Putnam
Health
Sciences
Trust
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
2-29-00
[SCALE LOGO OMITTED]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The markets continued to provide their share of challenges and
opportunities as your fund closed its books on the first half of fiscal
2000. In the following report, the fund's managers discuss performance for
the period and prospects for the months ahead.
This is the last letter to you and the other shareholders of Putnam Health
Sciences Trust that I will be signing. After more than 30 years as
Chairman of the Trustees and President of the Putnam Funds, the time has
come for me to step aside. In June, John Hill will become Chairman. John
is currently an independent Trustee and has served on the board for the
past 14 years. In addition, my son, George Putnam, III, will take on the
role of President. I am confident that the leadership of the funds will be
in exceptionally strong hands.
I will become Chairman Emeritus, remain a Putnam shareholder, and stay in
close touch with the funds. It has been my privilege to serve you.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
April 19, 2000
Report from the Fund Managers
Richard B. England
David G. Carlson
Margery C. Parker
Propelled by the phenomenal performance of biotechnology stocks, Putnam
Health Sciences Trust delivered solid returns for the six months ended
February 29, 2000. In a period dominated by "new economy" stocks such as
Internet services, software, and telecommunications, the health-care
sector offered biotechnology, another new economy industry in which stocks
have soared. While your fund capitalized on the extraordinary growth of
biotech stocks, it also remained committed to its strategy of diversifying
across a number of health-care industries. As always, this allowed the
fund to benefit from fast-growing stocks while offering lower risk than
health-care funds whose returns are dependent on just one or two
industries.
Total return for 6 months ended 2/29/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------
21.98% 14.97% 21.52% 16.52% 21.50% 20.50% 21.65% 17.39%
- --------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 5.
The rally of biotech stocks began in mid 1999 and grew steadily as the
year progressed. During the semiannual period, investors were attracted to
biotech companies of all sizes and at all stages of growth. In fact, the
Nasdaq Biotech Index, which is made up of more than 200 U.S. and European
companies, rose nearly 100% in the 1999 calendar year. There were a number
of reasons for the rally. First, rigorous research on the part of these
companies has led to technologically advanced products that offer vast
improvements in the way illnesses and diseases are treated. Second, many
biotech companies have matured and have begun to turn profitable, which
gives them more credibility with investors. In addition, many more biotech
companies have developed multiple products rather than being dependent on
just one or two. And finally, biotech companies are expected to benefit
substantially from genomics -- the study of the structure and function of
human genes that is causing a revolution in the health-care industry.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Pharmaceuticals 43.6%
Biotechnology 32.2%
Medical technology 13.3%
Medical services 7.1%
Other 1.0%
Footnote reads:
*Based on net assets as of 2/29/00. Holdings will vary over time.
* GENOMICS -- REVOLUTION IN HEALTH CARE
For many people, the study of genes brings images of cloned sheep and
complicated scientific formulas. Recent advances in the field, however,
should bring dramatic improvements to the way every person is diagnosed
and treated for illnesses. Genomics refers to the mapping of the human
genome -- the entire sequence of 3 billion chemical pairs that make up
human DNA. Scientists around the world, including those working on a
publicly funded project in the United States, are coming closer to mapping
this DNA "blueprint." This information will eventually allow us to
determine each person's predisposition to illnesses. Biotech and
pharmaceutical companies, in turn, will have the information needed to
develop highly effective methods for treating, curing, and even preventing
illnesses. Today drugs prescribed by doctors typically work only 40% of
the time and can cause unpleasant side effects. Genomics offers the
possibility that extremely effective drugs, without side effects, can be
developed based on what we will know about every person's genetic makeup.
"Companies involved in all aspects of genomics, the study of the structure and
function of human genes, have soared to especially lofty heights, creating an
excitement bubbling throughout the entire industry about the future of drug
discovery."
- -- CNNfn.com, February 22, 2000
The excitement about these possibilities began to penetrate the financial
markets during this semiannual period and benefited a number of stocks in
your fund's portfolio. One example is Celera Genomics Group, which
announced that it expects to complete the sequencing of the human genome
by the end of 2000 -- ahead of the publicly funded Human Genome Project.
