-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T14opU8udajIHYvJOCLbsZ9pRm6QQuysC1bAW/08QAhTGZn8TJpRZVflp1kkzfS0 N7ONjRI4YdeFifwijmPA0g== 0000928816-00-000214.txt : 20000501 0000928816-00-000214.hdr.sgml : 20000501 ACCESSION NUMBER: 0000928816-00-000214 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20000428 EFFECTIVENESS DATE: 20000428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM VARIABLE TRUST CENTRAL INDEX KEY: 0000822671 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042986134 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-17486 FILM NUMBER: 613685 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-05346 FILM NUMBER: 613686 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ STREET 2: MAILSTOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 8002551581 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM CAPITAL MANAGER TRUST /MA/ DATE OF NAME CHANGE: 19920703 485BPOS 1 PUTNAM VARIABLE TRUST As filed with the Securities and Exchange Commission on April 28, 2000 Registration No. 33-17486 811-5346 - ----------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM N-1A ---- REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/ ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 24 /X/ and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY /X/ ACT OF 1940 ---- ---- Amendment No. 25 /X/ (Check appropriate box or boxes) ---- -------------------- PUTNAM VARIABLE TRUST (Exact name of registrant as specified in charter) One Post Office Square, Boston, Massachusetts 02109 (Address of principal executive offices) Registrant's Telephone Number, including Area Code (617) 292-1000 -------------------- It is proposed that this filing will become effective (check appropriate box) - ---- / / immediately upon filing pursuant to paragraph (b) - ---- - ---- / X / on April 30, 2000 pursuant to paragraph (b) - ---- - ---- / / 60 days after filing pursuant to paragraph (a)(1) - ---- - ---- / / on (date) pursuant to paragraph (a)(1) - ---- - ---- / / 75 days after filing pursuant to paragraph (a)(2) - ---- - ---- / / on (date) pursuant to paragraph (a)(2) of Rule 485. - ---- If appropriate, check the following box: - ---- / / this post-effective amendment designates a new - ---- effective date for a previously filed post-effective amendment. ----------------------- JOHN R. VERANI, Vice President PUTNAM VARIABLE TRUST One Post Office Square Boston, Massachusetts 02109 (Name and address of agent for service) ----------------------- Copy to: JOHN W. GERSTMAYR, Esquire ROPES & GRAY One International Place Boston, Massachusetts 02110 ----------------------- Prospectus April 30, 2000 Putnam Variable Trust Class IA Shares Growth Funds Putnam VT Asia Pacific Growth Fund Putnam VT Global Growth Fund Putnam VT Growth Opportunities Fund Putnam VT Health Sciences Fund Putnam VT International Growth Fund Putnam VT International New Opportunities Fund Putnam VT Investors Fund Putnam VT New Opportunities Fund Putnam VT OTC & Emerging Growth Fund Putnam VT Research Fund Putnam VT Vista Fund Putnam VT Voyager Fund Asset Allocation Fund Putnam VT Global Asset Allocation Growth and Income Funds Putnam VT The George Putnam Fund of Boston Putnam VT Growth and Income Fund Putnam VT International Growth and Income Fund Putnam VT New Value Fund Putnam VT Small Cap Value Fund Putnam VT Utilities Growth and Income Fund Income Funds Putnam VT American Government Income Fund Putnam VT Diversified Income Fund Putnam VT High Yield Fund Putnam VT Income Fund Money Market Fund Putnam VT Money Market Fund This prospectus explains what you should know about the funds in Putnam Variable Trust, which are available for purchase by separate accounts of insurance companies. Putnam Investment Management, Inc. (Putnam Management), which has managed mutual funds since 1937, manages the funds. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS Fund summaries (including Goal, Main investment strategies, Main risks and Performance Information) What are the funds' main investment strategies and related risks? Who manages the funds? How to buy and sell fund shares How do the funds price their shares? Fund distributions and taxes Financial highlights Fund summaries The following summaries identify each fund's goal, main investment strategies and the main risks that could adversely affect the value of a fund's shares and the total return on your investment. Each summary also contains performance information that provides some indication of each fund's risks. The chart contained in each summary shows year-to-year changes in the performance of the fund's class IA shares. A table following each chart compares the fund's performance to that of broad measures of market performance. Of course, a fund's past performance is not necessarily an indication of future performance. None of the performance information reflects the impact of insurance-related charges or expenses. If it did, performance would be less than that shown. Please refer to the prospectus for your insurance contract for information about those charges and performance data reflecting those charges and expenses. More detailed descriptions of the funds, including the risks associated with investing in the funds, can be found further back in this prospectus. Please be sure to read this additional information before you invest. You can lose money by investing in any of the funds. A fund may not achieve its goal, and none of the funds is intended as a complete investment program. An investment in any fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although Putnam VT Money Market Fund seeks to preserve the value of your investment at $1.00 per share, you may lose money by investing in that fund. PUTNAM VT AMERICAN GOVERNMENT INCOME FUND GOAL The fund seeks high current income with preservation of capital as its secondary objective. MAIN INVESTMENT STRATEGIES -- U.S. GOVERNMENT BONDS We invest mostly in bonds that * are obligations of the U.S. government, its agencies and instrumentalities, * are either backed by the full faith and credit of the United States, such as U.S. Treasury bonds and Ginnie Mae mortgage-backed bonds, or backed only by the credit of a federal agency or government sponsored entity, such as Fannie Mae mortgage-backed bonds, and * have intermediate- to long-term maturities (three years or longer). We may also invest in mortgage-backed investments of private issuers rated AAA or its equivalent, at the time of purchase, by a nationally recognized securities rating agency, or if unrated, that we determine to be of comparable quality. MAIN RISKS * The risk that movements in financial markets will adversely affect the value of the fund's investments. This risk includes interest rate risk, which means that the prices of the fund's investments are likely to fall if interest rates rise. Interest rate risk is generally highest for investments with long maturities. * The risk that the issuers of the fund's investments will not make timely payments of interest and principal. * The risk that, compared to other debt, mortgage-backed investments may increase in value less when interest rates decline, and decline in value more when interest rates rise. PERFORMANCE INFORMATION Performance information will be available after the fund completes a full calendar year of operation. PUTNAM VT ASIA PACIFIC GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- ASIAN AND PACIFIC BASIN STOCKS We normally invest mostly in common stocks of Asian or Pacific Basin companies. We first select the countries and industries we believe are attractive. We then seek stocks offering opportunity for gain. We look for companies with stock prices that reflect a lower value than that which we place on the company. We also look for the presence of factors we think will cause the stock price to increase toward that value. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risks of investing mostly in one geographic region. Investments in a single region, even though representing a number of different countries within the region, may be affected by common economic forces and other factors. This vulnerability to factors affecting Asian and Pacific Basin investments is significantly greater than for a more geographically diversified fund, which may result in greater losses and volatility. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1996 9.10% 1997 -14.66% 1998 - 5.48% 1999 107.56% Year-to-date performance through 3/31/2000 was - 6.64%. During the periods shown in the bar chart, the highest return for a quarter was 41.72% (quarter ending 12/31/99) and the lowest return for a quarter was -15.83% (quarter ending 12/31/97). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (5/1/95) Class IA 107.56% 14.33% MSCI Pacific Index 57.63% 2.11% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1995. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) Pacific Index, an unmanaged index of equity securities issued by companies located in one of five Asian countries and listed on the exchanges of Australia, New Zealand, Japan, Hong Kong, Singapore/Malaysia, with all values expressed in U.S. dollars. PUTNAM VT DIVERSIFIED INCOME FUND GOAL The fund seeks as high a level of current income as Putnam Management believes is consistent with preservation of capital. MAIN INVESTMENT STRATEGIES -- MULTI-SECTOR BONDS We invest mostly in bonds that * are obligations of corporations and governments worldwide, * are a combination of investment-grade and below investment-grade securities (junk bonds), and * have intermediate- to long-term maturities (three years or longer). We invest a portion of the fund in each of three sectors: * U.S. and investment-grade sector: U.S. government securities and investment-grade bonds of U.S. corporations. * High yield sector: lower-rated bonds of U.S. corporations. * International sector: bonds of foreign governments and corporations, including both investment-grade and lower-rated securities. MAIN RISKS * The risk that movements in financial markets will adversely affect the value of the fund's investments. This risk includes interest rate risk, which means that the prices of the fund's investments are likely to fall if interest rates rise. Interest rate risk is generally highest for investments with long maturities. * The risk that the issuers of the fund's investments will not make timely payments of interest and principal. This credit risk is higher for debt that is below investment grade in quality. Because the fund invests significantly in junk bonds, this risk is heightened for the fund. Investors should carefully consider the risks associated with an investment in the fund. * The risk that, compared to other debt, mortgage-backed investments may increase in value less when interest rates decline, and decline in value more when interest rates rise. * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments in foreign markets. These risks are increased for investments in emerging markets. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1994 -4.23% 1995 19.13% 1996 8.81% 1997 7.38% 1998 -1.37% 1999 1.66% Year-to-date performance through 3/31/2000 was 0.63%. During the periods shown in the bar chart, the highest return for a quarter was 5.97% (quarter ending 6/30/95) and the lowest return for a quarter was - 4.94% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (9/15/93) Class IA 1.66% 6.89% 5.10% Lehman Brothers Mortgage-Backed Bond Index 1.85% 7.98% 6.21% Lehman Brothers Aggregate Bond Index -0.82% 7.73% 5.65% Salomon Brothers Non- U.S. World Government Bond Index -4.26% 6.42% 5.48% First Boston High Yield Bond Index 3.28% 9.08% 7.77% The fund's performance is compared to the Lehman Brothers Mortgage- Backed Bond Index, an unmanaged index of U.S. government and mortgage-backed securities; the Lehman Brothers Aggregate Bond Index, an unmanaged index that is frequently used as a broad market measure for U.S denominated investment grade fixed-income securities; the Salomon Brothers Non-U.S. World Government Bond Index, an unmanaged index of bonds issued by ten countries, excluding the United States; and the First Boston High Yield Bond Index, an unmanaged index of lower-rated, higher-yielding U.S. corporate bonds. The Lehman Brothers Aggregate Bond Index is replacing the Lehman Brothers Mortgage-Backed Bond Index because Putnam Management believes the Lehman Brothers Aggregate Bond Index is a more appropriate index against which to compare the fund's performance. PUTNAM VT THE GEORGE PUTNAM FUND OF BOSTON GOAL The fund seeks to provide a balanced investment composed of a well diversified portfolio of stocks and bonds which produce both capital growth and current income. MAIN INVESTMENT STRATEGIES -- VALUE STOCKS AND BONDS We invest mainly in a combination of U.S. value stocks and bonds with a greater focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We buy bonds of governments and private companies that are mostly investment-grade in quality with intermediate- to long-term maturities (three years or longer). We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk that prices of bonds we buy will fall if interest rates rise. Interest rate risk is generally higher for investments with longer maturities. * The risk that issuers of bonds we buy will not make timely payments of interest and principal. This credit risk is generally higher for debt that is below investment-grade in quality. * The risk that our allocation of investments between stocks and bonds may adversely affect the fund's performance. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1999 -0.36 Year-to-date performance through 3/31/2000 was -0.80%. During the periods shown in the bar chart, the highest return for a quarter was 4.92% (quarter ending 6/30/99) and the lowest return for a quarter was - 6.80% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (4/30/98) Class IA -0.36% 1.97% S&P 500 Index 21.04% 19.80% Lehman Brothers Government/ Corporate Bond Index -2.16% 2.95% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended July 31, 1999. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Lehman Brothers Government/Corporate Bond Index, an unmanaged index of publicly issued U.S. governmental and corporate debt obligations used as a general measure of the performance of fixed-income securities. PUTNAM VT GLOBAL ASSET ALLOCATION FUND GOAL The fund seeks a high level of long-term total return consistent with preservation of capital. MAIN INVESTMENT STRATEGIES -- ASSET ALLOCATION We invest in a wide variety of equity and fixed-income securities both of U.S. and foreign issuers. We may invest in securities in the following four investment categories, which we believe represent large, well-differentiated classes of securities with distinctive investment characteristics: * U.S. Equities: This sector will invest primarily in growth and value stocks of U.S. companies. Growth stocks are issued by companies whose earnings we believe are likely to grow faster than the economy as a whole. Growth in earnings may lead to an increase in the price of the stock. Value stocks are those we believe are currently undervalued compared to their true worth. If we are correct and other investors recognize the value of the company, the price of the stock may rise. * International Equities: This sector will invest primarily in growth and value stocks principally traded in foreign securities markets. * U.S. Fixed-income: This sector will invest primarily in fixed-income securities of U.S. companies or the U.S. government, its agencies or instrumentalities, mortgage-backed and asset-backed securities, convertible securities and preferred stock. * International Fixed-income: This sector will invest primarily in fixed-income securities denominated in foreign currencies of non-U.S. companies or foreign governmental issuers or supranational agencies. The allocation of fund assets assigned to each investment category will be reevaluated at least quarterly based on an assessment of the relative market opportunities and risks of each investment category taking into account various economic and market factors. The fund may from time to time invest in all or any one of the investment categories as we may consider appropriate in response to changing market conditions. We expect that under normal market conditions the fund will invest a majority of its assets in equity securities. We can invest in companies of any size. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. * The risk that prices of bonds we buy will fall if interest rates rise. Interest rate risk is generally highest for investments with longer maturities. * The risk that issuers of bonds we buy will not make timely payments of interest and principal. This credit risk is generally higher for debt that is below investment-grade in quality. * The risk that, compared to other debt, mortgage-backed investments may increase in value less when interest rates decline, and decline in value more when interest rates rise. * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risk that our allocation of investments between stocks and bonds may adversely affect the fund's performance. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1990 0.18% 1992 19.02% 1994 6.29% 1996 17.48% 1998 -2.50% 2000 24.71% 2002 15.62% 2004 19.67% 2006 13.47% 2008 11.85% Year-to-date performance through 3/31/2000 was 0.95%. During the periods shown in the bar chart, the highest return for a quarter was 14.51% (quarter ending 12/31/98) and the lowest return for a quarter was -10.30% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IA 11.85% 16.97% 12.26% MSCI World Index 24.95% 19.76% 11.43% The fund's performance is compared to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index of global equity securities, with all values expressed in U.S. dollars. PUTNAM VT GLOBAL GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- GLOBAL GROWTH STOCKS We normally invest in common stocks of companies worldwide. We invest mainly in growth stocks, which are those issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in earnings may lead to an increase in the price of the stock. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1991 15.01% 1992 -0.36% 1993 32.40% 1994 -0.96% 1995 15.67% 1996 17.20% 1997 14.33% 1998 29.71% 1999 65.00% Year-to-date performance through 3/31/2000 was 4.61%. During the periods shown in the bar chart, the highest return for a quarter was 48.01% (quarter ending 12/31/99) and the lowest return for a quarter was -12.18% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (5/1/90) Class IA 65.00% 27.10% 17.21% MSCI World Index 24.94% 19.76% 13.82% MSCI All-Country World Free 30.90% 12.39% 10.05% The fund's performance is compared to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index of global equity securities composed of companies in 22 Developed Market countries in North America, Europe and the Asia/Pacific Region with all values expressed in U.S. dollars. The fund's performance is also compared to the Morgan Stanley Capital International (MSCI) All-Country World Free Index, an unmanaged index of global equity securities of companies in 47 Developed and Emerging Market Countries in the Americas, Europe/Middle East and Asia/Pacific Region with all values expressed in U.S. dollars. The MSCI All-Country World Free Index is replacing the MSCI World Index because Putnam Management believes the MSCI All-Country World Free Index is a more appropriate index against which to compare the fund's performance. PUTNAM VT GROWTH AND INCOME FUND GOAL The fund seeks capital growth and current income. MAIN INVESTMENT STRATEGIES -- VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1990 1.96% 1991 19.05% 1992 9.75% 1993 14.27% 1994 0.35% 1995 36.71% 1996 21.92% 1997 24.15% 1998 15.42% 1999 1.59% Year-to-date performance through 3/31/2000 was - 1.76%. During the periods shown in the bar chart, the highest return for a quarter was 16.62% (quarter ending 12/31/98) and the lowest return for a quarter was - 10.14% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IA 1.59% 19.39% 14.00% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT GROWTH OPPORTUNITIES FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest in a relatively small number of companies that we believe will benefit from long-term trends in the economy, business conditions, consumer behavior or public perceptions of the economic environment. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of loss from investing in fewer issuers than a fund that invests more broadly. This vulnerability to factors affecting a single investment can result in greater fund losses and volatility. PERFORMANCE INFORMATION Performance information will be available after the fund completes a full calendar year of operation. PUTNAM VT HEALTH SCIENCES FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies in the health sciences industries, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest mainly in midsized and large companies. Industry focus. We invest primarily in companies that provide health care services, applied research and development, pharmaceutical products, and medical equipment and supplies, and companies that we believe will grow as a result of their products, patents or other market advantages in the health sciences industries. Events that affect the health sciences industries will have a greater effect on the fund than they would on a fund that is more widely diversified among a number of unrelated industries. Examples include technological advances that make existing products and services obsolete, and changes in regulatory policies concerning approvals of new drugs, medical devices or procedures. In addition, changes in governmental payment systems and use of managed care arrangements may be more likely to adversely affect the fund. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of investing in a single group of industries. Investments in the health sciences industries, even though representing interests in different companies within these industries, may be affected by common economic forces and other factors. This vulnerability to factors affecting the health sciences industries is significantly greater than for a fund that invests in a broader range of industries , and may result in greater fund losses and volatility. * The risk of loss from investing in fewer issuers than a fund that invests more broadly. The fund is "non-diversified," which means that it may invest more of its assets in the securities of fewer companies than a "diversified" fund. This vulnerability to factors affecting a single investment can result in greater fund losses and volatility. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1999 -3.93 Year-to-date performance through 3/31/2000 was 14.57%. During the periods shown in the bar chart, the highest return for a quarter was 9.25% (quarter ending 12/31/99) and the lowest return for a quarter was -5.59% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (4/30/98) Class IA -3.93% 3.08% S&P 500 Index 21.04% 19.80% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1999. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT HIGH YIELD FUND GOAL The fund seeks high current income. Capital growth is a secondary goal when consistent with high current income. MAIN INVESTMENT STRATEGIES -- LOWER-RATED BONDS We invest mostly in bonds that * are obligations of U.S. corporations, * are below investment grade in quality (junk bonds), and * have intermediate- to long-term maturities (three years or longer). MAIN RISKS * The risk that the issuers of the fund's investments will not make timely payments of interest and principal. This credit risk is higher for debt that is below investment grade in quality. Because the fund invests mainly in junk bonds, this risk is heightened for the fund. Investors should carefully consider the risks associated with an investment in the fund * The risk that movements in financial markets will adversely affect the value of the fund's investments. This risk includes interest rate risk, which means that the prices of the fund's investments are likely to fall if interest rates rise. Interest rate risk is generally highest for investments with long maturities. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1990 -9.98% 1991 44.83% 1992 18.98% 1993 19.57% 1994 -0.94% 1995 18.32% 1996 12.81% 1997 14.34% 1998 -5.86% 1999 5.92% Year-to-date performance through 3/31/2000 was - 0.60%. During the periods shown in the bar chart, the highest return for a quarter was 19.79% (quarter ending 3/31/91) and the lowest return for a quarter was - 9.95% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IA 5.92% 8.76% 10.83% First Boston High Yield Bond Index 3.28% 9.08% 11.06% The fund's performance is compared to the First Boston High Yield Bond Index, an unmanaged index of lower-rated, higher-yielding U.S. corporate bonds. The First Boston High Yield Bond Index includes over 180 issues with an average maturity range of 7 to 10 years. PUTNAM VT INCOME FUND GOAL The fund seeks current income consistent with preservation of capital. MAIN INVESTMENT STRATEGIES -- MULTI-SECTOR BONDS We invest mostly in bonds that * are obligations of corporations and governments worldwide denominated in U.S. dollars, * are a combination of investment grade and below investment-grade securities (junk bonds), and * have intermediate- to long-term maturities (three years or longer). MAIN RISKS * The risk that movements in financial markets will adversely affect the value of the fund's investments. This risk includes interest rate risk, which means that the prices of the fund's investments are likely to fall if interest rates rise. Interest rate risk is generally highest for investments with long maturities . * The risk that the issuers of the fund's investments will fail to make timely payments of interest and principal . This credit risk is higher for debt that is below investment-grade quality. Because the fund invests significantly in junk bonds, this risk is heightened for the fund. Investors should carefully consider the risks associated with an investment in the fund. * The risk that , compared to other debt, mortgage-backed investments may increase in value less when interest rates decline, and decline in value more when interest rates rise. PERFORMANCE INFORMATION Prior to April 9, 1999, the fund's policies required it to invest at least 25% of its assets in U.S. government securities and limited the amount of assets invested in securities rated below A. Consequently, the historic information in the table does not reflect the fund's performance under its current investment policies . [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1990 7.51% 1991 17.28% 1992 7.49% 1993 11.28% 1994 -3.23% 1995 20.44% 1996 2.42% 1997 8.64% 1998 8.25% 1999 -2.07% Year-to-date performance through 3/31/2000 was 1.33%. During the periods shown in the bar chart, the highest return for a quarter was 6.78% (quarter ending 6/30/95) and the lowest return for a quarter was - 3.17% (quarter ending 3/31/96). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IA -2.07% 7.27% 7.56% Lehman Brothers Aggregate Bond Index -0.82% 7.73% 7.70% The fund's performance is compared to the Lehman Brothers Aggregate Bond Index, an unmanaged index of investment-grade bonds. PUTNAM VT INTERNATIONAL GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- INTERNATIONAL STOCKS We normally invest mostly in common stocks of companies outside the United States. We first select the countries and industries we believe are attractive. We then seek stocks offering opportunity for gain. We look for companies with stock prices that reflect a lower value than that which we place on the company. We also look for the presence of factors we think will cause the stock price to increase toward that value. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments in international markets. The risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1998 18.69% 1999 60.21% Year-to-date performance through 3/31/2000 was 6.10%. During the periods shown in the bar chart, the highest return for a quarter was 35.46% (quarter ending 12/31/99) and the lowest return for a quarter was - 18.92% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IA 60.21% 30.33% MSCI EAFE Index 26.96% 15.76% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index of equity securities from Europe, Australia, and the Far East, with all values expressed in U.S. dollars. PUTNAM VT INTERNATIONAL GROWTH AND INCOME FUND GOAL The fund seeks capital growth. Current income is a secondary objective. MAIN INVESTMENT STRATEGIES -- INTERNATIONAL VALUE STOCKS We normally invest mostly in common stocks of companies outside the United States. We invest mainly in value stocks that offer the potential for income. We look for companies undergoing positive change. Value stocks are those that we believe are currently undervalued by the market. If we are correct and other investors recognize the value of the company, the price of these stocks may rise. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments . These risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we buy. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1998 11.28% 1999 24.59% Year-to-date performance through 3/31/2000 was 2.65%. During the periods shown in the bar chart, the highest return for a quarter was 16.54% (quarter ending 12/31/98) and the lowest return for a quarter was - 17.32% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IA 24.59% 18.37% MSCI EAFE Index 26.96% 15.76% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index of equity securities from Europe, Australia, and the Far East, with all values expressed in U.S. dollars. PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES -- INTERNATIONAL GROWTH STOCKS We normally invest mainly in common stocks of companies outside the United States. We invest mainly in growth stocks, which are those issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in earnings may lead to an increase in the price of the stock. We may invest in companies of any size. We may invest in both established and developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance , including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1998 15.58% 1999 102.96% Year-to-date performance through 3/31/2000 was 4.68%. During the periods shown in the bar chart, the highest return for a quarter was 57.18% (quarter ending 12/31/99) and the lowest return for a quarter was - 16.61% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IA 102.96% 32.95% MSCI EAFE Index 26.96% 15.76% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index of international equity securities from Europe, Australia and the Far East, with all values expressed in U.S. dollars. PUTNAM VT INVESTORS FUND GOAL The fund seeks long-term growth of capital and any increased income that results from this growth. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1999 30.13% Year-to-date performance through 3/31/2000 was 2.97%. During the periods shown in the bar chart, the highest return for a quarter was 24.67% (quarter ending 12/31/99) and the lowest return for a quarter was -4.93% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (4/30/98) Class IA 30.13% 28.40% S&P 500 Index 21.04% 19.80% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT MONEY MARKET FUND GOAL The fund seeks as high a rate of current income as Putnam Management believes is consistent with preservation of capital and maintenance of liquidity. MAIN INVESTMENT STRATEGIES -- INCOME We seek to maintain a stable net asset asset value of $1.00 per share for the fund. We invest primarily in instruments that: * are high quality and * have a short-term maturity. Industry focus. We may invest without limit in money market investments from the banking, personal credit and business credit industries. We may invest over 25% of the fund's assets in money market investments from the personal credit or business credit industries only when we determine that the yields on those investments exceed the yields that are available from eligible investments of issuers in the banking industry. The value of the fund's shares may be more vulnerable than the values of shares of money market funds that invest in issuers in a greater number of industries. To the extent that a fund invests significantly in a particular industry, it runs an increased risk of loss if economic or other developments affecting that industry cause the prices of related money market investments to fall. MAIN RISKS * The risk that the value of your investment may be eroded over time by the effects of inflation. * The risk that, as a result of, for example, a deterioration in the credit quality of issuers whose securities the fund holds or an increase in interest rates, the fund may be unable to maintain a net asset value of $1.00 per share. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1990 7.98% 1991 5.92% 1992 3.57% 1993 2.79% 1994 3.82% 1995 5.46% 1996 5.08% 1997 5.22% 1998 5.19% 1999 4.86% Year-to-date performance through 3/31/2000 was 1.36%. During the periods shown in the bar chart, the highest return for a quarter was 1.99% (quarter ending 6/30/90) and the lowest return for a quarter was 0.67% (quarter ending 6/30/93). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IA 4.86% 5.16% 4.98% Merrill Lynch 91-Day Treasury Bill Index 4.85% 5.35% 5.28% Lipper Money Market Average 4.49% 4.95% 4.80% The fund's performance is compared to the Merrill Lynch 91-Day Treasury Bill Index, an unmanaged index that seeks to measure the performance of United States Treasury bills currently available in the marketplace and the Lipper Money Market Average is an arithmetic average of the total return of all money market mutual funds tracked by Lipper , Inc. PUTNAM VT NEW OPPORTUNITIES FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks in sectors of the economy that we believe have high growth potential. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. The growth sectors we currently target include communications, media/entertainment, medical technology/cost containment, industrial and environmental services, applied/advanced technology, financial services, consumer products and services and business services. We invest in companies of all sizes. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of investing in a limited group of market sectors. The vulnerability of the fund to factors affecting the sectors chosen may be significantly greater than that of a fund that invests in a broader range of sectors and may result in greater fund losses and volatility. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1995 44.87% 1996 10.17% 1997 23.29% 1998 24.38% 1999 69.35% Year-to-date performance through 3/31/2000 was 15.33%. During the periods shown in the bar chart, the highest return for a quarter was 49.47% (quarter ending 12/31/99) and the lowest return for a quarter was - -18.85% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (5/2/94) Class IA 69.35% 32.89% 30.36% Russell Midcap Growth Index 18.23% 21.86% 24.61% S&P 500 Index 21.04% 28.56% 25.66% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1994. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index of common stocks of midsized companies that are also listed on the Russell 1000 Growth Index. The Russell Midcap Growth Index has been added because Putnam Management believes this index is an appropriate index against which to compare the fund's performance. PUTNAM VT NEW VALUE FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES -- VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in midsized and large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1998 6.26% 1999 0.27% Year-to-date performance through 3/31/2000 was - 0.54%. During the periods shown in the bar chart, the highest return for a quarter was 16.45% (quarter ending 12/31/98) and the lowest return for a quarter was - 13.75% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IA 0.27% 7.83% S&P 500 Index 21.04% 24.77% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT OTC & EMERGING GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies traded in the over-the-counter (OTC) market and "emerging growth" companies listed on securities exchanges, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. Emerging growth companies are those we believe have a leading or proprietary position in a growing industry or are gaining market share in an established industry. We invest mainly in small and midsized companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1999 126.52% Year-to-date performance through 3/31/2000 was 10.52%. During the periods shown in the bar chart, the highest return for a quarter was 76.22% (quarter ending 12/31/99) and the lowest return for a quarter was 8.03% (quarter ending 3/31/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (4/30/98) Class IA 126.52% 64.09% Russell 2000 Growth Index 43.09% 16.30% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1999. The fund's performance is compared to the Russell 2000 Growth Index, an unmanaged index composed of securities with greater-than-average growth orientation within the Russell 2000 Index. PUTNAM VT RESEARCH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH AND VALUE STOCKS We invest mainly in common stocks of U.S. companies that we believe offer the opportunity for gain. We look for companies with stock prices that reflect a lower value than that which we place on the company. We also look for the presence of factors we think will cause the stock price to increase toward that value. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1999 27.58% Year-to-date performance through 3/31/2000 was 4.40%. During the periods shown in the bar chart, the highest return for a quarter was 20.14% (quarter ending 12/31/99) and the lowest return for a quarter was -5.35% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (9/30/98) Class IA 27.58% 40.14% S&P 500 Index 21.04% 35.93% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1999. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT SMALL CAP VALUE FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in small companies. These are companies of a size similar to those in the Russell 2000 Index, a commonly used index of small company stocks. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and fact ors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION Performance information will be available after the fund completes a full calendar year of operation. PUTNAM VT UTILITIES GROWTH AND INCOME FUND GOAL The fund seeks capital growth and current income. MAIN INVESTMENT STRATEGIES -- VALUE STOCKS AND BONDS We invest mainly in a combination of bonds and U.S. value stocks of companies in the public utilities industries, with a significantly greater focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We buy bonds of governments and private companies that are mostly investment-grade in quality with intermediate- to long-term maturities (three years or longer). We invest mainly in large companies. Industry focus. We invest primarily in companies that produce or distribute electricity, gas or other types of energy, supply water or provide telecommunications services (but not public broadcasting or cable television). Events that affect these public utilities industries will have a greater effect on the fund than they would on a fund that is more widely diversified among a number of unrelated industries. Examples include increases in fuel and other operating costs, and technological advances that make existing plants, equipment or products obsolete. In addition, changes in regulatory policies concerning the environment, energy conservation, nuclear power and utility pricing, as well as deregulation of certain utility services, may be more likely to adversely affect the fund. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of investing in a single group of industries. Investments in the utilities industries, even though representing interests in different companies within these industries, may be affected by common economic forces and other factors. This vulnerability to factors affecting the utilities industries is significantly greater than for a fund that invests in a broader range of industries, and may result in greater fund losses and volatility. * The risk that prices of bonds we buy will fall if interest rates rise. Interest rate risk is generally higher for investments with longer maturities. * The risk that issuers of bonds we buy will not make timely payments of interest and principal. This credit risk is generally higher for debt that is below investment-grade in quality. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1993 13.42% 1994 -7.02% 1995 31.08% 1996 15.80% 1997 27.10% 1998 14.92% 1999 -0.66% Year-to-date performance through 3/31/2000 was 2.37%. During the periods shown in the bar chart, the highest return for a quarter was 12.32% (quarter ending 12/31/97) and the lowest return for a quarter was - 6.76% (quarter ending 3/31/94). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (5/4/92) Class IA -0.66% 17.10% 12.62% S&P Utilities Index -8.88% 13.66% 11.07% S&P 500 Index 21.04% 28.56% 20.58% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1992. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the S&P Utilities Index, an unmanaged list of common stocks issued by utility companies. The S&P Utilities Index is replacing the S&P 500 Index because Putnam Management believes the S&P Utilities Index is a more appropriate index against which to compare the fund's performance. PUTNAM VT VISTA FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest mainly in midsized companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1998 19.48% 1999 52.90% Year-to-date performance through 3/31/2000 was 21.23%. During the periods shown in the bar chart, the highest return for a quarter was 41.28% (quarter ending 12/31/99) and the lowest return for a quarter was -17.22% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IA 52.90% 31.17% Russell Midcap Growth Index 51.29% 29.79% S&P 500 Index 21.04% 27.58% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index that measures the performance of those companies in the Russell Midcap Index that have higher prices relative to the book value of their assets and higher forecasted growth rates. The Russell Midcap Growth Index is replacing the S&P 500 Index because Putnam Management believes the Russell Midcap Growth Index is a more appropriate index against which to compare the fund's performance. PUTNAM VT VOYAGER FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest in companies of all sizes. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1990 -2.03% 1991 46.09% 1992 10.36% 1993 18.70% 1994 1.04% 1995 40.67% 1996 12.97% 1997 26.51% 1998 24.36% 1999 58.22% Year-to-date performance through 3/31/2000 was 10.82%. During the periods shown in the bar chart, the highest return for a quarter was 41.38% (quarter ending 12/31/99) and the lowest return for a quarter was -17.36% (quarter ending 9/30/90). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IA 58.22% 31.66% 22.31% Russell Midcap Growth Index 51.29% 28.03% 18.96% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index of common stocks of midsized companies that are also included on the Russell 1000 Growth Index. The Russell Midcap Growth Index has been added because Putnam Management believes this index is an appropriate index against which to compare the fund's performance. What are the funds' main investment strategies and related risks? We generally manage the funds in styles similar to certain funds in the retail Putnam family of funds. However, the counterpart funds will not have identical portfolios or investment results, since we may employ different investment practices and invest in different securities for them. Any investment carries with it some level of risk that generally reflects its potential for reward. This section provides additional information on the investment strategies and related risks that are identified for each fund in "Fund summaries" at the beginning of this prospectus and discusses investment strategies and related risks that are common to a number of the funds. Not every investment strategy listed below applies to each fund. Please refer to your fund's strategy in the Fund summaries section to determine which risks apply to your fund. Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors relating directly to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. We may purchase stock that trades at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for the company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. Companies whose stock we believe is undervalued by the market may have experienced adverse business developments or may be subject to special risks that have caused their stocks to be out of favor. If our assessment of a company's prospects is wrong, or if other investors do not eventually recognize the value of the company, then price of the company's stock may fall or may not approach the value that we have placed on it. We will consider, among other things, a company's financial strength, competitive position in its industry, and projected future earnings, cash flows and dividends when deciding whether to buy or sell stocks. Smaller companies. We may invest in smaller companies. These companies, which may have market capitalizations of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may therefore be more vulnerable to adverse developments than those of larger companies. Foreign investments. Each of the funds may invest in securities of foreign issuers. Foreign investments involve certain special risks, including * Unfavorable changes in currency exchange rates: Foreign investments are typically issued and traded in foreign currencies. As a result, their values may be affected by changes in exchange rates between foreign currencies and the U.S. dollar. * Political and economic developments: Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or export of foreign currency, and tax increases. * Unreliable or untimely information: There may be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices as stringent as those in the United States. * Limited legal recourse: Legal remedies for investors may be more limited than the remedies available in the United States. * Limited markets: Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than U.S. investments, which means we may at times be unable to sell these foreign investments at desirable prices. For the same reason, we may at times find it difficult to value the fund's foreign investments. * Trading practices: Brokerage commissions and other fees are generally higher for foreign investments than for U.S. investments. The procedures and rules governing foreign transactions and custody may also involve delays in payment, delivery or recovery of money or investments. * Lower yield: Common stocks of foreign companies have historically offered lower dividends than stocks of comparable U.S. companies. Foreign withholding taxes may further reduce the amount of income available to distribute to shareholders of the fund. The fund's yield is therefore expected to be lower than yields of most funds that invest mainly in U.S. companies. * Sovereign issuers: The willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic factors, including the issuer's balance of payments, overall debt level, and cash flow from tax or other revenues. For Putnam VT Income Fund, we may invest in U.S. dollar denominated fixed-income securities of foreign issuers, including Yankee bonds. For Putnam VT Money Market Fund, we may invest in money market instruments of foreign issuers that are denominated in U.S. dollars. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be changing rapidly, which can cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets, or to investments in U.S. companies that have significant foreign operations. Special U.S. tax considerations may apply to the fund's foreign investments. Fixed-income investments. Fixed-income securities, which typically pay an unchanging rate of interest or dividends, include bonds and other debt. Each of the funds may invest in fixed-income securities. The value of a fixed-income investment may fall as a result of factors directly relating to the issuer of the security, such as decisions made by its management or a reduction in its credit rating. An investment's value may also fall because of factors affecting not just the issuer, but other issuers, such as increases in production costs. The value of an investment may also be affected by general changes in financial market conditions, such as changing interest rates or currency exchange rates. We will consider, among other things, credit, interest rate and prepayment risks as well as general market conditions when deciding whether to buy or sell investments. * Interest rate risk. The values of bonds and other debt usually rise and fall in response to changes in interest rates. Declining interest rates generally increase the value of existing debt instruments, and rising interest rates generally decrease the value of existing debt instruments. Changes in a debt instrument's value usually will not affect the amount of interest income paid to the fund, but will affect the value of the fund's shares. Interest rate risk is generally greater for investments with longer maturities. Some investments give the issuer the option to call, or redeem, these investments before their maturity date. If an issuer "calls" its security during a time of declining interest rates, we might have to reinvest the proceeds in an investment offering a lower yield, and therefore might not benefit from any increase in value as a result of declining interest rates. "Premium investments" offer interest rates higher than prevailing market rates. However, they involve a greater risk of loss, because their values tend to decline over time. You may find it useful to compare the fund's yield, which