Putnam
Health
Sciences
Trust
[GRAPHIC OMITTED: ARTWORK]
SEMIANNUAL REPORT
February 29, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Morningstar, Inc., an independent rating agency, once again awarded
Putnam Health Sciences Trust four out of a possible five stars for the
overall risk-adjusted performance of its class A shares as of March 31,
1996 (based on the fund's average annual returns for the 3-, 5-, and 10-
year periods). Only 22.5% of the 1,469 equity funds rated received four
stars.*
* "In managing Putnam Health Sciences Trust we rely on Putnam's
extensive research capabilities in our search for attractive investment
opportunities within this dynamic field. Indeed, we believe the health-
care industry encompasses a broad array of possibilities for investors."
- Joanne Soja, Fund Manager
CONTENTS
4 Report from Putnam Management
10 Fund performance summary
13 Portfolio holdings
17 Financial statements
* Morningstar ratings are subject to change every month and are
calculated from a fund's 3-, 5-, and 10-year average annual returns in
excess of 90-day Treasury bill returns, with appropriate sales charge
adjustments and a risk factor that reflects performance compared to 90-
day Treasury bill monthly returns. For 3-, 5-, and 10-year performance,
the fund received 5, 2, and 5 stars, respectively. There were 1,469,
970, and 517 funds rated. 10% of the funds in an investment category
receive 5 stars; 22.5% receive 4 stars; and 35% receive 3 stars.
Performance for other shares classes will vary. Past performance is not
indicative of future results.
[GRAPHIC OMITTED: photo of George Putnam]
(copyright) Karsh, Ottawa
From the Chairman
Dear Shareholder:
Putnam Health Sciences Trust began its new fiscal year during one of the
strongest stock market advances in recent memory. The extent of the
market's rise and management's adept positioning of the portfolio in our
opinion are clearly reflected in your fund's results during the six
months ended February 29, 1996.
While we are pleased with the fund's performance, the stock market's
sharp drop just after the period's close served as an abrupt reminder
that even the strongest markets will take an occasional pause. Indeed,
more turbulence may lie ahead; Putnam Management nevertheless believes
there is still some life in the market's broad advance.
Fund Manager Joanne Soja, however, looks beyond the market's short-term
ups and downs as she pursues the fund's objective of seeking capital
appreciation through investing in stocks of companies in the health-
sciences industries. She has had recent success with investments in the
pharmaceutical, managed-care, and biotechnology sectors. In the report
that follows, Joanne discusses first-half performance and looks at
prospects for the remainder of the fiscal year.
Respectfully yours,
/s/ George Putnam
George Putnam
Chairman of the Trustees
April 17, 1996
Report from the Fund Manager
Joanne Soja
Health-care stocks continued their run of strong performance throughout
the six months ended February 29, 1996. Putnam Health Sciences Trust was
once again a standout. Indeed, the fund's double-digit total returns for
its class A and class B shares at net asset value, 26.93% and 26.49%,
respectively (19.63% for class A shares at POP), handily surpassed both
the Dow Jones Industrial Average (20.43%) and the Standard & Poor's
500(registered trademark) Index (15.32%) for the period.
Your fund's outperformance continues to demonstrate the effectiveness of
its flexible investment strategy. Although focused on the health-care
sector, it emphasizes diversification across a variety of subsectors and
investment in the stocks of companies at different levels of market
capitalization. During the semiannual period, the fund benefited from
strong performance in each of several key subsectors in which it
invests: pharmaceuticals, medical equipment and supplies, managed care,
biotechnology, and hospitals and providers.
In addition, several small-company stocks held in the portfolio did
particularly well in recent months. One such stock is Quintiles, a
clinical research organization that helps pharmaceutical and
biotechnology companies design and test emerging drug therapies more
efficiently. Quintiles' stock, purchased very inexpensively last year,
has increased in value by over 50% so far in 1996. Because it continues
to exceed our earnings estimates, we increased the Quintiles position
and it is now more than 1% of the fund's net assets. While this stock,
along with others discussed in this report, was viewed favorably at the
end of the period, all portfolio holdings are, of course, subject to
review and adjustment in accordance with the fund's investment strategy
and may well vary in the future.
Another winning issue in the portfolio was Biochem Pharmaceutical, a
midsize biotechnology company that recently secured federal approval for
producing a promising new AIDS drug. The value of Biochem's stock, up
more than 200% in 1995, has already risen another 20% in 1996.
The following discussion summarizes the fund's strategies during the
period and offers insights into what we believe may lie ahead.
*MANAGED-CARE STOCK SELECTION STRATEGY STAYS
ON TARGET
In the opening months of the period, we continued to observe a lack of
investor interest in managed-care stocks, particularly those of health
maintenance organizations (HMOs). Additionally, concern over proposed
changes in Medicare and Medicaid spending threatened the performance of
the entire medical-services sector. We chose to retain the fund's
medical-services position but shifted assets into companies we felt
confident had the potential to prosper despite a challenging market
environment.
