PUTNAM OTC EMERGING GROWTH FUND, 497, 1994-05-25

PUTNAM OTC EMERGING GROWTH FUND
497, 1994-05-25

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PROSPECTUS
DECEMBER 1, 1993 , AS
REVISED JUNE 1,
1994

PUTNAM OTC EMERGING GROWTH FUND
CLASS A AND B SHARES
INVESTMENT STRATEGY: GROWTH

This Prospectus explains concisely what you should know before
investing in Class A or B shares of the Fund. Please read
it carefully and keep it for future reference. You can find more
detailed information about the Fund in the December 1, 1993
Statement of Additional Information, as amended from time to
time. For a free copy of the Statement, call Putnam Investor
Services at 1-800-225-1581. The Statement has been filed with
the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION , ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY , AND INVOLVE RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL .

BOSTON * LONDON * TOKYO<PAGE>
Putnam OTC Emerging Growth Fund (the "Fund") seeks capital
appreciation. The Fund invests primarily in common stocks of
small- to medium-sized "emerging growth" companies traded in the
over-the-counter ("OTC") market. It is designed for investors
willing to assume above-average risk in return for above-average
capital growth potential. The Fund may trade securities for
short-term profits. For a description of these speculative
strategies, and the related risks and expenses, see the section
"How objective is pursued."

The Fund offers two classes of shares: Class A and Class B. Each
class is sold pursuant to different sales arrangements and bears
different expenses. For more information about the different
sales arrangements, see "Alternative sales arrangements." For
information about various expenses borne by each class, see
"Expenses summary."
<PAGE>
ABOUT THE FUND

Expenses summary 3
............................................................
Financial highlights 4
............................................................
Objective 7
............................................................
How objective is pursued 7
............................................................
How performance is shown 11
............................................................
How the Fund is managed 12
............................................................
Organization and history 12
............................................................

ABOUT YOUR INVESTMENT

Alternative sales arrangements 14
............................................................
How to buy shares 15
............................................................
Distribution Plans
19
............................................................
How to sell shares 21
............................................................
How to exchange shares 22
............................................................
How the Fund values its shares 23
............................................................
How distributions are made; tax information 23

ABOUT PUTNAM INVESTMENTS, INC
24
<PAGE>
About the Fund

EXPENSES SUMMARY

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

CLASS A SHARES CLASS B SHARES

Shareholder Transaction Expenses

Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 5.75%
NONE*

5.0% in the first
Deferred Sales Charge (as a year, declining
percentage of the lower of to 1.0% in the
original purchase price or sixth year , and
redemption proceeds) NONE** eliminated thereafter

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

Management Fees 0.70% 0.70%
12b-1 Fees 0.25% 1.00%
Other Expenses 0.29% 0.29%
Total Fund Operating Expenses 1.24% 1.99%
<PAGE>
EXAMPLES

Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years

CLASS A $69 $95 $122 $199
CLASS B $70 $92 $127 $212***

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

1 3 5 10
year years years years

CLASS A $69 $95 $122 $199
CLASS B $20 $62 $107 $212***

The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses
which the Fund incurs. The management fees shown in the table
reflect a decrease in the management fees payable to Putnam
Investment Management, Inc., the Fund's investment adviser
("Putnam Management") , and the 12b-1 fees shown in the Table
for such class of shares reflect the maximum amount permitted by
the Trustees under that class's Distribution Plan . Actual
management fees, 12b-1 fees and total operating expenses
for Class A shares for fiscal 1993 were 0.75% , 0.22% and
1.26%, respectively. "Other expenses" for Class A shares
shown in the table are based on the operating expenses for
the Fund's last fiscal year . For Class B shares,
management fees and "Other expenses" are based on the operating
expenses for the Fund's Class A shares. The Examples do not
represent past or future expense levels. Actual expenses may be
greater or less than those shown. Federal regulations require
the Examples to assume a 5% annual return, but actual annual
return has varied.

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

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

*** Reflects conversion of Class B shares to Class A shares
(which pay lower ongoing expenses) approximately eight
years after purchase. See "How to buy shares - Class B
shares - Conversion of Class B shares."

FINANCIAL HIGHLIGHTS

The table on the following page presents per share financial
information for the life of the Fund. This information has been
audited and reported on by the Fund's independent accountants.
The Report of Independent Accountants and financial statements
included in the Fund's Annual Report to shareholders for the
1993 fiscal year are incorporated by reference into this
Prospectus. The Fund's Annual Report which contains additional
unaudited performance information, will be made available without
charge upon request.

FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the period)
<PAGE>
<PAGE>
OBJECTIVE

FINANCIAL
HIGHLIGHTS*
(FOR A SHARE
OUTSTANDING
THROUGHOUT
THE PERIOD)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD
JULY 15, 1993 ELEVEN
(COMMENCEMENT MONTHS YEAR OCTOBER 6,
OF OPERATIONS) ENDED ENDED 1982
TO JULY 31 YEAR ENDED JULY 31 JULY 31 AUGUST 31TO AUG. 31
1993** 1993 1992 1991 1990 1989 1988 1987** 1986 1985 1984 1983***
CLASS B CLASS A

NET ASSET VALUE,
BEGINNING OF PERIOD $10.80 $9.05 $8.35 $8.20 $8.09 $6.40 $7.84 $6.56 $5.10 $4.17 $4.22 $2.50

INVESTMENT OPERATIONS
NET INVESTMENT LOSS (.01) (.06) (.04) (.01) (.03) (.03) (.04)(A)(.02)(A) (.02) (.03) (.04)(A) --(A)
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS (.09) 2.87 .83 .46 .60 1.72 (.77) 1.87 1.57 .99 .10 1.72

TOTAL FROM INVESTMENT
OPERATIONS (.10) 2.81 .79 .45 .57 1.69 (.81) 1.85 1.55 .96 .14 1.72

LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME -- -- -- -- -- -- -- -- -- (.03) -- --
NET REALIZED GAIN ON
INVESTMENTS -- (1.14) (.09) (.30) (.46) -- (.63) (.57) (.09) -- (.19) --

TOTAL DISTRIBUTIONS -- (1.14) (.09) (.30) (.46) -- (.63) (.57) (.09) (.03) (.19) --

NET ASSET VALUE,
END OF PERIOD $10.70 $10.72 $9.05 $8.35 $8.20 $8.09 $6.40 $7.84 $6.56 $5.10 $4.17 $4.22<PAGE>
TOTAL INVESTMENT
RETURN AT NET
ASSET VALUE
(%) (B) (22.32)(C) 32.93 9.53 6.40 7.36 26.36 (9.77) 31.64 31.09 25.05(C) 3.05 76.21(C)

NET ASSETS, END OF
PERIOD (IN THOUSANDS)$455 $364,400 $267,338 $234,055 $195,802 $180,775 $143,506 $157,094 $41,014 $20,248 $13,222 $5,422

RATIO OF EXPENSES
TO AVERAGE NET
ASSETS (%) .09(D) 1.26 1.39 1.48 1.50 1.63 1.59(A) 1.49(A) 1.46 1.55(D) 1.72(A) 1.43(A)(D)
RATIO OF NET INVESTMENT
INCOME (LOSS) TO
AVERAGE NET
ASSETS (%) (.09)(D) (.90) (.59) (.46) (.47) (.41) (.74)(A)(.62)(A) (.63) (.86)(D) 1.16(A)(.23)(A)(D)
PORTFOLIO
TURNOVER (%) 108.20 108.20 66.75 54.06 42.66 73.58 76.91 92.76 91.92 55.17(D) 104.33 67.53(D)

* TABLE HAS BEEN RESTATED TO REFLECT A 4-FOR-1 SHARE SPLIT, CLASS A ONLY, DECLARED BY THE FUND TO SHAREHOLDERS OF
RECORD ON OCTOBER 27, 1989, PAYABLE ON OCTOBER 28, 1989. SELECTED PER SHARE DATA AND RATIOS FOR PERIODS ENDED THROUGH
JULY 31, 1992 HAVE BEEN RESTATED TO CONFORM WITH REQUIREMENTS ISSUED BY THE SEC IN APRIL 1993.
** PER SHARE NET INVESTMENT INCOME FOR THE YEAR ENDED JULY 31, 1987 FOR CLASS A AND FOR THE PERIOD ENDED JULY 31, 1993
FOR CLASS B HAS BEEN DETERMINED ON THE BASIS OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD.
***INVESTMENT OPERATIONS COMMENCED ON NOVEMBER 1, 1982 FOLLOWING THE RECEIPT OF THE PROCEEDS OF THE INITIAL OFFERING OF
SHARES.