Also in the fund's portfolio is the stock of PE Biosystems Group, which
manufactures instruments used to accomplish the gene sequencing. Another
fund holding that performed exceptionally well was Millennium
Pharmaceuticals, which develops treatments for conditions such as
diabetes, asthma, and cancer based on their genetic causes. While these
holdings and others discussed in this report were viewed favorably at the
end of the fiscal period, all are subject to review and adjustment in
accordance with the fund's investment strategy and may vary in the future.
* TRADITIONAL BIOTECHS STRONG; DRUG STOCKS WEAK
Outside of the genomics excitement, a number of more traditional biotech
companies also delivered strong returns. Fund holding Genentech, Inc. is
one of the world's largest biotech firms with a large pipeline of
products, including treatments for breast cancer, cystic fibrosis, and
post-heart attack patients. Another strong performing fund holding was
Immunex Corporation. One notable Immunex product is Enbrel, a treatment
for rheumatoid arthritis that has also shown potential promise as a
treatment for heart failure.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Warner-Lambert Co.
Pharmaceuticals
Bristol-Myers Squibb Co.
Pharmaceuticals
Immunex Corp.
Biotechnology
Pharmacia & Upjohn, Inc.
Pharmaceuticals
Johnson & Johnson
Pharmaceuticals
PE Corp.-PE Biosystems Group
Biotechnology
Genentech, Inc.
Biotechnology
Amgen, Inc.
Biotechnology
Merck & Co., Inc.
Pharmaceuticals
Schering-Plough Corp.
Pharmaceuticals
Footnote reads:
These holdings represent 34.3% of the fund's net assets as of 2/29/00.
Portfolio holdings will vary over time.
Pharmaceutical stocks, which had weakened considerably in fiscal 1999,
continued to perform sluggishly during the semiannual period. The factors
that hurt drug stocks over the past year have remained in place, including
a strong U.S. economy that has sent investors to industries that offer
greater growth potential. In addition, uncertainty remains about Medicare
reform and the possibility of price controls on the drug industry. These
concerns may remain in the spotlight for some time, as Medicare reform is
expected to be an election issue in 2000. Throughout the period, the
fund's weighting of pharmaceutical stocks remained lower than it had been
in quite some time. At the close of the period, drug stocks represented
43.6% of the fund's net assets, while biotech stocks represented 32.2%,
their highest weighting in many years.
Health-care services stocks, including those of health maintenance
organizations (HMOs), nursing homes, and hospitals, continued to struggle
in a difficult regulatory and legal environment. Most companies remained
under pressure from concerns about Medicare spending cuts and rising
health-care costs. During the period, hospital stocks improved somewhat
but retreated toward the period's end. We believe many hospital stocks,
such as fund holding Columbia/HCA Healthcare Corp., have strong long-term
potential and should rebound once market psychology is back in their
favor. Columbia is a hospital holding company whose affiliates own and
operate more than 200 hospitals and surgery centers in the United States,
England, and Switzerland.
* KEEPING AN EYE ON VALUATIONS AND ECONOMY
As we look ahead to the second half of fiscal 2000, we are carefully
monitoring both the soaring biotechnology industry and the weakened
pharmaceutical sector. Drug stocks, after a disappointing 1999, are at
historically attractive price levels and could be poised for a rebound,
especially if the U.S. economic growth begins to show signs of slowing.
Many biotech stocks, on the other hand, had historically high valuations
at the close of the period and we are maintaining a cautious stance for
this portion of the fund's portfolio. Although prices of these stocks may
be stretched, the long-term outlook for the biotech industry remains
extremely attractive as more companies become profitable and the genomics
revolution, now in its infancy, begins to unfold. We are keeping a
strategic eye on market conditions and remain committed to finding the
best opportunities for growth across the full spectrum of health-related
industries.
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 2/29/00, there is no guarantee the fund will
continue to hold these securities in the future. Funds investing in a
single sector may be subject to more volatility than funds investing in a
diverse group of sectors.