Our selection strategy has proved successful thus far in fiscal 1996.
For example, among the fund's HMO holdings, we took some profits in
Humana and U.S. Healthcare, reducing their positions in the portfolio,
and shifted the assets into Pacificare and Oxford Healthcare.
Pacificare, with its proven establishment of Medicare HMOs and lower
margin risk, continues to be a strong performer for the fund. More
recently, we began a position in Oxford Healthcare at a bargain price
and have since seen a rapid increase in the value of the shares.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS *]
showing:
Pharmaceuticals 35.4%
Medical equipment and supplies 15.8%
Managed care 12.0%
Medical devices 11.6%
Biotechnology 7.2%
Footnote reads:
*Based on net assets as of 2/29/96. Holdings will vary over time.
Considering the need for quality health-care delivery at affordable
costs, we believe interest in HMOs will continue in the future. In fact,
most HMO enrollments are still growing at double-digit rates. We are
confident that our strict selection criteria for managed-care stocks --
which emphasize those with strong enrollment gains or with a good handle
on their cost structures -- will be a distinguishing factor in fund
performance this year.
*PRODUCT-ORIENTED STOCKS BOOST PERFORMANCE IN THE PHARMACEUTICAL
SUBSECTOR
Pharmaceutical companies, as a group, have had a spectacular run over
the last few months and were up approximately 60% in 1995. In general,
their rising valuations were balanced by strong corporate fundamentals
and improved multiples. However, in our opinion, the real strength of
this subsector lies in the potential created by new-product
developments. Here are some examples from the portfolio:
Astra AB. Over the past 20 years, the Swedish drug company Astra has
moved from relative obscurity to become one of the world's leading
pharmaceutical companies. Its exceptional research and development
efforts have led to the creation of leading products in the
gastrointestinal and respiratory categories, among others. It was Astra
researchers who were among those who recognized that a bacterium, H.
pylori, not stress and gastric acid as was previously thought, is a
primary cause of stomach ulcers. Astra's anti-ulcer agent, Losec
(Prilosec in the United States), is now beginning to replace other ulcer
treatments worldwide. Astra is also a world leader in asthma therapy
with its drug Pulmicort and unique Turbuhaler, a breath-actuated
delivery system for inhaled steroids. This system is currently
undergoing review by the Food and Drug Administration in order to be
approved for use in the United States. Astra is an example of a rapidly
growing overseas company that is presently selling at slightly lower
multiples than many domestic companies. We have increased the
portfolio's Astra position to approximately 1% of the fund's net assets.
Because your fund may invest up to 20% of its assets in foreign
securities, we will seek to seize attractive opportunities such as this
one whenever possible.
[GRAPHIC OMITTED: TOP 10 HOLDINGS (2/29/96)
showing:
Johnson & Johnson
Medical equipment and supplies
Merck & Co., Inc.
Pharmaceuticals
Abbott Laboratories
Medical equipment and supplies
SmithKline Beecham PLC ADR (United Kingdom)
Pharmaceuticals
Eli Lilly & Co.
Phamaceuticals
Pfizer, Inc.
Pharmaceuticals
United Healthcare Corp.
Managed care
Medtronic, Inc.
Medical equipment and supplies
Schering-Plough Corp.
Pharmaceuticals
American Home Products Corp.
Pharmaceuticals
Footnote reads: These holdings represent 43.2% of the fund's net
assets. Portfolio holdings will vary over time.
Eli Lilly & Company. This major pharmaceutical company, currently
representing approximately 4.4% of net assets, continues to contribute
significantly to overall fund performance. Lilly is focused on the
development of an important new drug in the treatment of schizophrenia.
SmithKline Beecham. Another large-cap drug company, SmithKline, has
several new pharmaceutical products in the pipeline. In recent clinical
trials, Coreg, a new heart-disease drug, demonstrated dramatic
improvement in the subjects who received it.
We believe that each of these companies will continue to enjoy a
combination of top-line sales growth and high earnings. Thus, they
appear to be innovative and dynamic performers for the fund.
*NEW OPPORTUNITIES ABOUND IN MEASURING THE QUALITY OF HEALTH CARE
We see new themes currently emerging in health care. An extended period
of self-reform throughout the industry has given rise to several new
opportunities to measure the quality of care and to prevent disease. A
wealth of new products combined with efforts to manage health-care
delivery demands that consumers and payers be given tools by which to
evaluate the appropriateness of care. For example, many HMOs have
developed software bases that evaluate doctors for both inadequate care
and overprescription of care. Another area is the provision of
information through computer services that more effectively link
communications between physicians and hospitals.
