(logo)
Putnam
Health
Sciences
Trust
Semiannual
Report
February 28, 1994
(artwork)
For investors seeking
capital appreciation
through investments in
the health sciences
industries
Contents
2 How your fund performed
3 From the Chairman
4 Report from Putnam Management
Semiannual Report
6 Portfolio of investments owned
9 Financial statements
18 Fund performance supplement
19 Your Trustees
A member
of the Putnam
Family of Funds
<PAGE>
How your
fund performed
For periods ended February 28, 1994
Total return* Fund+
Class A Class B S&P 500(R) Consumer
NAV POP NAV CDSC Index Price Index
6 months 10.45% 4.09% 10.06% 5.06% 2.12% 1.31%
1 year 12.76 6.27 11.25 6.25 8.28 2.51
5 years 109.11 97.11 -- -- 89.52 20.65
annualized 15.90 14.54 -- -- 13.64 3.83
10 years 341.39 316.06 -- -- 320.47 43.27
annualized 16.01 15.32 -- -- 15.44 3.66
Share data Class A Class B
NAV POP NAV
August 31, 1993 $24.40 $25.89 $24.28
February 28, 1994 $26.65 $28.28 $26.48
Distributions Long-term
6 months ended Investment capital
February 28, 1994 Number income gains Total
Class A 1 $0.240 $0.051 $0.291
Class B 1 $0.185 $0.051 $0.236
Total return at end of most recent calendar quarter
Periods ended March 31, 1993
Class A Class B
NAV POP NAV POP
6 months 2.81% -3.11% 2.40% -2.60%
1 year 4.00 -1.98 3.08 -1.92
5 years 87.32 76.56 -- --
annualized 13.37 12.04 -- --
10 years 313.01 289.33 -- --
annualized 15.24 14.56 -- --
Life of class -- -- 4.15 0.15
annualized -- -- 3.84 0.14
*Performance data represent past results. Investment return and
net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
+The fund began investment operations on May 28, 1982, offering
shares now known as class A shares. Effective March 1, 1993, the
fund began offering class B shares. Results for each share class
will differ.
<PAGE>
Terms you need to know
Total return is the change in value of an investment from the
beginning to the end of a period, assuming the reinvestment of
all distributions. It may be shown at net asset value or at
public offering price.
Net asset value (NAV) is the value of all your fund's assets,
minus any liabilities, divided by the number of outstanding
shares, not reflecting any sales charge.
Public offering price (POP) is the price of a mutual fund share
plus the maximum sales charge levied at the time of purchase.
Contingent deferred sales charge (CDSC) is a charge applied at
the time of the redemption of shares rather than the time of
purchase. It generally declines and eventually disappears over a
stated period.
Class A shares are the shares of your fund offered subject to an
initial sales charge. Your fund's POP includes the maximum 5.75%
sales charge.
Class B shares are the shares of your fund offered with no
initial sales charge. Within the first six years of purchase,
they are subject to a CDSC declining from 5% to 1%. After the
sixth year, the CDSC no longer applies.
Please see the fund performance supplement on page 18 for
additional information about performance comparisons.
<PAGE>
From the
Chairman
(photograph of George Putnam)
George Putnam
Chairman
of the Trustees
(C) Karsh, Ottawa
Dear Shareholder:
It is safe to predict that virtually every American will be
affected by the outcome of the debate now taking place over the
nation's health care delivery system. Although the discussion has
been proceeding in earnest for well over a year, it is still too
early to predict the final shape of these changes.
Putnam Management and Joanne Soja, portfolio manager of Putnam
Health Sciences Trust, are not waiting for the drama to play
itself out. They have identified several areas of the health care
industry they believe have the opportunity to gain, regardless of
what reforms finally emerge.
In the closing quarter of 1993, Joanne became more optimistic
about prospects for health care stocks as valuations of these
stocks became extremely low in relation to valuations of the
market overall. As she tells you in the Report from Putnam
Management that follows, Joanne believes the market's concern
over health care reform has resulted in some extraordinarily
attractive prices for the stocks of many companies. She is
studying these companies carefully, seeking the ones most likely
to benefit from the coming changes.
We are confident that she will continue to find them. Likewise,
we remain firm in our belief that patient investors will be well
rewarded over the long term by a diversified and closely
monitored investment in the health care industry.