factors out the effect of premium investments, with its current dividend rate, which does not factor out that effect. For Putnam VT Money Market Fund, average portfolio maturity will not exceed 90 days and the fund may not hold an investment with more than 397 days remaining to maturity. These short-term investments generally have lower yields than longer-term investments. Some investments have an interest rate that changes based on a market interest rate, and allow the holder to demand payment of principal and accrued interest before the scheduled maturity date. We measure the maturity of these obligations using the relatively short period in which payment could be demanded. Because the interest rate on these investments can change as market interest rates change, these investments are unlikely to be able to lock in favorable longer term interest rates. * Credit risk. Investors normally expect to be compensated in proportion to the risk they are assuming. Thus, debt of issuers with poor credit usually offers higher yields than debt of issuers with more secure credit. Higher-rated investments generally have lower-credit risk. For Putnam VT Income Fund, we invest most of the fund's assets in investment-grade investments. These are rated at least BBB or its equivalent by a nationally recognized securities rating agency, or are unrated investments we believe are of comparable quality. We may also invest the fund's assets in non-investment-grade investments. However, we may not invest in securities that are rated below B or the equivalent by each agency or are unrated investments we believe are of comparable quality. We will not necessarily sell an investment if its rating is reduced after we buy it. For Putnam VT The George Putnam Fund of Boston, we invest mostly in investment-grade debt instruments. These are rated at least BBB or its equivalent at the time of purchase by a nationally recognized securities rating agency, or are unrated investments that we believe are of comparable quality. We may invest in lower-rated instruments. However, we will not invest in securities rated lower than B or its equivalent by each rating agency rating the investment or unrated securities that we believe are of comparable quality. We will not necessarily sell an investment if its rating is reduced after we purchase it. For Putnam VT High Yield Fund, we invest mostly in higher-yielding, higher-risk debt investments that are rated below BBB or its equivalent at the time of purchase by each nationally recognized securities rating agency rating such investments, or are unrated investments that we believe are of comparable quality. For Putnam VT Diversified Income Fund, Putnam VT Global Asset Allocation and Putnam VT Utilities Growth and Income Fund, we may invest up to 70%, 35% and 20%, respectively, of the fund's total assets in non-investment grade securities using the investment criteria described above under Putnam VT High Yield Fund. For Putnam VT High Yield Fund and Putnam VT Diversified Income Fund, we may invest up to 15% and 5%, respectively, of the fund's total assets in debt investments rated below CCC or its equivalent, at the time of purchase, by each agency rating such investments and unrated investments that we believe are of comparable quality. We will not necessarily sell an investment if its rating is reduced after we buy it. Investments rated below BBB or its equivalent are known as "junk bonds." This rating reflects a greater possibility that the issuers may be unable to make timely payments of interest and principal and thus default. If this happens, or is perceived as likely to happen, the values of those investments will usually be more volatile and are likely to fall. A default or expected default could also make it difficult for us to sell the investments at prices approximating the values we had previously placed on them. Lower-rated debt usually has a more limited market than higher-rated debt, which may at times make it difficult for us to buy or sell certain debt instruments or to establish their fair value. Credit risk is generally greater for investments that are issued at less than their face value and make payments of interest only at maturity rather than at intervals during the life of the investment. Credit ratings are based largely on the issuer's historical financial condition and the rating agencies' investment analysis at the time of rating. The rating assigned to any particular investment does not necessarily reflect the issuer's current financial condition, and does not reflect an assessment of an investment's volatility or liquidity. Although we consider credit ratings in making investment decisions, we perform our own investment analysis and do not rely only on ratings assigned by the rating agencies. The fund depends more on our ability in buying lower-rated debt than it does in buying investment-grade debt. We may have to participate in legal proceedings or to take possession of and manage assets that secure the issuer's obligations. This could increase the fund's operating expenses and decrease its net asset value. Although investment-grade investments generally have lower credit risk, they may share some of the risks of lower-rated investments. U.S. government investments generally have the least credit risk, but are not completely free of credit risk. While some, such as U.S. Treasury obligations and Ginnie Mae certificates, are backed by the full faith and credit of the U.S. government, others are subject to varying degrees of risk. These risk factors include the creditworthiness of the issuer and, in the case of mortgage-backed securities, the ability of the underlying borrowers to meet their obligations. For Putnam VT Money Market Fund, we buy only high quality investments. These are: * rated in one of the two highest categories by at least two nationally recognized rating services, * rated by one rating service in one of the service's two highest categories (if only one rating service has provided a rating), or * unrated investments that we determine are of equivalent quality. If an issuer of a note does not have the credit rating usually required by the fund, another company may use its higher credit rating to back up the credit of the issuer of the note by selling the issuer a letter of credit. The main risk of investments backed by a letter of credit is that the entity issuing the letter of credit will be unable to fulfill its obligations to the fund. Insurance. We have bought liability insurance that insures the fund against a decrease in the value of its investments arising from the issuer's default or bankruptcy. The insurance covers most of the fund's investments, other than U.S. government securities. The insurance does not guarantee or ensure that the fund will be able to maintain a stable net asset value of $1.00 per share. The maximum total coverage for the fund is $30 million, with a deductible for each loss of $1 million or 0.30% of the fund's net assets, whichever is less. The $30 million maximum coverage is shared with four other Putnam money market funds. Recovery under the insurance is subject to certain conditions, including the condition that the other Putnam money market funds have not previously exhausted the insurance coverage, and the insurance might not be renewed when it expires. * Prepayment risk. Traditional debt investments typically pay a fixed rate of interest until maturity, when the entire principal amount is due. By contrast, payments on mortgage-backed investments typically include both interest and partial payment of principal. Principal may also be prepaid voluntarily, or as a result of refinancing or foreclosure. We may have to invest the proceeds from prepaid investments in other investments with less attractive terms and yields. Compared to debt that cannot be prepaid, mortgage-backed investments are less likely to increase in value during periods of declining interest rates and have a higher risk of decline in value during periods of rising interest rates. They may increase the volatility of a fund. Some mortgage-backed investments receive only the interest portion or the principal portion of payments on the underlying mortgages. The yields and values of these investments are extremely sensitive to changes in interest rates and in the rate of principal payments on the underlying mortgages. The market for these investments may be volatile and limited, which may make them difficult to buy or sell. Money market instruments. These include certificates of deposit, commercial paper, U.S. government debt and repurchase agreements, corporate obligations and bankers acceptances. For Putnam VT Money Market Fund, we buy bankers acceptances only if they are issued by banks with deposits in excess of $2 billion (or the foreign currency equivalent) at the close of the last calendar year. If the Trustees change this minimum deposit requirement, shareholders would be notified. Illiquid securities. We may invest up to 15% of a fund's assets (10% for Putnam VT Money Market Fund) in illiquid investments, which may be considered speculative. Illiquid investments are investments that may be difficult to sell. The sale of many of these investments is limited by law. We may not be able to sell a fund's illiquid investments when we consider it is desirable to do so or we may be able to sell them only at less than their market value. Derivatives. We may engage in a variety of transactions involving derivatives, such as futures, options, warrants and swap contracts. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indexes or currencies. We may use derivatives both for hedging and non-hedging purposes. For example, the fund may use derivatives to increase or decrease its exposure to long- or short-term interest rates (in the United States or abroad). However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Derivatives involve special risks and may result in losses. The funds depend on our ability to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways, especially in unusual market conditions. Some derivatives are "leveraged" and therefore may magnify or otherwise increase investment losses . Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund's derivative positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction will not meet its obligations . For further information about the risks of derivatives, see the Trust's statement of additional information (SAI). Frequent trading. We may buy and sell investments relatively often, which involves higher brokerage commissions and other expenses. Other investments. In addition to the main investment strategies described above, we may make other investments, which may be subject to other risks as described in the SAI. Alternative strategies. At times we may judge that market conditions make pursuing a fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the affected fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. Changes in policies. The Trust's Trustees may change any of the funds' goals, investment strategies and other policies without shareholder approval, except as otherwise indicated. Who manages the funds? The Trust's Trustees oversee the general conduct of each fund's business. The Trustees have retained Putnam Management to be the funds' investment manager, responsible for making investment decisions for the funds and managing the funds' other affairs and business. Each fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. Putnam Management's address is One Post Office Square, Boston, MA 02109. The funds paid Putnam Management management fees in the following amounts (reflected as a percentage of average net assets for each fund's last fiscal year): Management Putnam VT Fund Fees - ------------------------------------------------------------------------ Putnam VT Asia Pacific Growth Fund 0.80% - ------------------------------------------------------------------------ Putnam VT Diversified Income Fund 0.68% - ------------------------------------------------------------------------ Putnam VT The George Putnam Fund of Boston 0.65% - ------------------------------------------------------------------------ Putnam VT Global Asset Allocation 0.65% - ------------------------------------------------------------------------ Putnam VT Global Growth Fund 0.61% - ------------------------------------------------------------------------ Putnam VT Growth and Income Fund 0.46% - ------------------------------------------------------------------------ Putnam