Performance summary
This section provides information about your fund's performance, which should
always be considered in light of its investment strategy. Putnam Health
Sciences Trust is designed for investors seeking capital appreciation through
investments in the health sciences industry.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 2/29/00
Class A Class B Class C Class M
(inception dates) (5/28/82) (3/1/93) (7/26/99) (7/3/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 21.98% 14.97% 21.52% 16.52% 21.50% 20.50% 21.65% 17.39%
- -----------------------------------------------------------------------------------------
1 year 17.75 10.98 16.86 11.86 16.88 15.88 17.14 13.05
- -----------------------------------------------------------------------------------------
5 years 195.80 178.78 184.82 182.82 184.84 184.84 188.50 178.45
Annual average 24.22 22.76 23.29 23.11 23.29 23.29 23.60 22.73
- -----------------------------------------------------------------------------------------
10 years 507.75 472.88 462.63 462.63 463.59 463.59 477.57 457.25
Annual average 19.78 19.07 18.86 18.86 18.88 18.88 19.17 18.74
- -----------------------------------------------------------------------------------------
Annual average
(life of fund) 17.80 17.41 16.78 16.78 16.92 16.92 17.08 16.85
- -----------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/29/00
S&P 500 Consumer
Index price index
- ----------------------------------------------------------------------
6 months 4.11% 1.67%
- ----------------------------------------------------------------------
1 year 11.73 3.16
- ----------------------------------------------------------------------
5 years 206.93 12.58
Annual average 25.13 2.40
- ----------------------------------------------------------------------
10 years 425.39 32.81
Annual average 18.04 2.88
- ----------------------------------------------------------------------
Annual average
(life of fund) 18.78 3.28
- ----------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50%, respectively. Class B share returns for the 1-, 5-, and 10-year
(where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class B and class M shares for periods prior to their inception
are derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares the
higher operating expenses applicable to such shares. For class C shares,
returns for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 2/29/00
Class A Class B Class C Class M
- ------------------------------------------------------------------------------
Distributions (number)* -- -- -- --
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- ------------------------------------------------------------------------------
8/31/99 $59.51 $63.14 $56.96 $59.48 $58.47 $60.59
- ------------------------------------------------------------------------------
2/29/00 72.59 77.02 69.22 72.27 71.13 73.71
- ------------------------------------------------------------------------------
*The fund did not make any distributions during the period.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (5/28/82) (3/1/93) (7/26/99) (7/3/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 25.96% 18.73% 25.50% 20.50% 25.62% 24.62% 25.66% 21.26%
- -----------------------------------------------------------------------------------------
1 year 15.94 9.27 15.07 10.07 15.21 14.21 15.37 11.33
- -----------------------------------------------------------------------------------------
5 years 178.60 162.58 168.25 166.25 168.60 168.60 171.74 162.24
Annual average 22.74 21.30 21.82 21.63 21.85 21.85 22.13 21.27
- -----------------------------------------------------------------------------------------
10 years 466.40 433.93 424.33 424.33 425.74 425.74 438.48 419.53
Annual average 18.94 18.24 18.02 18.02 18.05 18.05 18.34 17.91
- -----------------------------------------------------------------------------------------
Annual average
(life of fund) 17.53 17.13 16.50 16.50 16.65 16.65 16.81 16.57
- -----------------------------------------------------------------------------------------
</TABLE>
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost. See first
page of performance section for performance calculation method.
Terms and definitions
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.
Class A shares shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no 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 5.75% maximum 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 or C shares and assumes redemption at the end of
the period. Your fund's class B 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. The CDSC for class C shares is 1% for one year after
purchase.
Comparative benchmarks
Standard & Poor's 500 Index is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance. The
index assumes reinvestment of all distributions and interest payments and
does not take into account brokerage fees or taxes. Securities in the fund
do not match those in the index and performance of the fund will differ.