Respectfully yours,
(signature of George Putnam)
George Putnam
April 20, 1994
<PAGE>
Report from
Putnam Management
Putnam Health Sciences Trust's results during the six months
ended February 28, 1994, clearly support our judgment that the
two-year underperformance of health care stocks relative to the
market may be near an end. At the same time, we expect a good
deal of volatility in the prices of health care stocks as the
industry continues to work through a significant number of
challenges.
It is in this context that we report the fund's 10.45% total
return for class A shares at net asset value for the period,
compared with the 2.12% average return for stocks measured by the
Standard & Poor's 500 Index.
The shape of reform Much of the volatility we expect in health
care stocks will trace back to the ongoing national debate on
health care and the industry's response to this debate. In the
final analysis, the threat of legislation may play a more
significant role than the legislation itself in achieving reform.
For example, the prospect of price controls early in the debate
has already pressured companies to trim the rate of escalation in
health care costs. It has forced them to tighten their belts,
rethink their market focus, and service their customers more
aggressively.
While it is never safe to bet on what Washington will do, it is
already clear that the plan as submitted by President Clinton
will not survive intact. In our judgment, what is likely to
emerge is a less bureaucratic and rigid version. We believe this
ultimately means a greater role for market forces in bringing
down the cost of health care. To that end, we have been seeking
out companies that can best prosper in such an environment --
companies that can deliver the most cost-effective care.
Industry's response We are increasingly seeing restructuring,
consolidation, and creative alliances as one of the health care
industry's responses to reform. For example, portfolio company
Columbia Hospitals' recent merger with two large public hospital
companies, Galen and Hospital Corporation of America, has created
an entity large enough to negotiate significant cost savings with
suppliers and distributors in return for shifting its business to
them. As Columbia lowers its own operating costs, it can position
itself as a low-cost provider of services.
The purchase of Medco Containment Services by portfolio company
Merck & Co. represents this drug manufacturer's attempt to
deliver lower costs or better value to a client base increasingly
seeking managed care alternatives to drug cost inflation.
<PAGE>
Owens & Minor, another portfolio company, is taking on more of
the inventory costs for its hospital customers, thus allowing the
hospitals more productive use of their cash. We believe the
company's recent move to merge with Stuart Medical would provide
consolidation of its distribution capacity, more efficiencies,
and clout in seeking large national accounts.
Outlook The market is looking more closely at the potential of
individual companies, rather than lumping all health care stocks
together. While we can never guarantee future results, we believe
the companies in your fund's portfolio are among those likely to
benefit most from this change in the market's focus.
Here is how we view prospects for major sectors of the health
care market.
Biotechnology Because of a number of disappointments in this
area, investors are taking a harder look at clinical data before
buying. The Food and Drug Administration recently approved
exciting new products at Genentech, another portfolio company,
and Chiron, partially restoring the market's confidence in the
potential of biotechnology to develop new therapies for
previously unserved markets.
Medical supplies and technology Many companies in this sector
were forced to bring down their cost structures in the mid-1980s
when Congress changed reimbursement with creation of
diagnostic-related groups (DRGs). Today these companies are
leaner and thus better able to survive in a difficult pricing
environment.
Major pharmaceuticals On a relative basis, drug stocks are more
attractively priced than at any time since the price control
hearings of the 1950s. Many companies are actively considering
ways to restructure, merge, or otherwise enhance productivity of
their sales and research efforts.
Medical services Led by health maintenance organizations, this
has been the best-performing sector in the health care industry.
We believe continued opportunities will arise, driven by further
consolidation among health care providers. In addition,
demographics should favor companies focused on long-term care,
while rising costs are expected to drive continued membership
growth in managed care plans.
The views expressed here are exclusively those of Putnam
Management. They are not meant as investment advice. Although the
companies identified as holdings were viewed favorably as of
February 28, 1994, there is no guarantee the fund will continue
to hold their securities in the future.
<PAGE>
Top 10 holdings*
Abbott Laboratories
Merck & Co., Inc.
Johnson & Johnson
American Home Products
Corp.
Pfizer Inc.
United Healthcare Corp.
SmithKline Beecham
PLC ADR
Schering Plough Corp.
Medtronic, Inc.
U.S. Healthcare Inc.
*Reflect 43.90% of portfolio, based on net assets as of 2/28/94.
Holdings are subject to change.