Another area receiving an increasing focus is women's health care. More
dollars than ever before are being spent. Neuromedical Systems, a
portfolio company within the medical supplies and devices subsector, has
developed an improved scan process for Pap smears, which are essential
in the early detection of cervical cancer. While it may add to the
initial cost of a test, the enhanced Pap smear imaging should more than
compensate in total dollars for the prevention of more costly cancers.
Also, Conceptus, Inc., a recent addition to the portfolio, is in the
early stages of developing innovative answers to such needs as
infertility. American Home Products Corp., one of the fund's
pharmaceutical companies, recently produced an improved combination
therapy of estrogen-progesterone that is superior to estrogen
replacement alone for many female patients. And Merck has joined forces
with American Home Products to market a new product for the ob-gyn
market that combats osteoporosis.
One of your fund's goals is to give your investment the potential to
benefit from successful cutting-edge approaches to products and services
wherever they are found: from smaller companies as well as from the
tried-and-true larger companies.
*OUTLOOK: CAUTIOUS OPTIMISM GOING FORWARD
Quite naturally, we are very pleased with your fund's semiannual
results. At the same time, we must caution that strong market
performance like this does not last indefinitely. It would be realistic
to expect some moderation to come in the pace of the market's advance.
Over the short- to intermediate-term, health-care stocks may depend on
several factors including their earnings relative to the market. And we
are somewhat concerned about rising stock prices across the health-care
industry due to the current environment of intensive investment.
However, we believe our bottom-up approach to growth stock selection --
continuing to seek out companies with strong earnings potential within
diverse health-care subsectors -- should continue to move your fund
favorably forward in 1996, though possibly at a more subdued pace than
in 1995.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described
holdings were viewed favorably as of 2/29/96, there is no guarantee the
fund will continue to hold these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Health Sciences Trust is designed for investors
seeking capital appreciation through investments in the health sciences
industries.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions in the fund.
TOTAL RETURN FOR PERIODS ENDED 2/29/96
Class A Class B Class M
Inception date 4/8/82 3/1/93 7/3/95
NAV POP NAV CDSC NAV POP
- ---------------------------------------------------------------------
6 months 26.93% 19.63% 26.49% 21.49% 26.63% 22.21%
- ---------------------------------------------------------------------
1 year 44.57 36.26 43.48 38.48 -- --
- ---------------------------------------------------------------------
5 years 105.48 93.66 -- -- -- --
Annual average 15.49 14.13 -- -- -- --
- ---------------------------------------------------------------------
10 years 399.37 370.56 -- -- -- --
Annual average 17.45 16.75 -- -- -- --
- ---------------------------------------------------------------------
Life of class -- -- 93.92 90.92 34.87 30.16
Annual average -- -- 24.70 24.06 -- --
--------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/29/96
Standard & Poor's
500
(registered Consumer Price
trademark) Index Index
- ------------------------------------------------------------------
6 months 15.32% 1.31%
- ------------------------------------------------------------------
1 year 34.66 2.65
- ------------------------------------------------------------------
5 years 101.10 14.91
Annual average 15.00 2.82
- ------------------------------------------------------------------
10 years 285.67 41.72
Annual average 14.45 3.55
- ------------------------------------------------------------------
Life of class B 56.63 8.25
Annual average 16.13 2.68
- ------------------------------------------------------------------
Life of class M 18.95 1.57
- ------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions or,
for class A shares, distribution fees prior to implementation of the
class A distribution plan in 1990. Investment returns and net asset
value will fluctuate so that an investor's shares, when sold, may be
worth more or less than their original cost. POP assumes 5.75% maximum
sales charge for class A shares and 3.50% for class M shares. CDSC for
class B shares assumes the applicable contingent deferred sales charge,
with the maximum being 5%.
TOTAL RETURN FOR PERIODS ENDED 3/31/96
(most recent calendar quarter)
Class A Class B Class M
Inception dates 4/8/82 3/1/93 7/3/95
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------
6 months 18.12% 11.34% 17.71% 12.71% 17.81% 13.69%
- -----------------------------------------------------------------------
1 year 40.21 32.14 39.14 34.14 -- --
- -----------------------------------------------------------------------
5 years 94.32 83.12 -- -- -- --
Annual average 14.21 12.86 -- -- -- --
- -----------------------------------------------------------------------
10 years 352.34 326.41 -- -- -- --
Annual average 16.29 15.61 -- -- -- --
- -----------------------------------------------------------------------
Life of class -- -- 93.79 90.79 34.81 30.10
Annual average -- -- 23.88 23.25 -- --
- -----------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions or,
for class A shares, distribution fees prior to implementation of the
class A distribution plan in 1990. Investment returns and net asset
value will fluctuate so that an investor's shares, when sold, may be
worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 2/29/96
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number)
- ------------------------------------------------------------------------
Number 1 1 1
- ------------------------------------------------------------------------
Income $0.27 $0.08 $0.145
- ------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------
Long-term 0.909 0.909 0.909
- ------------------------------------------------------------------------
Short-term 0.013 0.013 0.013
- ------------------------------------------------------------------------
Total $1.192 $1.002 $1.067
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
8/31/95 $36.21 $38.42 $35.72 $36.17 $37.48
- ------------------------------------------------------------------------
2/29/96 44.66 47.38 44.09 44.64 46.26
- ------------------------------------------------------------------------
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus
the maximum sales charge levied at the time of purchase. POP
performance figures shown here assume the maximum 5.75% sales charge for
class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
COMPARATIVE BENCHMARKS
Standard & Poor's 500(registered trademark) Index is an unmanaged list
of common stocks that is frequently used as a general measure of stock
market performance.