VT Health Sciences Fund 0.70% - ------------------------------------------------------------------------ Putnam VT High Yield Fund 0.65% - ------------------------------------------------------------------------ Putnam VT Income Fund 0.60% - ------------------------------------------------------------------------ Putnam VT International Growth Fund 0.80% - ------------------------------------------------------------------------ Putnam VT International Growth and Income Fund 0.80% - ------------------------------------------------------------------------ Putnam VT International New Opportunities Fund 1.08% - ------------------------------------------------------------------------ Putnam VT Investors Fund 0.63% - ------------------------------------------------------------------------ Putnam VT Money Market Fund 0.41% - ------------------------------------------------------------------------ Putnam VT New Opportunities Fund 0.54% - ------------------------------------------------------------------------ Putnam VT New Value Fund 0.70% - ------------------------------------------------------------------------ Putnam VT OTC & Emerging Growth Fund* 0.53% - ------------------------------------------------------------------------ Putnam VT Research Fund* 0.54% - ------------------------------------------------------------------------ Putnam VT Utilities Growth and Income Fund 0.65% - ------------------------------------------------------------------------ Putnam VT Vista Fund 0.65% - ------------------------------------------------------------------------ Putnam VT Voyager Fund 0.53% - ------------------------------------------------------------------------ * The management fees shown in the table reflect an expense limitation then in effect or currently in effect. In the absence of an expense limitation, management fees would have been: Putnam VT OTC & Emerging Growth Fund 0.70% Putnam VT Research Fund 0.65% The following funds paid Putnam Management a quarterly management fee for these services at the annual rate of: Putnam VT American Government Income Fund: 0.65% of the first 500 million of average net assets, 0.55% of the next 500 million, 0.50% of the next 500 million, 0.45% of the next 5 billion, 0.425% of the next 5 billion, 0.405% of the next 5 billion, 0.39% of the next 5 billion, 0.38% of the next 5 billion, 0.37% of the next 5 billion, 0.36% of the next 5 billion, 0.35% of the next 5 billion and 0.34% of any excess thereafter. In order to limit expenses for Putnam VT American Government Income Fund, Putnam Management has agreed to limit its compensation (and, to the extent necessary, bear other expenses) through December 31, 2000 to the extent that the expenses of the fund (exclusive of brokerage, interest, taxes and extraordinary expenses, and payments under the fund's distribution plans) would exceed an annual rate of 0.90% of the fund's average net assets. For the purpose of determining any such limitation on Putnam Management's compensation, expenses of the fund do not reflect the application of commissions or cash management credits that may reduce designated fund expenses. Putnam VT Growth Opportunities Fund: 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, 0.43% of the next 5 billion and 0.42% of any excess thereafter. Putnam VT Small Cap Value Fund: 0.80% of the first 500 million of average net assets; 0.70% of the next 500 million; 0.65% of the next 500 million; 0.60% of the next 5 billion; 0.575% of the next 5 billion; 0.555% of the next 5 billion; 0.54% of the next 5 billion; and 0.53% of any excess thereafter. The following officers and advisor teams of Putnam Management have primary responsibility for the day-to-day management of the relevant fund's portfolio. Each officer's length of service to the relevant fund and the officer's experience as portfolio manager or investment analyst over at least the last five years are shown.
Fund name Year Business experience (at least 5 years) Putnam VT American Government Income Fund Kevin M. Cronin 2000 1997-Present Putnam Management Managing Director Prior to February 1997 MFS Investment Management Michael Martino 2000 1994-Present Putnam Management Managing Director Putnam VT Asia Pacific Growth Fund Paul Warren 1997 1997-Present Putnam Management Senior Vice President Prior to May 1997 IDS Fund Management Carmel Peters 1999 1997-Present Putnam Management Senior Vice President Prior to May 1997 Wheelock Natwest Investment Prior to February 1996 Management, Hong Kong Rothschild Asset Management Asia Pacific, Hong Kong Putnam VT Diversified Income Fund David L. Waldman 1998 1997-Present Putnam Management Managing Director Prior to June 1997 Lazard Freres The Core Fixed Income Team Putnam VT The George Putnam Fund of Boston David L. King 2000 1983-Present Putnam Management Managing Director Jeanne L. Mockard 2000 1990-Present Putnam Management Senior Vice President James M. Prusko 1998 1992-Present Putnam Management Senior Vice President The Core Fixed Income Team Putnam VT Global Asset Allocation The Global Asset Allocation Committee Putnam VT Global Growth Fund Robert J. Swift 1996 1995-Present Putnam Management Managing Director Prior to August 1995 IAI International/Hill Samuel Investment Advisors Kelly A. Morgan 1997 1996-Present Putnam Management Managing Director Prior to December 1996 Alliance Capital Management L.P. Lisa H. Svensson 1998 1994-Present Putnam Management Senior Vice President Prior to July 1994 Lord Abbett & Co. Manuel Weiss 1998 1987-Present Putnam Management Senior Vice President Stephen P. Dexter 2000 1999-Present Putnam Management Senior Vice President Prior to June 1999 Scudder Kemper Inc. Putnam VT Growth and Income Fund David L. King 1993 1983-Present Putnam Management Managing Director Hugh H. Mullin 1998 1986-Present Putnam Management Senior Vice President Sheldon N. Simon 1997 1984-Present Putnam Management Senior Vice President Putnam VT Growth Opportunities Fund C. Beth Cotner 2000 1995-Present Putnam Management Managing Director Prior to September 1995 Kemper Financial Services Jeffery R. Lindsey 2000 1994-Present Putnam Management Senior Vice President David J. Santos 2000 1986-Present Putnam Management Senior Vice President Putnam VT Health Sciences Fund Richard B. England 1998 1992-Present Putnam Management Senior Vice President David G. Carlson 1998 1992-Present Putnam Management Senior Vice President Margery C. Parker 1998 1997-Present Putnam Management Senior Vice President Prior to December 1997 Keystone Investments Putnam VT High Yield Fund Krishna K. Memani 1999 1998-Present Putnam Management Managing Director Prior to September 1998 Morgan Stanley & Co. The Credit Team Putnam VT Income Fund James M. Prusko 2000 1992-Present Putnam Management Senior Vice President The Core Fixed Income Team Putnam VT International Growth Fund Justin M. Scott 1996 1988-Present Putnam Management Managing Director Omid Kamshad 1996 1996-Present Putnam Management Managing Director Prior to January 1996 Lombard Odier International Mark D. Pollard 1999 1990-Present Putnam Management Managing Director Paul C. Warren 1999 1997-Present Putnam Management Senior Vice President Prior to May 1997 IDS Fund Management Joshua L. Byrne 2000 1993-Present Putnam Management Senior Vice President Putnam VT International Growth and Income Fund Deborah F. Kuenstner 1999 1997-Present Putnam Management Managing Director Prior to May 1997 DuPont Pension Fund Investment George Stairs 1999 1994-Present Putnam Management Senior Vice President Prior to July 1994 Value Quest Ltd. Putnam VT International New Opportunities Fund Robert J. Swift 1996 1995-Present Putnam Management Managing Director Prior to August 1995 IAI International/Hill Samuel Investment Advisors Carmel Peters 1999 1997-Present Putnam Management Senior Vice President Prior to May 1997 Wheelock Natwest Investment Management, Hong Kong Prior to February 1996 Rothschild Asset Management Asia Pacific, Hong Kong Stephen P. Dexter 1999 1999-Present Putnam Management Senior Vice President Prior to June 1999 Scudder Kemper Inc. Putnam VT Investors Fund C. Beth Cotner 1998 1995-Present Putnam Management Senior Vice President Prior to September 1995 Kemper Financial Services Richard B. England 1998 1992-Present Putnam Management Senior Vice President Manuel H. Weiss 1998 1987-Present Putnam Management Senior Vice President Putnam VT New Opportunities Fund Daniel L. Miller 1994 1983-Present Putnam Management Managing Director Jeffrey R. Lindsey 1999 1994-Present Putnam Management Senior Vice President Kenneth Lang 1999 1997-Present Putnam Management Vice President Prior to April 1997 Montgomery Securities Putnam VT New Value Fund David L. King 1996 1983-Present Putnam Management Managing Director Putnam VT OTC & Emerging Growth Fund Steven L. Kirson 1998 1989-Present Putnam Management Senior Vice President Michael J. Mufson 1998 1993-Present Putnam Management Senior Vice President Putnam VT Research Fund The Global Equity Research Team Putnam VT Small Cap Value Fund Edward T. Shadek, Jr. 1999 1997-Present Putnam Management Managing Director Prior to March 1997 Newbold's Asset Management Co. Jeffrey Netols 1999 1993-Present Putnam Management Senior Vice President Putnam VT Utilities Growth and Income Fund Krishna K. Memani 1999 1998-Present Putnam Management Managing Director Prior to September 1998 Morgan Stanley & Co. Jeanne L. Mockard 1998 1990-Present Putnam Management Senior Vice President The Credit Team Putnam VT Vista Fund Eric Wetlaufer 1997 1997-Present Putnam Management Managing Director Prior to November 1997 Cadence Capital Management Anthony C. Santosus 1996 1985-Present Putnam Management Senior Vice President Margery C. Parker 1998 1997-Present Putnam Management Senior Vice President Prior to December 1997 Keystone Investments Dana Clark 1999 1987-Present Putnam Management Vice President Putnam VT Voyager Fund Robert R. Beck 1995 1989-Present Putnam Management Managing Director Roland W. Gillis 1995 1995-Present Putnam Management Managing Director Prior to March 1995 Keystone Custodian Funds, Inc. Michael P. Stack 1997 1997-Present Putnam Management Senior Vice President Prior to November 1997 Independence Investment Associates, Inc. Charles H. Swanberg 1994 1984-Present Putnam Management Senior Vice President Paul Marrkand 2000 1987-Present Putnam Management Senior Vice President
How to buy and sell fund shares The Trust has an underwriting agreement relating to the funds with Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam Mutual Funds presently offers shares of each fund of the Trust continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Mutual Funds accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Mutual Funds may, at its expense, provide promotional incentives to dealers that sell variable insurance products. Shares are sold or redeemed at the net asset value per share next determined after receipt of an order, except that, in the case of Putnam VT Money Market Fund, purchases will not be affected until the next determination of net asset value after federal funds have been made available to the Trust. Orders for purchases or sales of shares of a fund 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. No fee is charged to a separate account when it redeems fund shares. Please check with your insurance company to determine which funds are available under your variable annuity contract or variable life insurance policy. Certain funds may not be available in your state due to various insurance regulations. Inclusion in this prospectus of a fund that is not available in your state is not to be considered a solicitation. This prospectus should be read in conjunction with the prospectus of the separate account of the specific insurance product which accompanies this prospectus. The funds currently do not foresee any disadvantages to policyowners arising out of the fact that the funds offer their shares to separate accounts of various insurance companies to serve as the investment medium for their variable products. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise, and to determine what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more insurance companies' separate accounts might be required to withdraw their investments in one or more funds and shares of another fund may be substituted. This might force a fund to sell portfolio securities at disadvantageous prices. In addition, the Trustees may refuse to sell shares of any fund to any separate account or may suspend or terminate the offering of shares of any fund if such action is required by law or regulatory authority or is in the best interests of the shareholders of the fund. Under unusual circumstances, the Trust may suspend repurchases or postpone payment for up to seven days or longer, as permitted by federal securities law. How do the funds price their shares? The price of a fund's shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. Each fund (other than Putnam VT Money Market Fund) values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. Putnam VT Money Market Fund values all of its investments at amortized cost. Each fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect each fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of each fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of each fund's foreign investments (other than Putnam VT Money Market Fund) occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. Fund distributions and taxes Each fund (other than Putnam VT Money Market Fund) will distribute any net investment income and net realized capital gains at least annually. Both types of distributions will be made in shares of such funds unless an election is made on behalf of a separate account to receive some or all of the distributions in cash. Putnam VT Money Market Fund will declare a dividend of its net investment income daily and distribute such dividend monthly. Each month's distributions will be paid on the first business day of the next month. Since the net income of Putnam VT Money Market Fund is declared as a dividend each time it is determined, the net asset value per share of the fund remains at $1.00 immediately after each determination and dividend declaration. Distributions are reinvested without a sales charge, using the net asset value determined on the ex-dividend date, except that with respect to Putnam VT Money Market Fund, distributions are reinvested using the net asset value determined on the day following the distribution payment date. Distributions on each share are determined in the same manner and are paid in the same amount, regardless of class, except for such differences as are attributable to differential class expenses. Generally, owners of variable annuity and variable life contracts are not taxed currently on income or gains realized with respect to such contracts. However, some distributions from such contracts may be taxable at ordinary income tax rates. In addition, distributions made to an owner who is younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own tax advisors for more information on their own tax situation, including possible foreign, state or local taxes. In order for investors to receive the favorable tax treatment available to holders of variable annuity and variable life contracts, the separate accounts underlying such contracts, as well as the funds in which such accounts invest, must meet certain diversification requirements. Each fund intends to comply with these requirements. If a fund does not meet such requirements, income allocable to the contracts would be taxable currently to the holders of such contracts. Each fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal income taxes on income and gains it distributes to the separate accounts. For information concerning federal income tax consequences for the holders of variable annuity contracts and variable life insurance policies, contract holders should consult the prospectus of the applicable separate account. Fund investments in foreign securities may be subject to withholding taxes at the source on dividend or interest payments. In that case, a fund's yield on those securities would be decreased. A fund's investments in certain debt obligations may cause the fund to recognize taxable income in excess of the cash generated by such obligations. Thus, the fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. Financial highlights The financial highlights table is intended to help you understand the funds' recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from each fund's financial statements, which have been audited and reported on by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the funds' annual report to shareholders, which is available upon request.
Financial Highlights Investment Operations Less Distributions: Net From Net Asset Net Realized and Total From In Excess Net In Excess of Value, Investment Unrealized from Net of Net Realized Net Realized Year Beginning Income Gain (Loss) on Investment Investment Investment Gain on Gain on ended of Period (Loss) Investments operations Income Income Investments Investments Putnam VT Asia Pacific Growth Fund 1999 $8.33 $(.01)(a) $8.97 $8.96 $-- $-- $-- $-- 1998 9.20 .08(a) (.56) (.48) (.38) -- -- -- 1997 11.01 .07 (1.66) (1.59) (.22) -- -- -- 1996 10.23 .05 .88 .93 (.15) -- -- -- 1995** 10.00 .06(a)(b) .17 .23 -- -- -- -- Putnam VT Diversified Income Fund 1999 $10.49 $.80(a) $(.63) $.17 $(.74) $-- $-- $-- 1998 11.31 .86(a) (.99) (.13) (.48) -- (.21) -- 1997 11.27 .82(a) (.05) .77 (.63) -- (.10) -- 1996 11.03 .80(a) .11 .91 (.67) -- -- -- 1995 9.74 .71 1.09 1.80 (.51) -- -- -- Putnam VT The George Putnam Fund of Boston 1999 $10.28 $.32(a) $(.36) $(.04) $(.23) $-- $(.02) $-- 1998***** 10.00 .18(a)(b) .19 .37 (.09) -- -- -- Putnam VT Global Asset Allocation Fund 1999 $18.94 $.41(a) $1.69 $2.10 $(.38) $-- $(1.06) $-- 1998 18.76 .46(a) 2.00 2.46 (.43) -- (1.85) -- 1997 17.25 .50 2.63 3.13 (.60) -- (1.02) -- 1996 16.15 .43 1.94 2.37 (.44) -- (.83) -- 1995 13.19 .47 2.74 3.21 (.25) -- -- -- Putnam VT Global Growth Fund 1999 $20.28 $(.02)(a) $12.09 $12.07 $(.09) $-- $(1.77) $-- 1998 18.34 .05(a) 5.01 5.06 (.52) -- (2.60) -- 1997 16.88 .13 2.18 2.31 (.41) -- (.44) -- 1996 15.18 .17 2.35 2.52 (.25) -- (.57) -- 1995 13.48 .20 1.85 2.05 (.11) -- (.24) -- Putnam VT Growth and Income Fund 1999 $28.77 $.47(a) $0.01 $.48 $(.41) $-- $(2.04) $-- 1998 28.32 .44(a) 3.77 4.21 (.50) -- (3.26) -- 1997 24.56 .48 5.07 5.55 (.52) -- (1.27) -- 1996 21.47 .65(a) 3.84 4.49 (.51) -- (.89) -- 1995 16.44 .53 5.31 5.84 (.51) -- (.30) -- Putnam VT Health Sciences Fund 1999 $10.94 $.01(a) $(.44) $(.43) $(.01) $-- $-- $-- 1998***** 10.00 .01(a)(b) .94 .95 (.01) -- -- -- Putnam VT High Yield Fund 1999 $11.70 $1.13(a) $(.48) $.65 $(1.26) $-- $-- $-- 1998 13.62 1.31(a) (1.98) (.67) (1.08) -- (.17) -- 1997 12.96 1.06 .65 1.71 (.94) -- (.11) -- 1996 12.37 1.18(a) .32 1.50 (.91) -- -- -- 1995 11.46 .91 1.05 1.96 (1.05) -- -- -- Putnam VT Income Fund 1999 $13.73 $.78(a) $(1.05) $(.27) $(.73) $-- $(.21) $-- 1998 13.42 .82(a) .24 1.06 (.73) (.02) -- -- 1997 13.21 .88 .18 1.06 (.85) -- -- -- 1996 13.74 .81 (.52) .29 (.82) -- -- -- 1995 12.22 .81 1.56 2.37 (.85) -- -- -- Putnam VT International Growth Fund 1999 $13.52 $.08(a) $8.06 $8.14 $-- $-- $-- $-- 1998 11.43 .11(a) 2.03 2.14 (.04) -- -- -- 1997*** 10.00 .05(b) 1.56 1.61 (.05) (.02) (.04) (.06) Putnam VT International Growth and Income Fund 1999 $12.24 $.21(a) $2.80 $3.01 $-- $-- $-- $-- 1998 11.53 .23(a) 1.06 1.29 (.11) -- (.22) (.19) 1997*** 10.00 .07 1.87 1.94 (.08) (.05) (.28) -- Putnam VT International New Opportunities Fund 1999 $11.49 $(.05)(a) $11.88 $11.83 $(.01) $-- $-- $-- 1998 9.96 .04(a)(b) 1.59 1.55 (.02) -- -- -- 1997*** 10.00 .01(b) (.02) (.01) (.01) (.02) -- -- Putnam VT Investors Fund 1999 $11.65 $.01(a) $3.50 $3.51 $-- $-- $-- $-- 1998***** 10.00 .02(a)(b) 1.65 1.67 (.01) -- -- -- Putnam VT Money Market Fund 1999 $1.00 $.0476(a) $-- $.0476 $(.0476) $-- $-- $-- 1998 1.00 .0510 -- .0510 (.0510) -- -- -- 1997 1.00 .0509 -- .0509 (.0509) -- -- -- 1996 1.00 .0497 -- .0497 (.0497) -- -- -- 1995 1.00 .0533 -- .0533 (.0533) -- -- -- Investment Operations Less Distributions: Investment Operations Less Distributions: Net From Net Asset Net Realized and Total From In Excess Net In Excess of Value, Investment Unrealized from Net of Net Realized Net Realized Year Beginning Income Gain (Loss) on Investment Investment Investment Gain on Gain on ended of Period (Loss) Investments operations Income Income Investments Investments Putnam VT New Opportunities Fund 1999 $26.06 $(.08)(a) $17.93 $17.85 $-- $-- $(.37) $-- 1998 21.23 (.04) 5.19 5.15 -- -- (.32) -- 1997 17.22 --(e) 4.01 4.01 -- -- -- -- 1996 15.63 (.01) 1.60 1.59 -- -- -- -- 1995 10.82 -- 4.84 4.84 -- -- (.02) -- Putnam VT New Value Fund 1999 $12.03 $.18(a) $(.14) $.04 $--(e) $-- $(.21) $-- 1998 11.76 .16(a) .57 .73 (.23) -- (.23) -- 1997*** 10.00 .18(a) 1.58 1.76 -- -- -- -- Putnam VT OTC & Emerging Growth Fund 1999 $10.09 $(.08)(a)(b) $12.84 $12.76 $-- $-- $(.06) $-- 1998***** 10.00 (.01)(a)(b) .10 .09 -- -- -- -- Putnam VT Research Fund 1999 $11.93 $.05(a)(b) $3.20 $3.25 $(.03) $-- $(.46) $-- 1998******* 10.00 .02(a)(b) 1.93 1.95 (.01) -- (.01) -- Putnam VT Small Cap Value Fund 1999******* $10.00 $(.02)(a) $.37 $.35 $-- $-- $-- $(.03) Putnam VT Utilities Growth and Income Fund 1999 $18.19 $.52(a) $(.72) $(.20) $(.50) $-- $(.52) $-- 1998 17.14 .54(a) 1.90 2.44 (.51) -- (.88) -- 1997 14.80 .53 3.11 3.64 (.55) -- (.75) -- 1996 13.28 .54 1.49 2.03 (.51) -- -- -- 1995 10.68 .53 2.65 3.18 (.58) -- -- -- Putnam VT Vista Fund 1999 $14.72 $(.05)(a) $7.64 $7.59 $-- $-- $(1.63) $-- 1998 12.32 (.02)(a) 2.42 2.40 -- -- -- -- 1997*** 10.00 -- (e) 2.32 2.32 -- (e) -- -- -- Putnam VT Voyager Fund 1999 $45.85 $.03(a) $24.59 $24.62 $(.05) $-- $(4.17) $-- 1998 39.08 .05(a) 9.26 9.31 (.10) -- (2.44) -- 1997 32.53 .10 8.01 8.11 (.07) -- (1.49) -- 1996 30.50 .09 3.75 3.84 (.13) -- (1.68) -- 1995 22.20 .10 8.76 8.86 (.07) -- (.49) --
Total Ratio of Net Investment Ratio of Investment From Net Asset Return at Net Assets Expenses to Income (Loss) to Return of Total Value, End Net Asset End of Period Average Net Average Net Portfolio Capital Distributions of Period Value(%)(c) (in thousands) Assets(%)(d) Assets(%) Turnover(%) Putnam VT Asia Pacific Growth Fund 1999 $-- $-- $17.29 107.56 $250,986 1.13 (.09) 145.51 1998 (.01) (.39) 8.33 (5.48) 90,667 1.12 1.01 136.49 1997 -- (.22) 9.20 (14.66) 112,902 1.07 .70 102.92 1996 -- (.15) 11.01 9.10 130,548 1.23 .84 66.10 1995*** -- -- 10.23 2.30* 25,045 .81(b)* .72(b)* 67.72* Putnam VT Diversified Income Fund 1999 $-- $(.74) $9.92 1.66 $623,737 .78 7.86 117.02 1998 -- (.69) 10.49 (1.37) 669,053 .78 7.94 186.80 1997 -- (.73) 11.31 7.38 608,148 .80 7.43 282.56 1996 -- (.67) 11.27 8.81 494,811 .83 7.45 235.53 1995 -- (.51) 11.03 19.13 303,721 .85 7.85 297.17 Putnam VT The George Putnam Fund of Boston 1999 $(.01) $(.26) $9.98 (0.36) $276,553 .83 3.04 173.41 1998***** -- (.09) 10.28 3.69* 113,202 .57(b)* 1.84(b)* 99.85* Putnam VT Global Asset Allocation Fund 1999 $-- $(1.44) $19.60 11.85 $1,001,087 .77 2.22 149.82 1998 -- (2.28) 18.94 13.47 1,020,354 .78 2.54 133.80 1997 -- (1.62) 18.76 19.67 956,532 .77 3.01 181.05 1996 -- (1.27) 17.25 15.62 747,734 .83 3.08 165.03 1995 -- (.25) 16.15 24.71 535,666 .84 3.31 150.88 Putnam VT Global Growth Fund 1999 $-- $(1.86) $30.49 65.00 $3,090,073 .73 (.09) 154.88 1998 -- (3.12) 20.28 29.71 1,987,094 .72 .26 164.56 1997 -- (.85) 18.34 14.33 1,611,503 .75 .77 158.37 1996 -- (.82) 16.88 17.20 1,344,887 .76 1.25 79.18 1995 -- (.35) 15.18 15.67 831,593 .75 1.49 82.53 Putnam VT Growth and Income Fund 1999 $-- $(2.45) $26.80 1.59 $9,567,077 .50 1.66 53.68 1998 -- (3.76) 28.77 15.42 9,948,386 .50 1.59 63.62 1997 -- (1.79) 28.32 24.15 8,337,334 .51 2.08 64.96 1996 -- (1.40) 24.56 21.92 5,679,100 .54 2.90 39.57 1995 -- (.81) 21.47 36.71 3,312,306 .57 3.34 50.87 Total Ratio of Net Investment Ratio of Investment From Net Asset Return at Net Assets Expenses to Income (Loss) to Return of Total Value, End Net Asset End of Period Average Net Average Net Portfolio Capital Distributions of Period Value(%)(c) (in thousands) Assets(%)(d) Assets(%) Turnover(%) Putnam VT Health Sciences Fund 1999 $-- $(.01) $10.50 (3.93) $218,848 .83 .14 82.45 1998***** --(e) (.01) 10.94 9.51* 134,436 .61(b)* .14(b)* 39.68* Putnam High Yield Fund 1999 $-- $(1.26) $11.09 5.92 $964,590 .72 10.18 52.96 1998 -- (1.25) 11.70 (5.86) 1,032,892 .71 10.31 52.00 1997 -- (1.05) 13.62 14.34 1,025,298 .72 9.26 84.61 1996 -- (.91) 12.96 12.81 769,918 .76 9.57 62.72 1995 -- (1.05) 12.37 18.32 498,467 .79 9.42 69.78 Putnam VT Income Fund 1999 $-- $(.94) $12.52 (2.07) $935,800 .67 6.07 220.90 1998 -- (.75) 13.73 8.25 1,000,161 .67 6.13 233.04 1997 -- (.85) 13.42 8.64 789,540 .69 6.58 194.29 1996 -- (.82) 13.21 2.42 778,924 .69 6.48 142.49 1995 -- (.85) 13.74 20.44 747,024 .70 6.22 149.18 Putnam VT International Growth Fund 1999 $-- $-- $21.66 60.21 $627,368 1.02 .51 107.38 1998 (.01) (.05) 13.52 18.69 317,602 1.07 .84 98.31 1997*** (.01) (.18) 