(bar chart)
Top industry sectors (based on percentage of net assets as of
2/28/94)
Ethical Pharmaceuticals ..........................36.1%
Medical Supplies and Devices ...................25.0%
Hospital Management
and Health Care ................23.5%
Biotechnology ....5.1%
<PAGE>
Portfolio of
investments owned
February 28, 1994 (Unaudited)
Common Stocks (95.0%)(a)
Number of Shares Value
Ethical Pharmaceuticals (36.1%)
300,000 Allergan Inc. $ 7,050,000
300,000 American Cyanamid Co. 13,312,500
643,000 American Home Products Corp. 38,499,625
300,000 Bristol-Myers Squibb Co. 16,575,000
120,000 Elan Corp. ADR(b)(c) 4,785,000
270,000 Forest Laboratories, Inc.
Class A(b) 13,533,750
100,000 Ivax Corp. 3,512,500
250,000 Lilly (Eli) & Co. 13,781,250
1,267,200 Merck & Co., Inc. 41,025,600
120,000 Mylan Laboratories Inc. 2,820,000
92,100 Perrigo Co.(b) 2,670,900
652,500 Pfizer Inc. 37,845,000
118,500 Roberts Pharmaceutical Corp.(b) 3,732,750
450,000 Schering Plough Corp. 26,887,500
1,230,000 SmithKline Beecham PLC ADR(c) 33,978,750
100,000 Syntex Corp. 1,550,000
330,000 Upjohn Co. 9,570,000
240,000 Warner-Lambert Co. 15,270,000
286,400,125
Medical Supplies and Devices (25.0%)
1,860,000 Abbott Laboratories 51,382,500
678,300 Bard (C.R.), Inc. 19,077,188
783,750 Baxter International Inc. 17,830,312
170,000 Cordis Corp.(b) 7,862,500
300,000 Haemonetics Corp.(b) 6,675,000
976,200 Johnson & Johnson 39,170,025
300,000 Medtronic, Inc. 23,925,000
120,000 Mitek(b) 2,100,000
170,000 Nellcor Inc.(b) 4,930,000
125,000 Perseptive Tech II Corp.(b) 3,531,250
70,000 Sci-Med Life Systems, Inc.(b) $ 2,485,000
100,000 Sofamor/Danek Group, Inc.(b) 2,800,000
80,000 St. Jude Medical Inc. 2,280,000
448,000 Stryker Corp. 14,560,000
198,608,775
Hospital Management and Health Care Services (23.5%)
750,000 Beverly Enterprises Inc.(b) 11,343,750
230,000 Caremark International, Inc. 4,973,750
281,125 Columbia/hca Healthcare Corp. 12,088,375
300,000 FHP Intl. Corp.(b) 8,475,000
300,000 Foundation Health Corp.(b) 11,512,500
210,000 Health Care & Retirement Corp.(b) 5,460,000
308,700 Horizon Healthcare Corp.(b) 7,949,025
800,000 Humana Inc. 15,600,000
160,000 Manor Care, Inc. 4,200,000
100,000 Medaphis Corp.(b) 3,675,000
193,100 National Medical Enterprises, Inc. 3,017,188
80,000 Oxford Health Plan(b) 5,160,000
221,000 Pacificare Health Systems
Class B(b) 11,436,750
140,000 Quantum Health Resources,
Inc.(b) 5,285,000
315,000 U.S. Healthcare Inc. 20,002,500
440,000 United Healthcare Corp. 36,355,000
295,600 Value Health, Inc.(b) 12,341,300
320,000 Vivra, Inc.(b) 7,760,000
186,635,138
Biotechnology (5.1%)
270,000 Amgen Inc.(b) $ 11,272,500
156,500 Amylin Pharmaceuticals, Inc.(b) 2,034,500
350,000 Athena Neurosciences, Inc.(b) 3,193,750
50,000 Biochem Pharmaceutical, Inc.(b) 556,250
140,000 Biogen, Inc.(b) 6,142,500
260,000 Cor Therapeutics Inc(b) 3,510,000
172,500 Genentech, Inc.(b) 8,430,938
110,000 Gensia Pharmaceuticals Inc(b) 2,310,000
133,400 Vertex Pharmaceuticals Inc(b) 2,267,800
39,718,238
Distribution and Drug Retailing (1.9%)
67,000 McKesson Corp. 4,288,000
430,000 Owens & Minor, Inc. 11,180,000
15,468,000
Conglomerates (0.7%)
60,000 ITT Corp. 5,790,000
Computer Software (0.6%)
178,300 Gmis, Inc.(b) 2,184,175
100,000 Shared Medical Systems Corp. 2,675,000
4,859,175
Electronic Components and Equipment (0.6%)
65,000 Intel Corp.(b) 4,468,750
Transportation (0.5%)
65,000 Burlington Northern, Inc. 4,086,875
Insurance (0.5%)
100,000 Lincoln National Corp. $ 4,075,000
Automotive (0.5%)
65,000 General Motors Corp. 3,786,250
Total Common Stocks
(cost $639,353,221) $753,896,326
Convertible Bonds (0.3%)(a) (cost $1,750,000)
Principal Amount Value
$ 1,750,000 Hillhaven (The) Corp. cv.
