! Brands, Inc.  34,485  3,083,649 
 84,966,982 
Electronics (2.1%)   
Agilent Technologies, Inc.  66,075  3,178,868 
Analog Devices, Inc.  17,053  1,088,493 
Broadcom, Ltd.  11,310  1,831,994 
L-3 Communications Holdings, Inc.  21,611  3,276,876 
Micron Technology, Inc. †  169,843  2,333,643 
NVIDIA Corp.  63,370  3,618,427 
ON Semiconductor Corp. †  59,582  597,607 
QUALCOMM, Inc.  48,568  3,039,385 
TE Connectivity, Ltd.  35,132  2,117,757 
Texas Instruments, Inc.  62,997  4,394,041 
 25,477,091 
Energy (4.1%)   
Anadarko Petroleum Corp.  101,127  5,514,455 
Antero Resources Corp. †  5,029  131,710 
Apache Corp.  16,142  847,455 
Baker Hughes, Inc.  17,078  816,841 
Cenovus Energy, Inc. (Canada)  290,420  4,157,278 
Cheniere Energy, Inc. †  14,502  606,619 
Chevron Corp.  59,691  6,117,134 
Cimarex Energy Co.  4,677  561,334 
Concho Resources, Inc. †  6,101  757,744 
ConocoPhillips  109,993  4,489,914 
Devon Energy Corp.  21,019  804,607 
Enterprise Products Partners LP  19,669  559,976 
EOG Resources, Inc.  48,663  3,975,767 
Exxon Mobil Corp.  1,045  92,953 

 

28   George Putnam Balanced Fund 

 


COMMON STOCKS (60.4%)* cont.  Shares  Value 
Energy cont.     
FMC Technologies, Inc. †  38,126  $967,638 
Halliburton Co.  1,658  72,388 
Hess Corp.  9,375  502,969 
Marathon Oil Corp.  136,581  1,862,965 
Occidental Petroleum Corp.  32,610  2,436,945 
Pioneer Natural Resources Co.  17,061  2,773,607 
Range Resources Corp.  26,146  1,053,945 
Rice Energy, Inc. †  14,764  344,296 
Royal Dutch Shell PLC Class A (United Kingdom)  105,401  2,711,743 
Schlumberger, Ltd.  38,087  3,066,765 
Southwestern Energy Co. †  15,352  223,832 
Spectra Energy Corp.  17,832  641,417 
Suncor Energy, Inc. (Canada)  77,474  2,084,825 
Suncor Energy, Inc. (Canada)  57,869  1,557,475 
Targa Resources Corp.  4,289  159,808 
Williams Cos., Inc. (The)  20,060  480,838 
 50,375,243 
Financials (9.4%)   
AllianceBernstein Holding LP  103,394  2,477,320 
American International Group, Inc.  112,567  6,128,147 
Ameriprise Financial, Inc.  22,660  2,171,734 
Assured Guaranty, Ltd.  105,014  2,813,325 
AvalonBay Communities, Inc. R   11,578  2,149,456 
Bank of America Corp.  556,307  8,060,888 
Bank of New York Mellon Corp. (The)  87,874  3,462,236 
Berkshire Hathaway, Inc. Class B †  2,612  376,833 
Boston Properties, Inc. R   16,035  2,279,055 
Capital One Financial Corp.  47,019  3,154,035 
CBRE Group, Inc. Class A †  20,940  595,743 
Charles Schwab Corp. (The)  210,647  5,986,588 
Chubb, Ltd.  36,760  4,604,558 
Citigroup, Inc.  89,030  3,900,404 
Equity Lifestyle Properties, Inc. R   14,630  1,203,171 
Essex Property Trust, Inc. R   3,549  830,040 
Federal Realty Investment Trust R   6,887  1,168,724 
Gaming and Leisure Properties, Inc. R   51,663  1,851,085 
General Growth Properties R   50,709  1,620,153 
Genworth Financial, Inc. Class A †  255,082  729,535 
Hartford Financial Services Group, Inc. (The)  87,883  3,502,138 
Invesco, Ltd.  56,425  1,646,482 
JPMorgan Chase & Co.  188,247  12,042,161 
KeyCorp  274,399  3,210,468 
Kimco Realty Corp. R   15,950  511,995 
KKR & Co. LP  298,305  4,307,524 
Oportun Financial Corp. (acquired 6/23/15, cost $386,984)     
(Private) † ΔΔ  F   135,784  348,286 
Pebblebrook Hotel Trust R   16,755  496,786 
Prudential PLC (United Kingdom)  189,986  3,356,683 

 

George Putnam Balanced Fund   29 

 


COMMON STOCKS (60.4%)* cont.  Shares  Value 
Financials cont.     
Public Storage R   8,002  $1,911,838 
Simon Property Group, Inc. R   11,601  2,633,891 
Synchrony Financial †  191,994  5,352,793 
Visa, Inc. Class A  101,737  7,940,573 
Vornado Realty Trust R   7,264  780,154 
Wells Fargo & Co.  234,741  11,260,526 
 114,865,328 
Health care (8.0%)   
Abbott Laboratories  14,209  635,853 
Aetna, Inc.  5,692  655,775 
Allergan PLC †  33,417  8,452,830 
Amgen, Inc.  40,794  7,017,792 
Becton Dickinson and Co.  20,147  3,545,872 
Biogen, Inc. †  19,002  5,509,250 
Boston Scientific Corp. †  42,123  1,022,746 
Bristol-Myers Squibb Co.  67,005  5,012,644 
C.R. Bard, Inc.  11,976  2,679,390 
Cardinal Health, Inc.  23,187  1,938,433 
Celgene Corp. †  56,974  6,391,913 
Cigna Corp.  20,439  2,635,813 
Cooper Cos., Inc. (The)  10,845  1,978,887 
DexCom, Inc. †  8,187  755,087 
Edwards Lifesciences Corp. †  10,991  1,258,689 
Eli Lilly & Co.  57,708  4,783,416 
Express Scripts Holding Co. †  19,333  1,470,661 
Gilead Sciences, Inc.  103,368  8,214,655 
Henry Schein, Inc. †  6,436  1,164,787 
HTG Molecular Diagnostics, Inc. †  6,668  16,137 
Humana, Inc.  5,094  878,970 
Intuitive Surgical, Inc. †  4,158  2,892,970 
Jazz Pharmaceuticals PLC †  6,444  972,851 
Johnson & Johnson  29,589  3,705,430 
Medivation, Inc. †  38,923  2,490,683 
Medtronic PLC  27,622  2,420,516 
Merck & Co., Inc.  98,762  5,793,379 
Mylan NV †  58,800  2,751,252 
Pfizer, Inc.  191,269  7,055,913 
Press Ganey Holdings, Inc. †  14,485  578,241 
Service Corp. International/US  40,077  1,110,934 
Ventas, Inc. R   26,614  2,026,922 
 97,818,691 
Miscellaneous (0.1%)   
Conyers Park Acquisition Corp. (Units) †  63,307  654,594 
 654,594 
Semiconductor (0.2%)   
Lam Research Corp.  33,898  3,043,023 
 3,043,023 
Software (2.0%)   
Adobe Systems, Inc. †  43,867  4,292,825 
Microsoft Corp.  319,717  18,121,560 

 

30    George Putnam Balanced Fund 

 


COMMON STOCKS (60.4%)* cont.  Shares  Value 
Software cont.     
Tencent Holdings, Ltd. (China)  67,081  $1,612,524 
TubeMogul, Inc. †  25,588  286,841 
 24,313,750 
Technology services (4.1%)   
Alibaba Group Holding, Ltd. ADR (China) †  28,756  2,371,795 
Alphabet, Inc. Class A †  26,471  20,947,561 
Computer Sciences Corp.  46,764  2,236,722 
Facebook, Inc. Class A †  108,151  13,404,235 
Fidelity National Information Services, Inc.  41,550  3,304,472 
GoDaddy, Inc. Class A †  27,769  830,848 
Hewlett Packard Enterprise Co.  79,200  1,664,784 
salesforce.com, Inc. †  55,854  4,568,857 
Wix.com, Ltd. (Israel) †  31,642  1,126,455 
 50,455,729 
Transportation (1.1%)   
American Airlines Group, Inc.  71,681  2,544,676 
Union Pacific Corp.  83,757  7,793,589 
United Parcel Service, Inc. Class B  32,432  3,505,899 
 13,844,164 
Utilities and power (2.6%)   
American Electric Power Co., Inc.  25,095  1,739,084 
American Water Works Co., Inc.  31,288  2,583,763 
Calpine Corp. †  193,040  2,652,370 
Edison International  19,119  1,479,428 
ENI SpA (Italy)  188,650  2,885,260 
Exelon Corp.  120,718  4,500,367 
Kinder Morgan, Inc.  66,289  1,347,655 
NextEra Energy Partners LP  35,401  1,105,573 
NextEra Energy, Inc.  31,132  3,993,924 
NRG Energy, Inc.  230,852  3,194,992 
NRG Yield, Inc. Class C  65,064  1,167,248 
PG&E Corp.  53,972  3,450,970 
Sempra Energy  19,625  2,195,645 
    32,296,279 
 
Total common stocks (cost $678,518,034)    $740,585,203 
  
U.S. GOVERNMENT AND AGENCY     
MORTGAGE OBLIGATIONS (6.1%)*  Principal amount  Value 
U.S. Government Guaranteed Mortgage Obligations (1.6%)     
Government National Mortgage Association Pass-Through Certificates     
3.50%, with due dates from 2/20/45 to 11/20/45  $3,112,459  $3,335,071 
3.50%, TBA, 8/1/46  8,000,000  8,503,750 
3.00%, TBA, 8/1/46  7,000,000  7,354,375 
 19,193,196 
U.S. Government Agency Mortgage Obligations (4.5%)   
Federal Home Loan Mortgage Corporation Pass-Through Certificates     
6.00%, 3/1/35  2,279  2,631 
4.00%, with due dates from 7/1/42 to 6/1/43  5,177,477  5,573,911 
3.50%, with due dates from 12/1/42 to 4/1/43  753,576  810,389 
3.00%, with due dates from 3/1/43 to 7/1/43  2,673,230  2,789,036 

 

George Putnam Balanced Fund   31 

 


U.S. GOVERNMENT AND AGENCY     
MORTGAGE OBLIGATIONS (6.1%)* cont.  Principal amount  Value 
U.S. Government Agency Mortgage Obligations cont.     
Federal National Mortgage Association Pass-Through Certificates     
5.50%, with due dates from 7/1/33 to 11/1/38  $2,980,652  $3,371,210 
5.00%, with due dates from 8/1/33 to 1/1/39  804,054  893,513 
4.50%, 11/1/44  7,286,702  8,079,131 
4.50%, TBA, 8/1/46  13,000,000  14,175,078 
4.00%, TBA, 8/1/46  5,000,000  5,359,766 
3.50%, with due dates from 5/1/43 to 3/1/45  3,709,550  3,931,268 
3.00%, with due dates from 2/1/43 to 6/1/46  3,581,916  3,748,198 
3.00%, TBA, 9/1/46  3,000,000  3,115,664 
3.00%, TBA, 8/1/46  4,000,000  4,162,812 
    56,012,607 
 
Total U.S. government and agency mortgage obligations (cost $74,479,649)  $75,205,803 
 
U.S. TREASURY OBLIGATIONS (12.7%)*  Principal amount  Value 
U.S. Treasury Bonds     
3.75%, 11/15/43  $1,040,000  $1,399,450 
2.75%, 8/15/42  12,810,000  14,419,244 
U.S. Treasury Notes     
2.00%, 11/30/20 Δ   44,660,000  46,571,658 
1.875%, 11/30/21  2,170,000  2,257,427 
1.375%, 9/30/18  29,620,000  30,054,351 
1.125%, 12/31/19  24,210,000  24,438,482 
1.00%, 8/31/16  4,320,000  4,322,211 
0.75%, 3/31/18  23,900,000  23,935,291 
0.75%, 12/31/17  1,190,000  1,191,762 
0.75%, 6/30/17  6,800,000  6,809,828 
Total U.S. treasury obligations (cost $151,199,649)    $155,399,704 
 
 
CORPORATE BONDS AND NOTES (14.9%)*  Principal amount  Value 
Basic materials (0.7%)     
Agrium, Inc. sr. unsec. notes 3.375%, 3/15/25 (Canada)  $310,000  $320,953 
Agrium, Inc. sr. unsec. unsub. notes 7.125%, 5/23/36 (Canada)  182,000  238,669 
Celanese US Holdings, LLC company guaranty sr. unsec. unsub.     
notes 4.625%, 11/15/22 (Germany)  150,000  162,000 
Cytec Industries, Inc. sr. unsec. unsub. notes 3.50%, 4/1/23  215,000  215,016 
Eastman Chemical Co. sr. unsec. notes 3.80%, 3/15/25  235,000  249,209 
Eastman Chemical Co. sr. unsec. unsub. notes 6.30%, 11/15/18  200,000  219,651 
Freeport-McMoran Oil & Gas, LLC/FCX Oil & Gas, Inc. company     
guaranty sr. unsec. notes 6.75%, 2/1/22  95,000  92,388 
Georgia-Pacific, LLC sr. unsec. unsub. notes 7.75%, 11/15/29  850,000  1,249,376 
Glencore Funding, LLC 144A company guaranty sr. unsec.     
unsub. notes 4.625%, 4/29/24  941,000  916,101 
Glencore Funding, LLC 144A company guaranty sr. unsec.     
unsub. notes 4.00%, 4/16/25  638,000  597,561 
Glencore Funding, LLC 144A company guaranty sr. unsec.     
unsub. notes 2.875%, 4/16/20  682,000  663,020 
International Paper Co. sr. unsec. notes 8.70%, 6/15/38  10,000  15,077 