(A) REFLECTS AN EXPENSE LIMITATION APPLICABLE DURING THE PERIOD. AS A RESULT OF SUCH LIMITATION, THE NET INVESTMENT LOSS
OF THE FUND FOR THE FISCAL YEAR ENDED JULY 31, 1988, AND JULY 31, 1987 REFLECTS PER SHARE EXPENSE REDUCTIONS OF LESS
THAN $0.01. THE NET INVESTMENT LOSS FOR THE FISCAL YEAR ENDED AUGUST 31, 1984 AND FOR THE PERIOD ENDED AUGUST 31, 1983
REFLECTS PER SHARE EXPENSE REDUCTIONS OF $0.01 AND $0.02, RESPECTIVELY.

(B) TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES.

(D) NOT ANNUALIZED.

</TABLE>
<PAGE>
PUTNAM OTC EMERGING GROWTH FUND'S INVESTMENT OBJECTIVE IS CAPITAL
APPRECIATION. THE FUND IS DESIGNED FOR INVESTORS WILLING TO
ASSUME ABOVE-AVERAGE RISK IN RETURN FOR ABOVE-AVERAGE CAPITAL
GROWTH POTENTIAL. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its
objective.

HOW OBJECTIVE IS PURSUED

BASIC INVESTMENT STRATEGY

PUTNAM OTC EMERGING GROWTH FUND INVESTS PRIMARILY IN COMMON
STOCKS OF SMALL- TO MEDIUM - SIZED COMPANIES THAT PUTNAM
MANAGEMENT BELIEVES HAVE POTENTIAL FOR CAPITAL APPRECIATION
SIGNIFICANTLY GREATER THAN THAT OF THE MARKET AVERAGES. In
choosing portfolio investments for the Fund, Putnam Management
seeks public companies in a relatively early stage of development
with a record of profitability and a strong financial position.
These "emerging growth" companies may have a new technology, a
unique or proprietary product or a profitable market niche. They
are often experiencing strong unit sales growth. The management
group of these companies often includes founders with substantial
equity stakes. Although Putnam Management looks for these
characteristics, they will not necessarily all be present in each
of the Fund's investments. Under normal market conditions, the
Fund will invest at least 65% of the value of its total assets in
common stocks that, when purchased, were traded in the over-the-
counter ("OTC") market (that is, stocks not listed on any
national, regional or foreign stock exchange).

The companies in which the Fund invests may offer greater
opportunities for capital appreciation than larger, more
established companies, but investments in such companies may
involve certain special risks. Emerging growth companies may
have limited product lines, markets or financial resources and
may be dependent on a limited management group. Many OTC stocks
trade less frequently and in smaller volume than exchange-listed
stocks. The values of these stocks may fluctuate more sharply
than exchange-listed stocks, and the Fund may experience some
difficulty in establishing or closing out positions in these
stocks at prevailing market prices.

Though common stocks are normally the Fund's main investment, it
may also purchase convertible bonds, convertible preferred
stocks, warrants, preferred stocks and debt securities,
regardless of credit ratings, of emerging growth companies if
Putnam Management believes they would help achieve the Fund's
objective. Securities in the lower-rated categories are
considered to be primarily speculative and may be in default.
The Fund may also hold a portion of its assets in cash or money
market instruments. Dividend and interest income is not a
consideration in the selection of portfolio investments.

At times Putnam Management may judge that conditions in the
securities markets make pursuing the Fund's basic investment
strategy inconsistent with the best interests of its
shareholders. At such times Putnam Management may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the Fund's assets. In implementing
these "defensive" strategies, the Fund may invest in common
stocks of larger, more established companies or in debt
securities or preferred stocks, or invest in any other securities
Putnam Management considers consistent with such defensive
strategies. It is impossible to predict when, or for how long,
the Fund will use these alternative strategies.

FOREIGN INVESTMENTS

THE FUND MAY INVEST UP TO 20% OF ITS ASSETS IN SECURITIES
PRINCIPALLY TRADED IN FOREIGN MARKETS. The Fund may also
purchase Eurodollar certificates of deposit without regard to the
20% limit. Since foreign securities are normally denominated and
traded in foreign currencies, the values of the Fund's assets may
be affected favorably or unfavorably by currency exchange rates
and exchange control regulations. There may be less information
publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to
accounting, auditing and financial reporting standards and
practices comparable to those in the United States. The
securities of some foreign companies are less liquid and at times
more volatile than securities of comparable U.S. companies.
Foreign brokerage commissions and other fees are also generally
higher than in the United States. Foreign settlement procedures
and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the
Fund's assets held abroad) and expenses not present in the
settlement of domestic investments.

In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial
instability and diplomatic developments which could affect the
value of the Fund's investments in certain foreign countries.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit the
Fund's ability to invest in securities of certain issuers located
in those foreign countries. Special tax considerations apply to
foreign securities.

The Fund may buy or sell foreign currencies, foreign currency
forward contracts and call options on foreign currencies for
hedging purposes in connection with its foreign investments.

A MORE DETAILED EXPLANATION OF FOREIGN INVESTMENTS, AND THE RISKS
AND SPECIAL TAX CONSIDERATIONS ASSOCIATED WITH THEM, IS INCLUDED
IN THE STATEMENT OF ADDITIONAL INFORMATION.

SHORT-TERM TRADING

UNDER CERTAIN MARKET CONDITIONS, THE FUND MAY SEEK PROFITS BY
SHORT-TERM TRADING. The length of time the Fund has held a
particular security is not generally a consideration in
investment decisions. A change in the securities owned by the
Fund is known as "portfolio turnover." To the extent short-term
trading strategies are used, the Fund's portfolio turnover rate
may be higher than that of other mutual funds. Portfolio
turnover generally involves some expense to the Fund, including
brokerage commissions or dealer mark-ups and other transaction
costs on the sale of securities and reinvestment in other
securities. Such transactions may result in realization of
taxable capital gains. Portfolio turnover rates for the life of
the Fund are shown in the section "Financial highlights."

STOCK INDEX FUTURES AND OPTIONS

THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS FOR
HEDGING PURPOSES. An "index future" is a contract to buy or
sell units of a particular stock index at an agreed price on a
specified future date. Depending on the change in value of the
index between the time when the Fund enters into and terminates
an index future or option transaction, the Fund realizes a
gain or loss. The Fund may buy and sell call and put options on
index futures or on stock indices in addition to or as an
alternative to purchasing or selling index futures or, to the
extent permitted by applicable law, to earn additional income.

THE USE OF INDEX FUTURES AND OPTIONS INVOLVES CERTAIN SPECIAL
RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS AND MAY
RESULT IN LOSSES. Certain risks arise because of the possibility
of imperfect correlations between movements in the prices of
index futures and options and movements in the prices of the
underlying stock index or of the common stocks in the Fund's
portfolio that are the subject of a hedge. The successful use of
the strategies described above further depends on Putnam
Management's ability to forecast market movements correctly.
Other risks arise from the Fund's potential inability to close
out its index futures or options positions, and there can be no
assurance that a liquid secondary market will exist for any index
future or option at any particular time. Certain options on
stock indices are traded "over-the counter" rather than on an
exchange. This means that the Fund will enter into such option
contracts with particular securities dealers who make markets in
these options. The Fund's ability to terminate option positions
in the over-the-counter market may be more limited than for
exchange-traded options and may also involve the risk that
securities dealers participating in such transactions would fail
to meet their obligations to the Fund. However, the Fund will
engage in these transactions only if, in the opinion of Putnam
Management, the pricing mechanism and liquidity of the over-the
counter market are satisfactory and the participants are
responsible parties likely to meet their contractual obligations.
Certain provisions of the Internal Revenue Code and certain
regulatory requirements may limit the Fund's ability to engage in
index futures and options transactions.

A more detailed explanation of index futures and options
transactions, including the risks associated with them, is
included in the Statement of Additional Information.

OTHER INVESTMENT PRACTICES

THE FUND MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING
INVESTMENT PRACTICES, EACH OF WHICH INVOLVES CERTAIN SPECIAL
RISKS. THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE
DETAILED INFORMATION ABOUT THESE PRACTICES, INCLUDING LIMITATIONS
DESIGNED TO REDUCE THESE RISKS.

OPTIONS. The Fund may, for hedging purposes or in order to earn
additional income, sell ("write") call options on common stocks
it owns, but only if the options are traded on national
securities exchanges. The Fund receives a premium on the sale of
an option, but gives up the opportunity to profit from any
increase in the price of the stock above the exercise price of
the option. There can be no assurance that the Fund will always
be able to close out options positions at acceptable prices. The
aggregate value of the securities underlying the options may not
exceed 25% of the Fund's net assets.

SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS.
The Fund may lend portfolio securities amounting to not more than
25% of its assets to broker-dealers and may enter into repurchase
agreements on up to 25% of its assets. These transactions must
be fully collateralized at all times. The Fund may also purchase
securities for future delivery, which may increase its overall
investment exposure and involves a risk of loss if the value of
the securities declines prior to the settlement date.
These transactions involve some risk to the Fund if the
other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral or completing
the transaction .