Dow Jones Industrial Average (DJIA) is an unmanaged list of 30 common
stocks frequently used as a general measure of stock market performance.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
These indexes assume reinvestment of all distributions and do not take
into account brokerage commissions or other costs. The fund's portfolio
contains securities that do not match those in the indexes and
performance will differ. It is not possible to invest in an index.
<TABLE>
<CAPTION>
Portfolio of investments owned
February 29, 1996 (Unaudited)
COMMON STOCKS (92.9%)*
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Biotechnology (7.2%)
- ----------------------------------------------------------------------------------------------------
500,000 Amgen, Inc. + $29,875,000
306,500 Amylin Pharmaceuticals, Inc. + 3,448,125
350,000 Athena Neurosciences, Inc. + 4,900,000
250,000 Biochem Pharmaceutical, Inc. + 11,562,500
150,000 Biogen, Inc. + 9,806,250
120,000 Cor Therapeutics Inc. + 1,252,500
200,000 CytoTherapeutics, Inc. + 2,950,000
100,000 Ergo Science Corp. + 2,200,000
212,500 Genentech, Inc. + 11,607,813
150,000 Genome Therapeutics Corp. + 2,006,250
100,000 Immulogic Pharmaceutical Corp. + 1,975,000
200,000 La Jolla Pharmaceutical Co. + 1,437,500
120,000 Ligand Pharmaceuticals, Inc. Class B + 1,455,000
100,000 Magainin Pharmaceuticals, Inc. + 1,287,500
197,200 Martek Biosciences Corp. + 6,556,900
80,000 Medimmune, Inc. + 1,500,000
190,000 Metra Biosystems, Inc. + 2,850,000
35,000 Myriad Genetics, Inc. + 1,006,250
60,000 NPS Pharmaceuticals, Inc. + 870,000
50,000 Synaptic Pharmaceutical Corp. + 875,000
133,400 Vertex Pharmaceuticals, Inc. + 3,701,850
--------------
103,123,438
Clinics & Hospitals (2.8%)
- ----------------------------------------------------------------------------------------------------
200,000 Columbia/HCA Healthcare Corp. 10,950,000
23,900 National Surgery Centers, Inc. + 663,225
210,000 Quantum Health Resources, Inc. + 2,257,500
213,900 Quorum Health Group, Inc. + 5,267,288
48,000 Renal Care Group, Inc. + 1,320,000
223,100 Tenet Healthcare Corp. + 4,991,860
30,000 Total Renal Care Holdings, Inc. + 885,000
480,000 Vivra, Inc. + 14,160,000
--------------
40,494,873
Distribution/Retail (1.5%)
- ----------------------------------------------------------------------------------------------------
102,000 Amerisource Health Corp. Class A + 2,958,000
50,900 Cardinal Health, Inc. 3,066,725
160,900 Eckerd Corp. + 7,220,388
665,000 Owens & Minor, Inc. 7,730,625
--------------
20,975,738
Drugs (35.4%)
- ----------------------------------------------------------------------------------------------------
360,000 Allergan Inc. $13,410,000
210,000 Alza Corp. + 6,982,500
380,000 American Home Products Corp. 37,430,000
268,000 Astra AB (Sweden) 12,290,850
220,000 Bristol-Myers Squibb Co. 18,727,500
7,000 Ciba-Geigy AG (Switzerland) 6,242,298
120,000 Elan Corp. PLC ADR (Ireland) + 6,960,000
134,100 Forest Laboratories, Inc. Class A + 6,973,200
225,000 Ivax Corp. 6,440,625
1,040,000 Lilly (Eli) & Co. 62,920,000
1,087,200 Merck & Co., Inc. 72,027,000
230,000 Mylan Laboratories, Inc. 4,485,000
945,000 Pfizer, Inc. 62,251,875
725,000 Pharmacia & Upjohn, Inc. 30,359,375
120,000 R.P. Scherer Corp. + 5,280,000
7,000 Sandoz AG (Switzerland) 6,562,864
690,000 Schering-Plough Corp. 38,726,250
1,210,000 SmithKline Beecham PLC ADR (United Kingdom) 66,247,500
100,200 Synthelabo (France) 7,025,415
330,000 Warner-Lambert Co. 32,628,750
--------------
503,971,002
Information Systems (2.3%)
- ----------------------------------------------------------------------------------------------------
50,000 Enterprise Systems, Inc. + 1,312,500
220,000 GMIS, Inc. + 2,887,500
50,000 HCIA, Inc. + 2,662,500
125,575 Health Management Systems, Inc. + 3,673,069
625,000 Physicians Computer Network + 8,671,875
230,000 Shared Medical Systems Corp. 12,822,500
49,100 Summit Medical Systems, Inc. + 994,275
--------------
33,024,219
