Prospectus
DECEMBER 30, 1998 , AS
REVISED JUNE 30, 1999
PUTNAM HEALTH
SCIENCES TRUST
CLASS A, B AND M SHARES
INVESTMENT CATEGORY: GROWTH
This prospectus explains what you should know about this mutual
fund before you invest. Please read it carefully.
Putnam Investment Management, Inc. (Putnam Management), which has
managed mutual funds since 1937, manages the fund.
These securities have not been approved or disapproved by the
Securities and Exchange Commission nor has the Commission passed
upon the accuracy or adequacy of this prospectus. Any statement
to the contrary is a crime.
CONTENTS
2 FUND SUMMARY
2 Goal
2 M ain investment strategies
2 Ma in risks
3 Per formance information
4 Fees and expenses
6 What are the fund's main investment strategies and related risks?
9 Who manages the fund?
10 How does the fund price its shares?
10 How do I buy fund shares?
13 How do I sell fund shares?
15 How do I exchange fund shares?
16 Fund distributions and taxes
17 Financial highlights
BOSTON LONDON TOKYO
Fund summary
GOAL
The fund seeks capital appreciation by investing at least 80% of
its assets (other than assets invested in U.S. government
securities, short-term debt obligations and cash or money market
instruments) in common stocks and other securities of companies
in the health sciences industries, except when Putnam Management,
believes alternative strategies are appropriate to protect the
fund against a market decline.
MAIN INVESTMENT STRATEGIES
The fund invests mainly in common stocks of companies in the
health sciences industries. The fund invests mainly in growth
stocks, which are those issued by companies whose earnings Putnam
Management believes are likely to grow faster than the economy as
a whole. Growth in earnings may lead to an increase in the price
of the stock.
MAIN RISKS
The main risks that could adversely affect the value of the
fund's shares and the total return on your investment include
The risk that the stock price of one or more of the companies in
the fund's portfolio will fall, or will fail to appreciate as
anticipated by Putnam Management. Many factors can adversely
affect a stock's performance, including factors related to a
specific company or industry or general financial market
conditions. This risk is greater for small and medium-sized
companies, which tend to be more vulnerable to adverse
developments.
The risk that movements in the securities markets will adversely
affect the price of the fund's investments, regardless of how
well the companies in which the fund invests perform.
The risk of investing in a single group of industries.
Investments in the health sciences industries, even though
representing interests in different companies in such industries,
may be affected by common economic forces and other factors. The
vulnerability of the fund to factors affecting the health
sciences industries will be significantly greater than that of a
fund that invests in a broader range of industries which may
result in greater losses and volatility.
The risk of loss from investing in fewer issuers than a fund
that invests more broadly. The fund is "non-diversified,"
which means that it may invest more of its assets in the
securities of fewer companies than a "diversified" fund.
You can lose money by investing in the fund. The fund may not
achieve its goals, and is not intended as a complete investment
program. An investment in the fund is NOT a deposit of a bank and
is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
PERFORMANCE INFORMATION
The following information provides some indication of the fund's
risks. The chart shows year-to-year changes in the performance
of one of the fund's classes of shares, class A shares. The table
following the chart compares the fund's performance to that of a
broad measure of market performance. Of course, the fund's past
performance is not an indication of future performance.
CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
1988 10.57%
1989 41.98%
1990 15.51%
1991 49.07%
1992 -10.70%
1993 -0.04%
1994 15.16%
1995 47.00%
1996 12.43%
1997 32.37%
Performance figures in the bar chart do not reflect the impact of
sales charges. If they did, performance would be less than that
shown. Year-to-date performance through 9/30/98 was 9.13%.
During the periods shown in the bar chart, the highest return for
a quarter was 21.49% (quarter ending 3/31/91) and the lowest
return for a quarter was -12.12% (quarter ending 3/31/92).