 

32   George Putnam Balanced Fund 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Basic materials cont.     
INVISTA Finance, LLC 144A company guaranty sr. notes     
4.25%, 10/15/19  $356,000  $353,300 
LyondellBasell Industries NV sr. unsec. unsub. notes     
4.625%, 2/26/55  515,000  514,264 
Union Carbide Corp. sr. unsec. unsub. bonds 7.75%, 10/1/96  180,000  228,693 
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes     
8.20%, 1/15/30  1,265,000  1,725,326 
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes     
7.95%, 2/15/31  187,000  251,418 
WestRock RKT Co. company guaranty sr. unsec. unsub. notes     
4.45%, 3/1/19  168,000  177,483 
Weyerhaeuser Co. sr. unsec. unsub. notes 7.375%, 3/15/32 R   553,000  750,617 
 8,940,122 
Capital goods (0.3%)   
Delphi Corp. company guaranty sr. unsec. notes 5.00%, 2/15/23  125,000  132,625 
Legrand France SA sr. unsec. unsub. notes 8.50%,     
2/15/25 (France)  767,000  1,046,548 
Medtronic, Inc. company guaranty sr. unsec. sub. notes     
4.375%, 3/15/35  307,000  353,553 
Medtronic, Inc. company guaranty sr. unsec. sub. notes     
3.50%, 3/15/25  327,000  358,096 
Northrop Grumman Systems Corp. company guaranty sr. unsec.     
unsub. notes 7.875%, 3/1/26  265,000  371,565 
Parker Hannifin Corp. sr. unsec. unsub. notes Ser. MTN,     
6.25%, 5/15/38  975,000  1,401,544 
Republic Services, Inc. company guaranty sr. unsec. unsub.     
notes 5.50%, 9/15/19  240,000  268,538 
United Technologies Corp. sr. unsec. unsub. notes     
5.70%, 4/15/40  100,000  135,784 
United Technologies Corp. sr. unsec. unsub. notes 4.50%, 6/1/42  225,000  266,527 
 4,334,780 
Communication services (1.1%)   
America Movil SAB de CV company guaranty sr. unsec. unsub.     
notes 6.125%, 3/30/40 (Mexico)  200,000  257,237 
America Movil SAB de CV company guaranty sr. unsec. unsub.     
notes 2.375%, 9/8/16 (Mexico)  280,000  280,144 
American Tower Corp. sr. unsec. notes 4.00%, 6/1/25 R   335,000  364,218 
American Tower Corp. sr. unsec. notes 3.40%, 2/15/19 R   735,000  769,650 
American Tower Corp. sr. unsec. unsub. bonds     
3.375%, 10/15/26 R   500,000  516,501 
AT&T, Inc. sr. unsec. unsub. notes 4.75%, 5/15/46  122,000  129,192 
CC Holdings GS V, LLC/Crown Castle GS III Corp. company     
guaranty sr. notes 3.849%, 4/15/23  240,000  259,340 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital 144A sr. sub. bonds     
6.484%, 10/23/45  1,159,000  1,390,493 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital 144A sr. sub. notes     
4.908%, 7/23/25  356,000  393,080 
Comcast Cable Communications Holdings, Inc. company     
guaranty sr. unsec. notes 9.455%, 11/15/22  645,000  917,776 

 

George Putnam Balanced Fund   33 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Communication services cont.     
Comcast Corp. company guaranty sr. unsec. unsub. notes     
6.50%, 11/15/35  $268,000  $377,268 
Crown Castle International Corp. sr. unsec. notes     
5.25%, 1/15/23 R   75,000  85,850 
Crown Castle International Corp. sr. unsec. notes     
4.875%, 4/15/22 R   313,000  348,213 
Crown Castle Towers, LLC 144A company guaranty sr. notes     
4.883%, 8/15/20  710,000  774,949 
NBCUniversal Media, LLC company guaranty sr. unsec. unsub.     
notes 6.40%, 4/30/40  380,000  542,983 
Rogers Communications, Inc. company guaranty sr. unsec.     
bonds 8.75%, 5/1/32 (Canada)  95,000  139,606 
Rogers Communications, Inc. company guaranty sr. unsec.     
unsub. notes 4.50%, 3/15/43 (Canada)  215,000  236,540 
TCI Communications, Inc. sr. unsec. unsub. notes     
7.875%, 2/15/26  610,000  877,838 
Telecom Italia SpA 144A sr. unsec. notes 5.303%, 5/30/24 (Italy)  1,000,000  1,012,500 
Telefonica Emisiones SAU company guaranty sr. unsec. unsub.     
notes 7.045%, 6/20/36 (Spain)  355,000  472,187 
Verizon Communications, Inc. sr. unsec. unsub. notes 5.90%,     
2/15/54 (units)  5,200  145,340 
Verizon Communications, Inc. sr. unsec. unsub. notes     
5.05%, 3/15/34  270,000  304,416 
Verizon Communications, Inc. sr. unsec. unsub. notes     
4.522%, 9/15/48  982,000  1,047,976 
Verizon Communications, Inc. sr. unsec. unsub. notes     
4.40%, 11/1/34  595,000  630,371 
Verizon New Jersey, Inc. company guaranty sr. unsec. unsub.     
bonds 8.00%, 6/1/22  770,000  965,691 
 13,239,359 
Conglomerates (0.1%)   
General Electric Capital Corp. company guaranty sr. unsec.     
notes 6.75%, 3/15/32  441,000  625,787 
General Electric Co. jr. unsec. sub. FRB Ser. D, 5.00%,     
perpetual maturity  1,111,000  1,190,159 
 
Consumer cyclicals (1.9%)    1,815,946 
21st Century Fox America, Inc. company guaranty sr. unsec.     
notes 7.85%, 3/1/39  190,000  279,898 
21st Century Fox America, Inc. company guaranty sr. unsec.     
notes 7.75%, 1/20/24  1,045,000  1,358,541 
Autonation, Inc. company guaranty sr. unsec. notes     
4.50%, 10/1/25  330,000  352,985 
Autonation, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 2/1/20  847,000  925,774 
Bed Bath & Beyond, Inc. sr. unsec. sub. notes 5.165%, 8/1/44  553,000  501,857 
CBS Corp. company guaranty sr. unsec. debs. 7.875%, 7/30/30  1,187,000  1,693,906 
Dollar General Corp. sr. unsec. sub. notes 3.25%, 4/15/23  625,000  656,999 
Expedia, Inc. 144A company guaranty sr. unsec. unsub. notes     
5.00%, 2/15/26  375,000  400,250 
Ford Motor Co. sr. unsec. unsub. notes 9.98%, 2/15/47  135,000  227,240 
Ford Motor Co. sr. unsec. unsub. notes 7.75%, 6/15/43  1,290,000  1,715,251 

 

34    George Putnam Balanced Fund 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Consumer cyclicals cont.     
Ford Motor Co. sr. unsec. unsub. notes 7.45%, 7/16/31  $24,000  $32,984 
Ford Motor Co. sr. unsec. unsub. notes 7.40%, 11/1/46  200,000  299,655 
Ford Motor Credit Co., LLC sr. unsec. unsub. notes     
5.875%, 8/2/21  318,000  366,737 
Ford Motor Credit Co., LLC sr. unsec. unsub. notes     
4.134%, 8/4/25  477,000  510,306 
General Motors Co. sr. unsec. unsub. notes 6.75%, 4/1/46  844,000  1,096,593 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
notes 3.20%, 7/6/21  215,000  218,212 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
unsub. notes 4.30%, 7/13/25  395,000  412,920 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
unsub. notes 4.00%, 1/15/25  250,000  257,771 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
unsub. notes 3.45%, 4/10/22  900,000  918,118 
Grupo Televisa SAB sr. unsec. unsub. bonds 6.625%,     
1/15/40 (Mexico)  300,000  357,491 
Grupo Televisa SAB sr. unsec. unsub. notes 5.00%,     
5/13/45 (Mexico)  355,000  359,676 
Historic TW, Inc. company guaranty sr. unsec. unsub. bonds     
9.15%, 2/1/23  460,000  621,679 
Host Hotels & Resorts LP sr. unsec. unsub. notes     
6.00%, 10/1/21 R   320,000  364,511 
Host Hotels & Resorts LP sr. unsec. unsub. notes     
5.25%, 3/15/22 R   150,000  165,916 
Hyatt Hotels Corp. sr. unsec. unsub. notes 3.375%, 7/15/23  200,000  206,089 
L Brands, Inc. company guaranty sr. unsec. notes     
6.625%, 4/1/21  435,000  498,075 
Lear Corp. company guaranty sr. unsec. unsub. notes     
5.375%, 3/15/24  375,000  401,250 
Macy’s Retail Holdings, Inc. company guaranty sr. unsec. notes     
6.90%, 4/1/29  699,000  794,932 
Macy’s Retail Holdings, Inc. company guaranty sr. unsec. notes     
6.65%, 7/15/24  100,000  118,789 
NVR, Inc. sr. unsec. notes 3.95%, 9/15/22  435,000  460,336 
O’Reilly Automotive, Inc. company guaranty sr. unsec. notes     
3.85%, 6/15/23  195,000  210,129 
O’Reilly Automotive, Inc. company guaranty sr. unsec. sub.     
notes 3.55%, 3/15/26  480,000  513,965 
Omnicom Group, Inc. company guaranty sr. unsec. unsub. notes     
3.60%, 4/15/26  540,000  575,307 
Owens Corning company guaranty sr. unsec. sub. notes     
9.00%, 6/15/19  880,000  1,025,906 
Priceline Group, Inc. (The) sr. unsec. notes 3.65%, 3/15/25  164,000  171,498 
PulteGroup, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 3/1/26  470,000  490,144 
QVC, Inc. company guaranty sr. notes 4.85%, 4/1/24  390,000  405,470 
S&P Global, Inc. company guaranty sr. unsec. unsub. notes     
4.40%, 2/15/26  670,000  753,210 
Tiffany & Co. sr. unsec. unsub. notes 4.90%, 10/1/44  460,000  478,440 

 

George Putnam Balanced Fund    35 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Consumer cyclicals cont.     
Time Warner, Inc. company guaranty sr. unsec. bonds     
7.70%, 5/1/32  $520,000  $746,227 
Time Warner, Inc. company guaranty sr. unsec. unsub. bonds     
2.95%, 7/15/26  190,000  194,238 
Viacom, Inc. sr. unsec. unsub. notes 5.85%, 9/1/43  450,000  482,694 
Vulcan Materials Co. sr. unsec. unsub. notes 4.50%, 4/1/25  175,000  190,176 
 22,812,145 
Consumer staples (1.2%)   
Anheuser-Busch InBev Finance, Inc. company guaranty sr.     
unsec. unsub. bonds 4.90%, 2/1/46  1,947,000  2,371,678 
Anheuser-Busch InBev Finance, Inc. company guaranty sr.     
unsec. unsub. bonds 3.65%, 2/1/26  428,000  459,537 
Anheuser-Busch InBev Worldwide, Inc. company guaranty sr.     
unsec. unsub. notes 8.20%, 1/15/39  165,000  268,684 
Bacardi, Ltd. 144A unsec. notes 4.50%, 1/15/21 (Bermuda)  495,000  533,371 
CVS Health Corp. sr. unsec. notes 4.75%, 12/1/22  715,000  819,203 
CVS Pass-Through Trust 144A sr. mtge. notes 7.507%, 1/10/32  649,258  818,199 
CVS Pass-Through Trust 144A sr. mtge. notes 4.704%, 1/10/36  651,813  677,783 
Diageo Investment Corp. company guaranty sr. unsec. notes     
8.00%, 9/15/22  820,000  1,086,573 
ERAC USA Finance, LLC 144A company guaranty sr. unsec.     
notes 7.00%, 10/15/37  1,434,000  1,995,613 
ERAC USA Finance, LLC 144A company guaranty sr. unsec.     
notes 5.625%, 3/15/42  553,000  683,227 
ERAC USA Finance, LLC 144A company guaranty sr. unsec.     
notes 3.85%, 11/15/24  211,000  227,986 
Grupo Bimbo SAB de CV 144A company guaranty sr. unsec.     
unsub. notes 4.875%, 6/27/44 (Mexico)  350,000  359,893 
Kraft Foods Group, Inc. company guaranty sr. unsec. notes     
Ser. 144A, 6.875%, 1/26/39  625,000  879,028 
Kraft Foods Group, Inc. company guaranty sr. unsec. unsub.     
notes 6.50%, 2/9/40  309,000  421,268 
Kraft Heinz Foods Co. 144A company guaranty sr. unsec. unsub.     
bonds 4.375%, 6/1/46  670,000  728,878 
Newell Brands, Inc. sr. unsec. unsub. notes 4.20%, 4/1/26  1,030,000  1,125,299 
SABMiller Holdings, Inc. 144A company guaranty sr. unsec.     
unsub. notes 4.95%, 1/15/42  200,000  239,477 
Tyson Foods, Inc. company guaranty sr. unsec. bonds     
4.875%, 8/15/34  134,000  151,378 
Walgreens Boots Alliance, Inc. sr. unsec. bonds 3.45%, 6/1/26  765,000  801,170 
 14,648,245 
Energy (0.8%)   
BG Energy Capital PLC 144A company guaranty sr. unsec.     
unsub. notes 4.00%, 10/15/21 (United Kingdom)  250,000  275,694 
BP Capital Markets PLC company guaranty sr. unsec. bonds     
3.119%, 5/4/26 (United Kingdom)  670,000  684,763 
DCP Midstream Operating LP company guaranty sr. unsec.     
notes 2.70%, 4/1/19  225,000  217,125 
EOG Resources, Inc. sr. unsec. unsub. notes 5.625%, 6/1/19  205,000  225,584 
EQT Midstream Partners LP company guaranty sr. unsec. sub.     
notes 4.00%, 8/1/24  575,000  557,363 