It is not possible to invest directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
<TABLE>
<CAPTION>
The fund's portfolio
February 29, 2000 (Unaudited)
COMMON STOCKS (97.2%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Biotechnology (32.2%)
- --------------------------------------------------------------------------------------------------------------------------
68,300 Abgenix, Inc. (NON) $ 22,001,138
78,200 Affymetrix, Inc. (NON) 22,648,675
237,400 Alexion Pharmaceuticals, Inc. (NON) 20,238,350
509,600 Alkermes, Inc. (NON) 97,779,500
2,570,300 Amgen Inc. (NON) 175,262,331
177,900 Avigen, Inc. (NON) 13,164,600
253,300 Celera Genomics (NON) 61,805,200
602,400 Cell Genesys, Inc. (NON) 23,418,300
251,500 Cephalon, Inc. (NON) 16,716,891
441,600 Connetics Corp. (NON) 6,099,600
511,700 COR Therapeutics, Inc. (NON) 45,861,113
109,133 Diversa Corp. (NON) 14,569,256
144,300 Gene Logic, Inc. (NON) 17,225,813
931,500 Genentech, Inc. (NON) 179,663,063
484,000 Gilead Sciences, Inc. (NON) 37,026,000
1,245,600 Guilford Pharmaceuticals, Inc. (NON) (AFF) 41,260,500
230,900 IDEC Pharmaceuticals Corp. (NON) 32,528,038
1,735,800 IDEXX Laboratories, Inc. (NON) 51,314,588
1,136,200 Immunex Corp. (NON) 224,328,488
767,300 Inhale Therapeutic Systems (NON) 77,689,125
369,000 Invitrogen Corp. (NON) 31,180,500
121,200 Maxim Pharmaceuticals, Inc. (NON) 9,120,300
632,700 MedImmune, Inc. (NON) 125,590,950
318,300 Millennium Pharmaceuticals, Inc. (NON) 82,797,788
1,721,600 PE Corp.-PE Biosystems Group 181,628,800
143,600 Progenics Pharmaceuticals, Inc. (NON) 13,354,800
142,100 QIAGEN N.V. (Netherlands) (NON) 24,796,450
629,300 QLT PhotoTherapeutics, Inc. (Canada) (NON) 44,916,288
1,366,400 Sepracor, Inc. (NON) 138,518,800
691,200 Transkaryotic Therapies, Inc. (Malaysia) (NON) 34,646,400
764,560 Trimeris, Inc. (NON) (AFF) 47,402,720
--------------
1,914,554,365
Medical Services (7.1%)
- --------------------------------------------------------------------------------------------------------------------------
571,700 Cardinal Health, Inc. 23,582,625
703,500 CIGNA Corp. 51,927,094
4,354,600 Columbia/HCA Healthcare Corp. 84,098,213
3,091,000 Health Management Assoc., Inc. (NON) 33,228,250
328,000 Healtheon Corp. (NON) 18,142,500
1,469,200 IMS Health, Inc. 29,567,650
1,437,300 Lincare Holdings, Inc. (NON) 33,686,719
1,441,000 Medquist, Inc. (NON) 37,105,750
1,137,000 Province Healthcare Co. (NON) (AFF) 22,882,125
246,900 Renal Care Group, Inc. (NON) 4,336,181
894,200 Trigon Healthcare, Inc. (NON) 28,558,513
499,600 United Healthcare Corp. 25,542,050
449,800 Wellpoint Health Networks, Inc. (NON) 30,361,500
--------------
423,019,170
Medical Technology (13.3%)
- --------------------------------------------------------------------------------------------------------------------------
93,000 Agilent Technologies, Inc. (NON) 9,642,938
345,000 ArthroCare Corp. 42,607,500
1,128,800 Bausch & Lomb, Inc. 59,544,200
1,736,950 Baxter International, Inc. 94,663,775
426,800 Cerus Corp. (NON) 20,593,100
455,000 Cyberonics, Inc. (NON) 11,602,500
744,700 Mallinckrodt, Inc. 18,338,238
2,542,066 Medtronic, Inc. 123,131,322
807,600 Mentor Corp. 22,410,900
562,100 Minimed, Inc. (NON) 56,139,738
529,700 Miravant Medical Technologies (NON) 14,765,388
410,400 Molecular Devices Corp. (NON) 33,652,800
222,800 ResMed Inc. (NON) 16,626,450
463,300 SonoSight, Inc. (NON) (AFF) 15,346,813
1,986,300 Sybron International Corp. (NON) 55,616,400