LIMITING INVESTMENT RISK

SPECIFIC INVESTMENT RESTRICTIONS HELP THE FUND LIMIT INVESTMENT
RISKS FOR ITS SHAREHOLDERS. THESE RESTRICTIONS PROHIBIT THE FUND
FROM: acquiring more than 10% of the voting securities of any
one issuer* and investing more than: (a) 5% of its total assets
in securities of any one issuer (other than the U.S.
government);* (b) 5% of its net assets in companies that,
together with any predecessors, have been in operation less than
three years and in equity securities (other than securities
restricted as to resale) that do not have readily available
market quotations; (c) 15% of its net assets in securities
restricted as to resale (excluding securities determined by the
Trustees of the Fund (or the person designated by them to make
such determinations) to be readily marketable);* (d) 25% of its
total assets in any one industry;* (e) 5% of its net assets in
warrants or more than 2% of its net assets in warrants not listed
on the New York or American Stock Exchanges; or (f) 15% of its
net assets in any combination of securities that are not readily
marketable, in securities restricted as to resale (excluding
securities determined by the Trustees of the Fund (or the person
designated by the Trustees of the Fund to make such
determinations) to be readily marketable), and in repurchase
agreements maturing in more than seven days.

Restrictions marked with an asterisk (*) above are summaries of
fundamental policies. See the Statement of Additional
Information for the full text of these policies and the Fund's
other fundamental policies. Except for investment policies
designated as fundamental in this Prospectus or the Statement,
the investment policies described in this Prospectus and in the
Statement are not fundamental policies. The Trustees may change
any non-fundamental investment policies without shareholder
approval. As a matter of policy, the Trustees would not
materially change the Fund's investment objective without
shareholder approval.

HOW PERFORMANCE IS SHOWN

TOTAL RETURN DATA MAY FROM TIME TO TIME BE INCLUDED IN
ADVERTISEMENTS ABOUT THE FUND. "Total return" for the one-,
five- and ten year periods (or since the commencement of the
public offering of the shares of a class, if shorter) through the
most recent calendar quarter represents the average annual
compounded rate of return on an investment of $1,000 in the Fund
at the maximum public offering price (in the case of Class A
shares) or reflecting the deduction of any applicable contingent
deferred sales charge (in the case of Class B shares). Total
return may also be presented for other periods or based on
investment at reduced sales charge levels. Any quotation of
total return not reflecting the maximum initial sales charge or
contingent deferred sales charge would be reduced if such sales
charges were used. Quotations of total return for any period
when an expense limitation was in effect will be greater than if
the limitation had not been in effect. The Fund's performance
may be compared to various indices. See the Statement of
Additional Information.

ALL DATA IS BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DOES
NOT PREDICT FUTURE PERFORMANCE. Investment performance, which
will vary, is based on many factors, including market conditions,
the composition of the Fund's portfolio, the Fund's operating
expenses and which class of shares you purchase. Investment
performance also often reflects the risks associated with the
Fund's investment objective and policies. These factors should
be considered when comparing the Fund's investment results to
those of other mutual funds and other investment vehicles.

HOW THE FUND IS MANAGED

THE TRUSTEES OF THE FUND ARE RESPONSIBLE FOR GENERALLY OVERSEEING
THE CONDUCT OF THE FUND'S BUSINESS. Subject to such policies as
the Trustees may determine, Putnam Management furnishes a
continuing investment program for the Fund and makes investment
decisions on its behalf. Subject to the control of the Trustees,
Putnam Management also manages the Fund's other affairs and
business. Daniel L. Miller , Senior Vice President of
Putnam Management and Vice President of the Fund has had primary
responsibility for the day-to-day management of the Fund's
portfolio since February, 1994. Mr. Miller has
been employed by Putnam Management for the past five years.

The Fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
its Distribution Plans (which are in turn allocated to the
relevant class). The Fund also reimburses Putnam Management for
the compensation and related expenses of certain officers of the
Fund and their staff who provide administrative services to the
Fund. The total reimbursement is determined annually by the
Trustees.

Putnam Management places all orders for purchases and sales of
the Fund's securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of the Fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers.
<PAGE>
ORGANIZATION AND HISTORY

Putnam OTC Emerging Growth Fund is a Massachusetts business trust
organized on July 8, 1982. A copy of the Agreement and
Declaration of Trust, which is governed by Massachusetts law, is
on file with the Secretary of State of The Commonwealth of
Massachusetts. Prior to September 7, 1989, the Fund was one of
four series of Depositors Investment Trust. On September 7,
1989, the three other series were liquidated and Depositors
Investment Trust was renamed Putnam OTC Emerging Growth Fund.
Prior to September 30, 1986, the Fund was named Aggressive Growth
Fund.

If you own fewer shares than a minimum amount set by the Trustees
(presently 20 shares), the Fund may choose to redeem your shares
and pay you for them. You will receive at least 30 days' written
notice before the Fund redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Fund
may also redeem shares if you own shares above a maximum amount
set by the Trustees. There is presently no maximum, but the
Trustees may establish one at any time, which could apply to both
present and future shareholders.

THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of the
Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Fund Corp., ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; WILLIAM F. POUNDS, VICE
CHAIRMAN. Professor of Management, Alfred P. Sloan School of
Management, M.I.T. ; JAMESON ADKINS BAXTER, President, Baxter
Associates, Inc. ; HANS H. ESTIN, Vice Chairman, North
American Management; JOHN A. HILL, Principal and Managing
Director, First Reserve Corporation; ELIZABETH T. KENNAN,
President, Mount Holyoke College; LAWRENCE J. LASSER,* Vice
President of the Putnam funds. President, Chief Executive
Officer and Director of Putnam Investments, Inc. and Putnam
Management. Director, Marsh & McLennan Companies, Inc.; ROBERT
E. PATTERSON, Executive Vice President, Cabot Partners Limited
Partnership; DONALD S. PERKINS, Director of various corporations,
including AT&T, K mart Corporation and Time Warner Inc.;
GEORGE PUTNAM, III,* President, New Generation Research, Inc.;
A.J.C. SMITH,* Chairman Chief Executive Officer and Director,
Marsh & McLennan Companies, Inc.; and W. NICHOLAS THORNDIKE,
Director of various corporations and charitable organizations,
including Providence Journal Co. Also, Trustee and President,
Massachusetts General Hospital and Trustee of Eastern Utilities
Associates. The Fund's Trustees are also Trustees of the other
Putnam funds. Those marked with an asterisk (*) are "interested
persons" of the Fund, Putnam Management or Putnam Mutual Funds.

ABOUT YOUR INVESTMENT

ALTERNATIVE SALES ARRANGEMENTS

This Prospectus offers investors two classes of shares
which bear sales charges in different forms and amounts and which
bear different levels of expenses:

CLASS A SHARES. An investor who purchases Class A shares pays a
sales charge at the time of purchase. As a result, Class A
shares are not subject to any charges when they are redeemed
(except for sales at net asset value in excess of $1 million
which are subject to a contingent deferred sales charge).
Certain purchases of Class A shares qualify for reduced sales
charges. Class A shares currently bear a 12b-1 fee at the annual
rate of 0.25% of the Fund's average net assets attributable to
Class A shares. See "How to buy shares - Class A shares".

CLASS B SHARES. Class B shares, are sold without an initial
sales charge, but are subject to a contingent deferred sales
charge of up to 5% if redeemed within six years. Class B shares
also bear a higher 12b-1 fee than Class A shares, currently at
the annual rate of 1.00% of the Fund's average net assets
attributable to Class B shares. Class B shares will
automatically convert into Class A shares, based on relative net
asset value, approximately eight years after purchase. Class B
shares provide an investor the benefit of putting all of the
investor's dollars to work from the time the investment is made,
but (until conversion) will have a higher expense ratio and pay
lower dividends than Class A shares due to the higher 12b-1 fee.
See "How to buy shares - Class B shares".

WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount and
intended length of the investment. Investors making investments
that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge
might consider Class B shares. Orders for Class B shares for
$250,000 or more will be treated as orders for Class A shares or
declined. For more information about these sales arrangements,
consult your investment dealer or Putnam Investor Services.
Sales personnel may receive different compensation depending on
which class of shares they sell. Shares may only be exchanged for
shares of the same class of another Putnam fund. See "How to
exchange shares".

HOW TO BUY SHARES

You can open a Fund account with as little as $500 and make
additional investments at any time with as little as $50. You
can buy Fund shares three ways - through most investment dealers,
through Putnam Mutual Funds (at 1-800-225-1581), or through a
systematic investment plan. If you do not have a dealer, Putnam
Mutual Funds can refer you to one.

BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS. Complete an order
form and return it with a check payable to the Fund to Putnam
Mutual Funds, which will act as your agent in purchasing shares
through your designated investment dealer.

BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking account. Application forms are available
from your investment dealer or through Putnam Investor Services.

Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.