AVERAGE ANNUAL TOTAL RETURNS (for periods ending 12/31/97)
PAST PAST PAST
1 YEAR 5 YEARS 10 YEARS
CLASS A 24.76% 18.87% 19.07%
CLASS B 26.39% 19.16% 18.79%
CLASS M 27.11% 18.83% 18.69%
S&P 500 INDEX 33.36% 20.27%18.05%
Unlike the bar chart, this performance information reflects the
impact of sales charges. Class A and class M share performance
reflects the current maximum initial sales charges; class B
share performance reflects the maximum applicable deferred
sales charge if shares had been redeemed on 12/31/97 and
assumes conversion to class A shares after eight years. For
periods before the inception of class B shares (3/1/93) and
class M shares (7/3/95), performance shown for
these classes in the table is based on the
performance of the fund's class A shares, adjusted to reflect the
appropriate sales charge and the higher 12b-1 fees paid
by class B and class M shares. The fund's performance through
8/31/88 benefited from Putnam Management's agreement to limit the
fund's expenses. The fund's performance is compared to the
Standard & Poor's 500 Index, an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market
performance.
FEES AND EXPENSES
This table summarizes the fees and expenses you may pay if you
invest in the fund. Expenses are based on the fund's last fiscal
year.
SHAREHOLDER FEES (fees paid directly from your investment)
CLASS A CLASS B CLASS M
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
the offering price) 5.75% NONE* 3.50%*
Maximum Deferred Sales Charge (Load)
(as a percentage of the original
purchase price or redemption
proceeds, whichever is lower) NONE** 5.00% NONE
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
TOTAL
ANNUAL FUND
MANAGEMENT DISTRIBUTION OTHER OPERATING
FEES (12B-1) FEES EXPENSES EXPENSES
CLASS A 0.55% 0.25% 0.20% 1.00%
CLASS B 0.55% 1.00% 0.20% 1.75%
CLASS M 0.55% 0.75% 0.20% 1.50%
*The higher 12b-1 fees borne by class B and class M shares may
cause long-term class B and class M shareholders to pay more than
the total sales charges paid by class A shareholders.
**A deferred sales charge of up to 1% may be imposed on certain
redemptions of class A shares bought without an initial sales
charge.
EXAMPLE
This example translates the "total annual fund operating
expenses" shown in the preceding table into dollar amounts. By
doing this, you can more easily compare the cost of investing in
the fund to the cost of investing in other mutual funds. The
example makes certain assumptions. It assumes that you invest
$10,000 in the fund for the time periods shown and then, except
as shown for class B shares, redeem all your shares at the end of
those periods. It also assumes a 5% return on your investment
each year and that the fund's operating expenses remain the same.
The example is hypothetical; your actual costs and returns may be
higher or lower.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A $671 $875 $1,096 $1,729
CLASS B $678 $851 $1,149 $1,864 *
CLASS B (no redemption) $178 $551 $949 $1,864 *
CLASS M $497 $807 $1,140 $2,078
*Reflects the conversion of class B shares to class A shares,
which pay lower 12b-1fees. Conversion occurs no more than eight
years after purchase.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES AND RELATED RISKS?
Any investment carries with it some level of risk that generally
reflects its potential for reward. The fund pursues its goal of
capital appreciation by investing mainly in companies in the
health sciences industries. Putnam Management will consider,
among other things, a company's financial strength, competitive
position in its industry and projected future earnings and
dividends when deciding whether to buy or sell investments.
A description of the risks associated with the fund's
main investment strategies follows.
COMMON STOCKS. Common stocks represent ownership interest in a
company. The value of a company's stock may fall as a result of
factors directly relating to that company, such as decisions made
by its management or lower demand for the company's products or
services. Similarly, a stock's value may fall because of factors
affecting companies in the same industry or a number of different
industries, such as increases in production costs. The value of a
company's stock may also be affected by changes in financial
market conditions relatively unrelated to the company or its
industry, such as changes in interest rates or currency exchange
rates. In addition, a company's stock generally pays dividends
only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of the stock
will usually react more strongly than the bonds and other debt to
actual or perceived changes in the company's financial condition
or prospects.
GROWTH STOCKS. The fund may invest in stocks of companies that
Putnam Management believes have earnings that will grow faster
than the economy as a whole. These growth stocks typically trade
at higher multiples of current earnings than other stocks.
Therefore, the values of growth stocks may be more sensitive to
changes in current or expected earnings than the values of other
stocks. If Putnam Management's assessment of the prospects for
the company's earnings growth is wrong, or if its judgment of how
other investors will value the company's earnings growth is
wrong, then the price of the company's stock may fall or not
approach the value that Putnam Management has placed on it.