268,700 Techne Corp. (NON) 23,049,422
673,900 Ventana Medical Systems, Inc. (NON) 37,991,113
1,091,900 Waters Corp. (NON) 107,074,444
978,270 Wesley Jessen VisionCare, Inc. (NON) (AFF) 28,125,263
--------------
790,922,304
Other (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,418,600 CVS Corp. 49,651,000
331,600 On Assignment, Inc. (NON) 12,393,550
--------------
62,044,550
Pharmaceuticals (43.6%)
- --------------------------------------------------------------------------------------------------------------------------
2,094,900 Allergan, Inc. 105,399,656
1,212,283 Alpharma, Inc., Class A (AFF) 41,975,299
1,235,200 American Home Products Corp. 53,731,200
26,144 Ares-Serono Group, Class B (Switzerland) 85,041,621
628,203 Aventis S.A. (France) 32,604,395
1,209,500 Biovail Corp. International (Canada) (NON) 79,827,000
4,678,700 Bristol-Myers Squibb Co. (SEG) 265,808,644
202,000 ChiRex Inc. (NON) 5,024,750
206,800 DUSA Pharmaceuticals, Inc. (NON) 7,406,025
1,805,240 Elan Corp. Plc ADR (Ireland) (NON) 74,240,495
613,400 Forest Laboratories, Inc. (NON) 41,902,888
1,487,000 Fujisawa Pharmaceutical Co. (Japan) 48,787,327
888,300 IVAX Corp. (NON) 20,208,825
2,677,810 Johnson & Johnson 192,132,868
1,602,900 Lilly (Eli) & Co. 95,272,369
910,700 Medicis Pharmaceutical Corp., Class A (NON) 45,933,431
2,471,500 Merck & Co., Inc. 152,151,719
3,026,900 Pfizer, Inc. 97,239,163
4,145,000 Pharmacia & Upjohn, Inc. 197,405,625
1,247,500 Rexall Sundown, Inc. (NON) 18,712,500
8,103 Roche Holdings AG (Switzerland) 87,760,942
1,212,200 Sanofi-Synthelabo SA (France) 46,851,936
4,022,000 Schering-Plough Corp. 140,267,250
1,140,883 Shire Pharmaceuticals Group Plc ADR
(United Kingdom) (NON) 54,762,384
1,486,900 Smithkline Beecham Plc ADR (United Kingdom) 83,545,194
2,016,000 Takeda Chemical Industries (Japan) 113,598,104
485,300 United Therapeutics Corp. (NON) 47,316,750
3,869,500 Warner-Lambert Co. 331,084,093
642,000 Yamanouchi Pharmaceutical Co., Ltd. (Japan) 30,632,555
--------------
2,596,625,008
--------------
Total Common Stocks (cost $3,699,021,091) $5,787,165,397
SHORT-TERM INVESTMENTS (1.8%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 40,000,000 Corporate Asset Funding Co. effective yield of 5.80%,
March 17, 2000 $ 39,896,889
39,467,000 Old Line Funding Corp. effective yield of 5.88%,
March 1, 2000 39,460,554
27,407,000 Interest in $1,000,000,000 joint tri-party repurchase
agreement dated February 29, 2000 with Goldman
Sachs & Co. due March 1, 2000 with respect to
various U.S. Treasury obligations -- maturity value
of $27,411,393 for an effective yield of 5.77% 27,407,000
--------------
Total Short-Term Investments (cost $106,764,443) $ 106,764,443
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,805,785,534) (b) $5,893,929,840
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $5,952,352,517.
(b) The aggregate identified cost on a tax basis is $3,812,407,400, resulting in gross unrealized appreciation and
depreciation of $2,388,374,159 and $306,851,719, respectively, or net unrealized appreciation of $2,081,522,440.
(NON) Non-income-producing security.
(AFF) Affiliated Companies (Note 5).
(SEG) A portion of this security was pledged and segregated with the custodian to cover margin requirements for futures
contracts at February 29, 2000.
ADR after the name of a foreign holding stands for American Depositary Receipts representing ownership of foreign
securities on deposit with a domestic custodian bank.