 

36    George Putnam Balanced Fund 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Energy cont.     
Hess Corp. sr. unsec. unsub. notes 7.30%, 8/15/31  $388,000  $447,599 
Kerr-McGee Corp. company guaranty sr. unsec. unsub. notes     
7.875%, 9/15/31  1,070,000  1,261,876 
Lukoil International Finance BV 144A company guaranty sr.     
unsec. notes 4.563%, 4/24/23 (Russia)  315,000  318,938 
Marathon Petroleum Corp. sr. unsec. unsub. notes     
6.50%, 3/1/41  175,000  188,213 
Noble Holding International, Ltd. company guaranty sr. unsec.     
unsub. notes 6.05%, 3/1/41  390,000  239,850 
Petroleos Mexicanos company guaranty sr. unsec. unsub. notes     
4.50%, 1/23/26 (Mexico)  535,000  517,345 
Pride International, Inc. company guaranty sr. unsec. unsub.     
notes 7.875%, 8/15/40  760,000  560,348 
Spectra Energy Capital, LLC company guaranty sr. unsec. sub.     
notes 6.20%, 4/15/18  580,000  618,544 
Spectra Energy Capital, LLC company guaranty sr. unsec. unsub.     
notes 8.00%, 10/1/19  820,000  949,852 
Statoil ASA company guaranty sr. unsec. notes 5.10%,     
8/17/40 (Norway)  480,000  589,611 
Tosco Corp. company guaranty sr. unsec. notes 8.125%, 2/15/30  600,000  796,436 
Williams Partners LP sr. unsec. notes 5.25%, 3/15/20  700,000  737,464 
Williams Partners LP sr. unsec. sub. notes 4.30%, 3/4/24  322,000  315,963 
Williams Partners LP/ACMP Finance Corp. sr. unsec. sub. notes     
4.875%, 3/15/24  342,000  341,177 
 9,843,745 
Financials (5.8%)   
Aflac, Inc. sr. unsec. notes 6.45%, 8/15/40  314,000  432,125 
Aflac, Inc. sr. unsec. unsub. notes 6.90%, 12/17/39  747,000  1,076,948 
Air Lease Corp. sr. unsec. notes 3.75%, 2/1/22  410,000  424,330 
Air Lease Corp. sr. unsec. unsub. notes 3.375%, 6/1/21  630,000  654,583 
Ally Financial, Inc. sub. unsec. notes 5.75%, 11/20/25  705,000  734,081 
American Express Co. jr. unsec. sub. FRN Ser. C, 4.90%,     
perpetual maturity  310,000  305,171 
American Express Co. sr. unsec. notes 7.00%, 3/19/18  650,000  708,659 
American International Group, Inc. jr. unsec. sub. FRB     
8.175%, 5/15/58  856,000  1,112,800 
Aon PLC company guaranty sr. unsec. unsub. notes     
4.25%, 12/12/42  1,150,000  1,152,083 
Assurant, Inc. sr. unsec. notes 6.75%, 2/15/34  525,000  670,223 
Australia & New Zealand Banking Group, Ltd./United     
Kingdom 144A jr. unsec. sub. FRB 6.75%, perpetual maturity     
(United Kingdom)  200,000  217,368 
AXA SA 144A jr. unsec. sub. FRN 6.463%, perpetual     
maturity (France)  550,000  576,923 
AXA SA 144A jr. unsec. sub. FRN 6.379%, perpetual     
maturity (France)  135,000  147,265 
Banco del Estado de Chile 144A sr. unsec. notes 2.00%,     
11/9/17 (Chile)  400,000  400,677 
Bank of America Corp. jr. unsec. sub. FRN Ser. AA, 6.10%,     
perpetual maturity  314,000  327,345 
Bank of America Corp. unsec. sub. FRN 1.413%, 9/15/26  275,000  236,341 

 

George Putnam Balanced Fund   37 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Financials cont.     
Bank of America Corp. unsec. sub. notes 6.11%, 1/29/37  $600,000  $739,517 
Barclays Bank PLC unsec. sub. notes 7.625%, 11/21/22     
(United Kingdom)  525,000  586,845 
Barclays Bank PLC 144A unsec. sub. notes 10.179%, 6/12/21     
(United Kingdom)  869,000  1,107,331 
Bear Stearns Cos., Inc. (The) sr. unsec. notes 6.40%, 10/2/17  500,000  529,483 
Bear Stearns Cos., LLC (The) sr. unsec. unsub. notes     
7.25%, 2/1/18  331,000  359,717 
Berkshire Hathaway Finance Corp. company guaranty sr. unsec.     
notes 4.30%, 5/15/43  703,000  805,649 
BGC Partners, Inc. 144A sr. unsec. notes 5.125%, 5/27/21  155,000  156,513 
BNP Paribas SA 144A jr. unsec. sub. FRN 7.195%, perpetual     
maturity (France)  100,000  110,738 
BPCE SA 144A unsec. sub. notes 5.70%, 10/22/23 (France)  370,000  403,011 
BPCE SA 144A unsec. sub. notes 5.15%, 7/21/24 (France)  810,000  858,358 
Camden Property Trust sr. unsec. unsub. notes     
4.875%, 6/15/23 R   1,213,000  1,364,060 
Cantor Fitzgerald LP 144A unsec. notes 6.50%, 6/17/22  1,020,000  1,073,864 
Capital One Bank USA NA unsec. sub. notes 3.375%, 2/15/23  462,000  476,427 
Capital One Financial Corp. unsec. sub. notes 4.20%, 10/29/25  295,000  307,575 
CBRE Services, Inc. company guaranty sr. unsec. notes     
5.25%, 3/15/25  257,000  274,824 
CBRE Services, Inc. company guaranty sr. unsec. unsub. notes     
4.875%, 3/1/26  708,000  738,528 
Citigroup, Inc. jr. unsec. sub. FRB Ser. P, 5.95%,     
perpetual maturity  956,000  984,393 
Citigroup, Inc. jr. unsec. sub. FRN 5.875%, perpetual maturity  402,000  403,005 
CNO Financial Group, Inc. sr. unsec. unsub. notes     
5.25%, 5/30/25  345,000  357,938 
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA/     
Netherlands company guaranty unsec. sub. notes 4.625%,     
12/1/23 (Netherlands)  250,000  269,064 
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA/     
Netherlands unsec. sub. notes 5.25%, 8/4/45 (Netherlands)  285,000  335,336 
Cooperatieve Rabobank UA 144A jr. unsec. sub. FRN 11.00%,     
perpetual maturity (Netherlands)  718,000  877,755 
Credit Agricole SA 144A unsec. sub. notes 4.375%,     
3/17/25 (France)  255,000  261,565 
Credit Suisse Group AG 144A unsec. sub. notes 6.50%,     
8/8/23 (Switzerland)  729,000  800,325 
DDR Corp. sr. unsec. unsub. notes 7.875%, 9/1/20 R   302,000  365,518 
Duke Realty LP company guaranty sr. unsec. unsub. notes     
4.375%, 6/15/22 R   1,117,000  1,222,694 
EPR Properties company guaranty sr. unsec. sub. notes     
5.25%, 7/15/23 R   345,000  369,245 
Fairfax US, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 8/13/24  300,000  304,500 
Fifth Third Bancorp jr. unsec. sub. FRB 5.10%, perpetual maturity  217,000  210,165 
Five Corners Funding Trust 144A sr. unsec. bonds     
4.419%, 11/15/23  425,000  461,621 

 

38    George Putnam Balanced Fund 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Financials cont.     
GE Capital International Funding Co. Unlimited Co. company     
guaranty sr. unsec. bonds 4.418%, 11/15/35 (Ireland)  $1,521,000  $1,753,140 
Goldman Sachs Group, Inc. (The) unsec. sub. notes     
6.75%, 10/1/37  282,000  362,569 
Hartford Financial Services Group, Inc. (The) sr. unsec. unsub.     
notes 6.625%, 3/30/40  1,495,000  1,971,394 
Healthcare Realty Trust, Inc. sr. unsec. unsub. notes     
3.875%, 5/1/25 R   555,000  562,409 
Highwood Realty LP sr. unsec. unsub. notes 5.85%, 3/15/17 R   1,005,000  1,031,064 
Hospitality Properties Trust sr. unsec. unsub. notes     
4.50%, 3/15/25 R   250,000  254,078 
HSBC Bank USA NA/New York NY unsec. sub. notes Ser. BKNT,     
5.625%, 8/15/35 (United Kingdom)  250,000  296,540 
HSBC Bank USA, NA unsec. sub. notes 7.00%, 1/15/39  342,000  462,988 
HSBC Holdings PLC unsec. sub. notes 6.50%, 5/2/36     
(United Kingdom)  800,000  1,010,020 
HSBC Holdings PLC unsec. sub. notes 4.25%, 8/18/25     
(United Kingdom)  455,000  469,896 
HSBC USA, Inc. sr. unsec. unsub. notes 3.50%, 6/23/24  105,000  108,963 
ING Bank NV 144A unsec. sub. notes 5.80%,     
9/25/23 (Netherlands)  2,225,000  2,474,810 
International Lease Finance Corp. sr. unsec. unsub. notes     
6.25%, 5/15/19  275,000  301,469 
JPMorgan Chase & Co. jr. unsec. sub. FRB Ser. Z, 5.30%,     
perpetual maturity  330,000  339,735 
JPMorgan Chase & Co. jr. unsec. sub. FRN 7.90%,     
perpetual maturity  780,000  811,200 
JPMorgan Chase Bank, NA unsec. sub. notes Ser. BKNT,     
6.00%, 10/1/17  1,250,000  1,315,460 
KKR Group Finance Co., LLC 144A company guaranty sr. unsec.     
unsub. notes 6.375%, 9/29/20  555,000  650,273 
Liberty Mutual Group, Inc. 144A company guaranty jr. unsec.     
sub. bonds 7.80%, 3/15/37  785,000  873,313 
Liberty Mutual Insurance Co. 144A unsec. sub. notes     
7.697%, 10/15/97  340,000  448,428 
Liberty Property LP sr. unsec. unsub. notes 3.375%, 6/15/23 R   100,000  102,004 
Lloyds Bank PLC company guaranty sr. unsec. unsub. notes     
2.70%, 8/17/20 (United Kingdom)  220,000  226,103 
Lloyds Banking Group PLC jr. unsec. sub. FRB 7.50%, perpetual     
maturity (United Kingdom)  200,000  199,500 
Lloyds Banking Group PLC unsec. sub. notes 4.50%, 11/4/24     
(United Kingdom)  530,000  549,771 
Lloyds Banking Group PLC 144A unsec. sub. notes 5.30%,     
12/1/45 (United Kingdom)  1,404,000  1,539,155 
Massachusetts Mutual Life Insurance Co. 144A unsec. sub. notes     
8.875%, 6/1/39  1,290,000  2,064,535 
MetLife Capital Trust IV 144A jr. unsec. sub. notes     
7.875%, 12/15/37  2,564,000  3,178,078 
Mid-America Apartments LP sr. unsec. notes 4.30%, 10/15/23 R   285,000  308,280 
Mitsubishi UFJ Financial Group, Inc. sr. unsec. unsub. notes     
3.85%, 3/1/26 (Japan)  640,000  701,111 

 

George Putnam Balanced Fund   39 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Financials cont.     
Nationwide Mutual Insurance Co. 144A unsec. sub. notes     
8.25%, 12/1/31  $415,000  $585,792 
Neuberger Berman Group, LLC/Neuberger Berman Finance     
Corp. 144A sr. unsec. notes 4.875%, 4/15/45  840,000  728,700 
OneAmerica Financial Partners, Inc. 144A sr. unsec. notes     
7.00%, 10/15/33  370,000  434,406 
Pacific LifeCorp 144A sr. unsec. notes 6.00%, 2/10/20  365,000  408,915 
Peachtree Corners Funding Trust 144A company guaranty sr.     
unsec. unsub. bonds 3.976%, 2/15/25  140,000  142,185 
Primerica, Inc. sr. unsec. notes 4.75%, 7/15/22  213,000  234,593 
Progressive Corp. (The) jr. unsec. sub. FRN 6.70%, 6/15/37  1,939,000  1,803,270 
Prudential Financial, Inc. jr. unsec. sub. FRN 5.625%, 6/15/43  359,000  381,886 
Prudential Financial, Inc. jr. unsec. sub. FRN 5.20%, 3/15/44  1,153,000  1,165,971 
Realty Income Corp. sr. unsec. notes 4.65%, 8/1/23 R   1,045,000  1,155,963 
Royal Bank of Canada unsec. sub. notes Ser. GMTN, 4.65%,     
1/27/26 (Canada)  420,000  461,921 
Royal Bank of Scotland Group PLC unsec. sub. bonds 5.125%,     
5/28/24 (United Kingdom)  425,000  426,463 
Santander Issuances SAU company guaranty unsec. sub. notes     
5.179%, 11/19/25 (Spain)  1,200,000  1,233,854 
Santander UK PLC 144A unsec. sub. notes 5.00%, 11/7/23     
(United Kingdom)  430,000  450,263 
Select Income REIT sr. unsec. unsub. notes 3.60%, 2/1/20 R   290,000  295,268 
Select Income REIT sr. unsec. unsub. notes 2.85%, 2/1/18 R   290,000  291,956 
Standard Chartered PLC 144A jr. unsec. sub. FRB 7.014%,     
perpetual maturity (United Kingdom)  1,400,000  1,491,000 
State Street Capital Trust IV company guaranty jr. unsec. sub.     
FRB 1.653%, 6/15/37  2,021,000  1,735,374 
Sumitomo Mitsui Financial Group, Inc. 144A unsec. sub. bonds     
4.436%, 4/2/24 (Japan)  412,000  445,240 
Teachers Insurance & Annuity Association of America 144A     
unsec. sub. notes 6.85%, 12/16/39  263,000  365,005 
TIERS Trust/United States 144A sr. bonds stepped-coupon     
zero % (8 1/8s, 9/15/17), 3/15/46 ††  570,000  575,700 
Travelers Property Casualty Corp. company guaranty sr. unsec.     
unsub. bonds 7.75%, 4/15/26  295,000  406,366 
UBS AG unsec. sub. notes 5.125%, 5/15/24 (Switzerland)  2,640,000  2,785,543 
VEREIT Operating Partnership LP company guaranty sr. unsec.     
notes 4.60%, 2/6/24 R   720,000  752,400 
Wells Fargo & Co. jr. unsec. sub. FRB Ser. U, 5.875%,     
perpetual maturity  580,000  636,550 
Willis Towers Watson PLC company guaranty sr. unsec. unsub.     
notes 5.75%, 3/15/21  710,000  790,785 
WP Carey, Inc. sr. unsec. unsub. notes 4.60%, 4/1/24 R   787,000  826,432 
ZFS Finance USA Trust V 144A jr. unsec. sub. FRB 6.50%, 5/9/37  214,000  215,070 
 71,885,643 
Government (0.5%)   
International Bank for Reconstruction & Development sr. unsec.     
unsub. bonds 7.625%, 1/19/23 (Supra-Nation)  4,000,000  5,523,864 
    5,523,864 