CLASS A SHARES

The public offering price of Class A shares is the net asset
value plus a sales charge. The Fund receives the net asset
value. The sales charge varies depending on the size of your
purchase and is allocated between your investment dealer and
Putnam Mutual Funds. The current sales charges are: <PAGE>
<TABLE>
<CAPTION>

SALES CHARGE AMOUNT OF
AS A PERCENTAGE OF SALES CHARGE
------------------ REALLOWED
NET TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE
AT OFFERING PRICE INVESTED PRICE OF OFFERING PRICE*
- -------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Less than $ 50,000 6.10% 5.75% 5.00%
$ 50,000 but less than $ 100,000 4.71 4.50 3.75
100,000 but less than 250,000 3.63 3.50 2.75
250,000 but less than 500,000 2.56 2.50 2.00
500,000 but less than 1,000,000 2.04 2.00 1.75
- -------------------------------------------------------------------------------------
/TABLE
<PAGE>
* At the discretion of Putnam Mutual Funds, however, the entire
sales charge may at times be reallowed to dealers. The Staff of
the Securities and Exchange Commission has indicated that dealers
who receive more than 90% of the sales charge may be considered
underwriters.

There is no initial sales charge on purchases of Class A shares
of $1 million or more. However, a contingent
deferred sales charge ("CDSC") of 1.00% or 0.50%,
respectively, is imposed on redemptions of such shares
within the first or second year after purchase ,
based on the lower of the shares' cost
and current net asset value . Any shares acquired
by reinvestment of distributions will be redeemed without a CDSC.
In addition, shares purchased by certain investors investing
$1 million or more that have made arrangements with Putnam Mutual
Funds and whose dealer of record waived the commission described
in the next paragraph are not subject to the CDSC. In
determining whether a CDSC is payable, the Fund will first redeem
shares not subject to any charge. Putnam Mutual Funds
receives the entire amount of any CDSC you pay. See the
Statement of Additional Information for more information about
the CDSC.

Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of Class A shares of $1
million or more based on an investor's cumulative purchases
during the one-year period beginning with the date of the initial
purchase at net asset value and each subsequent one-year period
beginning with the first purchase at net asset value following
the end of the prior period. Such commissions are paid at the
rate of 1.00% of the amount under $3 million. 0.50% of the next
$47 million and 0.25% thereafter. On sales at net asset value to
a participant-directed qualified retirement plan initially
investing less than $20 million in Putnam funds and other
investments managed by Putnam Management or its affiliates
(including a plan sponsored by an employer with more than 750
employees), Putnam Mutual Funds pays commissions on cumulative
purchases during the life of the account at the rate of 1.00% of
the amount under $3 million and 0.50% thereafter. On sales at
net asset value to all other participant-directed qualified
retirement plans. Putnam Mutual Funds pays commissions on the
initial investment and on subsequent net quarterly sales at the
rate of 0.15%.

YOU MAY BE ELIGIBLE TO BUY CLASS A SHARES AT REDUCED SALES
CHARGES. Consult your investment dealer or Putnam Mutual Funds
for details about Putnam's Combined Purchase Privilege,
Cumulative Quantity Discount, Statement of Intention, Group Sales
Plan, Employee Benefit Plans and other plans. Descriptions are
also included in the order form and in the Statement of
Additional Information. Shares may be sold at net asset value to
certain categories of investors , and the CDSC may be waived
under certain circumstances . See "How to buy shares -
General" below.

CLASS B SHARES

Class B shares are sold without an initial sales charge, although
a CDSC will be imposed if you redeem shares within six years of
purchase. The following types of shares may be redeemed
without charge at any time: (i) shares acquired by reinvestment
of distributions and (ii) shares otherwise exempt from the CDSC,
as described below. Subject to the foregoing exclusions, the
amount of the charge is determined as a percentage of the lesser
of the current market value or the cost of the shares being
redeemed. Therefore when a share is redeemed, any increase in
its value above the initial purchse price is not subject to any
CDSC. The amount of the CDSC will depend on the number of
years since you invested and the dollar amount being redeemed,
according to the following table:

CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
YEARS SINCE PURCHASE DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
- ------------------- -------------------
0-1.................................. 5.0%
1-2.................................. 4.0%
2-3.................................. 3.0%
3-4.................................. 3.0%
4-5.................................. 2.0%
5-6.................................. 1.0%
6 and thereafter..................... NONE

In determining whether a CDSC is payable on any redemption, the
Fund will first redeem shares not subject to any charge, and then
shares held longest during the six-year period. For
information on how sales charges are calculated if you exchange
your shares, see "How to exchange shares." Putnam Mutual Funds
receives the entire amount of any CDSC you pay.

CONVERSION OF CLASS B SHARES. Class B shares will automatically
convert into Class A shares at the end of the month eight years
after the purchase date, except as noted below. Class B shares
acquired by exchange of Class B shares of another Putnam fund
will convert into Class A shares based on the time of the initial
purchase. Class B shares acquired through reinvestment of
distributions will convert into Class A shares based on the date
of the initial purchase to which such shares relate. For this
purpose, Class B shares acquired through reinvestment of
distributions will be attributed to particular purchases of Class
B shares in accordance with such procedures as the Trustees may
determine from time to time. The conversion of Class B shares to
Class A shares is subject to the continuing availability of a
ruling from the Internal Revenue Service or an opinion of counsel
that such conversions will not constitute taxable events for
Federal tax purposes. There can be no assurance that such ruling
or opinion will be available, and the conversion of Class B
shares to Class A shares will not occur if such ruling or opinion
is not available. In such event, Class B shares would continue to
be subject to higher expenses than Class A shares for an
indefinite period.

GENERAL

The Fund may sell Class A shares and Class B shares at net asset
value without an initial sales charge or CDSC to the Fund's
current and retired Trustees (and their families), current and
retired employees (and their families) of Putnam Management and
affiliates, registered representatives and other employees (and
their families) of broker-dealers having sales agreements with
Putnam Mutual Funds, employees (and their families) of financial
institutions having sales agreements with Putnam Mutual Funds (or
otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of Fund shares), financial
institution trust departments investing an aggregate of $1
million or more in Putnam funds, clients of certain
administrators of tax-qualified plans, employee benefit plans of
companies with more than 750 employees, tax-qualified plans when
proceeds from repayments of loans to participants are invested
(or reinvested) in Putnam funds, "wrap accounts" for the benefit
of clients of broker-dealers , financial institutions or
financial planners adhering to certain standards established by
Putnam Mutual Funds, and investors meeting certain requirements
who sold shares of certain Putnam closed-end funds pursuant to a
tender offer by the closed-end fund. In addition, the Fund may
sell shares at net asset value without an initial sales charge or
a CDSC in connection with the acquisition by the Fund of assets
of an investment company or personal holding company, and the
CDSC will be waived on redemptions of shares arising out
of death or disability or in connection with certain withdrawals
from IRA or other retirement plans. Up to 12% of the value of
Class B shares subject to a Systematic Withdrawal Plan may also
be redeemed each year without a CDSC. See the Statement of
Additional Information.

Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of the Fund at net asset value.

If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you
should pay for those shares with a certified check to avoid any
delay in redemption, exchange or transfer. Otherwise the Fund
may delay payment until the purchase price of those shares has
been collected or, if you redeem by telephone, until 15 calendar
days after the purchase date.

To eliminate the need for safekeeping, the Fund will not issue
certificates for your shares unless you request them. Putnam
Mutual Funds may, at its expense, provide additional promotional
incentives or payments to dealers that sell shares of the Putnam
funds. In some instances, these incentives or payments may be
offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares.

DISTRIBUTION PLANS

CLASS A DISTRIBUTION PLAN. The purpose of the Class A Plan is to
permit the Fund to compensate Putnam Mutual Funds for services
provided and expenses incurred by it in promoting the sale of
Class A shares of the Fund, reducing redemptions, or maintaining
or improving services provided to shareholders by Putnam Mutual
Funds or dealers. The Class A Plan provides for payments by the
Fund to Putnam Mutual Funds at the annual rate of up to 0.35% of
the Fund's average net assets attributable to Class A shares,
subject to the authority of the Fund's Trustees to reduce the
amount of payments or to suspend the Class A Plan for such
periods as they may determine. Subject to these limitations, the
amount of such payments and the specific purposes for which they
are made shall be determined by the Trustees of the Fund. At
present, the Trustees have approved payments under the Class A
Plan at the annual rate of 0.25% of the Fund's average net assets
attributable to Class A shares for the purpose of compensating
Putnam Mutual Funds for services provided and expenses incurred
by it as principal underwriter of the Fund's Class A shares,
including payments made by it to dealers under the Service
Agreements referred to below. Should the Trustees decide in the
future to approve payments in excess of this amount, shareholders
will be notified and this Prospectus will be revised.