deb. 7 3/4s, 2002(b) $ 2,432,500
Venture Capital Limited Partnership (0.2%)
(cost $2,090,519)
Montgomery Medical Ventures ll
(Represents an interest in the
limited partnership: $568,165
invested on 10/30/87, 11/7/88,
6/30/89, and 1/5/90, and
$151,902 invested on 10/24/90,
for a total investment of
$2,424,562)(d) $ 1,891,387
Short-Term Investments (4.6%)(a)
Principal Amount Value
$10,000,000 Ford Motor Credit Co. 3.6s,
March 28, 1994 $ 9,977,050
26,380,000 Interest in $26,380,000 joint
repurchase agreement dated
February 28, 1993 with Bankers
Trust Company due March 1,
1994 with respect to various
U.S Treasury obligations--
maturity value of $26,382,513
for an effective yield of 3.43% 26,382,513
Total Short-Term Investments
(cost $36,359,563) $ 36,359,563
Total Investments
(cost $679,553,303)(e) $794,579,776
<PAGE>
(a) Percentages indicated are based on net assets of $793,361,092
which correspond to a net asset value per share of Class A and
Class B shareholders of $26.65 and 26.48, respectively.
(b) Non-income-producing security.
(c) Securities whose value is determined or significantly
influenced by trading on exchanges not in the United States or
Canada. ADR after the name of a foreign holding stands for
American Depository Receipt, representing foreign securities on
deposit with a domestic custodian bank.
(d) Restricted as to public resale. At the date of acquistion,
this security was valued at cost. The investment in Montgomery
Medical Ventures II represents interest in a limited partnership
which makes investments in companies developing various health
care products and technologies. There were no outstanding
unrestricted securities of the same class as that held. Total
market value of the restricted security owned at February 28,
1994 was $1,891,387 or 0.2% of net assets.
(e) The aggregate identified cost on a tax basis is $679,553,303,
resulting in gross unrealized appreciation and depreciation of
$176,164,778 and $61,138,305, respectively, or net unrealized
appreciation of $115,026,473.
<PAGE>
<TABLE>
<CAPTION>
Statement of
assets and liabilities
February 28, 1994 (Unaudited)
<S> <C> <C>
Assets
Investments in securities, at value (identified cost $679,553,303)
(Note 1) $794,579,776
Cash 440
Dividends and interest receivable 1,639,074
Receivable for securities sold 1,408,708
Receivable for shares of the Fund sold 1,149,030
Receivable for foreign tax 1,156
Total assets 798,778,184
Liabilities
Payable for shares of the Fund repurchased $2,075,601
Distribution payable to shareholders 4,133
Payable for securities purchased 1,211,879
Payable for compensation of Manager (Note 2) 1,332,662
Payable for administrative services (Note 2) 4,741
Payable for compensation of Trustees (Note 2) 1,027
Payable for investor servicing and custodian fees
(Note 2) 332,278
Payable for distribution fees (Note 2) 358,852
Other accrued expenses 95,919
Total liabilities 5,417,092
Net assets $793,361,092
Represented by
Paid-in capital (Note 4) $673,697,215
Undistributed net investment income 1,571,977
Accumulated net realized gain on investments 3,065,427
Net unrealized appreciation of investments 115,026,473
Total -- Representing net assets applicable to capital
shares outstanding $793,361,092
Computation of net asset value and offering price
Net asset value and redemption price of Class A shares ($755,284,010
divided by 28,340,811 shares) $26.65
Offering price per Class A share (100/94.25 of $26.65)* $28.28
Net asset value and offering price of Class B shares ($ 38,077,082
divided by 1,438,070)** $26.48
*On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales the offering price is reduced.
**Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
operations
Six months ended February 28, 1994 (Unaudited)
<S> <C> <C>
Investment income:
Dividends $ 6,899,977
Interest 934,398
Total investment income 7,834,375
Expenses:
Compensation of manager (Note 2) $2,640,326
Investor servicing and custodian fees (Note 2) 637,727
Compensation of Trustees (Note 2) 16,166
Auditing 16,577
Reports to shareholders 29,770
Legal 9,058
Postage 13,753
Distribution fees -- Class A (Note 2) 968,725
Distribution fees -- Class B (Note 2) 146,326
Administrative services (Note 2) 15,214
Registration fees 7,702
Other 52,517
Total expenses 4,553,861
Net investment income 3,280,514
Net realixed gain on investments (Notes 1 and 3) 25,742,652
Net unrealized appreciation of investments during the period 50,863,062
Net gain on investments 76,605,714
Net increase in net assets resulting from operations $79,886,228
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
changes in net assets
<S> <C> <C>
Six months ended Year ended
February 28 August 31
1994* 1993
Increase (decrease) in net assets
Operations:
Net investment income $ 3,280,514 $ 8,002,314
Net realized gain (loss) on investments 25,742,652 (14,644,194)
Net unrealized appreciation (depreciation)
of investments 50,863,062 (52,699,200)
Net increase (decrease) in net assets resulting
from operations 79,886,228 (59,341,080)
Distributions to shareholders from:
Net investment income -- Class A (7,069,791) (4,451,894)
Net investment income -- Class B (218,867) --
Net realized gain on investments -- Class A (1,502,331) (74,951,856)
Net realized gain on investments -- Class B (60,336) --
Decrease from capital share transactions (Note 4) (60,572,299)(48,768,406)
Total increase (decrease) in net assets 10,462,604 (187,513,236)
Beginning of year 782,898,488 970,411,724
End of year (including undistributed net
investment income of
$1,571,977 and $9,003,209, respectively) $793,361,092 $782,898,488
*Unaudited.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Financial highlights*
(For a share outstanding
throughout the period)
March 1, 1993
Six Months (commencement Six Months
Ended of operations) to Ended
February 28 August 31 February 28 Year ended August 31
1994*** 1993** 1994*** 1993 1992
<S> <C> <C> <C> <C> <C>
Class B Class A
Net Asset Value,
Beginning of Period $24.28 $24.02 $24.40 $28.31 $31.29
Investment operations
Net Investment Income .09 .05 .14 .26 .12
Net Realized and Unrealized
Gain (Loss) on Investments 2.35 .21 2.40 (1.82) (.35)
Total from
investment operations 2.44 .26 2.54 (1.56) (.23)
Less Distributions from:
Net Investment Income (.19) -- (.24) (.13) (.27)
Net Realized Gain on
Investments (.05) -- (.05) (2.22) (2.48)
Total Distributions (.24) -- (.29) (2.35) (2.75)
Net Asset Value,
End of Period $26.48 $24.28 $26.65 $24.40 $28.31
Total Investment Return at
Net Asset Value (%)(b) 20.12(c) 2.16(c) 20.90(c) (6.45) (1.12)
<PAGE>
Net Assets, End of Period
(in thousands) $38,077 $18,455 $755,284 $764,443 $970,412
Ratio of Total Expenses to
Average Net Assets (%) 1.09(c) 1.91(c) .64(c) 1.13 1.20
Ratio of Net Investment Income
to Average Net
Assets (%) (.83)(c) .42(c) (.57)(c) .91 .61
Portfolio Turnover (%) 14.42(d) 45.46(d) 14.42(d) 45.46 42.12
See page 13 for notes to Financial highlights.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Financial highlights*(continued)
Year ended August 31
1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Net Asset Value,
Beginning of Period $22.82 $21.81 $18.55 $24.39 $22.46 $18.47 $15.96
Investment operations
Net Investment Income .25 .27 .39 .25(a) .17 .20 .22
Net Realized and Unrealized
Gain (Loss) on Investments 9.07 2.85 5.21 (4.67) 4.70 6.67 2.99
Total from
investment operations 9.32 3.12 5.60 (4.42) 4.87 6.87 3.21
Less Distributions from:
Net Investment Income (.35) (.30) (.29) (.12) (.20) (.22) (.16)
Net Realized Gain on Investments (.50) (1.81) (2.05) (1.30) (2.74) (2.66) (.54)
Total Distributions (.85) (2.11) (2.34) (1.42) (2.94) (2.88) (.70)
Net Asset Value,
End of Period $31.29 $22.82 $21.81 $18.55 $24.39 $22.46 $18.47
Total Investment Return at
Net Asset Value (%)(b) 41.99 15.01 34.15 (18.79) 27.68 45.12 21.38
Net Assets, End of Period
(in thousands) $676,081 $335,080 $270,712 $244,169 $347,540 $289,545 $236,588
<PAGE>
Ratio of Total Expenses to
Average Net Assets (%) 1.18 1.18 1.14 1.08(a) 1.03 1.00 .99
Ratio of Net Investment Income
to Average Net Assets (%) 1.27 1.44 1.88 1.22(a) .82 1.01 1.05
Portfolio Turnover (%) 26.59 37.30 25.11 20.85 33.35 31.14 42.75
*Financial highlights for periods ended through August 31, 1992 have been reclassified and data has been presented to
conform with the requirements issued by the SEC in April, 1993.
**Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
***Unaudited.
(a)Reflects an expense limitation during the year ended August 31, 1988. As a result of such limitation, expenses of the
Fund reflect a reduction of $0.02 per share.
(b)Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c)Annualized.
(d)Not annualized.
/TABLE
<PAGE>
Notes to
Financial statements
February 28, 1994 (Unaudited)
Note 1 Significant accounting policies
The Fund is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment
company. The investment objective of the Fund is to seek capital
appreciation by investing primarily in the common stocks of
companies in the health sciences industries.
The Fund offers both Class A and Class B shares. The Fund
commenced its public offering of Class B shares on March 1, 1993.
Class A shares are sold with a maximum front-end sales charge of
5.75%. Class B shares do not pay a front-end sales charge but pay
a higher ongoing distribution fee than Class A shares, and may be
subject to a contingent deferred sales charge if those shares are
redeemed within six years of purchase. Expenses of the Fund are
borne pro-rata by the holders of both classes of shares, except
that each class bears expenses unique to that class (including
the distribution fees applicable to such class) and 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. Shares of each class would receive their pro-rata
share of the net assets of the Fund, if the Fund were liquidated.
In addition, the Trustees declare separate dividends on each
class of shares.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with
generally accepted accounting principles.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sale price, or, if no sales are reported
- -- as in the case of some securities traded over-the-counter --
the last reported bid price, except that certain U.S. government
obligations are stated at the mean between the last reported bid
and asked prices. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value, and other investments are stated at
fair value following procedures approved by the Trustees. Foreign
securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate. The fair value of
restricted securities is determined by the Manager following
procedures approved by the Trustees, and such valuations and
procedures are reviewed periodically by the Trustees.
<PAGE>
B) Joint trading account Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the Fund may transfer
uninvested cash balances into a joint trading account, along with
the cash of other registered investment companies managed by
Putnam Investment Management, Inc. (Putnam Management) (formerly
known as Putnam Management Company, Inc.), the Fund's Manager, a
wholly-owned subsidiary of Putnam Investments, Inc. (formerly
known as The Putnam Companies, Inc.), and certain other accounts.
These balances may be invested in one or more repurchase
agreements and/or short-term money market instruments.
C) Repurchase agreements The Fund or any joint trading account,
through the Fund's custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price,
including accrued interest. The Fund's Manager is responsible for
determining that the value of these underlying securities is at
all times at least equal to the resale price, including accrued
interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the
accrual basis and dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are
recorded as soon as the Fund is informed of the ex-dividend date.
E) Federal taxes It is the policy of the Fund to distribute all
of its income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the
Fund to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Internal Revenue Code of
1986. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation of securities
held and excise tax on income and capital gains.
F) Distributions to shareholders Distributions to shareholders
are recorded by the Fund on the ex-dividend date.
Note 2 Management fee, administrative services, and other
transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net
assets of the Fund for the quarter. Such fee is based on the
following annual rates: 0.70% of the first $500 million of
average net assets, 0.60% of the next $500 million, 0.55% of the
next $500 million, and 0.50% of any excess over $1.5 billion,
subject to reduction in any year to the extent that expenses
(exclusive of distribution fees, brokerage, interest and taxes)
of the Fund exceed 2.5% of the first $30 million of average net
assets, 2% of the next $70 million and 1.5% of any excess over
$100 million and by the amount of certain brokerage commissions
and fees (less expenses) received by affiliates of the Manager on
the Fund's portfolio transactions.