SMALLER COMPANIES. The fund will invest in small and medium-
sized companies, including companies with market capitalizations
of less than $500 million. These companies are more likely than
larger companies to have limited product lines, markets or
financial resources, or to depend on a small or inexperienced
management group. Stocks of these companies may trade less
frequently and in limited volume, and their prices may fluctuate
more than stocks of other companies. Stocks of these companies
may therefore be more vulnerable to adverse developments than
those of larger companies.
FOREIGN INVESTMENTS. The fund may invest without limit in
securities of foreign issuers traded in U.S. public markets.
While the fund may also invest in securities of foreign issuers
that are not traded in U.S. public markets, it does not expect
that such investments will normally represent more than 30% of
its assets, although they may occasionally exceed this amount.
Foreign investments involve certain additional risks. For
example, their values may decline in response to changes in
currency exchange rates, unfavorable political and legal
developments, unreliable or untimely information, and economic
and financial instability. In addition, the liquidity of these
investments may be more limited than domestic investments, which
means the fund may at times be unable to sell them at desirable
prices. Foreign settlement procedures may also involve
additional risks. These risks are generally greater in the case
of "emerging markets" that typically have less developed legal
and financial systems.
Certain of these risks may also apply to some extent to domestic
investments that are denominated in foreign currencies or that
are traded in foreign markets, or to securities of U.S. companies
that have significant foreign operations. Special U.S. tax
considerations may apply to the fund's foreign investments.
INDUSTRY FOCUS. The fund invests in a wide variety of companies
in the health sciences industries including companies in the
pharmaceutical, health care services, applied research and
development and medical equipment and supplies businesses. The
fund considers a company to be principally engaged in the health
sciences industries if at the time of investment Putnam
Management determines that at least 50% of the company's
assets, revenues or profits are derived from these industries.
Under normal market conditions, the fund will invest at least 65%
of its assets in securities of issuers meeting at least one of
these 50% tests.
Putnam Management may also consider a company with the potential
for growth as a result of particular products, technology,
patents or other market advantages in the health science
industries to be in the health sciences industries. The fund
does not anticipate that companies in this category will
represent more than 15% of the fund's investments in the health
sciences industries.
The fund invests primarily in a single group of industries and is
therefore more concentrated and less diversified than funds not
primarily investing in a single group of industries. Therefore,
events that affect the health sciences industries more
significantly than the market as a whole will have a greater
affect on the fund than a fund that is more widely diversified
among a number of unrelated industries. Because the fund's
investments are concentrated in the health sciences industries,
many products and services are subject to risk of rapid
obsolescence caused by technological and scientific advances. In
addition, the health sciences industries are generally subject to
greater government regulation than many other industries.
Changes in governmental policies may have a material effect on
the demand for or costs of certain products and services.
Regulatory approvals are generally required before new drugs and
medical devices or procedures may be introduced and before the
acquisition of additional facilities and equipment by health care
providers. Changes in governmental payment systems and the
increased use of managed care arrangements may also affect the
revenues and expenses of health care service providers.
OTHER INVESTMENTS. In addition to the main investment strategies
described above, the fund may also make other types of
investments, such as investments in U.S. government securities
and other fixed-income securities, preferred stocks, convertible
securities or derivative instruments, and, therefore, may be
subject to other risks, as described in the fund's statement of
additional information (SAI).
ALTERNATIVE STRATEGIES. At times Putnam Management may judge that
market conditions make pursuing the fund's investment strategies
inconsistent with the best interests of its shareholders. Putnam
Management then may temporarily use alternative strategies that
are mainly designed to limit the fund's losses. Although Putnam
Management has the flexibility to use these strategies, it may
choose not to for a variety of reasons, even in very volatile
market conditions. These strategies may cause the fund to miss
out on investment opportunities, and may prevent the fund from
achieving its goal.
CHANGES IN POLICIES. The fund's Trustees may change the fund's
goal, investment strategies and other policies without
shareholder approval, except as otherwise indicated.
Who manages the fund?
The fund's Trustees oversee the general conduct of the fund's
business. The Trustees have retained Putnam Management to be the
fund's investment manager, responsible for making investment
decisions for the fund and managing the fund's other affairs and
business. The fund pays Putnam Management a quarterly management
fee for these services based on the fund's average net assets.
The fund paid Putnam Management a management fee of 0.55% of
average net assets for the fund's last fiscal year. Putnam
Management's address is One Post Office Square, Boston, MA 02109.
The following officers of Putnam Management have had primary
responsibility for the day-to-day management of the fund's
portfolio since the years shown below. Their experience
as portfolio managers or investment analysts over at least the
last five years is also shown.