In order to compensate investment dealers (including, for this
purpose, certain financial institutions) for services provided in
connection with sales of Class A shares and the maintenance of
shareholder accounts, Putnam Mutual Funds makes quarterly
payments to qualifying dealers based on the average net asset
value of Class A shares of the Fund which are attributable
to shareholders for whom the dealers are designated as the dealer
of record. This calculation excludes until one year after
purchase shares purchased at net asset value after March 31, 1994
by shareholders investing $1 million or more and by participant-
directed qualified retirement plans sponsored by emplyers with
more than 750 employees ("NAV Shares"), except for shares owned
by certain investors investing $1 million or more that have made
arrangements with Putnam Mutual Funds and whose dealer of record
waived the sales commission. Except as stated below, Putnam
Mutual Funds makes such payments at the annual rate of 0.25% of
such average net asset value for Class A shares outstanding as
of July 14, 1993 and 0.20% of such average net asset value os
shares acquired after that date (including shares acquired
through reinvestment of distribution). For participant-directed
qualified retirement plans initially investing less than $20
million in Putnam funds and other investments managed by Putnam
Management or its affiliates, Putnam Mutual Funds' payments to
qualifying dealers on NAV Shares are 100% of the rate stated
above if average plan assets in Putnam funds (excluding money
market funds) during eht quarter are less than $20 million, 60%
of the stated rate if average plan assets are at least $20
million but less than $30 million, and 40% of the stated rate if
average plan assets are $30 million or more. For all other
participant-directed qualified retirement plans purchasing NAV
Shares, Putnam Mutual Funds makes quarterly payments to qualified
dealers at the annual rate of 0.10% of the average net asset
value of such shares .

CLASS B DISTRIBUTION PLAN. The Class B Plan provides for
payments by the Fund to Putnam Mutual Funds at the annual rate of
up to 1.00% of the Fund's average net assets attributable to
Class B shares, subject to the authority of the Trustees to
reduce the amount of payments or to suspend the Class B
Plan for such periods as they may determine. Putnam Mutual Funds
also receives the proceeds of any CDSC imposed on redemptions of
shares.

Although Class B shares are sold without an initial sales charge,
Putnam Mutual Funds pays a sales commission equal to 4.00% of the
amount invested to dealers who sell Class B shares. These
commissions are not paid on exchanges from other Putnam funds and
sales to investors exempt from the CDSC. In addition, in order
to further compensate dealers (including, for this purpose,
certain financial institutions) for services provided in
connection with sales of Class B shares and the maintenance of
shareholder accounts, Putnam Mutual Funds makes quarterly
payments to qualifying dealers based on the average net asset
value of Class B shares which are attributable to shareholders
for whom the dealers are designated as the dealer of record.
Putnam Mutual Funds makes such payments at an annual rate of
0.25% of such average net asset value.

GENERAL. Putnam Mutual Funds may suspend or modify the
payments made to dealers described above, and such payments are
subject to the continuation of the relevant Plan described above,
the terms of Service Agreements between dealers and Putnam
Mutual Funds, and any applicable limits imposed by the National
Association of Securities Dealers, Inc.

HOW TO SELL SHARES

You can sell your shares to the Fund any day the New York Stock
Exchange is open, either directly to the Fund or through your
investment dealer. The Fund will only repurchase shares for
which it has received payment.

SELLING SHARES DIRECTLY TO THE FUND. Send a signed letter of
instruction or stock power form to Putnam Investor Services,
along with any certificates that represent shares you want to
sell. The price you will receive is the next net asset value
calculated after the Fund receives your request in proper form
less any applicable CDSC. In order to receive that day's net
asset value, Putnam Investor Services must receive your request
before the close of regular trading on the New York Stock
Exchange. If you sell shares having a net asset value of
$100,000 or more, the signatures of registered owners or their
legal representatives must be guaranteed by a bank, broker-
dealer or certain other financial institutions. See the
Statement of Additional Information for more information about
where to obtain a signature guarantee. Stock power forms are
available from your investment dealer, Putnam Investor Services
and many commercial banks. If you want your redemption proceeds
sent to an address other than your address as it appears on
Putnam's records, a signature guarantee is required. Putnam
Investor Services usually requires additional documentation for
the sale of shares by a corporation, partnership, agent or
fiduciary, or a surviving joint owner. Contact Putnam Investor
Services for details.

THE FUND GENERALLY SENDS YOU PAYMENT FOR YOUR SHARES THE BUSINESS
DAY AFTER YOUR REQUEST IS RECEIVED. Under unusual circumstances,
the Fund may suspend repurchases, or postpone payment for more
than seven days, as permitted by federal securities law.

You may use Putnam's Telephone Redemption Privilege to redeem
shares valued up to $100,000 from your account, unless you have
notified Putnam Investor Services of an address change within the
preceding 15 days. Unless an investor indicates otherwise on the
Account Application, Putnam Investor Services will be authorized
to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide Putnam Investor
Services with his or her account registration and address as it
appears on Putnam Investor Services' records. Putnam Investor
Services will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, Putnam Investor
Services may be liable for any losses due to unauthorized or
fraudulent instructions. For information, consult Putnam
Investor Services. During periods of unusual market changes and
shareholder activity, you may experience delays in contacting
Putnam Investor Services by telephone in which case you may wish
to submit a written redemption request, as described above, or
contact your investment dealer, as described below. The
Telephone Redemption Privilege is not available if you were
issued certificates for your shares which remain outstanding.
The Telephone Redemption Privilege may be modified or terminated
without notice.

SELLING SHARES THROUGH YOUR INVESTMENT DEALER. Your dealer must
receive your request before the close of regular trading on the
New York Stock Exchange and transmit it to Putnam Mutual Funds
before 5 p.m. Boston time to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary
documentation to Putnam Investor Services, and may charge for its
services.

HOW TO EXCHANGE SHARES

You can exchange your shares for shares of the same class of
certain other Putnam funds at net asset value beginning 15 days
after purchase. Not all Putnam funds offer more than one class
of shares. If the other Putnam fund offers only one class of
shares, only Class A shares may be exchanged for such class. If
you exchange shares subject to a CDSC, the transaction will not
be subject to the CDSC. However, when you redeem the shares
acquired through the exchange, the redemption may be subject to
the CDSC, depending upon when you originally purchased the shares
and using the schedule of any fund into or from which you have
exchanged your shares that would result in your paying the
highest CDSC applicable to your class of shares. For purposes of
computing the CDSC, 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, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services.
Exchange Authorization Forms are available by calling or writing
Putnam Investor Services. For federal income tax purposes, an
exchange is treated as a sale of shares and generally results in
a capital gain or loss. A Telephone Exchange Privilege is
currently available for amounts up to $500,000. Putnam Investor
Services' procedures for telephonic transactions are described
above under "How to sell shares." The Telephone Exchange
Privilege is not available if you were issued certificates for
shares which remain outstanding. Ask your investment dealer or
Putnam Investor Services for prospectuses of other Putnam funds.
Shares of certain Putnam funds are not available to residents of
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
in other circumstances where the Trustees or Putnam Management
believes doing so would be in 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. Shareholders would be notified of any such action to
the extent required by law. Consult Putnam Investor Services
before requesting an exchange. See the Statement of Additional
Information to find out more about the exchange privilege.

HOW THE FUND VALUES ITS SHARES

THE FUND CALCULATES THE NET ASSET VALUE OF A SHARE OF EACH CLASS
BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS LIABILITIES, BY
THE NUMBER OF ITS SHARES OUTSTANDING. SHARES ARE VALUED AS OF
THE CLOSE OF REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE EACH
DAY THE EXCHANGE IS OPEN. Portfolio securities for which market
quotations are readily available are stated at market value.
Short-term investments that will mature in 60 days or less are
stated at amortized cost, which approximates market value. All
other securities and assets are valued at their fair value
following procedures approved by the Trustees.

HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION

The Fund distributes any net investment income and any net
realized capital gains at least annually. Distributions from
capital gains are made after applying any available capital loss
carryovers. Distributions paid by the Fund with respect to Class
A shares will generally be greater than those paid with respect
to Class B shares because expenses attributable to Class B shares
will generally be higher.

YOU CAN CHOOSE FROM THREE DISTRIBUTION OPTIONS: (1) reinvest all
distributions in additional Fund shares without a sales charge;
(2) receive distributions from net investment income in cash
while reinvesting capital gains distributions in additional
shares without a sales charge; or (3) receive all distributions
in cash. You can change your distribution option by notifying
Putnam Investor Services in writing. If you do not select an
option when you open your account, all distributions will be
reinvested. All distributions not paid in cash will be
reinvested in shares of the class on which the distribution is
paid. You will receive a statement confirming reinvestment of
distributions in additional Fund shares (or in shares of other
Putnam funds for Dividends Plus accounts) promptly following the
quarter in which the reinvestment occurs.

If a check representing a Fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in the Fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in the Fund . Similarly,
if 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.

All Fund distributions will be taxable to you as ordinary income,
except that any distributions of net long-term capital gains will
be taxed as such, regardless of how long you have held the
shares. Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions.