Managed Care (12.0%)
- ----------------------------------------------------------------------------------------------------
150,000 Coventry Corp. + 2,662,500
75,000 Express Scripts, Inc. Class A + 4,106,250
255,000 FHP Intl. Corp. + 8,351,250
120,000 Foundation Health Corp. + 4,680,000
700,000 Humana Inc. + 17,150,000
360,000 Mid Atlantic Medical Services, Inc. 7,605,000
54,500 Oxford Health Plans Inc. + 4,486,031
271,000 Pacificare Health Systems, Inc. Class B + 25,474,000
100,000 Physicians Health Services, Inc. Class A + 3,212,500
208,200 Rightchoice Managed Care, Inc. Class A + 3,383,250
487,500 U.S. Healthcare Inc. 23,765,625
880,000 United Healthcare Corp. 57,420,000
305,900 Value Health, Inc. + 7,915,163
--------------
170,211,569
Medical Devices (11.6%)
- ----------------------------------------------------------------------------------------------------
155,000 Arrow International, Inc. $6,316,250
154,400 ArthoCare Corp. + 3,474,000
200,000 ATS Medical, Inc. + 2,125,000
221,600 AVECOR Cardiovascular, Inc. + 2,936,200
100,000 Biomet, Inc. + 1,900,000
340,145 Boston Scientific Corp. + 16,326,960
170,000 Chad Therapeutics, Inc. + 2,061,250
36,700 Conceptus, Inc. + 724,825
106,000 Instent, Inc. + 2,120,000
1,000,000 Medtronic, Inc. 57,375,000
340,000 Mentor Corp. 8,712,500
150,000 Minimed, Inc. + 2,475,000
200,000 Orthologic Corp. + 5,325,000
225,000 St. Jude Medical Inc. + 8,493,750
468,000 Stryker Corp. + 25,389,000
100,000 Target Therapeutics, Inc. + 5,237,500
340,000 U.S. Surgical Corp. 9,647,500
220,000 Ventritex, Inc. + 3,960,000
--------------
164,599,735
Medical Equipment and Supplies (15.8%)
- ----------------------------------------------------------------------------------------------------
1,590,000 Abbott Laboratories 66,382,500
510,000 Bard (C.R.), Inc. 18,296,250
463,750 Baxter International, Inc. 21,216,563
310,000 Haemonetics Corp. + 5,270,000
151,900 Heartstream, Inc. + 2,240,525
1,005,182 Johnson & Johnson 93,984,517
150,000 Molecular Devices Corp. + 1,856,250
210,400 Nellcor Puritan Bennett, Inc. + 14,096,800
21,400 Neuromedical Systems, Inc. + 430,675
75,000 Rochester Medical Corp. + 1,087,500
--------------
224,861,580
Nursing Homes (2.1%)
- ----------------------------------------------------------------------------------------------------
100,700 ARV Assisted Living, Inc. + 1,762,250
620,000 Beverly Enterprises Inc. + 7,517,500
220,000 Health Care & Retirement Corp. + 8,937,500
159,100 Horizon/CMS Healthcare Corp. + 3,778,625
210,000 Manor Care, Inc. 8,058,750
--------------
30,054,625
Other Health Care Services (1.2%)
- ----------------------------------------------------------------------------------------------------
23,600 Pharmaceutical Product Development, Inc. + 640,150
250,200 Quintiles Transnational Corp. + 16,513,200
--------------
17,153,350
Physicians Group Management (1.0%)
- ----------------------------------------------------------------------------------------------------
300,000 Medaphis Corp. + $11,662,500
110,000 OccuSystems, Inc. + 2,158,750
56,100 Physician Support Systems, Inc. + 995,775
--------------
14,817,025
--------------
Total Common Stocks (cost $683,840,814) $1,323,287,154
--------------
SHORT-TERM INVESTMENTS (6.7%)*
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------
$25,000,000 American Telephone & Telegraph Capital Corp.,
effective yield of 5.2%, April 1, 1996 $24,888,055
11,063,000 Federal Home Loan Mortgage Corp., effective
yield of 5.48%, March 1, 1996 11,063,000
59,278,000 Interest in $1,108,321,000 joint repurchase
agreement dated February 29, 1996 with
Morgan (J.P.) & Co. Inc., due March 1, 1996
with respect to various U.S. Treasury
obligations-maturity value of $59,286,925
for an effective yield of 5.42% 59,286,925
--------------
Total Short-Term Investments (cost $95,237,980) $95,237,980
--------------
Total Investments (cost $779,078,794)*** $1,418,525,134
- ----------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,424,012,728.