The Fund also reimburses the Manager for the compensation and
related expenses of certain officers of the Fund and their staff
who provide administrative services to the Fund. The aggregate
amount of all such reimbursements is determined annually by the
Trustees. For the six months ended February 28, 1994, the Fund
paid $15,214 for these services.
Trustees of the Fund receive an annual Trustee's fee of $2,060
and an additional fee for each Trustees' meeting attended.
Trustees who are not interested persons of the Manager and who
serve on committees of the Trustees receive additional fees for
attendance at certain committee meetings.
Custodial functions for the Fund are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam
Investor Services, a division of PFTC. Fees paid for these
investor servicing and custodial functions for the six months
ended February 28, 1994 amounted to $ 637,727.
Investor servicing and custodian fees reported in the Statement
of operations for the six months ended February 28, 1994 have
been reduced by credits allowed by PFTC.
The Fund has adopted a distribution plan with respect to its
class A shares (the "class A Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The purpose of the class A
Plan is to compensate Putnam Mutual Funds Corp., a wholly-owned
subsidiary of Putnam Investments Inc., for services provided and
expenses incurred by it in distributing class A shares. The
Trustees have approved payment by the Fund to Putnam Mutual Funds
Corp. at an annual rate of 0.25% of the average net assets
attributable to class A shares. For the six months ended February
28, 1994, the Fund paid distribution fees of $968,725 for class A
shares.
During the six months ended February 28, 1994, Putnam Mutual
Funds Corp., acting as an underwriter, received net commissions
of $159,708 from the sale of class A shares of the Fund.
A deferred sales charge of up to 1% is assessed on certain
redemptions of class A shares purchased as part of an investment
of $1 million or more. For the six months ended February 28,
1994, Putnam Mutual Funds Corp., acting as an underwriter,
received $9,975 on class A redemptions.
The Fund has adopted a separate distribution plan with respect to
its class B shares (the "class B Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the
class B Plan is to compensate Putnam Mutual Funds Corp. for
services provided and expenses incurred by it in distributing
class B shares. The class B Plan provides for payments by the
Fund to Putnam Mutual Funds Corp. at an annual rate of up to
1.00% of the Fund's average net assets attributable to class B
shares. For the six months ended February 28, 1994, the Fund paid
distribution fees of $146,326 for class B shares.
Putnam Mutual Funds Corp. also receives the proceeds of the
contingent deferred sales charges levied on class B share
redemptions within six years of purchase. The charge is based on
declining rates, which begin at 5.00% of the net asset value of
the redeemed shares. Putnam Mutual Funds Corp. received
contingent deferred sales charges of $31,456 from such
redemptions during the six months ended February 28, 1994.
Note 3 Purchases and sales of securities
During the six months ended February 28, 1994, purchases and
sales of investment securities other than short-term investments
aggregated $108,106,015 and $106,376,669, respectively. There
were no purchases or sales of U.S. government obligations during
the year. In determining the net gain or loss on securities sold,
the cost of securities has been determined on the identified cost
basis.
<PAGE>
<TABLE>
<CAPTION>
Note 4 Capital shares
At February 28, 1994, there was an unlimited number of shares of beneficial interest
authorized, divided into two classes, Class A and Class B capital stock. Transactions in
capital shares were as follows:
Six months ended Year ended
February 28 August 31
1994 1993
Class A Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 3,947,796 $101,873,467 7,677,047 $199,120,210
Shares issued in connection with
reinvestment of distributions 253,948 6,574,748 2,203,034 60,715,642
4,201,744 108,448,215 9,880,081 259,835,852
Shares repurchased (7,192,619) (186,402,132) (12,825,263) (327,178,004)
Net decrease (2,990,875)$ (77,953,917) (2,945,182) $ (67,342,152)
March 1, 1993
(commencement
Six months ended of operations) to
February 28 August 31
1994 1993
Class B Shares Amount Shares Amount
Shares sold 786,290 $ 20,172,507 856,829 $ 20,939,215
Shares issued in connection with
reinvestment of distributions 8,742 225,296 -- --
795,032 20,397,803 856,829 20,939,215
Shares repurchased (116,911) (3,016,185) (96,880) (2,365,469)
Net Increase (decrease) 678,121 $ 17,381,618 759,949 $ 18,573,746
/TABLE
<PAGE>
Note 5 Reclassification of Capital Accounts
Effective September 1, 1993, Putnam Health Sciences Trust has
adopted the provisions of Statement of Position 93-2
"Determination, Disclosure and Financial Statement Presentation
of Income, Capital Gain and Return of Capital distributions by
Investment Companies (SOP)" The purpose of this SOP is to report
the accumulated net investment income (loss) and accumulated net
realized gain (loss) accounts in such a manner as to approximate
amounts available for future distributions (or to offset future
realized capital gains) and to achieve uniformity in the
presentation of distributions by investment companies.