 

40    George Putnam Balanced Fund 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Health care (0.4%)     
AbbVie, Inc. sr. unsec. notes 3.60%, 5/14/25  $194,000  $205,727 
Actavis Funding SCS company guaranty sr. unsec. notes 4.75%,     
3/15/45 (Luxembourg)  373,000  413,238 
Actavis Funding SCS company guaranty sr. unsec. notes 3.45%,     
3/15/22 (Luxembourg)  186,000  195,619 
Aetna, Inc. sr. unsec. notes 6.75%, 12/15/37  95,000  132,067 
Anthem, Inc. sr. unsec. unsub. notes 4.625%, 5/15/42  205,000  224,786 
HCA, Inc. company guaranty sr. bonds 5.25%, 6/15/26  185,000  196,100 
HCA, Inc. company guaranty sr. sub. notes 5.00%, 3/15/24  430,000  451,500 
Omega Healthcare Investors, Inc. company guaranty sr. unsec.     
bonds 5.25%, 1/15/26 R   510,000  538,050 
Omega Healthcare Investors, Inc. company guaranty sr. unsec.     
notes 4.50%, 4/1/27 R   145,000  143,550 
Omega Healthcare Investors, Inc. company guaranty sr. unsec.     
unsub. notes 4.95%, 4/1/24 R   659,000  684,928 
Quest Diagnostics, Inc. company guaranty sr. unsec. notes     
4.75%, 1/30/20  121,000  132,797 
Teva Pharmaceutical Finance Netherlands III BV company     
guaranty sr. unsec. unsub. bonds 3.15%, 10/1/26 (Netherlands)  1,062,000  1,085,281 
UnitedHealth Group, Inc. sr. unsec. unsub. notes     
4.625%, 11/15/41  300,000  357,480 
 4,761,123 
Technology (0.5%)   
Apple, Inc. sr. unsec. notes 3.45%, 5/6/24  215,000  233,936 
Apple, Inc. sr. unsec. unsub. notes 4.375%, 5/13/45  297,000  324,371 
Apple, Inc. sr. unsec. unsub. notes 3.85%, 5/4/43  421,000  430,063 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A sr.     
bonds 8.35%, 7/15/46  271,000  309,483 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A sr.     
notes 5.45%, 6/15/23  1,626,000  1,722,149 
Fidelity National Information Services, Inc. company guaranty sr.     
unsec. unsub. notes 5.00%, 3/15/22  948,000  981,559 
Jabil Circuit, Inc. sr. unsec. sub. notes 8.25%, 3/15/18  162,000  176,175 
Oracle Corp. sr. unsec. unsub. notes 2.65%, 7/15/26  1,475,000  1,482,148 
 5,659,884 
Transportation (0.2%)   
Aviation Capital Group Corp. 144A sr. unsec. unsub. notes     
7.125%, 10/15/20  265,000  308,725 
Burlington Northern Santa Fe, LLC sr. unsec. notes     
5.40%, 6/1/41  454,000  591,881 
Burlington Northern Santa Fe, LLC sr. unsec. unsub. notes     
5.75%, 5/1/40  109,000  148,124 
Continental Airlines, Inc. pass-through certificates Ser. 97-4A,     
6.90%, 1/2/18  29,122  29,996 
Continental Airlines, Inc. pass-through certificates Ser. 98-1A,     
6.648%, 9/15/17  62,003  63,863 
Norfolk Southern Corp. sr. unsec. unsub. bonds 6.00%, 5/23/11  390,000  492,765 
Southwest Airlines Co. 2007-1 Pass Through Trust pass-through     
certificates Ser. 07-1, 6.15%, 8/1/22  586,172  669,701 
United Airlines 2014-2 Class A Pass Through Trust sr. notes     
Ser. A, 3.75%, 9/3/26  218,453  231,560 
    2,536,615 

 

George Putnam Balanced Fund    41 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Utilities and power (1.4%)     
Appalachian Power Co. sr. unsec. unsub. notes Ser. L,     
5.80%, 10/1/35  $510,000  $627,200 
Arizona Public Services Co. sr. unsec. notes 4.50%, 4/1/42  138,000  163,867 
Beaver Valley II Funding Corp. sr. bonds 9.00%, 6/1/17  6,000  6,030 
Commonwealth Edison Co. sr. mtge. bonds 5.875%, 2/1/33  595,000  780,723 
Consolidated Edison Co. of New York, Inc. sr. unsec. unsub.     
notes 4.20%, 3/15/42  220,000  244,191 
Duke Energy Carolinas, LLC sr. mtge. notes 4.25%, 12/15/41  450,000  518,060 
EDP Finance BV 144A sr. unsec. unsub. notes 6.00%,     
2/2/18 (Netherlands)  685,000  722,981 
EDP Finance BV 144A sr. unsec. unsub. notes 5.25%,     
1/14/21 (Netherlands)  365,000  397,766 
El Paso Natural Gas Co., LLC company guaranty sr. unsec.     
unsub. notes 8.375%, 6/15/32  490,000  594,396 
Electricite de France (EDF) 144A jr. unsec. sub. FRN 5.625%,     
perpetual maturity (France)  360,000  354,150 
Electricite de France (EDF) 144A sr. unsec. notes 6.95%,     
1/26/39 (France)  784,000  1,071,177 
Emera US Finance LP 144A company guaranty sr. unsec. notes     
3.55%, 6/15/26  437,000  458,740 
Enel Finance International SA 144A company guaranty sr. unsec.     
unsub. notes 5.125%, 10/7/19 (Netherlands)  360,000  396,926 
Energy Transfer Partners LP sr. unsec. unsub. notes     
7.60%, 2/1/24  470,000  523,572 
Energy Transfer Partners LP sr. unsec. unsub. notes     
6.50%, 2/1/42  766,000  814,732 
Energy Transfer Partners LP sr. unsec. unsub. notes     
5.20%, 2/1/22  240,000  256,111 
FirstEnergy Transmission, LLC 144A sr. unsec. unsub. notes     
5.45%, 7/15/44  1,120,000  1,275,055 
Iberdrola International BV company guaranty sr. unsec. unsub.     
bonds 6.75%, 7/15/36 (Spain)  185,000  251,594 
ITC Holdings Corp. 144A sr. unsec. notes 6.05%, 1/31/18  365,000  385,609 
Kinder Morgan Energy Partners LP company guaranty sr. unsec.     
notes 5.40%, 9/1/44  179,000  171,818 
Kinder Morgan Energy Partners LP company guaranty sr. unsec.     
notes 3.50%, 3/1/21  420,000  429,032 
Kinder Morgan, Inc. company guaranty sr. unsec. unsub. notes     
3.05%, 12/1/19  235,000  240,943 
Oncor Electric Delivery Co., LLC sr. notes 7.00%, 9/1/22  445,000  566,075 
Oncor Electric Delivery Co., LLC sr. notes 4.10%, 6/1/22  441,000  489,505 
Pacific Gas & Electric Co. sr. unsec. notes 6.35%, 2/15/38  418,000  583,033 
Pacific Gas & Electric Co. sr. unsec. unsub. notes 5.8s, 3/1/37  140,000  185,245 
Potomac Edison Co. (The) 144A sr. bonds 5.80%, 10/15/16  331,000  333,365 
PPL Capital Funding, Inc. company guaranty sr. unsec. unsub.     
notes 4.20%, 6/15/22  145,000  159,756 
Puget Sound Energy, Inc. jr. unsec. sub. FRN Ser. A,     
6.974%, 6/1/67  656,000  556,780 
Texas-New Mexico Power Co. 144A 1st sr. bonds Ser. A,     
9 1/2s, 4/1/19  889,000  1,034,793 

 

42   George Putnam Balanced Fund 

 


CORPORATE BONDS AND NOTES (14.9%)* cont.  Principal amount  Value 
Utilities and power cont.     
TransCanada PipeLines, Ltd. jr. unsec. sub. FRN 6.35%,     
5/15/67 (Canada)  $1,145,000  $859,471 
WEC Energy Group jr. unsec. sub. FRN 6.25%, 5/15/67  1,945,000  1,622,859 
    17,075,555 
 
Total corporate bonds and notes (cost $168,575,725)    $183,077,026 
 
MORTGAGE-BACKED SECURITIES (1.4%)*  Principal amount  Value 
Citigroup Commercial Mortgage Trust     
FRB Ser. 07-C6, Class A4, 5.712%, 12/10/49  $2,500,000  $2,565,153 
Ser. 14-GC21, Class AS, 4.026%, 5/10/47  508,000  566,898 
COMM Mortgage Trust     
FRB Ser. 12-LC4, Class C, 5.633%, 12/10/44  500,000  561,700 
FRB Ser. 14-CR18, Class C, 4.738%, 7/15/47  3,089,000  3,279,253 
Ser. 13-CR13, Class AM, 4.449s, 12/10/23  777,000  875,078 
Ser. 12-LC4, Class AM, 4.063%, 12/10/44  730,000  806,723 
Ser. 12-CR1, Class AM, 3.912%, 5/15/45  1,046,000  1,137,424 
Federal Home Loan Mortgage Corporation     
Structured Agency Credit Risk FRB Ser. 16-HQA2, Class M1,     
1.688%, 11/25/28  246,143  246,473 
Structured Agency Credit Risk Debt Notes FRB Ser. 15-DNA1,     
Class M1, 1.388%, 10/25/27  442,684  442,241 
FRB Ser. T-56, Class A, IO, 0.524%, 5/25/43  3,503,302  58,162 
FRB Ser. T-56, Class 2, IO, zero %, 5/25/43  5,155,058  1 
Federal National Mortgage Association Ser. 01-79, Class BI, IO,     
0.306%, 3/25/45  1,017,974  9,464 
FIRSTPLUS Home Loan Owner Trust Ser. 97-3, Class B1, 7.79%,     
11/10/23 (In default) †  194,241  19 
JPMBB Commercial Mortgage Securities Trust Ser. 13-C14,     
Class AS, 4.409%, 8/15/46  493,000  556,785 
JPMorgan Chase Commercial Mortgage Securities Trust     
FRB Ser. 12-C6, Class D, 5.192%, 5/15/45  772,000  799,560 
Ser. 04-LN2, Class A2, 5.115%, 7/15/41  15,104  15,121 
FRB Ser. 13-C13, Class C, 4.053%, 1/15/46  450,000  459,339 
JPMorgan Chase Commercial Mortgage Securities Trust 144A     
FRB Ser. 12-C8, Class D, 4.658%, 10/15/45  524,000  515,721 
LB Commercial Mortgage Trust 144A     
Ser. 99-C1, Class G, 6.41%, 6/15/31  202,805  206,450 
Ser. 98-C4, Class H, 5.60%, 10/15/35  328,022  331,778 
Morgan Stanley Capital I Trust 144A FRB Ser. 12-C4, Class D,     
5.521%, 3/15/45  1,794,000  1,851,767 
TIAA Real Estate CDO, Ltd. 144A Ser. 03-1A, Class E,     
8.00%, 12/28/38  2,232,382  558,096 
UBS-Barclays Commercial Mortgage Trust 144A FRB Ser. 12-C4,     
Class XA, IO, 1.777%, 12/10/45  12,771,821  1,012,881 
WF-RBS Commercial Mortgage Trust Ser. 14-C19, Class C,     
4.646%, 3/15/47  394,000  416,576 
Total mortgage-backed securities (cost $17,193,962)    $17,272,663 

 

George Putnam Balanced Fund   43 

 