MANAGER SINCE EXPERIENCE
David G. Carlson 1997 Employed by Putnam
SENIOR VICE PRESIDENT Management since 1990.
Richard B. England 1996 Employed by Putnam
SENIOR VICE PRESIDENT Management since 1992.
Margery C. Parker 1998 Employed by Putnam Management
SENIOR VICE PRESIDENT since 1997. Prior to December
1997, Ms. Parker was employed at
Keystone Investments.
YEAR 2000 ISSUES. The fund could be adversely affected if the
computer systems used by Putnam Management and the fund's other
service providers do not properly process and calculate date-
related information relating to the end of this century and the
beginning of the next. While year 2000-related computer problems
could have a negative effect on the fund, both in its operations
and in its investments, Putnam Management is working to avoid
such problems and to obtain assurances from the fund's service
providers that they are taking similar steps. No assurances,
though, can be provided that the fund will not be adversely
impacted by these matters.
How does the fund price its shares?
The price of the fund's shares is based on its net asset value
(NAV) . The NAV per share of each class equals the total
value of its assets, less its liabilities, divided by the number
of its outstanding shares. Shares are only valued as of the close
of regular trading on the New York Stock Exchange each day the
exchange is open.
The fund values its investments for which market quotations are
readily available at market value. It values short-term
investments that will mature within 60 days at amortized cost,
which approximates market value. It values all other investments
and assets at their fair value.
The fund translates prices for its investments quoted in foreign
currencies into U.S. dollars at current exchange rates. As a
result, changes in the value of those currencies in relation to
the U.S. dollar may affect the fund's NAV. Because foreign
markets may be open at different times than the New York Stock
Exchange, the value of the fund's shares may change on days when
shareholders are not able to buy or sell them. If events
materially affecting the values of the fund's foreign investments
occur between the close of foreign markets and the close of
regular trading on the New York Stock Exchange, these investments
will be valued at their fair value.
How do I buy fund shares?
You can open a fund account with as little as $500 and make
additional investments at any time with as little as $50. The
fund sells its shares at the offering price, which is the NAV
plus any applicable sales charge. Your financial advisor or
Putnam Investor Services generally must receive your completed
buy order before the close of regular trading on the New York
Stock Exchange for your shares to be bought at that day's
offering price.
You can buy shares
THROUGH A FINANCIAL ADVISOR . Your advisor will be
responsible for furnishing all necessary documents to Putnam
Investor Services, and may charge you for his or her services.
THROUGH SYSTEMATIC INVESTING . You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking or savings account. Application forms are
available through your advisor or Putnam Investor Services at 1-
800-225-1581.
You may also complete an order form and write a check for the
amount you wish to invest, payable to the fund. Return the check
and completed form to Putnam Mutual Funds.
The fund may periodically close to new purchases of shares or
refuse any order to buy shares if the fund determines that doing
so would be in the best interests of the fund and its
shareholders.
WHICH CLASS OF SHARES IS BEST FOR ME?
This prospectus offers you a choice of three classes of fund
shares: A, B, and M. This allows you to choose among different
types of sales charges and different levels of ongoing operating
expenses, as illustrated in the "Fees and expenses" section. The
class of shares that is best for you depends on a number of
factors, including the amount you plan to invest and how long you
plan to hold the shares. Here is a summary of the differences
among the classes of shares:
CLASS A SHARES
Initial sales charge of up to 5.75%
Lower sales charge for investments of $50,000 or more
No deferred sales charge (except on certain redemptions of shares
bought without an initial sales charge)
Lower annual expenses, and higher dividends, than class B or M
shares because of lower 12b-1 fee
CLASS B SHARES
No initial sales charge; your entire investment goes to work for
you
Deferred sales charge of up to 5.00% if you sell shares
within 6 years after you bought them
Higher annual expenses, and lower dividends, than class A or M
shares because of higher 12b-1 fee
Convert automatically to class A shares after 8 years, reducing
the future 12b-1 fee (may convert sooner in some cases)
Orders for class B shares for more than $250,000 are treated as
orders for class A shares or refused
CLASS M SHARES
Initial sales charge of up to 3.50%
Lower sales charges for larger investments of $50,000 or more
No deferred sales charge
Lower annual expenses, and higher dividends, than class B shares
because of lower 12b-1 fee
Higher annual expenses, and lower dividends, than class A shares
because of higher 12b-1 fee
No conversion to class A shares, so future 12b-1 fee does not
decrease
INITIAL SALES CHARGES FOR CLASS A AND M SHARES
CLASS A SALES CHARGE CLASS M SALES CHARGE
AS A PERCENTAGE OF: AS A PERCENTAGE OF:
----------------------------------- ------------------------------------
AMOUNT OF PURCHASE NET AMOUNT OFFERING NET AMOUNT OFFERING
AT OFFERING PRICE ($)INVESTED PRICE* INVESTED PRICE*
- ----------------------------------------------------------------------------
Under 50,000 6.10% 5.75% 3.63% 3.50%
50,000 but under 100,000 4.71 4.50 2.56 2.50
100,000 but under 250,000 3.63 3.50 1.52 1.50
250,000 but under 500,000 2.56 2.50 1.01 1.00
500,000 but under 1,000,000 2.04 2.00 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- --------------------------------------------------------------------------
*Offering price includes sales charge .