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at February 29, 2000 (Unaudited)
Aggregate Face Expiration Unrealized
Total Value Value Date Appreciation
- -------------------------------------------------------------------------------
S&P 500 Index (Long) $56,595,000 $55,896,041 Mar-00 $698,959
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 29, 2000 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $3,805,785,534) (Note 1) $5,893,929,840
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 3,090,716
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 17,100,772
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 103,200,151
- -----------------------------------------------------------------------------------------------
Receivable for variation margin 1,182,420
- -----------------------------------------------------------------------------------------------
Total assets 6,018,503,899
Liabilities
- -----------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 247,219
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 43,582,886
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 11,062,474
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 6,997,356
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 554,899
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 109,966
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,517
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 3,262,617
- -----------------------------------------------------------------------------------------------
Other accrued expenses 328,448
- -----------------------------------------------------------------------------------------------
Total liabilities 66,151,382
- -----------------------------------------------------------------------------------------------
Net assets $5,952,352,517
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $3,741,191,718
- -----------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (11,355,081)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments
and foreign currency transactions (Note 1) 133,758,406
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 2,088,757,474
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $5,952,352,517
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($3,376,945,177 divided by 46,520,602 shares) $72.59
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $72.59)* $77.02
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($2,438,996,786 divided by 35,236,891 shares)** $69.22
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($33,158,010 divided by 458,821 shares)** $72.27
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($103,252,544 divided by 1,451,576 shares) $71.13
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $71.13)* $73.71
- -----------------------------------------------------------------------------------------------
* 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, 2000 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $297,837) (including dividend
income of $88,977 from investments in affiliated issuers) (Note 5) $ 17,683,138
- -----------------------------------------------------------------------------------------------
Interest 3,484,935
- -----------------------------------------------------------------------------------------------
Total investment income 21,168,073
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 13,649,690
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,169,915
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 54,502
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 16,976
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 3,619,946
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 10,615,464
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 71,512
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 337,837
- -----------------------------------------------------------------------------------------------
Reports to shareholders 79,771
- -----------------------------------------------------------------------------------------------
Auditing 34,016
- -----------------------------------------------------------------------------------------------
Legal 15,976
- -----------------------------------------------------------------------------------------------
Postage 337,834
- -----------------------------------------------------------------------------------------------
Other 820,530
- -----------------------------------------------------------------------------------------------
Total expenses 32,823,969
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (300,815)
- -----------------------------------------------------------------------------------------------
Net expenses 32,523,154
- -----------------------------------------------------------------------------------------------
Net investment loss (11,355,081)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1, 3 and 5)
(including realized gain of $24,925,990 on sales of
investments in affiliated issuers) 187,913,728
- -----------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 4,613,274
- -----------------------------------------------------------------------------------------------
Net realized gains on foreign currency transactions (Note 1) 11,234
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (85,183)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the period 878,960,450
- -----------------------------------------------------------------------------------------------
Net gain on investments 1,071,413,503
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,060,058,422
- -----------------------------------------------------------------------------------------------
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
2000* 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (11,355,081) $ (20,427,022)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
and foreign currency transactions 192,538,236 (55,780,200)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 878,875,267 780,662,816
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,060,058,422 704,455,594
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A -- (209,438,189)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (143,039,807)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (6,108,803)
- ---------------------------------------------------------------------------------------------------------------
From return of capital
Class A -- (1,256,551)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (858,186)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (36,651)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital
share transactions (Note 4) (230,064,401) 1,193,092,454
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 829,994,021 1,536,809,861
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 5,122,358,496 3,585,548,635
- ---------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of $11,355,081 and $--, respectively) $5,952,352,517 $5,122,358,496
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ----------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share February 29
operating performance (Unaudited) Year ended August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $59.51 $53.50 $55.82 $43.67 $36.21 $29.77
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.04)(c) (.07)(c) (.01)(c) .13(c) .19 .23
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 13.12 11.09 4.13 13.71 8.46 6.99
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 13.08 11.02 4.12 13.84 8.65 7.22
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- (.02) (.09) (.27) (.26)
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (4.98) (6.42) (1.60) (.92) (.52)
- ----------------------------------------------------------------------------------------------------------------------------------
From return of
capital -- (.03) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (5.01) (6.44) (1.69) (1.19) (.78)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $72.59 $59.51 $53.50 $55.82 $43.67 $36.21
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 21.98* 20.50 7.48 32.46 24.12 24.81
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,376,945 $2,883,732 $2,236,469 $1,681,187 $1,166,794 $929,484
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .48* .95 1.00 1.08 1.10 1.12
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.06)* (.11) (.02) .26 .43 .70
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 35.43* 79.12 40.45 44.54 10.55 19.51
- ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 the period ended August 31, 1996 and thereafter, includes amounts paid through