CONVERTIBLE PREFERRED STOCKS (0.1%)*  Shares  Value 
Oportun Financial Corp. Ser. A-1, 8.00% cv. pfd. (acquired 6/23/15,     
cost $1,057) (Private) † ΔΔ  F   371  $952 
Oportun Financial Corp. Ser. B-1, 8.00% cv. pfd. (acquired 6/23/15,     
cost $20,210) (Private) † ΔΔ  F   6,416  18,189 
Oportun Financial Corp. Ser. C-1, 8.00% cv. pfd. (acquired 6/23/15,     
cost $47,464) (Private) † ΔΔ  F   9,325  42,718 
Oportun Financial Corp. Ser. D-1, 8.00% cv. pfd. (acquired 6/23/15,     
cost $68,847) (Private) † ΔΔ  F   13,526  61,963 
Oportun Financial Corp. Ser. E-1, 8.00% cv. pfd. (acquired 6/23/15,     
cost $38,611) (Private) † ΔΔ  F   7,033  34,750 
Oportun Financial Corp. Ser. F, 8.00% cv. pfd. (acquired 6/23/15, cost     
$116,544) (Private) † ΔΔ  F   15,175  104,890 
Oportun Financial Corp. Ser. F-1, 8.00% cv. pfd. (acquired 6/23/15,     
cost $326,895) (Private) † ΔΔ  F   114,700  294,206 
Oportun Financial Corp. Ser. G, 8.00% cv. pfd. (acquired 6/23/15, cost     
$413,355) (Private) † ΔΔ  F   145,037  372,020 
Oportun Financial Corp. Ser. H, 8.00% cv. pfd. (acquired 2/6/15, cost     
$633,655) (Private) † ΔΔ  F   222,546  570,290 
Total convertible preferred stocks (cost $1,666,638)    $1,499,978 
 
MUNICIPAL BONDS AND NOTES (0.1%)*  Principal amount  Value 
CA State G.O. Bonds (Build America Bonds), 7.50%, 4/1/34  $215,000  $333,960 
North TX, Tollway Auth. Rev. Bonds (Build America Bonds),     
6.718%, 1/1/49  350,000  551,341 
OH State U. Rev. Bonds (Build America Bonds), 4.91%, 6/1/40  275,000  354,049 
Total municipal bonds and notes (cost $841,351)    $1,239,350 
 
SHORT-TERM INVESTMENTS (7.0%)*  Shares  Value 
Putnam Short Term Investment Fund 0.44% L   85,041,084  $85,041,084 
SSgA Prime Money Market Fund Class N 0.34% P   1,150,000  1,150,000 
Total short-term investments (cost $86,191,084)    $86,191,084 
 
TOTAL INVESTMENTS     
Total investments (cost $1,178,666,092)    $1,260,470,811 

 

Key to holding’s abbreviations

ADR  American Depository Receipts: represents ownership of foreign securities on deposit with a 
  custodian bank 
BKNT  Bank Note 
FRB  Floating Rate Bonds: the rate shown is the current interest rate at the close of the reporting period 
FRN  Floating Rate Notes: the rate shown is the current interest rate or yield at the close of the reporting period 
GMTN  Global Medium Term Notes 
G.O. Bonds General Obligation Bonds  
IO  Interest Only 
MTN  Medium Term Notes 
TBA  To Be Announced Commitments 

 

44   George Putnam Balanced Fund 

 


Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from August 1, 2015 through July 31, 2016 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures and references to “OTC”, if any, represent over-the-counter.

* Percentages indicated are based on net assets of $1,227,005,500.

† This security is non-income-producing.

†† The interest rate and date shown parenthetically represent the new interest rate to be paid and the date the fund will begin accruing interest at this rate.

ΔΔ This security is restricted with regard to public resale. The total fair value of this security and any other restricted securities (excluding 144A securities), if any, held at the close of the reporting period was $2,213,498, or 0.2% of net assets.

Δ This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period.

F This security is valued by Putnam Management at fair value following procedures approved by the Trustees. Securities may be classified as Level 2 or Level 3 for ASC 820 based on the securities’ valuation inputs (Note 1).

L Affiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.

P This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period (Note 1).

R Real Estate Investment Trust.

At the close of the reporting period, the fund maintained liquid assets totaling $40,330,352 to cover certain derivative contracts, delayed delivery securities and the settlement of certain securities.

Debt obligations are considered secured unless otherwise indicated.

144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

See Note 1 to the financial statements regarding TBA commitments.

The dates shown on debt obligations are the original maturity dates.

FORWARD CURRENCY CONTRACTS at 7/31/16 (aggregate face value $35,799,947)     
          Unrealized 
  Contract  Delivery    Aggregate  appreciation/ 
Counterparty Currency  type  date  Value  face value  (depreciation) 
Bank of America N.A.           
Canadian Dollar  Sell  10/19/16  $532,262  $462,789  $(69,473) 
Barclays Bank PLC           
Canadian Dollar  Sell  10/19/16  2,849,862  2,874,098  24,236 
Citibank, N.A.           
Euro  Sell  9/21/16  4,077,155  4,080,085  2,930 
Credit Suisse International           
British Pound  Sell  9/21/16  7,110,446  7,740,720  630,274 
Canadian Dollar  Sell  10/19/16  1,699,451  1,714,049  14,598 
HSBC Bank USA, National Association         
British Pound  Sell  9/21/16  73,911  80,470  6,559 

 

George Putnam Balanced Fund   45 

 


FORWARD CURRENCY CONTRACTS at 7/31/16 (aggregate face value $35,799,947) cont.   
          Unrealized 
  Contract  Delivery    Aggregate  appreciation/ 
Counterparty Currency  type  date  Value  face value  (depreciation) 
JPMorgan Chase Bank N.A.           
British Pound  Sell  9/21/16  $3,989,882  $4,344,415  $354,533 
Canadian Dollar  Sell  10/19/16  4,349,648  4,387,622  37,974 
State Street Bank and Trust Co.           
British Pound  Buy  9/21/16  3,345,609  3,706,420  (360,811) 
Israeli Shekel  Sell  10/19/16  2,226,133  2,197,104  (29,029) 
UBS AG           
Euro  Sell  9/21/16  4,208,455  4,212,175  3,720 
Total          $615,511 
   

 

 
TBA SALE COMMITMENTS OUTSTANDING at 7/31/16 (proceeds receivable $3,119,180)   
  Principal  Settlement   
Agency  amount  date  Value 
 
Federal National Mortgage Association, 3.00%, 8/1/46  $3,000,000  8/16/46  $3,122,109 
Total       

 

46   George Putnam Balanced Fund 

 


ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:

Level 1: Valuations based on quoted prices for identical securities in active markets.

Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:

  Valuation inputs 
Investments in securities:  Level 1  Level 2  Level 3 
Common stocks*:       
Basic materials  $27,349,044  $—­  $—­ 
Capital goods  36,703,354  —­  —­ 
Communication services  41,376,450  —­  —­ 
Conglomerates  13,479,345  —­  —­ 
Consumer cyclicals  82,891,522  —­  —­ 
Consumer staples  84,601,748  —­  365,234 
Energy  50,375,243  —­  —­ 
Financials  114,517,042  —­  348,286 
Miscellaneous  654,594     
Health care  97,818,691  —­  —­ 
Technology  143,964,207  —­  —­ 
Transportation  13,844,164  —­  —­ 
Utilities and power  32,296,279  —­  —­ 
Total common stocks  739,871,683  —­  713,520 
Convertible preferred stocks  $—­  $—­  $1,499,978 
Corporate bonds and notes  —­  182,501,326  575,700 
Mortgage-backed securities  —­  17,272,663  —­ 
Municipal bonds and notes  —­  1,239,350  —­ 
U.S. government and agency mortgage obligations  —­  75,205,803  —­ 
U.S. treasury obligations  —­  155,399,704  —­ 
Short-term investments  86,191,084  —­  —­ 
Totals by level  $826,062,767  $431,618,846  $2,789,198 
  Valuation inputs 
Other financial instruments:  Level 1  Level 2  Level 3 
Forward currency contracts  $—­  $615,511  $—­ 
TBA sale commitments  —­  (3,122,109)  —­ 
Totals by level  $—­  $(2,506,598)  $—­ 

* Common stock classifications are presented at the sector level, which may differ from the fund’s portfolio presentation.

During the reporting period, transfers within the fair value hierarchy, if any, did not represent, in the aggregate, more than 1% of the fund’s net assets measured as of the end of the period. Transfers are accounted for using the end of period pricing valuation method.

At the start and close of the reporting period, Level 3 investments in securities represented less than 1% of the fund’s net assets and were not considered a significant portion of the fund’s portfolio.

The accompanying notes are an integral part of these financial statements.

George Putnam Balanced Fund    47 

 


Statement of assets and liabilities 7/31/16

ASSETS   
Investment in securities, at value (Note 1):   
Unaffiliated issuers (identified cost $1,093,625,008)  $1,175,429,727 
Affiliated issuers (identified cost $85,041,084) (Notes 1 and 5)  85,041,084 
Cash  1 
Foreign currency (cost $16) (Note 1)  16 
Dividends, interest and other receivables  4,353,651 
Receivable for shares of the fund sold  439,566 
Receivable for investments sold  24,739,765 
Receivable for sales of delayed delivery securities (Note 1)  1,040,638 
Unrealized appreciation on forward currency contracts (Note 1)  1,074,824 
Prepaid assets  41,241 
Total assets  1,292,160,513 
 
LIABILITIES   
Payable for investments purchased  12,995,918 
Payable for purchases of delayed delivery securities (Note 1)  43,680,316 
Payable for shares of the fund repurchased  1,739,635 
Payable for compensation of Manager (Note 2)  542,340 
Payable for custodian fees (Note 2)  19,874 
Payable for investor servicing fees (Note 2)  298,710 
Payable for Trustee compensation and expenses (Note 2)  613,505 
Payable for administrative services (Note 2)  4,723 
Payable for distribution fees (Note 2)  296,385 
Unrealized depreciation on forward currency contracts (Note 1)  459,313 
TBA sale commitments, at value (proceeds receivable $3,119,180) (Note 1)  3,122,109 
Collateral on certain derivative contracts, at value (Note 1)  1,150,000 
Other accrued expenses  232,185 
Total liabilities  65,155,013 
 
Net assets  $1,227,005,500 
 
REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $1,642,959,749 
Undistributed net investment income (Note 1)  13,015,690 
Accumulated net realized loss on investments and foreign currency transactions (Note 1)  (511,385,977) 
Net unrealized appreciation of investments and assets and liabilities in foreign currencies  82,416,038 
Total — Representing net assets applicable to capital shares outstanding  $1,227,005,500 

 

(Continued on next page)

48   George Putnam Balanced Fund 

 


Statement of assets and liabilities (Continued)

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share   
($953,549,408 divided by 54,852,312 shares)  $17.38 
Offering price per class A share (100/94.25 of $17.38)*  $18.44 
Net asset value and offering price per class B share ($21,592,328 divided by 1,256,474 shares)**  $17.18 
Net asset value and offering price per class C share ($41,699,546 divided by 2,416,281 shares)**  $17.26 
Net asset value and redemption price per class M share ($66,778,991 divided by 3,894,527 shares)  $17.15 
Offering price per class M share (100/96.50 of $17.15)*  $17.77 
Net asset value, offering price and redemption price per class R share   
($408,928 divided by 23,590 shares)  $17.33 
Net asset value, offering price and redemption price per class R5 share   
($76,674,240 divided by 4,393,865 shares)  $17.45 
Net asset value, offering price and redemption price per class R6 share   
($8,012,691 divided by 459,066 shares)  $17.45 
Net asset value, offering price and redemption price per class Y share   
($58,289,368 divided by 3,340,594 shares)  $17.45 

* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.

** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.

The accompanying notes are an integral part of these financial statements.

George Putnam Balanced Fund   49 

 


Statement of operations Year ended 7/31/16

INVESTMENT INCOME   
Interest (including interest income of $260,288 from investments in affiliated issuers) (Note 5)  $15,249,690 
Dividends (net of foreign tax of $67,528)  13,544,201 
Total investment income  28,793,891 
 
EXPENSES   
Compensation of Manager (Note 2)  6,487,016 
Investor servicing fees (Note 2)  2,006,261 
Custodian fees (Note 2)  57,143 
Trustee compensation and expenses (Note 2)  98,522 
Distribution fees (Note 2)  3,453,357 
Administrative services (Note 2)  33,819 
Other  542,548 
Fees waived and reimbursed by Manager (Note 2)  (15,594) 
Total expenses  12,663,072 
 
Expense reduction (Note 2)  (60,282) 
Net expenses  12,602,790 
 
Net investment income  16,191,101 
 
Net realized gain on investments (Notes 1 and 3)  6,187,424 
Net increase from payments by affiliates (Note 2)  1,040 
Net realized loss on swap contracts (Note 1)  (701,081) 
Net realized loss on futures contracts (Note 1)  (424,206) 
Net realized gain on foreign currency transactions (Note 1)  1,408,448 
Net realized gain on written options (Notes 1 and 3)  37,460 
Net unrealized appreciation of assets and liabilities in foreign currencies during the year  415,769 
Net unrealized depreciation of investments, futures contracts, swap contracts, written options,   
and TBA sale commitments during the year  (1,575,296) 
Net gain on investments  5,349,558 
 
Net increase in net assets resulting from operations  $21,540,659 

The accompanying notes are an integral part of these financial statements.

50    George Putnam Balanced Fund 

 


Statement of changes in net assets

INCREASE (DECREASE) IN NET ASSETS  Year ended 7/31/16  Year ended 7/31/15 
Operations:     
Net investment income  $16,191,101  $14,483,589 
Net realized gain on investments     
and foreign currency transactions  6,509,085  97,366,655 
Net unrealized depreciation of investments and assets     
and liabilities in foreign currencies  (1,159,527)  (9,196,272) 
Net increase in net assets resulting from operations  21,540,659  102,653,972 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  (11,362,355)  (11,916,224) 
Class B  (102,384)  (102,407) 
Class C  (196,107)  (136,312) 
Class M  (502,000)  (516,374) 
Class R  (5,030)  (9,433) 
Class R5  (1,028,461)  (462,840) 
Class R6  (366,668)  (114,367) 
Class Y  (1,303,237)  (1,598,783) 
Decrease from capital share transactions (Note 4)  (111,655,880)  (58,104,377) 
Total increase (decrease) in net assets  (104,981,463)  29,692,855 
 
NET ASSETS     
Beginning of year  1,331,986,963  1,302,294,108 
End of year (including undistributed net investment income     
of $13,015,690 and $11,175,163, respectively)  $1,227,005,500  $1,331,986,963 

The accompanying notes are an integral part of these financial statements.