Early in each year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding
year.

The foregoing is a summary of certain federal income tax
consequences of investing in the Fund. You should consult your
tax adviser to determine the precise effect of an investment in
the Fund on your particular tax situation (including possible
liability for state and local taxes).

ABOUT PUTNAM INVESTMENTS, INC.

PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937.
Putnam Mutual Funds is the principal underwriter of the Fund and
of other Putnam funds. Putnam Fiduciary Trust Company is the
Fund's custodian. Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, is the Fund's investor servicing and
transfer agent.

Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., which is
wholly-owned by Marsh & McLennan Companies, Inc., a publicly
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.<PAGE>

THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
PUTNAM OTC EMERGING GROWTH FUND
One Post Office Square
Boston, MA 02109

FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109

MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109

INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 14203
Providence, RI 02940 -
1203

CUSTODIAN
Putnam Fiduciary Trust
Company
One Post Office Square
Boston, MA 02109

LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110

INDEPENDENT ACCOUNTANTS
Coopers & Lybrand
One Post Office Square
Boston, MA 02109

PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>

PUTNAM OTC EMERGING GROWTH FUND
ONE POST OFFICE SQUARE
BOSTON, MA 02109
CLASS A SHARES
INVESTMENT STRATEGY: GROWTH
PROSPECTUS-DECEMBER 1, 1993 ,
AS REVISED JUNE 1, 1994

This Prospectus explains concisely what you should know before
investing in Class A shares of the Fund offered without a
sales charge through eligible employer-sponsored defined
contribution plans ("defined contribution plans").
Please read it carefully and keep it for future reference. You
can find more detailed information about the Fund in the December
1, 1993 Statement of Additional Information, as amended from time
to time. For a free copy of the Statement, or for other
information, including Prospectuses regarding another class of
Fund shares or Class A shares for other investors, call
Putnam Investor Services at 1- 800-752-9894. The Statement has
been filed with the Securities and Exchange Commission and is
incorporated into this Prospectus by reference.

PUTNAM OTC EMERGING GROWTH FUND (THE "FUND") SEEKS CAPITAL
APPRECIATION. THE FUND INVESTS PRIMARILY IN COMMON STOCKS OF
SMALL- TO MEDIUM-SIZED "EMERGING GROWTH" COMPANIES TRADED IN THE
OVER-THE-COUNTER ("OTC") MARKET. IT IS DESIGNED FOR INVESTORS
WILLING TO ASSUME ABOVE-AVERAGE RISK IN RETURN FOR ABOVE-AVERAGE
CAPITAL GROWTH POTENTIAL. THE FUND MAY TRADE SECURITIES FOR
SHORT-TERM PROFITS. FOR A DESCRIPTION OF THESE SPECULATIVE
STRATEGIES, AND THE RELATED RISKS AND EXPENSES, SEE THE SECTION
"HOW OBJECTIVE IS PURSUED".

PUTNAMINVESTMENTS
Putnam Defined
Contribution Plans
<PAGE>

ABOUT THE FUND

Expenses summary
2
.....................................................
Financial highlights
3
............ .... ..............................
.......
Objective
5
.....................................................
How objective is pursued
5
.....................................................
How performance is shown
9
... ............. ..............................
...... .
How the Fund is managed
9
.....................................................
Organization and history
10

ABOUT YOUR INVESTMENT

How to buy shares
11
.....................................................
Distribution Plan
12
............... .....................................
.
How to sell shares
13
............ .... ..............................
.......
How to exchange shares
13
............ .... ..............................
.......
How the Fund values its shares
14
....... ......... ..............................
.......
How distributions are made; tax information
14

ABOUT PUTNAM INVESTMENTS, INC
15
<PAGE>
ABOUT THE FUND

EXPENSES SUMMARY

Expenses are one of several factors to consider when investing in
the Fund. The following table summarizes your maximum
transaction costs from investing in the Fund and expenses
incurred by the Fund based on its most recent fiscal year. The
Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in Class A shares of the
Fund over specified periods.

Annual Fund Operating Expenses
(as a percentage of average net assets)

Management Fees 0.70%
12b-1 Fees 0.25%
Other Expenses 0.29%
Total Fund Operating Expenses 1.24%

EXAMPLE

Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years

$13 $39 $68 $150

The table is provided to help you understand your share
of the operating expenses which the Fund incurs. The management
fees shown in the table reflect a fee decrease in the management
fees payable to Putnam Investment Management, Inc., the Fund's
investment adviser ("Putnam Management") , and the 12b-1 fees
shown in the table reflect the maximum permitted by the Trustees
under the Distribution Plan . Actual management fees, 12b-
1 fees and total operating expenses for fiscal 1993 were
0.75% , 0.22% and 1.26%, respectively. The Example does
not represent past or future expense levels , and actual
expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but
actual annual return has varied. The Example does not reflect any
charges or expenses related to your employer's plan.
<PAGE>
FINANCIAL HIGHLIGHTS

The following tables present per share financial
information for the life of the Fund. This information has been
derived from the Fund's financial statements , which have been
audited and reported on by the Fund's independent
accountants . The Report of Independent Accountants and
financial statements included in the Fund's Annual Report to
shareholders for the 1993 fiscal year are incorporated by
reference into this Prospectus. The Fund's Annual Report, which
contains additional unaudited performance information, will be
made available without charge upon request.

FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the period)
<PAGE>

FINANCIAL
HIGHLIGHTS*
(FOR A SHARE
OUTSTANDING
THROUGHOUT
THE PERIOD)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

ELEVEN
MONTHS YEAR OCTOBER 6,
ENDED ENDED 1982
YEAR ENDED JULY 31 JULY 31 AUGUST 31TO AUG. 31
1993 1992 1991 1990 1989 1988 1987** 1986 1985 1984 1983***
CLASS A

NET ASSET VALUE,
BEGINNING OF PERIOD $9.05 $8.35 $8.20 $8.09 $6.40 $7.84 $6.56 $5.10 $4.17 $4.22 $2.50

INVESTMENT OPERATIONS
NET INVESTMENT LOSS (.06) (.04) (.01) (.03) (.03) (.04)(A)(.02)(A) (.02) (.03) (.04)(A) --(A)
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS 2.87 .83 .46 .60 1.72 (.77) 1.87 1.57 .99 .10 1.72

TOTAL FROM INVESTMENT
OPERATIONS 2.81 .79 .45 .57 1.69 (.81) 1.85 1.55 .96 .14 1.72

LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME -- -- -- -- -- -- -- -- (.03) -- --
NET REALIZED GAIN ON
INVESTMENTS (1.14) (.09) (.30) (.46) -- (.63) (.57) (.09) -- (.19) --

TOTAL DISTRIBUTIONS (1.14) (.09) (.30) (.46) -- (.63) (.57) (.09) (.03) (.19) --

NET ASSET VALUE,
END OF PERIOD $10.72 $9.05 $8.35 $8.20 $8.09 $6.40 $7.84 $6.56 $5.10 $4.17 $4.22<PAGE>
TOTAL INVESTMENT
RETURN AT NET
ASSET VALUE
(%) (B) 32.93 9.53 6.40 7.36 26.36 (9.77) 31.64 31.09 25.05(C) 3.05 76.21(C)

NET ASSETS, END OF
PERIOD (IN THOUSANDS) $364,400 $267,338 $234,055 $195,802 $180,775 $143,506 $157,094 $41,014 $20,248 $13,222 $5,422

RATIO OF EXPENSES
TO AVERAGE NET
ASSETS (%) 1.26 1.39 1.48 1.50 1.63 1.59(A) 1.49(A) 1.46 1.55(D) 1.72(A) 1.43(A)(D)
RATIO OF NET INVESTMENT
INCOME (LOSS) TO
AVERAGE NET
ASSETS (%) (.90) (.59) (.46) (.47) (.41) (.74)(A)(.62)(A) (.63) (.86)(D) 1.16(A)(.23)(A)(D)
PORTFOLIO
TURNOVER (%) 108.20 66.75 54.06 42.66 73.58 76.91 92.76 91.92 55.17(D) 104.33 67.53(D)

* TABLE HAS BEEN RESTATED TO REFLECT A 4-FOR-1 SHARE SPLIT, DECLARED BY THE FUND TO SHAREHOLDERS OF RECORD ON OCTOBER
27, 1989, PAYABLE ON OCTOBER 28, 1989. SELECTED PER SHARE DATA AND RATIOS FOR PERIODS ENDED THROUGH JULY 31, 1992 HAVE
BEEN RESTATED TO CONFORM WITH REQUIREMENTS ISSUED BY THE SEC IN APRIL 1993.
** PER SHARE NET INVESTMENT INCOME FOR THE YEAR ENDED JULY 31, 1987 HAS BEEN DETERMINED ON THE BASIS OF THE WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD.
***INVESTMENT OPERATIONS COMMENCED ON NOVEMBER 1, 1982 FOLLOWING THE RECEIPT OF THE PROCEEDS OF THE INITIAL OFFERING OF
SHARES.