+ Non-income-producing security.
*** The aggregate identified cost on a tax basis is $779,078,794 resulting in a gross unrealized
appreciation and depreciation of $677,279,802 and $37,833,462, respectively, or net unrealized
appreciation of $639,446,340.
ADR after the name of a foreign holding stands for American Depository Receipt, representing ownership
of foreign securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 29, 1996 (Unaudited)
- ------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value
(identified cost $779,078,794 ) (Note 1) $1,418,525,134
- ------------------------------------------------------------------------------------
Cash 211
- ------------------------------------------------------------------------------------
Dividends and interest receivable 1,535,828
- ------------------------------------------------------------------------------------
Receivable for shares of the fund sold 10,423,965
- ------------------------------------------------------------------------------------
Receivable for securities sold 3,685,064
- ------------------------------------------------------------------------------------
Total assets 1,434,170,202
Liabilities
- ------------------------------------------------------------------------------------
Payable for securities purchased 746,022
- ------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 6,137,250
- ------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,062,582
- ------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 1,350
- ------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,260
- ------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 643,187
- ------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 383,392
- ------------------------------------------------------------------------------------
Other accrued expenses 179,431
- ------------------------------------------------------------------------------------
Total liabilities 10,157,474
- ------------------------------------------------------------------------------------
Net assets $1,424,012,728
Represented by
- ------------------------------------------------------------------------------------
Paid-in-capital (Note 4) $780,637,011
- ------------------------------------------------------------------------------------
Distributions in excess of net investment income (1,423,495)
- ------------------------------------------------------------------------------------
Accumulated net realized gain on investments 5,352,872
- ------------------------------------------------------------------------------------
Net unrealized appreciation of investments 639,446,340
- ------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,424,012,728
Computation of net asset value and offering price
- ------------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($1,201,126,399 divided by 26,893,105 shares) $44.66
- ------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $44.66)* $47.38
- ------------------------------------------------------------------------------------
Net asset value and offering price of class B shares
($218,517,789 divided by 4,956,650 shares)** $44.09
- ------------------------------------------------------------------------------------
Net asset value and redemption price of class M shares
($4,368,540 divided by 97,862 shares) $44.64
- ------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $44.64)* $46.26
- ------------------------------------------------------------------------------------
+ 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.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended February 29, 1996 (Unaudited)
- -----------------------------------------------------------------------------------
<S> <C>
Investment income:
- ------------------------------------------------------------------------------------
Dividends (net of foreign tax of $11,815) $7,124,665
- ------------------------------------------------------------------------------------
Interest 1,586,644
- ------------------------------------------------------------------------------------
Total investment income 8,711,309
Expenses:
- ------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,871,528
- ------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 909,982
- ------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 16,478
- ------------------------------------------------------------------------------------
Administrative services (Note 2) 14,391
- ------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,339,268
- ------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 778,331
- ------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 7,106
- ------------------------------------------------------------------------------------
Auditing 20,118
- ------------------------------------------------------------------------------------
Legal 12,545
- ------------------------------------------------------------------------------------
Postage 103,277
- ------------------------------------------------------------------------------------
Reports to shareholders 63,112
- ------------------------------------------------------------------------------------
Registration fees 51,354
- ------------------------------------------------------------------------------------
Other 81,344
- ------------------------------------------------------------------------------------
Total expenses 7,268,834
- ------------------------------------------------------------------------------------
Expense reduction (Note 2) (47,562)
- ------------------------------------------------------------------------------------
Net expenses 7,221,272
- ------------------------------------------------------------------------------------
Net investment income 1,490,037
- ------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 9,942,244
- ------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 275,229,199
- ------------------------------------------------------------------------------------
Net gain on investments 285,171,443
- ------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $286,661,480
- ------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
- --------------------------------------------------------------------------------------------------------
Six months ended Year ended
February 29 August 31
1996* 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- --------------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------------
Net investment income $1,490,037 $5,819,982
- --------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions 9,942,244 23,154,465
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment transactions 275,229,199 177,658,264
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 286,661,480 206,632,711
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders
- --------------------------------------------------------------------------------------------------------
From net investment income:
Class A (6,941,343) (6,665,340)