George Putnam Balanced Fund    51 

 


Financial highlights (For a common share outstanding throughout the period)

INVESTMENT OPERATIONS:          LESS DISTRIBUTIONS:        RATIOS AND SUPPLEMENTAL DATA:     
                      Ratio of net   
  Net asset    Net realized              Ratio  investment   
  value,    and unrealized  Total from  From      Total return  Net assets,  of expenses  income (loss)  Portfolio 
  beginning  Net investment  gain (loss)  investment  net investment  Total  Net asset value,  at net asset  end of period  to average  to average  turnover 
Period ended­  of period­  income (loss) a  on investments­  operations­  income­  distributions  end of period­  value (%) b  (in thousands)  net assets (%) c  net assets (%)  (%) d 
Class A­                         
July 31, 2016­  $17.22­  .22­  .14  .36­  (.20)  (.20)  $17.38­  2.17­  $953,549­  1.00 ­e  1.33­ e  154­ 
July 31, 2015­  16.12­  .19­  1.10­  1.29­  (.19)  (.19)  17.22­  8.04­  999,928­  .97­  1.11­  130­ 
July 31, 2014­  14.81­  .23­  1.29­  1.52­  (.21)  (.21)  16.12­  10.37­  1,051,287­  .99­  1.52­  98­ 
July 31, 2013­  12.88­  .21­  1.92­  2.13­  (.20)  (.20)  14.81­  16.68­  1,030,545­  1.01­  1.56­  86­ 
July 31, 2012­  12.21­  .22­  .65­  .87­  (.20)  (.20)  12.88­  7.26­  973,318­  1.03­  1.80­  99­ 
Class B­                         
July 31, 2016­  $17.02­  .10­  .14­  .24­  (.08)  (.08)  $17.18­  1.42­  $21,592­  1.75­ e  .58­ e  154­ 
July 31, 2015­  15.94­  .06­  1.09­  1.15­  (.07)  (.07)  17.02­  7.21­  24,133­  1.72­  .36­  130­ 
July 31, 2014­  14.65­  .12­  1.27­  1.39­  (.10)  (.10)  15.94­  9.51­  24,881­  1.74­  .77­  98­ 
July 31, 2013­  12.74­  .11­  1.90­  2.01­  (.10)  (.10)  14.65­  15.83­  26,541­  1.76­  .82­  86­ 
July 31, 2012­  12.08­  .13­  .63­  .76­  (.10)  (.10)  12.74­  6.38­  29,272­  1.78­  1.06­  99­ 
Class C­                         
July 31, 2016­  $17.10­  .09­  .15­  .24­  (.08)  (.08)  $17.26­  1.45­  $41,700­  1.75 ­e  .58­ e  154­ 
July 31, 2015­  16.01­  .06­  1.10­  1.16­  (.07)  (.07)  17.10­  7.26­  36,720­  1.72­  .36­  130­ 
July 31, 2014­  14.72­  .12­  1.27­  1.39­  (.10)  (.10)  16.01­  9.50­  29,091­  1.74­  .76­  98­ 
July 31, 2013­  12.80­  .11­  1.91­  2.02­  (.10)  (.10)  14.72­  15.85­  23,534­  1.76­  .81­  86­ 
July 31, 2012­  12.14­  .13­  .64­  .77­  (.11)  (.11)  12.80­  6.39­  21,223­  1.78­  1.05­  99­ 
Class M­                         
July 31, 2016­  $16.99­  .14­  .14­  .28­  (.12)  (.12)  $17.15­  1.69­  $66,779­  1.50­ e  .83­ e  154­ 
July 31, 2015­  15.90­  .10­  1.10­  1.20­  (.11)  (.11)  16.99­  7.56­  75,297­  1.47­  .61­  130­ 
July 31, 2014­  14.62­  .16­  1.26­  1.42­  (.14)  (.14)  15.90­  9.75­  77,338­  1.49­  1.02­  98­ 
July 31, 2013­  12.71­  .14­  1.90­  2.04­  (.13)  (.13)  14.62­  16.17­  74,636­  1.51­  1.06­  86­ 
July 31, 2012­  12.06­  .16­  .63­  .79­  (.14)  (.14)  12.71­  6.62­  70,317­  1.53­  1.30­  99­ 
Class R­                         
July 31, 2016­  $17.16­  .19­  .13­  .32­  (.15)  (.15)  $17.33­  1.93­  $409­  1.25­ e  1.13 ­e  154­ 
July 31, 2015­  16.07­  .15­  1.09­  1.24­  (.15)  (.15)  17.16­  7.74­  1,102­  1.22­  .86­  130­ 
July 31, 2014­  14.77­  .20­  1.28­  1.48­  (.18)  (.18)  16.07­  10.08­  983­  1.24­  1.27­  98­ 
July 31, 2013­  12.84­  .18­  1.92­  2.10­  (.17)  (.17)  14.77­  16.44­  960­  1.26­  1.32­  86­ 
July 31, 2012­  12.18­  .19­  .64­  .83­  (.17)  (.17)  12.84­  6.92­  1,209­  1.28­  1.54­  99­ 
Class R5­                         
July 31, 2016­  $17.28­  .26­  .16­  .42­  (.25)  (.25)  $17.45­  2.49­  $76,674­  .73 ­e  1.59 ­e  154­ 
July 31, 2015­  16.18­  .23­  1.11­  1.34­  (.24)  (.24)  17.28­  8.28­  71,647­  .72­  1.34­  130­ 
July 31, 2014†  15.28­  .18­  .85­  1.03­  (.13)  (.13)  16.18­  6.76*  11­  .48*  1.15*  98­ 
Class R6­                         
July 31, 2016­  $17.28­  .28­  .15­  .43­  (.26)  (.26)  $17.45­  2.58­  $8,013­  .63 ­e  1.71­ e  154­ 
July 31, 2015­  16.18­  .25­  1.10­  1.35­  (.25)  (.25)  17.28­  8.39­  8,239­  .62­  1.46­  130­ 
July 31, 2014†  15.28­  .19­  .85­  1.04­  (.14)  (.14)  16.18­  6.81*  7,100­  .42*  1.19*  98­ 
Class Y­                         
July 31, 2016­  $17.28­  .26­  .15­  .41­  (.24)  (.24)  $17.45­  2.48­  $58,289­  .75­ e  1.60­ e  154­ 
July 31, 2015­  16.17­  .23­  1.11­  1.34­  (.23)  (.23)  17.28­  8.34­  114,920­  .72­  1.36­  130­ 
July 31, 2014­  14.86­  .27­  1.29­  1.56­  (.25)  (.25)  16.17­  10.61­  111,604­  .74­  1.77­  98­ 
July 31, 2013­  12.92­  .25­  1.92­  2.17­  (.23)  (.23)  14.86­  16.99­  106,794­  .76­  1.81­  86­ 
July 31, 2012­  12.26­  .25­  .64­  .89­  (.23)  (.23)  12.92­  7.42­  70,090­  .78­  2.04­  99­ 

See notes to financial highlights at the end of this section.

The accompanying notes are an integral part of these financial statements.

52    George Putnam Balanced Fund  George Putnam Balanced Fund    53 

 


Financial highlights (Continued)

* Not annualized.

† For the period December 2, 2013 (commencement of operations) to July 31, 2014.

a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.

b Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

c Includes amounts paid through expense offset and/or brokerage/service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.

d Portfolio turnover excludes TBA purchase and sales transactions.

e Reflects a voluntary waiver of certain fund expenses in effect during the period. As a result of such waivers, the expenses of each class reflect a reduction of less than .01% as a percentage of average net assets per share for each class (Note 2).

The accompanying notes are an integral part of these financial statements.

54   George Putnam Balanced Fund 

 


Notes to financial statements 7/31/16

Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from August 1, 2015 through July 31, 2016.

George Putnam Balanced Fund (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The goal of the fund is to seek to provide a balanced investment composed of a well-diversified portfolio of stocks and bonds which produce both capital growth and current income. The fund invests mainly in a combination of bonds and common stocks (growth or value stocks or both) of large U.S. companies, with a greater focus on common stocks. For example, Putnam Management may purchase stocks of companies with stock prices that reflect a value lower than that which Putnam Management places on the company. Putnam Management may also consider other factors that Putnam Management believes will cause the stock price to rise. The fund buys bonds of governments and private companies that are mostly investment-grade in quality with intermediate- to long-term maturities (three years or longer). Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell equity investments, and, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell fixed-income investments. The fund may also use derivatives, such as futures, options, warrants and swap contracts, for both hedging and non-hedging purposes.

The fund offers class A, class B, class C, class M, class R, class R5, class R6 and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively. Class A shares generally are not subject to a contingent deferred sales charge, and class M (effective November 1, 2015), class R, class R5, class R6 and class Y shares are not subject to a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class R5, class R6 and class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee and in the case of class R5 and class R6 shares, bear a lower investor servicing fee, which is identified in Note 2. Class R5, class R6 and class Y shares are not available to all investors.

In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.

The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.

Under the fund’s Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.

Note 1: Significant accounting policies

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 accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent

George Putnam Balanced Fund   55 

 


events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.

Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.

Security valuation Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.

Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820). If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.

Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.

Market quotations are not considered to be readily available for certain debt obligations (including short-term investments with remaining maturities of 60 days or less) and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2.

Many securities markets and exchanges outside the U.S. close prior to the scheduled close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.

To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.

To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. Certain securities may be valued on the basis of a price provided by a single source. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over

56   George Putnam Balanced Fund 

 


a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.

Interest income, net of any applicable withholding taxes, is recorded on the accrual basis. Dividend income, net of any applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain. All premiums/discounts are amortized/accreted on a yield-to-maturity basis.

Securities purchased or sold on a delayed delivery basis may be settled at a future date beyond customary settlement time; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the fair value of the underlying securities or if the counterparty does not perform under the contract.

Stripped securities The fund may invest in stripped securities which represent a participation in securities that may be structured in classes with rights to receive different portions of the interest and principal. Interest-only securities receive all of the interest and principal-only securities receive all of the principal. If the interest-only securities experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal-only securities increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The fair value of these securities is highly sensitive to changes in interest rates.

Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is 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 earned 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, currency gains and losses realized between the trade and settlement dates on securities transactions 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.

Options contracts The fund uses options contracts to hedge against changes in values of securities it owns, owned or expects to own, and to manage downside risks.

The potential risk to the fund is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.

Exchange-traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. OTC traded options are valued using prices supplied by dealers.

Options on swaps are similar to options on securities except that the premium paid or received is to buy or grant the right to enter into a previously agreed upon interest rate or credit default contract. Forward premium swap option contracts include premiums that have extended settlement dates. The delayed settlement of the premiums is factored into the daily valuation of the option contracts. In the case of interest rate cap and floor contracts, in return for a premium, ongoing payments between two parties are based on interest rates exceeding a specified rate, in the case of a cap contract, or falling below a specified rate in the case of a floor contract.

Written option contracts outstanding at period end, if any, are listed after the fund’s portfolio.

George Putnam Balanced Fund   57 

 


Futures contracts The fund uses futures contracts to equitize cash.

The potential risk to the fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. Risks may exceed amounts recognized on the Statement of assets and liabilities. 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 the value at the time it was closed.

Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.” Futures contracts outstanding at period end, if any, are listed after the fund’s portfolio.

Forward currency contracts The fund buys and sells forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to hedge foreign exchange risk.

The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The fair value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in fair value is recorded as an unrealized gain or loss. 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 the value at the time it was closed when the contract matures or by delivery of the currency. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the Statement of assets and liabilities.

Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio.

Total return swap contracts The fund entered into OTC total return swap contracts, which are arrangements to exchange a market-linked return for a periodic payment, both based on a notional principal amount, to gain exposure to a basket of securities (equities in this case).

To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. OTC total return swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as an unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain OTC total return swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. The fund’s maximum risk of loss from counterparty risk is the fair value of the contract. This risk may be mitigated by having a master netting arrangement between the fund and the counterparty. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.

OTC total return swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.

TBA commitments The fund may enter into TBA (to be announced) commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price and par amount have been established, the actual securities have not been specified. However, it is anticipated that the amount of the commitments will not significantly differ 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.

The fund may also enter into TBA sale commitments to hedge its portfolio positions, to sell mortgage-backed securities it owns under delayed delivery arrangements or to take a short position in mortgage-backed securities. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA

58   George Putnam Balanced Fund 

 


sale commitment is outstanding, either equivalent deliverable securities or an offsetting TBA purchase commitment deliverable on or before the sale commitment date are held as “cover” for the transaction, or other liquid assets in an amount equal to the notional value of the TBA sale commitment are segregated. If the TBA sale commitment is closed through the acquisition of an offsetting TBA purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into.

TBA commitments, which are accounted for as purchase and sale transactions, may be considered securities themselves, and involve a risk of loss due to changes in the value of the security prior to the settlement date as well as the risk that the counterparty to the transaction will not perform its obligations. Counterparty risk is mitigated by having a master agreement between the fund and the counterparty.

Unsettled TBA commitments are valued at their fair value according to the procedures described under “Security valuation” above. The contract is marked to market daily and the change in fair value is recorded by the fund as an unrealized gain or loss. Based on market circumstances, Putnam Management will determine whether to take delivery of the underlying securities or to dispose of the TBA commitments prior to settlement.