DEFERRED SALES CHARGES FOR CLASS B AND CERTAIN CLASS A SHARES
If you sell (redeem) class B shares within six years after you
bought them, you will generally pay a deferred sales charge
according to the following schedule.
YEAR AFTER
PURCHASE 1 2 3 4 5 6 7+
- -------------------------------------------
CHARGE 5% 4% 3% 3% 2% 1% 0%
A deferred sales charge of up to 1% may apply to class A shares
purchased without an initial sales charge, if redeemed within two
years after purchase.
Deferred sales charges will be based on the lower of the shares'
cost and current NAV. Shares not subject to any charge will be
redeemed first, followed by shares held longest. You may sell
shares acquired by reinvestment of distributions without a charge
at any time.
YOU MAY BE ELIGIBLE FOR REDUCTIONS AND WAIVERS OF SALES CHARGES.
Sales charges may be reduced or waived under certain
circumstances and for certain groups. Information about
reductions and waivers of sales charges is included in the SAI.
You may consult your financial advisor or Putnam Mutual Funds for
assistance.
DISTRIBUTION (12B-1) PLANS. The fund has adopted distribution
plans to pay for the marketing of fund shares and for services
provided to shareholders. The plans provide for payments at
annual rates (based on average net assets) of up to 0.35% on
class A shares and 1.00% on class B and class M shares. The
Trustees currently limit payments on class A and class M
shares to 0.25% and 0.75% of average net assets,
respectively. Because these fees are paid out of the fund's
assets on an ongoing basis, they will increase the cost of your
investment. The higher fees for class B and class M shares may
cost you more than paying the initial sales charge for class A
shares. Because class M shares, unlike class B shares, do not
convert to class A shares, class M shares may cost you more over
time than class B shares.
How do I sell fund shares?
You can sell your shares back to the fund any day the New York
Stock Exchange is open, either through your financial advisor or
directly to the fund. Payment for redemptions may be delayed
until the fund collects the purchase price of shares, which may
take up to 15 calendar days after the purchase date.
SELLING SHARES THROUGH YOUR FINANCIAL ADVISOR. Your advisor must
receive your request in proper form before the close of regular
trading on the New York Stock Exchange for you to receive that
day's NAV, less any applicable deferred sales charge. Your
advisor will be responsible for furnishing all necessary
documents to Putnam Investor Services on a timely basis and may
charge you for his or her services.
SELLING SHARES DIRECTLY TO THE FUND. Putnam Investor Services
must receive your request in proper form before the close of
regular trading on the New York Stock Exchange in order to
receive that day's NAV, less any applicable sales charge.
BY MAIL. Send a signed letter of instruction to Putnam Investor
Services. If you have certificates for the shares you want to
sell, you must include them along with completed stock power
forms.
BY TELEPHONE. You may use Putnam's Telephone Redemption Privilege
to redeem shares valued at less than $100,000 unless you have
notified Putnam Investor Services of an address change within the
preceding 15 days. Unless you indicate otherwise on the account
application, Putnam Investor Services will be authorized to
accept redemption and transfer instructions received by
telephone.
The Telephone Redemption Privilege is not available if there are
certificates for your shares. The Telephone Redemption Privilege
may be modified or terminated without notice.