(B) TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES.

(D) NOT ANNUALIZED.

</TABLE>
<PAGE>
OBJECTIVE

PUTNAM OTC EMERGING GROWTH FUND'S INVESTMENT OBJECTIVE IS CAPITAL
APPRECIATION. THE FUND IS DESIGNED FOR INVESTORS WILLING TO
ASSUME ABOVE-AVERAGE RISK IN RETURN FOR ABOVE-AVERAGE CAPITAL
GROWTH POTENTIAL. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its
objective.

HOW OBJECTIVE IS PURSUED

BASIC INVESTMENT STRATEGY

Though common stocks are normally the Fund's main investment, it
may also purchase convertible bonds, convertible preferred
stocks, warrants, preferred stocks and debt securities,
regardless of credit rating, of emerging growth companies if
Putnam Management believes they would help achieve the Fund's
objective. Securities in the lower-rated categories are
considered to be primarily speculative and may be in default.
The Fund may also hold a portion of its assets in cash or money
market instruments. Dividend and interest income is not a
consideration in the selection of portfolio investments.

FOREIGN INVESTMENTS

The Fund may buy or sell foreign currencies, foreign currency
forward contracts and call options on foreign currencies for
hedging purposes in connection with its foreign investments.

A more detailed explanation of foreign investments, and the risks
and special tax considerations associated with them, is included
in the Statement of Additional Information.

SHORT-TERM TRADING

Under certain market conditions, the Fund may seek profits by
short-term trading. The length of time the Fund has held a
particular security is not generally a consideration in
investment decisions. A change in the securities owned by the
Fund is known as "portfolio turnover." To the extent short-term
trading strategies are used, the Fund's portfolio turnover rate
may be higher than that of other mutual funds. Portfolio
turnover generally involves some expense to the Fund, including
brokerage commissions or dealer mark-ups and other transaction
costs on the sale of securities and reinvestment in other
securities. Such transactions may result in realization of
taxable capital gains. Portfolio turnover rates for the life of
the Fund are shown in the section "Financial highlights."

STOCK INDEX FUTURES AND OPTIONS

A more detailed explanation of index futures and options
transactions, including the risks associated with them, is
included in the Statement of Additional Information.

OTHER INVESTMENT PRACTICES

The Fund may also engage to a limited extent in the following
investment practices, each of which involves certain special
risks. The Statement of Additional Information contains more
detailed information about these practices, including limitations
designed to reduce these risks.

LIMITING INVESTMENT RISK

TOTAL RETURN DATA MAY FROM TIME TO TIME BE INCLUDED IN
ADVERTISEMENTS ABOUT THE FUND. "Total return" for the one-,
five- and ten year periods through the most recent calendar
quarter represents the average annual compounded rate of return
on an investment of $1,000 in the Fund at the maximum public
offering price. Total return may also be presented for other
periods or based on investment at reduced sales charge levels.
Any quotation of total return not reflecting the maximum initial
sales charge would be reduced if such sales charges were used.
Quotations of total return for any period when an expense
limitation was in effect will be greater than if the limitation
had not been in effect. The Fund's performance may be compared
to various indices. See the Statement of Additional Information.
Because shares sold through eligible defined contribution plans
are sold without a sales charge, quotations of total return
reflecting the deduction of a sales charge will be lower than the
actual total return on shares purchased through such plans.

ALL DATA IS BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DOES
NOT PREDICT FUTURE PERFORMANCE. Investment performance, which
will vary, is based on many factors, including market conditions,
the composition of the Fund's portfolio and the Fund's operating
expenses. Investment performance also often reflects the risks
associated with the Fund's investment objective and policies.
These factors should be considered when comparing the Fund's
investment results to those of other mutual funds and other
investment vehicles.

HOW THE FUND IS MANAGED

The Fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
its Distribution Plans (which are in turn allocated to the
relevant class) . The Fund also reimburses Putnam Management
for the compensation and related expenses of certain officers of
the Fund and their staff who provide administrative services to
the Fund. The total reimbursement is determined annually by the
Trustees.

ORGANIZATION AND HISTORY

The Fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. Shares of the Fund may, without shareholder
approval, be divided into two or more series of shares
representing separate investment portfolios. Any such series of
shares may be further divided, without shareholder approval, into
two or more classes of shares having such preferences and special
relative rights and privileges as the Trustees may determine.
The Fund's shares are currently divided into two classes. Only
the Fund's Class A shares are offered by this Prospectus. Class
B shares are subject to a contingent deferred sales charge and a
higher 12b-1 fee than Class A shares. Because Class B shares
generally bear greater expenses than Class A shares, the
investment return of Class B shares will be
lower than that of Class A shares. Each share has
one vote, with fractional shares voting proportionally. Shares
of each class will vote together as a single class except when
required by law or as determined by the Trustees. Shares are
freely transferable, are entitled to dividends as declared by the
Trustees, and, if the Fund were liquidated, would receive the net
assets of the Fund. The Fund may suspend the sale of shares at
any time and may refuse any order to purchase shares. Although
the Fund is not required to hold annual meetings of its
shareholders, shareholders holding at least 10% of the
outstanding shares entitled to vote have the right to call a
meeting to elect or remove Trustees, or to take other actions as
provided in the Declaration of Trust.<PAGE>
If you own fewer shares than a minimum amount set by the Trustees
(presently 20 shares), the Fund may choose to redeem your shares
and pay you for them. You will receive at least 30 days' written
notice before the Fund redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Fund
may also redeem shares if you own shares above a maximum amount
set by the Trustees. There is presently no maximum, but the
Trustees may establish one at any time, which could apply to both
present and future shareholders.

THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of the
Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Funds Corp., ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; WILLIAM F. POUNDS, VICE
CHAIRMAN. Professor of Management, Alfred P. Sloan School of
Management, M.I.T. ; JAMESON ADKINS BAXTER, President Baxter
Associates, Inc. ; HANS H. ESTIN, Vice Chairman, North
American Management; JOHN A. HILL, Principal and Managing
Director, First Reserve Corporation; ELIZABETH T. KENNAN,
President, Mount Holyoke College; LAWRENCE J. LASSER,* Vice
President of the Putnam funds. President, Chief Executive
Officer and Director of Putnam Investments, Inc. and Putnam
Management. Director, Marsh & McLennan Companies, Inc.; ROBERT
E. PATTERSON, Executive Vice President, Cabot Partners Limited
Partnership; DONALD S. PERKINS, Director of various corporations,
including AT&T, K mart Corporation and Time Warner Inc.; GEORGE
PUTNAM, III,* President, New Generation Research, Inc.; A.J.C.
SMITH,* Chairman Chief Executive Officer and Director, Marsh &
McLennan Companies, Inc.; and W. NICHOLAS THORNDIKE, Director of
various corporations and charitable organizations, including
Providence Journal Co. Also, Trustee and President,
Massachusetts General Hospital and Trustee of Eastern Utilities
Associates. The Fund's Trustees are also Trustees of the other
Putnam funds. Those marked with an asterisk (*) are "interested
persons" of the Fund, Putnam Management or Putnam Mutual Funds.

ABOUT YOUR INVESTMENT

HOW TO BUY SHARES

ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR
EMPLOYER'S DEFINED CONTRIBUTION PLAN. FOR MORE INFORMATION ABOUT
HOW TO PURCHASE SHARES OF THE FUND THROUGH YOUR EMPLOYER'S PLAN
OR LIMITATIONS ON THE AMOUNT THAT MAY BE PURCHASED, PLEASE
CONSULT YOUR EMPLOYER. Shares are sold to eligible defined
contribution plans at the net asset value per share next
determined after receipt of an order by Putnam Mutual Funds.
Orders must be received by Putnam Mutual Funds before the close
of regular trading on the New York Stock Exchange in order to
receive that day's net asset value. In order to be eligible to
purchase shares at net asset value, defined contribution plans
must initially invest at least $1 million or be sponsored
by companies with more than 750 employees. Eligible plans may
make additional investments of any amount at any time. To
eliminate the need for safekeeping, the Fund will not issue
certificates for your shares.

On sales at net asset value to a participant-directed
qualified retirement plan initially investing less than $20
million in Putnam funds and other investments managed by Putnam
Management or its affiliates (including a plan sponsored by an
employer with more than 750 employees), Putnam Mutual Funds pays
commissions on cumulative purchases during the life of the
account at the rate of 1.00% of the amount under $3 million and
0.50% thereafter. On sales at net asset value to all other
participant-directed qualified retirement plans, Putnam Mutual
Funds pays commissions on the initial investment and on
subsequent net quarterly sales at the rate of 0.15% . Putnam
Mutual Funds may, at its expense, provide additional promotional
incentives or payments to dealers that sell shares of the Putnam
funds. In some instances, these incentives or payments may be
offered only to certain dealers who have sold or may sell
significant amounts of shares or paid by dealers to their
employees based on pre-established sales levels.