- --------------------------------------------------------------------------------------------------------
Class B (304,825) (276,702)
- --------------------------------------------------------------------------------------------------------
Class M (6,773) --
- --------------------------------------------------------------------------------------------------------
From net realized gain on investments:
Class A (23,698,137) (13,402,834)
- --------------------------------------------------------------------------------------------------------
Class B (3,515,513) (1,193,139)
- --------------------------------------------------------------------------------------------------------
Class M (43,065) --
- --------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 128,726,667 13,017,671
- --------------------------------------------------------------------------------------------------------
Total increase in net assets 380,878,491 198,112,367
- --------------------------------------------------------------------------------------------------------
Net assets
- --------------------------------------------------------------------------------------------------------
Beginning of period 1,043,134,237 845,021,870
- --------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $1,423,495 and undistributed
net investment income of $4,339,409, respectively) $1,424,012,728 $1,043,134,237
- --------------------------------------------------------------------------------------------------------
+Unaudited.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------
July 3, 1995
Six months (commencement Six months
ended of operations) ended Year ended
February 29 August 31 February 29 August 31
- ------------------------------------------------------------------------------------------------
1996*+ 1995 1996*+ 1995
- ------------------------------------------------------------------------------------------------
Class M Class B
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $36.17 $33.96 $35.72 $29.47
- ------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------
Net investment income (loss) (.03) (.02) (.08) .11
- ------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 9.57 2.23 9.45 6.78
- ------------------------------------------------------------------------------------------------
Total from investment
operations 9.54 2.21 9.37 6.89
- ------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------
From net investment income (.15) -- (.08) (.12)
- ------------------------------------------------------------------------------------------------
From net realized gain
on investments (.92) -- (.92) (.52)
- ------------------------------------------------------------------------------------------------
Total distributions (1.07) -- (1.00) (.64)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $44.64 $36.17 $44.09 $35.72
- ------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (a) 26.63(b) 6.51(b) 26.49(b) 23.83
- ------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $4,369 $321 $218,518 $113,329
- ------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) (c) .78(b) .30(b) .91(b) 1.88
- ------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.07)(b) (.02)(b) (.20)(b) (.05)
- ------------------------------------------------------------------------------------------------
Portfolio turnover (%) 2.95(b) 19.51 2.95(b) 19.51
- ------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------
March 1, 1993
(commencement Six months
Year ended of operations) ended
August 31 August 31 February 29
- ------------------------------------------------------------------------------------------------
1994 1993+ 1996*+ 1995
- ------------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $24.28 $24.02 $36.21 $29.77
- ------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------
Net investment income (loss) .10 .05 .07 .23
- ------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.33 .21 9.57 6.99
- ------------------------------------------------------------------------------------------------
Total from investment
operations 5.43 .26 9.64 7.22
- ------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------
From net investment income (.19) -- (.27) (.26)
- ------------------------------------------------------------------------------------------------
From net realized gain
on investments (.05) -- (.92) (.52)
- ------------------------------------------------------------------------------------------------
Total distributions (.24) -- (1.19) (.78)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $29.47 $24.28 $44.66 $36.21
- ------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (a) 22.49 (1.08)(b) 26.93(b) 24.81
- ------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $55,424 $18,455 $1,201,126 $929,484
- ------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) (c) 1.87 .96(b) .54(b) 1.12
- ------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .24 .21(b) .17(b) .70
- ------------------------------------------------------------------------------------------------
Portfolio turnover (%) 23.18 45.46 2.95(b) 19.51
- ------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------
Year ended August 31
- ------------------------------------------------------------------------------------------------
1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $24.40 $28.31 $31.29 $22.82
- ------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------
Net investment income (loss) .30 .26 .12 .25
- ------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.36 (1.82) (.35) 9.07
- ------------------------------------------------------------------------------------------------
Total from investment
operations 5.66 (1.56) (.23) 9.32
- ------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------
From net investment income (.24) (.13) (.27) (.35)
- ------------------------------------------------------------------------------------------------
From net realized gain
on investments (.05) (2.22) (2.48) (.50)
- ------------------------------------------------------------------------------------------------
Total distributions (.29) (2.35) (2.75) (.85)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $29.77 $24.40 $28.31 $31.29
- ------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (a) 23.38 (6.45) (1.12) 41.99
- ------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $789,598 $764,443 $970,412 $676,081
- ------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) (c) 1.12 1.13 1.20 1.18
- ------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .96 .91 .61 1.27
- ------------------------------------------------------------------------------------------------
Portfolio turnover (%) 23.18 45.46 42.12 26.59
- ------------------------------------------------------------------------------------------------
* Unaudited.
+ Per share net investment income has been determined on the basis of weighted average number of
shares outstanding during the period.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales
charges.
(b) Not annualized.