ADDITIONAL DOCUMENTS. If you
* sell shares with a value of $100,000 or more,
* want your redemption proceeds sent to an address other than
your address as it appears on Putnam's records, or
* have notified Putnam of a change in address within the
preceding 15 days,
the signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer or
certain other financial institution. Stock power forms are
available from your financial advisor, Putnam Investor Services
and many commercial banks.
Putnam Investor Services usually requires additional documents
for the sale of shares by a corporation, partnership, agent or
fiduciary, or a surviving joint owner. Contact Putnam Investor
Services for details.
WHEN WILL THE FUND PAY ME? The fund generally sends you payment
for your shares the business day after your request is received.
Under unusual circumstances, the fund may suspend redemptions, or
postpone payment for more than seven days as permitted by federal
securities laws.
REDEMPTION BY THE FUND. If you own fewer shares than the minimum
set by the Trustees (presently 20 shares), the fund may redeem
your shares without your permission and send you the proceeds.
The fund may also redeem shares if you own more than a maximum
amount set by the Trustees. There is presently no maximum, but
the Trustees could set a maximum that would apply to both present
and future shareholders.
How do I exchange fund shares?
If you want to switch your investment from one Putnam fund to
another, you can exchange your fund shares for shares of the same
class of another Putnam fund at NAV. Not all Putnam funds offer
all classes of shares or are open to new investors. If you
exchange shares subject to a deferred sales charge, the
transaction will not be subject to the deferred sales charge.
When you redeem the shares acquired through the exchange, the
redemption may be subject to the deferred sales charge, depending
upon when you originally purchased the shares. The deferred sales
charge will be computed using the schedule of any fund into or
from which you have exchanged your shares that would result in
your paying the highest deferred sales charge applicable to your
class of shares. For purposes of computing the deferred sales
charge, the length of time you have owned your shares will be
measured from the date of original purchase and will not be
affected by any exchange.
To exchange your shares, complete an Exchange Authorization Form
and send it to Putnam Investor Services. The form is available
from Putnam Investor Services. A Telephone Exchange Privilege is
currently available for amounts up to $500,000. The Telephone
Exchange Privilege is not available if the fund issued
certificates for your shares. Ask your financial advisor or
Putnam Investor Services for prospectuses of other Putnam funds.
Some Putnam funds are not available in all states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
otherwise to promote the best interests of the fund, the fund
reserves the right to revise or terminate the exchange privilege,
limit the amount or number of exchanges or reject any exchange.
The fund into which you would like to exchange may also reject
your exchange. These actions may apply to all shareholders or
only to those shareholders whose exchanges Putnam Management
determines are likely to have a negative effect on the fund or
other Putnam funds. Consult Putnam Investor Services before
requesting an exchange.
Fund distributions and taxes
The fund distributes any net investment income and any net
realized capital gains at least once a year. You may choose to:
reinvest all distributions in additional shares;
receive any distributions from net investment income in cash
while reinvesting capital gains distributions in additional
shares; or
receive all distributions in cash.
If you do not select an option when you open your account, all
distributions will be reinvested. If you do not cash a
distribution check within a specified period or notify Putnam
Investor Services to issue a new check, the distribution will be
reinvested in the fund. You will not receive any interest on
uncashed distributions or redemption checks. Similarly, if any
correspondence sent by the fund or Putnam Investor Services is
returned as "undeliverable," fund distributions will
automatically be reinvested in the fund or in another Putnam
fund.
For federal income tax purposes, distributions of investment
income are taxable as ordinary income. Taxes on distributions of
capital gains are determined by how long the fund owned the
investments that generated them, rather than how long you have
owned your shares. Distributions are taxable to you even if they
are paid from income or gains earned by the fund before your
investment (and thus were included in the price you paid).
Distributions of gains from investments that the fund owned for
more than one year will be taxable as capital gains.
Distributions of gains from investments that the fund owned for
one year or less will be taxable as ordinary income.
Distributions are taxable whether you received them in cash or
reinvested them in additional shares.
Any gain resulting from the sale or exchange of your shares will
generally also be subject to tax. You should consult your tax
advisor for more information on your own tax situation, including
possible foreign, state and local taxes.
Financial highlights
The financial highlights table is intended to help you understand
the fund's recent financial performance. Certain information
reflects financial results for a single fund share. The total
returns represent the rate that an investor would have earned or
lost on an investment in the fund, assuming reinvestment of all
dividends and distributions. This information has been derived
from the fund's financial statements, which have been audited
by PricewaterhouseCoopers LLP. Its report and the fund's
financial statements are included in the fund's annual report to
shareholders, which is available upon request.