DISTRIBUTION PLAN

The purpose of the Plan is to permit the Fund to compensate
Putnam Mutual Funds for services provided and expenses incurred
by it in promoting the sale of Fund shares , reducing
redemptions, or maintaining or improving services provided to
shareholders by Putnam Mutual Funds or dealers. The Plan
provides for payments by the Fund to Putnam Mutual Funds at the
annual rate of up to 0.35% of the Fund's average net assets
attributable to Class A shares, subject to the authority
of the Fund's Trustees to reduce the amount of payments or to
suspend the Plan for such periods as they may determine. Subject
to these limitations, the amount of such payments and the
specific purposes for which they are made shall be determined by
the Trustees of the Fund. At present, the Trustees have approved
payments under the Plan at the annual rate of 0.25% of the Fund's
average net assets attributable to Class A shares for the
purpose of compensating Putnam Mutual Funds for services provided
and expenses incurred by it as principal underwriter of the
Fund's shares, including payments made by it to dealers under the
Service Agreements referred to below. Should the Trustees decide
in the future to approve payments in excess of this amount,
shareholders will be notified and this Prospectus will be
revised.

When Putnam Mutual Funds is not dealer of record, Putnam Mutual
Funds makes quarterly payments to qualifying dealers based on the
average net asset value of Class A shares which
are attributable to shareholders for whom the dealers are
designated as the dealer of record, in order to compensate such
dealers (including, for this purpose, such financial
institutions) for services provided in connection with sales of
Class A shares and the maintenance of shareholder
accounts. This calculation excludes until one year after
purchase shares purchased at net asset value after March 31, 1994
by shareholders investing $1 million or more and by participant-
directed qualified retirement plans sponsored by employers with
more than 750 employees ("NAV Shares"), except for shares owned
by certain investors investing $1 million or more that have made
arrangements with Putnam Mutual Funds and whose dealer of record
waived the sales commission. Except as stated below, Putnam
Mutual Funds makes such payments at the annual rate of 025% of
such average net asset value for shares outstanding as of July
14, 1993 and 0.20% of the average net asset value of shares
acquired after that date (including shares acquired through
reinvestment of distributions). For participant-directed
qualified retirement plans initially investing less than $20
million in Putnam funds and other investments managed by Putnam
Management or its affiliates, Putnam Mutual Fund's payments to
qualifying dealers on NAV Shares are 100% of the rate stated
above if average plan assets in Putnam funds (excluding money
market funds) during the quarter are less than $20 million, 60%
of the stated rate if average plan assets are at least $20
million but less than $30 million, and 40% of the stated rate if
average plan assets are $30 million or more. For all other
participant-directed qualified retirement plans purchasing NAV
Shares, Putnam Mutual Funds makes quarterly payments to
qualifying dealers at the annual rate of 0.10% of the average net
asset value of such shares. Putnam Mutual Funds may suspend
or modify these payments at any time, and payments are subject to
the continuation of the Plan described above, the terms
of Service Agreements between dealers and Putnam Mutual Funds,
and any applicable limits imposed by the National Association of
Securities Dealers, Inc.

HOW TO SELL SHARES

SUBJECT TO ANY RESTRICTIONS IMPOSED BY YOUR EMPLOYER'S PLAN, YOU
CAN SELL YOUR SHARES THROUGH THE PLAN TO THE FUND ANY DAY THE NEW
YORK STOCK EXCHANGE IS OPEN. For more information about how to
sell shares of the Fund through your employer's plan, including
any charges that may be imposed by the plan, please consult with
your employer.

Your plan administrator must send a signed letter of instruction
to Putnam Investor Services. The price you will receive is the
next net asset value calculated after the Fund receives your
request in proper form. All requests must be received by the
Fund prior to the close of regular trading on the New York Stock
Exchange in order to receive that day's net asset value. If you
sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives
must be guaranteed by a bank, broker-dealer or certain other
financial institutions. See the Statement of Additional
Information for more information about where to obtain a
signature guarantee.

THE FUND GENERALLY PROVIDES PAYMENT FOR YOUR SHARES THE BUSINESS
DAY AFTER THE REQUEST IS RECEIVED. Under unusual circumstances,
the Fund may suspend repurchases, or postpone payment for more
than seven days, as permitted by federal securities law. The
Fund will only repurchase shares for which it has received
payment.

HOW TO EXCHANGE SHARES

Subject to any restrictions contained in your plan, you can
exchange your shares for shares of other Putnam funds available
through your plan at net asset value. Contact your plan
administrator or Putnam Investor Services on how to exchange your
shares or how to obtain prospectuses of other Putnam funds in
which you may invest. Shares of certain Putnam funds are not
available to residents of all states.

HOW THE FUND VALUES ITS SHARES

THE FUND CALCULATES THE NET ASSET VALUE OF A SHARE BY DIVIDING
THE TOTAL VALUE OF ITS ASSETS, LESS LIABILITIES, BY THE NUMBER OF
ITS SHARES OUTSTANDING. SHARES ARE VALUED AS OF THE CLOSE OF
REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE EACH DAY THE
EXCHANGE IS OPEN. Portfolio securities for which market
quotations are readily available are stated at market value.
Short-term investments that will mature in 60 days or less are
stated at amortized cost, which approximates market value. All
other securities and assets are valued at their fair value
following procedures approved by the Trustees.

HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION

The Fund distributes any net investment income and any net
realized capital gains at least annually. Distributions from
capital gains are made after applying any available capital loss
carryovers.

The terms of your plan will govern how your plan may receive
distributions from the Fund. Generally, periodic distributions
from the Fund to your plan are reinvested in additional Fund
shares, although your plan may permit Fund distributions from net
investment income to be received by you in cash while reinvesting
capital gains distributions in additional shares or all Fund
distributions to be received in cash. If another option is not
selected, all distributions will be reinvested in additional Fund
shares.

The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal
taxes on income and gains it distributes. The Fund will
distribute substantially all of its ordinary income and capital
gain net income on a current basis. Generally, Fund distributions
are taxable as ordinary income, except that any distributions of
net long-term capital gains will be taxed as such. However,
distributions by the Fund to employer-sponsored defined
contribution plans that qualify for tax-exempt treatment under
federal income tax laws will not be taxable. Special tax rules
apply to investments through such plans. You should consult your
tax adviser to determine the suitability of the Fund as an
investment through such a plan and the tax treatment of
distributions (including distributions of amounts attributable to
an investment in the Fund) from such a plan.

The foregoing is a summary of certain federal income tax
consequences of investing in the Fund. You should consult your
tax adviser to determine the precise effect of an investment in
the Fund on your particular tax situation(including possible
liability for state and local taxes).

ABOUT PUTNAM INVESTMENTS, INC.

PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937.
Putnam Mutual Funds is the principal underwriter of the Fund and
of other Putnam funds. Putnam Defined Contribution Plans is a
division of Putnam Mutual Funds. Putnam Fiduciary Trust Company
is the Fund's custodian. Putnam Investor Services, a division of
Putnam Fiduciary Trust Company, is the Fund's investor servicing
and transfer agent.

Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are located at One Post Office Square, Boston,
Massachusetts, 02109 and are subsidiaries of Putnam Investments,
Inc., which is wholly-owned by Marsh & McLennan Companies, Inc.,
a publicly owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
Differences between the typeset (printed) prospectus and the
EDGAR filing version.

1. Each interior page of the prospectus includes the word
"prospectus" at the bottom of the page.

2. Pagination is different in printed prospectus.

3. Section headings and subheadings in the printed prospectus
are printed in boldface type with colored ink.

4. The first page of the printed prospectus contains an
illustration of balanced scales, Putnam's logo.

5. The last page of the printed prospectus contains a graphic
recyclable logo.
<PAGE>

DIFFERENCES BETWEEN THE TYPESET DEFINED CONTRIBUTION AND CLASS Y
(PRINTED)
PROSPECTUS AND THE EDGAR FILING VERSION.

1. PAGINATION IS DIFFERENT IN PRINTED PROSPECTUS

2. SECTION HEADINGS AND SUBHEADINGS IN THE PRINTED PROSPECTUS

ARE PRINTED IN BOLDFACE TYPE

3. THE FIRST FEW DESCRIPTIVE LINES OF CERTAIN PARAGRAPHS, AND

CERTAIN OTHER EMPHASIZED PHRASES, ARE PRINTED IN BOLDFACE
TYPE

4. IN THE PRINTED PROSPECTUS, THE DASHES AT THE BEGINNING OF
CERTAIN SENTENCES ARE REPLACED BY A SOLID BOX

5. THE FIRST PAGE OF THE PRINTED PROSPECTUS CONTAINS A BOX
WITH AN ILLUSTRATION OF THE BALANCE SCALES, THE PUTNAM
LOGO

<PAGE>