TBA purchase commitments outstanding at period end, if any, are listed within the fund’s portfolio and TBA sale commitments outstanding at period end, if any, are listed after the fund’s portfolio.

Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements that govern OTC derivative and foreign exchange contracts and Master Securities Forward Transaction Agreements that govern transactions involving mortgage-backed and other asset-backed securities that may result in delayed delivery (Master Agreements) with certain counterparties entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, are presented in the fund’s portfolio.

Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.

With respect to ISDA Master Agreements, termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term or short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.

At the close of the reporting period, the fund had a net liability position of $459,313 on open derivative contracts subject to the Master Agreements. Collateral posted by the fund at period end for these agreements totaled $346,210 and may include amounts related to unsettled agreements.

Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.

Lines of credit The fund participates, along with other Putnam funds, in a $392.5 million syndicated unsecured committed line of credit provided by State Street ($292.5 million) and Northern Trust Company ($100 million) and a $235.5 million unsecured uncommitted line of credit provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the higher of (1) the Federal Funds rate and (2) the overnight LIBOR plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.16% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based

George Putnam Balanced Fund   59 

 


on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.

Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the 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 Code.

The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. 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. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.

At July 31, 2016, the fund had a capital loss carryover of $499,248,912 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:

  Loss carryover  
Short-term  Long-term  Total  Expiration 
$499,248,912  N/A  $499,248,912  July 31, 2018 

Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer certain capital losses of $9,744,154 recognized during the period between November 1, 2015 and July 31, 2016 to its fiscal year ending July 31, 2017.

Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, 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. These differences include temporary and/or permanent differences from losses on wash sale transactions, from foreign currency gains and losses, from late year loss deferrals, from income on swap contracts, from interest-only securities, from partnership income, and from corporate action adjustments to basis and income. 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. At the close of the reporting period, the fund reclassified $515,668 to increase undistributed net investment income, $198,986 to decrease paid-in capital and $316,682 to increase accumulated net realized loss.

60 George Putnam Balanced Fund 

 


The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:

Unrealized appreciation  $119,709,976 
Unrealized depreciation  (40,288,500) 
Net unrealized appreciation  79,421,476 
Undistributed ordinary income  13,632,278 
Capital loss carryforward  (499,248,912) 
Post-October capital loss deferral  (9,744,154) 
Cost for federal income tax purposes  $1,181,047,772 

Note 2: Management fee, administrative services and other transactions

The fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of all open-end mutual funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:

0.680%  of the first $5 billion,  0.480%  of the next $50 billion, 
0.630%  of the next $5 billion,  0.460%  of the next $50 billion, 
0.580%  of the next $10 billion,  0.450%  of the next $100 billion and 
0.530%  of the next $10 billion,  0.445%  of any excess thereafter. 

For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.524% of the fund’s average net assets.

Putnam Management has contractually agreed, through November 30, 2017, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

Putnam Management may from time to time voluntarily undertake to waive fees and/or reimburse certain fund expenses. Any such waiver or reimbursement would be voluntary and may be modified or discontinued by Putnam Management at any time without notice. For the reporting period, Putnam Management voluntarily waived $15,594.

Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.40% of the average net assets of the portion of the fund managed by PIL.

Putnam Management has agreed to reimburse the fund $1,040 for a compliance exception which occurred during the reporting period. The effect of the loss incurred and the reimbursement by Putnam Management of such amounts had no material impact on total return.

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 State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.

Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class M, class R and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (“retail account”) of the fund and each of the other funds in its specified category, which was totaled and then allocated to each fund in the category based on its average daily net assets; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets

George Putnam Balanced Fund   61 

 


in retail accounts. Putnam Investor Services has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.320% of the fund’s average assets attributable to such accounts.

Effective September 1, 2016, Putnam Investor Services, Inc. will receive fees for investor servicing for class A, class B, class C, class M, class R and class Y shares that include (1) a per account fee for each retail account of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.

Class R5 shares paid a monthly fee based on the average net assets of class R5 shares at an annual rate of 0.15%. Class R6 shares paid a monthly fee based on the average net assets of class R6 shares at an annual rate of 0.05%.

During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:

Class A  $1,538,298  Class R5  104,985 
Class B  35,733  Class R6  11,350 
Class C  64,226  Class Y  139,079 
 
Class M  111,868  Total  $2,006,261 
Class R  722     
  

The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. The fund also reduced expenses through brokerage/service arrangements. For the reporting period, the fund’s expenses were reduced by $1,865 under the expense offset arrangements and by $58,417 under the brokerage/ service arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $896, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

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 a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.

The fund has adopted distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. During the reporting period, the class specific expenses related to distribution fees were as follows:

Class A  $2,335,207  Class M  509,619 
Class B  217,029  Class R  2,202 
Class C  389,300  Total  $3,453,357 

 

62   George Putnam Balanced Fund 

 


For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $85,883 and $1,942 from the sale of class A and class M shares, respectively, and received $15,340 and $4,010 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

A deferred sales charge of up to 1.00% and 0.65% (no longer applicable effective November 1, 2015) is assessed on certain redemptions of class  A and class  M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $35 and no monies on class  A and class  M redemptions, respectively.

Note 3: Purchases and sales of securities

During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:

  Cost of purchases  Proceeds from sales 
Investments in securities, including TBA commitments     
(Long-term)  $1,805,035,370  $1,897,348,421 
U.S. government securities (Long-term)  56,564,661  102,547,669 
Total  $1,861,600,031  $1,999,896,090 

The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.

Written option transactions during the reporting period are summarized as follows:

  Written option  Written option 
  contract amounts  premiums 
Written options outstanding at the     
beginning of the reporting period  $—  $— 
Options opened  87,117  37,460 
Options exercised  —  — 
Options expired  (87,117)  (37,460) 
Options closed  —  — 
Written options outstanding at the     
end of the reporting period  $—  $— 

Note 4: Capital shares

At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:

  Year ended 7/31/16  Year ended 7/31/15 
Class A  Shares  Amount  Shares  Amount 
Shares sold  2,585,466  $42,620,286  3,270,518  $55,029,240 
Shares issued in connection with         
reinvestment of distributions  635,462  10,433,690  645,928  10,967,040 
  3,220,928  53,053,976  3,916,446  65,996,280 
Shares repurchased  (6,444,498)  (106,322,090)  (11,074,223)  (185,609,366) 
Net decrease  (3,223,570)  $(53,268,114)  (7,157,777)  $(119,613,086) 

 

George Putnam Balanced Fund   63 

 


  Year ended 7/31/16  Year ended 7/31/15 
Class B  Shares  Amount  Shares  Amount 
Shares sold  200,145  $3,264,784  224,313  $3,749,144 
Shares issued in connection with         
reinvestment of distributions  5,963  97,029  5,839  97,697 
  206,108  3,361,813  230,152  3,846,841 
Shares repurchased  (367,448)  (5,977,728)  (373,604)  (6,233,023) 
Net decrease  (161,340)  $(2,615,915)  (143,452)  $(2,386,182) 
 
  Year ended 7/31/16  Year ended 7/31/15 
Class C  Shares  Amount  Shares  Amount 
Shares sold  885,692  $14,594,654  546,183  $9,206,428 
Shares issued in connection with         
reinvestment of distributions  10,397  169,838  7,514  126,661 
  896,089  14,764,492  553,697  9,333,089 
Shares repurchased  (627,298)  (10,291,137)  (223,040)  (3,748,088) 
Net increase  268,791  $4,473,355  330,657  $5,585,001 
 
  Year ended 7/31/16  Year ended 7/31/15 
Class M  Shares  Amount  Shares  Amount 
Shares sold  291,292  $4,736,923  330,826  $5,521,369 
Shares issued in connection with         
reinvestment of distributions  30,784  499,259  30,678  513,563 
  322,076  5,236,182  361,504  6,034,932 
Shares repurchased  (860,422)  (13,953,965)  (791,602)  (13,193,832) 
Net decrease  (538,346)  $(8,717,783)  (430,098)  $(7,158,900) 
 
  Year ended 7/31/16  Year ended 7/31/15 
Class R  Shares  Amount  Shares  Amount 
Shares sold  24,807  $410,071  12,266  $206,483 
Shares issued in connection with         
reinvestment of distributions  305  4,969  556  9,433 
  25,112  415,040  12,822  215,916 
Shares repurchased  (65,752)  (1,077,168)  (9,773)  (164,983) 
Net increase (decrease)  (40,640)  $(662,128)  3,049  $50,933 
 
  Year ended 7/31/16  Year ended 7/31/15 
Class R5  Shares  Amount  Shares  Amount 
Shares sold  959,785  $15,911,788  4,571,235  $76,316,699 
Shares issued in connection with         
reinvestment of distributions  62,403  1,028,461  26,608  462,840 
  1,022,188  16,940,249  4,597,843  76,779,539 
Shares repurchased  (773,902)  (12,818,389)  (452,924)  (7,793,994) 
Net increase  248,286  $4,121,860  4,144,919  $68,985,545 

 

64    George Putnam Balanced Fund 

 


  Year ended 7/31/16  Year ended 7/31/15 
Class R6  Shares  Amount  Shares  Amount 
Shares sold  1,894,887  $30,556,270  59,021  $1,007,097 
Shares issued in connection with         
reinvestment of distributions  22,331  366,668  6,704  114,367 
  1,917,218  30,922,938  65,725  1,121,464 
Shares repurchased  (1,934,837)  (32,250,486)  (27,929)  (476,237) 
Net increase (decrease)  (17,619)  $(1,327,548)  37,796  $645,227 
 
  Year ended 7/31/16  Year ended 7/31/15 
Class Y  Shares  Amount  Shares  Amount 
Shares sold  1,659,173  $27,671,572  645,544  $10,883,901 
Shares issued in connection with         
reinvestment of distributions  76,694  1,262,449  92,941  1,584,356 
  1,735,867  28,934,021  738,485  12,468,257 
Shares repurchased  (5,045,595)  (82,593,628)  (988,568)  (16,681,172) 
Net decrease  (3,309,728)  $(53,659,607)  (250,083)  $(4,212,915) 

 

At the close of the reporting period, Putnam Investments, LLC owned the following shares of the fund:

  Shares owned  Percentage of ownership  Value 
Class R5  679  0.02%  $11,849 
Class R6  681  0.15  11,883 

Note 5: Affiliated transactions

Transactions during the reporting period with Putnam Short Term Investment Fund, which is under common ownership and control, were as follows:

  Fair value at the        Fair value at 
  beginning of        the end of 
  the reporting      Investment  the reporting 
Name of affiliate  period  Purchase cost  Sale proceeds  income  period 
Putnam Short Term           
Investment Fund*  $48,223,912  $315,638,852  $278,821,680  $260,288  $85,041,084 

* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management.

Note 6: Market, credit and other risks

In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations. The fund may invest a significant portion of its assets in securitized debt instruments, including mortgage-backed and asset-backed investments. The yields and values of these investments are sensitive to changes in interest rates, the rate of principal payments on the underlying assets and the market’s perception of the issuers. The market for these investments may be volatile and limited, which may make them difficult to buy or sell.

George Putnam Balanced Fund    65 

 


Note 7: Summary of derivative activity

The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was based on an average of the holdings at the end of each fiscal quarter:

Purchased equity option contracts (contract amount)  $54,000 
Written equity option contracts (contract amount) (Note 3)  $—* 
Futures contracts (number of contracts)  4 
Forward currency contracts (contract amount)  $41,900,000 
OTC total return swap contracts (notional)  $1,900,000 

* For the reporting period, there were no holdings at the end of each fiscal quarter and the transactions were considered minimal.

The following is a summary of the fair value of derivative instruments as of the close of the reporting period:

Fair value of derivative instruments as of the close of the reporting period

  Asset derivatives Liability derivatives
Derivatives not         
accounted for as  Statement of    Statement of   
hedging instruments  assets and    assets and   
under ASC 815  liabilities location  Fair value  liabilities location  Fair value 
Foreign exchange         
contracts  Receivables  $1,074,824  Payables  $459,313 
Total    $1,074,824    $459,313 

The following is a summary of realized and change in unrealized gains or losses of derivative instruments in the Statement of operations for the reporting period (see Note 1):

Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments

Derivatives not accounted      Forward     
for as hedging instruments      currency     
under ASC 815  Options  Futures  contracts  Swaps  Total 
Foreign exchange           
contracts  $—  $—  $1,367,120  $—  $1,367,120 
Equity contracts  (173,202)  (424,206)  —  (701,081)  (1,298,489) 
Total  $(173,202)  $(424,206)  $1,367,120  $(701,081)  $68,631 

Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments

Derivatives not accounted      Forward     
for as hedging instruments      currency     
under ASC 815  Options  Futures  contracts  Swaps  Total 
Foreign exchange           
contracts  $—  $—  $416,545  $—  $416,545 
Equity contracts  12,069  (27,786)  —  119,296  103,579 
Total  $12,069  $(27,786)  $416,545  $119,296  $520,124 

 

66   George Putnam Balanced Fund 

 

 

 


 

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George Putnam Balanced Fund    67 

 


Note 8: Offsetting of financial and derivative assets and liabilities

The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.

  Bank of America N. A.  Barclays Bank PLC  Citibank, N. A.  Credit Suisse International  HSBC Bank USA, National Association  JPMorgan Chase Bank N. A.  State Street Bank and Trust Co.  UBS AG  Total 
Assets:                   
Forward currency contracts#  $—  $24,236  $2,930  $644,872  $6,559  $392,507  $—  $3,720  $1,074,824 
Total Assets  $—  $24,236  $2,930  $644,872  $6,559  $392,507  $—  $3,720  $1,074,824 
Liabilities:                   
Forward currency contracts#  69,473  —  —  —  —  —  389,840  —  459,313 
Total Liabilities  $69,473  $—  $—  $—  $—  $—  $389,840  $—  $459,313 
Total Financial and Derivative Net Assets  $(69,473)  $24,236  $2,930  $644,872  $6,559  $392,507  $(389,840)  $3,720  $615,511 
Total collateral received (pledged)†##  $—  $—  $—  $644,872  $—  $392,507  $(346,210)  $—   
Net amount  $(69,473)  $24,236  $2,930  $—  $6,559  $—  $(43,630)  $3,720   

† Additional collateral may be required from certain brokers based on individual agreements.