FINANCIAL HIGHLIGHTS
CLASS A
(For a share outstanding throughout the period)
YEAR ENDED AUGUST 31
1998 1997 1996 1995 1994
NET ASSET VALUE,
BEGINNING OF PERIOD $55.82 $43.67 $36.21 $29.77 $24.40
INVESTMENT OPERATIONS
Net investment income (loss) (.01)c .13c .19 .23 .30
Net realized and unrealized
gain on investments 4.13 13.71 8.46 6.99 5.36
TOTAL FROM INVESTMENT OPERATIONS 4.12 13.84 8.65 7.22 5.66
LESS DISTRIBUTIONS:
From net investment income (.02) (.09) (.27) (.26) (.24)
From net realized gain on investments (6.42) (1.60) (.92) (.52) (.05)
TOTAL DISTRIBUTIONS (6.44) (1.69) (1.19) (.78) (.29)
Net asset value,
end of period $53.50 $55.82 $43.67 $36.21 $29.77
RATIOS AND SUPPLEMENTAL DATA
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) a 7.48 32.46 24.12 24.81 23.38
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $2,236,469 $1,681,187 $1,166,794 $929,484 $789,598
Ratio of expenses to average
net assets (%) b 1.00 1.08 1.10 1.12 1.12
Ratio of net income (loss) to average
net assets (%) (.02) .26 .43 .70 .96
Portfolio turnover rate (%) 40.4544.5410.55 19.51 23.18
a Total return assumes dividend reinvestment and does not
reflect the effect of sales charges.
b The ratio of expenses to average net assets for periods
ended on or after August 31, 1996 includes amounts paid through
brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts.
c Per share net investment income has been determined on the
basis of the weighted average number of shares outstanding during
the period.
F INANCIAL HIGHLIGHTS
C LASS B
( For a share outstanding throughout the period)
Y EAR ENDED AUGUST 31
1 998 1997 1996 1995 1994
N ET ASSET VALUE,
B EGINNING OF PERIOD $54.54$42.94$35.72 $29.47 $24.28
I NVESTMENT OPERATIONS
N et investment income (loss) (.44)c (.24) c (.13)c .11 .10
Net realized and unrealized
gain on investments 4.06 13.44 8.35 6.78 5.33
TOTAL FROM INVESTMENT OPERATIONS 3.6213.20 8.22 6.89 5.43
LESS DISTRIBUTIONS:
From net investment income -- -- (.08) (.12) (.19)
From net realized gain on investments (6.42) (1.60) (.92) (.52) (.05)
TOTAL DISTRIBUTIONS(6.42) (1.60)(1.00)(.64) (.24)
Net asset value,
end of period $51.74 $54.54 $42.94 $35.72 $29.47
RATIOS AND SUPPLEMENTAL DATA
Total investment return at
net asset value (%) a 6.67 31.46 23.19 23.83 22.49
NET ASSETS, END OF PERIOD
(in thousands) $1,292,418 $567,928$273,243 $113,329 $55,424
Ratio of expenses to average
net assets (%)b 1.75 1.83 1.85 1.88 1.87
Ratio of net investment income
(loss) to average net assets (%) (.76) (.49) (.31) (.05) .24
Portfolio turnover rate (%)40.45 44.54 10.55 19.51 23.18
a Total return assumes dividend reinvestment and does not
reflect the effect of sales charges.
b The ratio of expenses to average net assets for periods
ended on or after August 31, 1996 includes amounts paid through
brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts.
c Per share net investment income has been determined on the
basis of the weighted average number of shares outstanding during
the period.
