PUTNAM BALANCED GOVERNMENT FUND

               Prospectus Supplement dated February 16, 1994
                   to Prospectus dated October 1, 1993,
                                      

An expense limitation in effect since the Fund's inception has
been terminated as of February 16, 1994.  The section "Expenses
Summary" on pages 3 and 4 of the Prospectus is replaced by the
following: 

EXPENSES SUMMARY

Expenses are one of several factors to consider when investing in
the Fund.  The following table summarizes your maximum
transaction costs from investing in the Fund and expenses which
the Fund expects to incur in its current fiscal year. The
Examples show the cumulative expenses attributable to a
hypothetical $1,000 investment in the Fund over specified
periods.


                                    CLASS A SHARES    CLASS B SHARES           
                                           
SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price)                          3.25%             NONE*
                                           
                                                  3.0% in the first year,     
                                                     declining to 1.0%        
Deferred Sales Charge (as percentage                in the fourth year,       
of the lower of original purchase price               and eliminated          
or redemption proceeds)                 NONE**          thereafter

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)

Management Fees                          0.60%             0.60%              
12b-1 Fees                               0.25%             0.85%           
Other Expenses                           0.51%             0.51%             
Total Fund Operating Expenses            1.36%             1.96%            


EXAMPLES

Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:

                             1                     3
                           YEAR                  YEARS

  CLASS A                   $46                   $74         
  CLASS B                   $50                   $82          

Your investment of $1,000 would incur the following expenses,
assuming 5% annual return but no redemption:

  CLASS A                   $46                   $74         
  CLASS B                   $20                   $62         


The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses
which the Fund expects to incur in its current fiscal year.  The
12b-1 fees shown in the table reflect the amount to which the
Fund's Trustees currently limit payments under the Fund's Class A
Distribution Plan and the maximum amount payable under the Fund's
Class B Distribution Plan.  Other expenses are based on estimated
amounts for the Fund's current fiscal year.  The Examples do not
represent past or future expense levels.  Actual expenses may be
more or less than those shown.  Federal regulations require the
Examples to assume a 5% annual return, but actual annual return
has varied.

*Class B shares are sold without a front-end sales charge, but
their 12b-1 fees may cause long-term shareholders to pay more
than the economic equivalent of the maximum permitted front-end
sales charges.

** A deferred sales charge of up to 1.00% is assessed on certain
redemptions of Class A shares that were purchased without an
initial sales charge as part of an investment of $1 million or
more.  See "How to buy shares -- Class A Shares."