expense offset arrangements and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2)
(c) Per share net investment income (loss) has been determined on the basis of weighted average number of shares outstanding during
the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share February 29
operating performance (Unaudited) Year ended August 31
- -----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $56.96 $51.74 $54.54 $42.94 $35.72 $29.47
- -----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.25)(c) (.50)(c) (.44)(c) (.24)(c) (.13)(c) .11
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 12.51 10.73 4.06 13.44 8.35 6.78
- -----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 12.26 10.23 3.62 13.20 8.22 6.89
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- -- (.08) (.12)
- -----------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (4.98) (6.42) (1.60) (.92) (.52)
- -----------------------------------------------------------------------------------------------------------------------------------
From return of
capital -- (.03) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (5.01) (6.42) (1.60) (1.00) (.64)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $69.22 $56.96 $51.74 $54.54 $42.94 $35.72
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 21.52* 19.61 6.67 31.46 23.19 23.83
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,438,997 $2,141,640 $1,292,418 $567,928 $273,243 $113,329
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .85* 1.70 1.75 1.83 1.85 1.88
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.44)* (.86) (.76) (.49) (.31) (.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 35.43* 79.12 40.45 44.54 10.55 19.51
- -----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 the period ended August 31, 1996 and thereafter, includes amounts paid through
expense offset arrangements and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2)
(c) Per share net investment income (loss) has been determined on the basis of weighted average number of shares outstanding during
the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- ----------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share Feb. 29 July 26, 1999+
operating performance (Unaudited) to August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $59.48 $59.32
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (c) (.26) (.04)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 13.05 .20
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 12.79 .16
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- --
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- --
- ----------------------------------------------------------------------------------------------------------------------------------
From return of
capital -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $72.27 $59.48
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 21.50* .27*
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $33,158 $3,770
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .85* .17*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.43)* (.09)*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 35.43* 79.12
- ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 the period ended August 31, 1996 and thereafter, includes amounts paid through
expense offset arrangements and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2)
(c) Per share net investment income (loss) has been determined on the basis of weighted average number of shares outstanding during
the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ----------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 29 July 3, 1995+
operating performance (Unaudited) Year ended August 31 to August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $58.47 $52.87 $55.47 $43.54 $36.17 $33.96
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.19)(c) (.37)(c) (.31)(c) (.12)(c) (.02)(c) (.02)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 12.85 10.98 4.13 13.65 8.46 2.23
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 12.66 10.61 3.82 13.53 8.44 2.21
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- -- (.15) --
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (4.98) (6.42) (1.60) (.92) --
- ----------------------------------------------------------------------------------------------------------------------------------
From return of
capital -- (.03) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (5.01) (6.42) (1.60) (1.07) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $71.13 $58.47 $52.87 $55.47 $43.54 $36.17
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 21.65* 19.93 6.94 31.79 23.51 6.51*
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $103,253 $93,216 $56,662 $23,675 $9,732 $321
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .73* 1.45 1.50 1.58 1.61 .30*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.31)* (.61) (.51) (.24) (.05) (.02)*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 35.43* 79.12 40.45 44.54 10.55 19.51
- ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 the period ended August 31, 1996 and thereafter, includes amounts paid through
expense offset arrangements and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2)
(c) Per share net investment income (loss) has been determined on the basis of weighted average number of shares outstanding during
the period.
</TABLE>
Notes to financial statements
February 29, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam Health Sciences Trust ("the fund") is registered under the
Investment Company Act of 1940, as amended, as a non-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, class C 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 C
shares are subject to the same fees and expenses as class B shares, except
that class C shares have a one-year 1.00% contingent deferred sales charge
and do not convert to class A shares. Class M shares are sold with a
maximum front end sales charge of 3.50% and pay an ongoing distribution
fee that is higher than class A shares but lower than class B and class C
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 that 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
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
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 sales price on its principal exchange, or if no sales are
reported -- as in the case of some securities traded over-the-counter --
the last reported bid price. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value. Other investments,
including restricted securities, are stated at fair value following
procedures approved 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 and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc. 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 the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. 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) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate. Investments in foreign securities involve
certain risks, including those related to economic instability,
unfavorable political developments, and currency fluctuations, not present
with domestic investments.
F) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on securities
it owns or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of
the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to
perform. When the contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices supplied
by dealers.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended February 29, 2000, the fund had no borrowings against the line of
credit.
H) 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, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains. At August 31, 1999, the fund had a capital loss carryover of
approximately $52,158,000 available to offset future net capital gain, if
any, which will expire on August 31, 2007.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
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.
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, 0.50% of the next $5 billion, 0.475% of the next $5
billion, 0.455% of the next $5 billion, 0.44% of the next $5 billion and
0.43% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
Under the subcustodian contract between the subcustodian bank and PFTC,
the subcustodian bank has a lien on the securities of the fund to the
extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At February 29, 2000, the payable to the
subcustodian bank represents the amount due for cash advance for the
settlement of a security purchased.