F INANCIAL HIGHLIGHTS
C LASS M For the period
(For a share outstanding throughout the period)
July 3, 1995+
Year ended August 31 to August 31
1998 1997 1996 1995
NET ASSET VALUE,
BEGINNING OF PERIOD $55.47 $43.54 $36.17 $33.96
INVESTMENT OPERATIONS
Net investment income (loss)(.31)c (.12)c (.02)c (.02)
Net realized and unrealized
gain on investments 4.13 13.65 8.46 2.23
TOTAL FROM INVESTMENT OPERATIONS 3.82 13.53 8.44 2.21
LESS DISTRIBUTIONS:
From net investment income -- -- (.15) --
From net realized gain on investments (6.42) (1.60) (.92) --
TOTAL DISTRIBUTIONS (6.42) (1.60) (1.07) --
Net asset value,
end of period $52.87 $55.47 $43.54 $36.17
RATIOS AND SUPPLEMENTAL DATA
Total investment return at
net asset value (%)a 6.94 31.79 23.51 6.51*
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $56,662 $23,675 $9,732 $321
Ratio of expenses to average
net assets (%)b 1.50 1.58 1.61 .30*
Ratio of net investment income
(loss) to average net assets (%) (.51)(.24) (.05) (.02)*
Portfolio turnover rate (%) 40.4544.5410.55 19.51
+ Commencement of operations.
* Not annualized.
a Total investment return assumes dividend reinvestment
and does not reflect the effect of sales charges.
b The ratio of expenses to average net assets for periods
ended on or after August 31, 1996 includes amounts paid through
brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts.
c Per share net investment income has been determined on the
basis of the weighted average number of shares outstanding during
the period.
MAKE THE MOST OF YOUR PUTNAM PRIVILEGES
The following services are available to you as a Putnam
mutual fund shareholder .
SYSTEMATIC INVESTMENT PLAN
Invest as much as you wish ($25 or more) on any business day of the
month except for the 29th, 30th, or 31st. The amount you choose will
be automatically transferred each month from your checking or savings
account.
SYSTEMATIC WITHDRAWAL Make regular withdrawals of $50 or more
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SYSTEMATIC EXCHANGE Transfer assets automatically from
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is no additional charge for this service.
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in the same class of shares without charge. The exchange privilege
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change. A signature guarantee is required for exchanges of more than
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Investors may not maintain, within the same fund, simultaneous plans
for systematic investment or exchange (into the fund) and
systematic withdrawal or exchange (out of the fund). These
privileges are subject to change or termination.
For more information about any of these services and privileges, call
your investment advisor or a Putnam customer service representative
toll free at 1 - 800 - 225 - 1581 .
PUTNAM FAMILY OF FUNDSA
PUTNAM GROWTH FUNDS
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Minnesota, New Jersey, New York, Ohio and Pennsylvania
LIFE STAGES M FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that
spread your money across a variety of stocks, bonds, and money
market investments seeking to help maximize your return and
reduce your risk.
THE THREE PORTFOLIOS:
Balanced Portfolio
Conservative Portfolio
Growth Portfolio
PUTNAM MONEY MARKET FUNDSd
Putnam Money Market Fund
Putnam California Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Tax Exempt Money Market Fund
a As of 3/31/99 .
b New investments restricted; see your financial advisor for
details.
c Not available in all states.
d Investments in money market funds are not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although these funds seek to
preserve an investment's net asset value at $1.00 per share,
it is possible to lose money by investing in them.
Please call your financial advisor or Putnam Mutual Funds to
obtain a prospectus for any Putnam fund. It contains more
complete information, including charges and expenses. Read it
carefully before you invest or send money.
FOR MORE INFORMATION
ABOUT PUTNAM HEALTH SCIENCES TRUST
The fund's statement of additional information (SAI) and annual
and semi-annual reports to shareholders include additional
information about the fund. The SAI, and the auditor's report and
financial statements included in the fund's most recent annual
report to its shareholders, are incorporated by reference into
this prospectus, which means they are part of this prospectus for
legal purposes. The fund's annual report discusses the market
conditions and investment strategies that significantly affected
the fund's performance during its last fiscal year. You may get
free copies of these materials, request other information about
the fund and other Putnam funds, or make shareholder inquiries,
by contacting your financial advisor or Putnam's Web site, or by
calling Putnam toll-free at 1-800-225-1581.
You may review and copy information about the fund, including its
SAI, at the Securities and Exchange Commission's public reference
room in Washington, D.C. You may call the Commission at 1-800-SEC-
0330 for information about the operation of the public reference
room. You may also access reports and other information about the
fund on the Commission's Internet site at http://www.sec.gov. You
may get copies of this information, with payment of a duplication
fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the fund's
file number
PUTNAM INVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
1-800-225-1581
Address correspondence to
Putnam Investor Services
P.O. Box 989
Boston MA 02103
www.putnaminv.com
File No. 811-3386 NP008 52593 5/99