(c) The ratio of expenses to average net assets for the period ended February 29, 1996 include amounts
paid through expense offset arrangements. Prior period ratios exclude these amounts. (Note 2)
</TABLE>
Notes to financial statements
February 29, 1996 (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 class A, class B and class M shares. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares,
which convert to class A shares after approximately eight years, do not
pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class
M shares are sold with a maximum front-end sales charge of 3.50% and pay
an ongoing distribution fee that is lower than class B shares and higher
than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). 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. 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 preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price, or, if no sales are reported -- as in the
case of some securities traded over-the-counter -- the last reported bid
price. Short-term investments having remaining maturities of 60 days or
less are stated at amortized cost, which approximates market value, 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 Putnam Investment
Management, Inc. ("Putnam Management"), the fund's manager, a wholly-
owned subsidiary of Putnam Investments, Inc., following procedures
approved by the Trustees, and such valuations and procedures are
reviewed periodically by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account, along with the cash of other
registered investment companies managed by Putnam Management and certain
other accounts. These balances may be invested in one or more repurchase
agreements and/or short-term money market instruments.
C) Repurchase agreements The fund or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to 102% of the resale price, including accrued
interest. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to
102% of 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
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. 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. Capital gain
distributions, if any, are recorded on ex-dividend date and are 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.
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, under current law, 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 Putnam
Management on the fund's portfolio transactions.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $2,540 and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "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 in the fund
and are invested in the fund or in other Putnam funds until distribution
in accordance with the Plan.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments
by the fund to Putnam Mutual Funds Corp. at an annual rate of to 0.35%,
1.00% and 1.00% of average net assets attributable to class A, class B,
and class M shares, respectively. The Trustees have approved payment by
the fund at an annual rate of 0.25%, 1.00%, and 0.75% of the average net
assets attributable to class A, class B, and class M shares,
respectively.
For the six months ended February 29, 1996, fund expenses were reduced
by $47,562 under expense offset arrangements with PFTC and brokerage
service arrangements. Investor servicing and custodian fees reported in
the Statement of operations exclude these credits. The fund could have
invested the assets utilized in connection with the expense offset
arrangements in an income producing asset if it had not entered into
such arrangements.
For the six months ended February 29, 1996, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $362,239 and $10,620
from the sale of class A and class M shares, respectively. There was
$200,302 in contingent deferred sales charges from redemptions of class
B shares. A deferred sales charge of up to 1% is assessed on certain
redemptions of class A shares. For the six months ended February 29,
1996, Putnam Mutual Funds Corp., acting as underwriter received $1,611
on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended February 29, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$72,451,876 and $34,761,120, respectively. There were no purchases or
sales of U.S. government obligations during the period. In determining
the net gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
Note 4
Capital shares
At February 29, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
February 29, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 6,579,426 $273,350,087
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 595,522 24,386,722
- ----------------------------------------------------
7,174,948 297,736,809
Shares
repurchased (5,952,000) (246,735,273)
- ----------------------------------------------------
Net increase 1,222,948 $51,001,536
- ----------------------------------------------------
Year ended
August 31, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 8,052,125 $258,073,342
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 535,035 15,853,096
- ----------------------------------------------------
8,587,160 273,926,438
Shares
repurchased (9,437,527) (302,016,572)
- ----------------------------------------------------
Net decrease (850,367) $(28,090,134)
- ----------------------------------------------------
Six months ended
February 29, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 2,544,016 $111,990,528
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 253,367 3,123,352
- ----------------------------------------------------
2,797,383 115,113,880
Shares
repurchased (1,013,550) (41,086,070)
- ----------------------------------------------------
Net increase 1,783,833 $74,027,810
- ----------------------------------------------------
Year ended
August 31, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 2,716,923 $85,990,448
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 41,252 1,212,410
- ----------------------------------------------------
2,758,175 87,202,858
Shares
repurchased (1,465,953) (46,403,109)
- ----------------------------------------------------
Net increase 1,292,222 $40,799,749
- ----------------------------------------------------
Six months ended
February 29, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 125,718 $5,231,981
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,093 44,781
- ----------------------------------------------------
126,811 5,276,762
Shares
repurchased (37,819) (1,579,441)
- ----------------------------------------------------
Net increase 88,992 $3,697,321
- ----------------------------------------------------
July 3, 1995
(commencement
of operations) to
August 31, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 8,913 $309,595
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ----------------------------------------------------
8,913 309,595
Shares
repurchased (43) (1,539)
- ----------------------------------------------------
Net increase 8,870 308,056
- ----------------------------------------------------
Our commitment to quality service
*CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past six years. In 1995, over 146,000 tests of 56 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
*HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.*
*SWITCH FUNDS EASILY
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change or
termination.)
*ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative.
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number:
1-800-225-1581.
* Regular investing of course, does not guarantee a profit or protect
against a loss in a declining market.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
Carol McMullen
Vice President
Joanne Soja
Vice President and Fund Manager
William N. Shiebler
Vice President
Paul M. O'Neil
Vice President
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, and
the most recent copy of Putnam's Quarterly Performance Summary. For
more information, or to request a prospectus, call toll free: 1-800-225-
1581.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency; and involve risk, including the possible loss of
the principal amount invested.
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- ----------------------
24025-021/335/2AB 4/96