# Covered by master netting agreement (Note 1).

## Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.

68   George Putnam Balanced Fund  George Putnam Balanced Fund   69 

 


Federal tax information (Unaudited)

The fund designated 63.76% of ordinary income distributions as qualifying for the dividends received deduction for corporations.

For the reporting period, the fund hereby designates 69.71%, or the maximum amount allowable, of its taxable ordinary income distributions as qualified dividends taxed at the individual net capital gain rates.

For the reporting period, pursuant to §871(k) of the Internal Revenue Code, the fund hereby designates $6,376,008 of distributions paid as qualifying to be taxed as interest-related dividends.

The Form 1099 that will be mailed to you in January 2017 will show the tax status of all distributions paid to your account in calendar 2016.

70   George Putnam Balanced Fund 

 


About the Trustees

Independent Trustees


George Putnam Balanced Fund   71 

 



* Mr. Reynolds is an “interested person” (as defined in the Investment Company Act of 1940) of the fund and Putnam Investments. He is President and Chief Executive Officer of Putnam Investments, as well as the President of your fund and each of the other Putnam funds.

The address of each Trustee is One Post Office Square, Boston, MA 02109.

As of July 31, 2016, there were 117 Putnam funds. All Trustees serve as Trustees of all Putnam funds.

Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 75, removal, or death.

72   George Putnam Balanced Fund 

 


Officers

In addition to Robert L. Reynolds, the other officers of the fund are shown below:

Jonathan S. Horwitz (Born 1955)  Janet C. Smith (Born 1965) 
Executive Vice President, Principal Executive  Vice President, Principal Accounting Officer, 
Officer, and Compliance Liaison  and Assistant Treasurer 
Since 2004  Since 2007 
Director of Fund Administration Services, 
Steven D. Krichmar (Born 1958)  Putnam Investments and Putnam Management 
Vice President and Principal Financial Officer 
Since 2002  Susan G. Malloy (Born 1957) 
Chief of Operations, Putnam Investments and  Vice President and Assistant Treasurer 
Putnam Management  Since 2007 
Director of Accounting & Control Services, 
Robert T. Burns (Born 1961)  Putnam Investments and Putnam Management 
Vice President and Chief Legal Officer 
Since 2011  James P. Pappas (Born 1953) 
General Counsel, Putnam Investments, Putnam  Vice President 
Management, and Putnam Retail Management  Since 2004 
Director of Trustee Relations, 
James F. Clark (Born 1974)  Putnam Investments and Putnam Management 
Vice President and Chief Compliance Officer 
Since 2016  Mark C. Trenchard (Born 1962) 
Chief Compliance Officer, Putnam Investments  Vice President and BSA Compliance Officer 
and Putnam Management  Since 2002 
Director of Operational Compliance, 
Michael J. Higgins (Born 1976)  Putnam Investments and Putnam 
Vice President, Treasurer, and Clerk  Retail Management 
Since 2010 
Manager of Finance, Dunkin’ Brands (2008–  Nancy E. Florek (Born 1957) 
2010); Senior Financial Analyst, Old Mutual Asset  Vice President, Director of Proxy Voting 
Management (2007–2008); Senior Financial  and Corporate Governance, Assistant Clerk, 
Analyst, Putnam Investments (1999–2007)  and Associate Treasurer 
  Since 2000 

The principal occupations of the officers for the past five years have been with the employers as shown above, although in some cases they have held different positions with such employers. The address of each officer is One Post Office Square, Boston, MA 02109.

George Putnam Balanced Fund   73 

 


Putnam family of funds

The following is a list of Putnam’s open-end mutual funds offered to the public. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, contact your financial advisor or call Putnam Investor Services at 1-800-225-1581. Please read the prospectus carefully before investing.

Growth  International Value Fund 
Growth Opportunities Fund  Multi-Cap Value Fund 
International Growth Fund  Small Cap Value Fund 
Multi-Cap Growth Fund 
Small Cap Growth Fund  Income 
Voyager Fund  American Government Income Fund 
Diversified Income Trust 
Blend  Emerging Markets Income Fund 
Asia Pacific Equity Fund  Floating Rate Income Fund 
Capital Opportunities Fund  Global Income Trust 
Capital Spectrum Fund  Government Money Market Fund* 
Emerging Markets Equity Fund  High Yield Advantage Fund 
Equity Spectrum Fund  High Yield Trust 
Europe Equity Fund  Income Fund 
Global Equity Fund  Money Market Fund* 
International Capital Opportunities Fund  Short Duration Income Fund 
International Equity Fund  U.S. Government Income Trust 
Investors Fund 
Low Volatility Equity Fund  Tax-free Income 
Multi-Cap Core Fund  AMT-Free Municipal Fund 
Research Fund  Intermediate-Term Municipal Income Fund 
Strategic Volatility Equity Fund  Short-Term Municipal Income Fund 
Tax Exempt Income Fund 
Value  Tax-Free High Yield Fund 
Convertible Securities Fund 
Equity Income Fund  State tax-free income funds†: 
Global Dividend Fund  Arizona, California, Massachusetts, Michigan, 
The Putnam Fund for Growth and Income  Minnesota, New Jersey, New York, Ohio, 
and Pennsylvania. 

 

74    George Putnam Balanced Fund 

 


Absolute Return  Retirement Income Lifestyle Funds — 
Absolute Return 100 Fund®  portfolios with managed allocations to 
Absolute Return 300 Fund®  stocks, bonds, and money market 
Absolute Return 500 Fund®  investments to generate retirement income. 
Absolute Return 700 Fund® 
  Retirement Income Fund Lifestyle 1 
Global Sector  Retirement Income Fund Lifestyle 2 
Global Consumer Fund  Retirement Income Fund Lifestyle 3 
Global Energy Fund 
Global Financials Fund  RetirementReady® Funds — portfolios with 
Global Health Care Fund  adjusting allocations to stocks, bonds, and 
Global Industrials Fund  money market instruments, becoming more 
Global Natural Resources Fund  conservative over time.  
Global Sector Fund   
Global Technology Fund  RetirementReady® 2060 Fund 
Global Telecommunications Fund  RetirementReady® 2055 Fund 
Global Utilities Fund  RetirementReady® 2050 Fund 
  RetirementReady® 2045 Fund 
Asset Allocation  RetirementReady® 2040 Fund 
George Putnam Balanced Fund  RetirementReady® 2035 Fund 
  RetirementReady® 2030 Fund 
Global Asset Allocation Funds — four  RetirementReady® 2025 Fund 
investment portfolios that spread your  RetirementReady® 2020 Fund 
money across a variety of stocks, bonds, and   
money market instruments.   
 
Dynamic Asset Allocation Balanced Fund   
Dynamic Asset Allocation Conservative Fund   
Dynamic Asset Allocation Growth Fund   
Dynamic Risk Allocation Fund   

* 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 fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

† Not available in all states.

Check your account balances and the most recent month-end performance in the Individual Investors section at putnam.com.

George Putnam Balanced Fund    75 

 


Services for shareholders

Investor services

Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.

Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.

Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.

Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.

Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.

Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.

Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.

Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.

For more information

Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.

Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.

76    George Putnam Balanced Fund 

 


Fund information

Founded over 75 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.

Investment Manager  Trustees  James F. Clark 
Putnam Investment  Jameson A. Baxter, Chair  Vice President and 
Management, LLC  Kenneth R. Leibler, Vice Chair  Chief Compliance Officer 
One Post Office Square  Liaquat Ahamed 
Boston, MA 02109  Ravi Akhoury  Michael J. Higgins 
  Barbara M. Baumann  Vice President, Treasurer,  
Investment Sub-Advisor  Robert J. Darretta  and Clerk 
Putnam Investments Limited  Katinka Domotorffy 
57–59 St James’s Street  John A. Hill  Janet C. Smith 
London, England SW1A 1LD  Paul L. Joskow  Vice President, 
Robert E. Patterson  Principal Accounting Officer, 
Marketing Services  George Putnam, III  and Assistant Treasurer 
Putnam Retail Management  Robert L. Reynolds 
One Post Office Square  W. Thomas Stephens  Susan G. Malloy 
Boston, MA 02109  Vice President and 
  Officers   Assistant Treasurer  
Custodian  Robert L. Reynolds 
State Street Bank  President  James P. Pappas 
and Trust Company  Vice President  
  Jonathan S. Horwitz 
Legal Counsel  Executive Vice President,   Mark C. Trenchard 
Ropes & Gray LLP  Principal Executive Officer, and  Vice President and 
Compliance Liaison  BSA Compliance Officer  
Independent Registered 
Public Accounting Firm  Steven D. Krichmar   Nancy E. Florek 
PricewaterhouseCoopers LLP   Vice President and  Vice President, Director of  
Principal Financial Officer   Proxy Voting and Corporate 
  Governance, Assistant Clerk, 
  Robert T. Burns  and Associate Treasurer 
  Vice President and   
  Chief Legal Officer   
   

This report is for the information of shareholders of George Putnam Balanced Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.



Item 2. Code of Ethics:
(a) The fund's principal executive, financial and accounting officers are employees of Putnam Investment Management, LLC, the Fund's investment manager. As such they are subject to a comprehensive Code of Ethics adopted and administered by Putnam Investments which is designed to protect the interests of the firm and its clients. The Fund has adopted a Code of Ethics which incorporates the Code of Ethics of Putnam Investments with respect to all of its officers and Trustees who are employees of Putnam Investment Management, LLC. For this reason, the Fund has not adopted a separate code of ethics governing its principal executive, financial and accounting officers.

(c) In November 2015, the Code of Ethics of Putnam Investment Management, LLC was amended. The key changes to the Code of Ethics are as follows: (i) Non-Access Persons are no longer required to pre-clear their trades, (ii) a new provision governing conflicts of interest has been added, (iii) modifying certain provisions of the pre-clearance requirements, Contra-Trading Rule and 60-Day Short-Term Rule, (iv) modifying and adding language relating to reporting of unethical or illegal acts, including anti-retaliation provision, and (v) certain other changes.

Item 3. Audit Committee Financial Expert:
The Funds' Audit, Compliance and Distributions Committee is comprised solely of Trustees who are "independent" (as such term has been defined by the Securities and Exchange Commission ("SEC") in regulations implementing Section 407 of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe that each of the members of the Audit, Compliance and Distributions Committee also possess a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualify them for service on the Committee. In addition, the Trustees have determined that each of Mr. Darretta, Mr. Patterson, Mr. Hill, and Ms. Baumann qualifies as an "audit committee financial expert" (as such term has been defined by the Regulations) based on their review of his or her pertinent experience and education. The SEC has stated, and the funds' amended and restated agreement and Declaration of Trust provides, that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit, Compliance and Distribution Committee and the Board of Trustees in the absence of such designation or identification.

Item 4. Principal Accountant Fees and Services:
The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund's independent auditor:


Fiscal year ended Audit Fees Audit-Related Fees Tax Fees All Other Fees
July 31, 2016 $105,601 $ — $16,543 $ —
July 31, 2015 $112,262 $ — $16,061 $ —

For the fiscal years ended July 31, 2016 and July 31, 2015, the fund's independent auditor billed aggregate non-audit fees in the amounts of $576,296 and $695,737 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.

Audit Fees represent fees billed for the fund's last two fiscal years relating to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements.

Audit-Related Fees represent fees billed in the fund's last two fiscal years for services traditionally performed by the fund's auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation.

Tax Fees represent fees billed in the fund's last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities.

Pre-Approval Policies of the Audit, Compliance and Distributions Committee. The Audit, Compliance and Distributions Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds' independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures.

The Audit, Compliance and Distributions Committee also has adopted a policy to pre-approve the engagement by Putnam Management and certain of its affiliates of the funds' independent auditors, even in circumstances where pre-approval is not required by applicable law. Any such requests by Putnam Management or certain of its affiliates are typically submitted in writing to the Committee and explain, among other things, the nature of the proposed engagement, the estimated fees, and why this work should be performed by that particular audit firm as opposed to another one. In reviewing such requests, the Committee considers, among other things, whether the provision of such services by the audit firm are compatible with the independence of the audit firm.

The following table presents fees billed by the fund's independent auditor for services required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.


Fiscal year ended Audit-Related Fees Tax Fees All Other Fees Total Non-Audit Fees
July 31, 2016 $ — $559,753 $ — $ —
July 31, 2015 $ — $679,676 $ — $ —

Item 5. Audit Committee of Listed Registrants
Not applicable
Item 6. Schedule of Investments:
The registrant's schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.

Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:

Not applicable
Item 8. Portfolio Managers of Closed-End Investment Companies
Not Applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:

Not applicable
Item 10. Submission of Matters to a Vote of Security Holders:
Not applicable
Item 11. Controls and Procedures:
(a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.

(b) Changes in internal control over financial reporting: Not applicable
Item 12. Exhibits:
(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith.

(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.

(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

George Putnam Balanced Fund
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer

Date: September 29, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title):
/s/ Jonathan S. Horwitz
Jonathan S. Horwitz
Principal Executive Officer

Date: September 29, 2016
By (Signature and Title):
/s/ Steven D. Krichmar
Steven D. Krichmar
Principal Financial Officer

Date: September 29, 2016