For the six months ended February 29, 2000, fund expenses were reduced by
$300,815 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 a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $3,755
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and meeting
fees for the three years preceding retirement. Pension expense for the
fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B, class C 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 up to 0.35%, 1.00%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares, respectively.
For the six months ended February 29, 2000, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $845,371 and $32,122
from the sale of class A and class M shares, respectively, and received
$3,708,687 and $1,889 in contingent deferred sales charges from
redemptions of class B and class C shares, respectively. A deferred sales
charge of up to 1% is assessed on certain redemptions of class A shares.
For the six months ended February 29, 2000, Putnam Mutual Funds Corp.,
acting as underwriter received $18,475 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended February 29, 2000, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $1,784,883,127 and $2,137,559,386, respectively.
There were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At February 29, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 5,726,323 $ 357,147,395
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
5,726,323 357,147,395
Shares
repurchased (7,660,150) (470,078,397)
- -----------------------------------------------------------------------------
Net decrease (1,933,827) $(112,931,002)
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 15,780,996 $955,941,380
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,939,701 176,969,983
- -----------------------------------------------------------------------------
18,720,697 1,132,911,363
Shares
repurchased (12,073,075) (718,353,158)
- -----------------------------------------------------------------------------
Net increase 6,647,622 $414,558,205
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,867,048 $ 289,752,545
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
4,867,048 289,752,545
Shares
repurchased (7,229,482) (423,394,339)
- -----------------------------------------------------------------------------
Net decrease (2,362,434) $(133,641,794)
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 19,563,008 $1,142,794,644
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,009,002 116,381,745
- -----------------------------------------------------------------------------
21,572,010 1,259,176,389
Shares
repurchased (8,950,494) (515,983,962)
- -----------------------------------------------------------------------------
Net increase 12,621,516 $ 743,192,427
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 411,917 $25,681,531
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
411,917 25,681,531
Shares
repurchased (16,487) (1,048,726)
- -----------------------------------------------------------------------------
Net increase 395,430 $24,632,805
- -----------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations)
to August 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 63,961 $3,792,336
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
63,961 3,792,336
Shares
repurchased (570) (33,113)
- -----------------------------------------------------------------------------
Net increase 63,391 $3,759,223
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 232,888 $14,285,897
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
232,888 14,285,897
Shares
repurchased (375,560) (22,410,307)
- -----------------------------------------------------------------------------
Net decrease (142,672) $(8,124,410)
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 933,321 $55,847,824
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 91,148 5,409,712
- -----------------------------------------------------------------------------
1,024,469 61,257,536
Shares
repurchased (501,896) (29,674,937)
- -----------------------------------------------------------------------------
Net increase 522,573 $31,582,599
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 5
Transactions with Affiliated Issuers
Transactions during the period with companies in which the fund owned at
least 5% of the voting securities were as follows:
Purchase Sales Dividend Market
Name of Affiliates cost cost Income Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alpharma, Inc. Class A $12,991,326 $ -- $88,977 $ 41,975,299
Guilford Pharmaceuticals, Inc. 11,873,574 4,429,654 -- 41,260,500
Inhale Therapeutic Systems, Inc. 4,887,477 7,280,047 -- --
Molecular Devices Corp. 1,100,042 4,118,672 -- --
Province Healthcare Co. 10,420,270 -- -- 22,882,125
SonoSight, Inc. 11,647,094 -- -- 15,346,813
Trimeris, Inc. 2,256,652 3,901,506 -- 47,402,720
Ventana Medical Systems, Inc. 465,278 3,396,212 -- --
Wesley Jessen VisionCare, Inc. 715,212 915,750 -- 28,125,263
- -------------------------------------------------------------------------------------------------------------------
Totals $56,356,925 $24,041,841 $88,977 $196,992,720
</TABLE>
Fund information
WEB SITE
www.putnaminv.com
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
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
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
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
John J. Morgan, Jr.
Vice President
C. Beth Cotner
Vice President
Richard B. England
Vice President and Fund Manager
David G. Carlson
Vice President and Fund Manager
Margery C. Parker
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
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.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
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PUTNAM
INVESTMENTS
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For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA008 59735 021/335/2AB 4/00