As a result of the SOP, the Fund has reclassified reducing
undistributed net investment income by $3,423,088, increasing
accumulated net realized gain by $2,962,679 and increasing
additional paid-in capital by $460,409.
These adjustments represent the cumulated amounts necessary to
report these balances through August 31, 1993, the close of the
fund's most recent fiscal year-end for financial reporting and
tax purposes.
Fund
performance
supplement
Putnam Health Sciences Trust is a portfolio managed for capital
appreciation primarily through investments in the health sciences
industries. The Standard & Poor's 500 Index is an unmanaged list
of large capitalization common stocks that assumes reinvestment
of all distributions. The index does not take into account
brokerage commissions or other costs. The fund's portfolio
contains securities that do not match those in the index. The
Consumer Price Index is a commonly used measure of inflation; it
does not represent an investment return.
Fund performance data do not take into account any adjustment
made for class A distribution plan payments made prior to the
plan's inception in 1990 or for taxes that may have been payable
on reinvested distributions.
The fund performance supplement has been prepared by Putnam
Management to provide additional information about the fund and
the indexes used for performance comparisons. The information is
not part of the portfolio of investments owned or the financial
statements.
<PAGE>
Your
Trustees
George Putnam
Chairman
Chairman and President,
The Putnam Funds
William F. Pounds
Vice Chairman
Professor of Management,
Alfred P. Sloan
School of Management,
Massachusetts Institute of
Technology
Jameson Adkins Baxter
President,
Baxter Associates, Inc.
Hans H. Estin
Vice Chairman,
North American
Management Corporation
John A. Hill
Principal and
Managing Director,
First Reserve Corp.
Elizabeth T. Kennan
President,
Mount Holyoke College
Lawrence J. Lasser
President and
Chief Executive Officer,
Putnam Investments, Inc.
Robert E. Patterson
Executive Vice President,
Cabot Partners
Limited Partnership
Donald S. Perkins
Director of various
corporations
George Putnam, III
President, New Generation
Research, Inc.
<PAGE>
A.J.C. Smith
Chairman of the Board
and Chief Executive Officer
Marsh & McLennan
Companies, Inc.
W. Nicholas Thorndike
Director of various
corporations
<PAGE>
Putnam
Health
Sciences
Trust
Fund information
Investment manager
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
Marketing services
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
Investor servicing agent
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
1-800-225-1581
Custodian
Putnam Fiduciary
Trust Company
Legal counsel
Ropes & Gray
(DALBAR logo)
Putnam Investor Services
has received the DALBAR
award each year since the
award's 1990 inception.
In more than 10,000 tests
of 38 shareholder
service components,
Putnam outperformed
the industry standard
in every category.
OL/63-11526
<PAGE>
Officers
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
John J. Morgan
Vice President
Joanne Soja
Vice President
and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul O'Neil
Vice President
John D. Hughes
Vice President
and Treasurer
Beverly Marcus
Clerk and
Assistant Treasurer
This report is for the information
of shareholders of Putnam Health
Sciences Trust. It may also be used
as sales literature when preceded
or accompanied by the current
prospectus, which gives details of
sales charges, investment objectives,
and operating policies of the fund.
- -------------------
Bulk Rate
U.S. Postage
Paid
Boston, MA
Permit No. 53749
- -------------------
PUTNAMINVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
APPENDIX TO FORM N30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS:
(1) Rule lines for tables are omitted.
(2) Boldface and italic typefaces are displayed in normal type.
(3) Headers (e.g, the name of the fund) and footers (e.g., page
numbers and "The accompanying notes are an integral part of these
financial statements") are omitted.
(4) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(5) Bullet points and similar graphic signals are omitted.
(6) Page numbering is different.
(7) An "(R)" tag has been used in place of the Registered
Trademark symbol.