11.43 16.13 150,884 1.20(b) .79(b) 75.18 Putnam VT International Growth and Income Fund 1999 $-- $-- $15.25 24.59 $387,504 .98 1.50 92.27 1998 (.06) (.58) 12.24 11.28 305,047 .99 1.86 62.61 1997*** -- (.41) 11.53 19.43 206,598 1.12 1.11 53.20 Putnam VT International New Opportunities Fund 1999 $-- $(.01) $23.31 102.96 $330,982 1.41 (.36) 196.53 1998 -- (.02) 11.49 15.58 135,451 1.60(b) (.36)(b) 157.72 1997*** -- (.03) 9.96 (.10) 107,000 1.60(b) .09(b) 131.89 Putnam VT Investors Fund 1999 $-- $-- $15.16 30.13 $867,151 .71 .05 65.59 1998***** (.01) (.02) 11.65 16.66* 243,296 .57(b)* .l9(b)* 42.97* Putnam VT Money Market Fund 1999 $-- $(.0476) $1.00 4.86 $823,013 .49 4.77 -- 1998 -- (.0510) 1.00 5.19 595,158 .53 5.04 -- 1997 -- (.0509) 1.00 5.22 405,577 .54 5.10 -- 1996 -- (.0497) 1.00 5.08 437,132 .53 4.93 -- 1995 -- (.0533) 1.00 5.46 263,213 .57 5.43 -- Total Ratio of Net Investment Ratio of Investment From Net Asset Return at Net Assets Expenses to Income (Loss) to Return of Total Value, End Net Asset End of Period Average Net Average Net Portfolio Capital Distributions of Period Value(%)(c) (in thousands) Assets(%)(d) Assets(%) Turnover(%) Putnam VT New Opportunities Fund 1999 $-- $(.37) $43.54 69.35 $6,432,227 .59 (.28) 71.14 1998 -- (.32) 26.06 24.38 3,586,225 .61 (.16) 59.75 1997 -- -- 21.23 23.29 2,590,244 .63 (.01) 71.78 1996 -- -- 17.22 10.17 1,674,197 .72 (.13) 57.94 1995 (.01) (.03) 15.63 44.87 515,109 .84 (.03) 30.87 Putnam VT New Value Fund 1999 $-- $(.21) $11.86 .27 $249,092 .80 1.40 98.21 1998 -- (.46) 12.03 6.26 255,754 .81 1.34 130.96 1997*** -- -- 11.76 17.60 195,391 .85 1.59 64.15 Putnam VT OTC & Emerging Growth Fund 1999 $-- $(.06) $22.79 126.52 $207,003 .90(b) (.55)(b) 127.98 1998****** --(e) -- 10.09 .94* 28,059 .60(b)* (.16)(b)* 59.93* Putnam VT Research Fund 1999 $-- $(.49) $14.69 27.58 $134,115 .85(b) .34(b) 169.16 1998****** -- (.02) 11.93 19.51* 22,626 .22(b)* .19(b)* 19.76* Putnam Small Cap Value Fund 1999******* $(.01) $(.04) $10.31 3.47* $12,298 1.29* (.24)* 48.24* Putnam VT Utilities Growth and Income Fund 1999 $-- $(1.02) $16.97 (.66) $945,581 .71 3.02 26.16 1998 -- (1.39) 18.19 14.92 1,015,327 .72 3.19 24.77 1997 -- (1.30) 17.14 27.10 822,257 .74 3.63 42.46 1996 -- (.51) 14.80 15.80 657,429 .73 4.22 61.94 1995 -- (.58) 13.28 31.08 530,461 .68 4.72 60.33 Putnam Vista Fund 1999 $-- $(1.63) $20.68 52.90 $542,491 .75 (.29) 133.32 1998 -- -- 14.72 19.48 311,612 .77 (.12) 116.48 1998*** --(e) -- 12.32 23.21 170,660 .87 -- 75.43 Putnam VT Voyager Fund 1999 $-- $(4.22) $66.25 58.22 $9,130,197 .57 .05 85.13 1998 -- (2.54) 45.85 24.36 5,803,073 .58 .14 62.99 1997 -- (1.56) 39.08 26.51 4,538,535 .59 .30 82.00 1996 -- (1.81) 32.53 12.97 3,281,490 .63 .36 63.87 1995 -- (.56) 30.50 40.67 2,000,232 .68 .49 57.51 * Not annualized. ** For the period May 1, 1995 (commencement of operations) to December 31, 1995. *** For the period January 2, 1997 (commencement of operations) to December 31, 1997. **** For the period April 6, 1998 (commencement of operations) to December 31, 1998. ***** For the period April 30, 1998 (commencement of operations) to December 31, 1998. ****** For the period September 30, 1998 (commencement of operations) to December 31, 1998. ******* For the period April 30, 1999 (commencement of operations) to December 31, 1999. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Reflects an expense limitation in effect during the period. As a result of such limitation, expenses of Putnam VT Asia Pacific Growth Fund for the period ended 1995 reflect a reduction of approximately $0.03 per share, expenses of Putnam VT The George Putnam Fund of Boston for the period ended 1998 reflect a reduction of approximately $0.03 per share, expenses of Putnam VT Health Sciences Fund for the period ended 1998 reflect a reduction of approximately $0.01 per share, expenses of Putnam VT International Growth Fund for the period ended 1997 reflect a reduction of approximately $0.01 per share, expenses of Putnam VT International New Opportunities Fund for the period ended 1997 reflect a reduction of approximately $0.02 per share and for the period ended 1998 reflect a reduction of approximately less than $0.01 per share, expenses of Putnam VT Investors Fund for the period ended 1998 reflect a reduction of approximately less than $0.01 per share , expenses of Putnam VT OTC & Emerging Markets Fund for the periods ended 1999 and 1998 reflect a reduction of approximately $0.02 and $0.06, respectively, per share and expenses of Putnam VT Research Fund for the periods ended 1999 and 1998 reflect a reduction of approximately $0.01 and $0.03, respectively, per share. (c) Total investment return assumes dividend reinvestment. (d) Includes amounts paid through expense offset and brokerage service arrangements. (e) Net investment income, distributions from net investment income and returns of capital were less than 0.01 per share.
For more information about the funds of Putnam Variable Trust The Trust's statement of additional information (SAI) and annual and semi--annual reports to shareholders include additional information about the funds. The SAI, and the auditor's report and financial statements included in the Trust's most recent annual report to the funds' shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected the funds' performance during the funds' last fiscal year. You may get free copies of these materials, request other information about the funds and other Putnam funds, or make shareholder inquiries, by contacting your financial advisor, by visiting Putnam's Web site, or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about the funds, including the Trust's SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1- 202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov. or by writing the Commission's Public Reference Section , Washington, D.C. 20549- 0102. You may need to refer to the fund's file number. P U T N A M I N V E S T M E N T S One Post Office Square Boston, Massachusetts 02109 1-800- 225-1581 Address correspondence to Putnam Investor Services P.O. Box 989 Boston, Massachusetts 02103 www.putnaminv.com File No. 811-5346 Prospectus April 30, 2000 Putnam Variable Trust Class IA Shares Growth Funds Putnam VT New Opportunities Fund This prospectus explains what you should know about Putnam VT New Opportunities Fund, one of the funds of Putnam Variable Trust, which offers shares of beneifical interest in separate investment portfolios for purchase by separate accounts of various insurance companies. Putnam Investment Management, Inc. (Putnam Management), which has managed mutual funds since 1937, manages the fund. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS 2 Fund summaries (including Goal, Main investment strategies, Main risks and Performance Information) 3 What are the funds' main investment strategies and related risks? 4 Who manages the funds? 5 How to buy and sell fund shares 5 How do the funds price their shares? 5 Fund distributions and taxes 7 Financial highlights Fund summary The following summary identifies the fund's goal, main investment strategies and the main risks that could adversely affect the value of the fund's shares and the total return on your investment. The summary also contains performance information that provides some indication of the fund's risks. The chart contained in the summary shows year-to-year changes in the performance of the fund's class IA shares. A table following the chart compares the fund's performance to that of broad measures of market performance. Of course, the fund's past performance is not necessarily an indication of future performance. None of the performance information reflects the impact of insurance-related charges or expenses. If it did, performance would be less than that shown. Please refer to the prospectus for your insurance contract for information about those charges and performance data reflecting those charges and expenses. A more detailed description of the fund, including the risks associated with investing in the fund, can be found further back in this prospectus. Please be sure to read this additional information before you invest. You can lose money by investing in the fund. The fund may not achieve its goal, and it is not intended as a complete investment program. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. PUTNAM VT NEW OPPORTUNITIES FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks in sectors of the economy that we believe have high growth potential. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. The growth sectors we currently target include communications, media/entertainment, medical technology/cost containment, industrial and environmental services, applied/advanced technology, financial services, consumer products and services and business services. We invest in companies of all sizes. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of investing in a limited group of market sectors. The vulnerability of the fund to factors affecting the sectors chosen may be significantly greater than that of a fund that invests in a broader range of sectors and may result in greater fund losses and volatility. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1995 44.87% 1996 10.17% 1997 23.29% 1998 24.38% 1999 69.35% Year-to-date performance through 3/31/2000 was 15.33%. During the periods shown in the bar chart, the highest return for a quarter was 49.47% (quarter ending 12/31/99) and the lowest return for a quarter was - -18.85% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Past Past Since 1 year 5 years Inception (5/2/94) Class IA 69.35% 32.89% 30.36% Russell Midcap Growth Index 18.23% 21.86% 24.61% S&P 500 Index 21.04% 28.56% 25.66% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1994. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index of common stocks of midsized companies that are also listed on the Russell 1000 Growth Index. The Russell Midcap Growth Index has been added because Putnam Management believes this index is an appropriate index against which to compare the fund's performance. What are the fund's main investment strategies and related risks? We generally manage the fund in a style similar to the Putnam New Opportunities Fund we also manage and whose shares are generally offered to the public. Putnam New Opportunities Fund, however, employs different investment practices and may invest in securities different from those in which Putnam VT New Opportunities Fund invests, and consequently the two funds will not have identical portfolios or experience identical investment results. Any investment carries with it some level of risk that generally reflects its potential for reward. Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors relating directly to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. We may purchase stock that trades at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for the company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. We will consider, among other things, a company's financial strength, competitive position in its industry, and projected future earnings, cash flows and dividends when deciding whether to buy or sell stocks. Smaller companies. We may invest in smaller companies. These companies, which may have market capitalizations of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may therefore be more vulnerable to adverse developments than those of larger companies. Foreign investments. The fund may invest in securities of foreign issuers. Foreign investments involve certain special risks, including * Unfavorable changes in currency exchange rates: Foreign investments are typically issued and traded in foreign currencies. As a result, their values may be affected by changes in exchange rates between foreign currencies and the U.S. dollar. * Political and economic developments: Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or export of foreign currency, and tax increases. * Unreliable or untimely information: There may be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices as stringent as those in the United States. * Limited legal recourse: Legal remedies for investors may be more limited than the remedies available in the United States. * Limited markets: Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than U.S. investments, which means we may at times be unable to sell these foreign investments at desirable prices. For the same reason, we may at times find it difficult to value the fund's foreign investments. * Trading practices: Brokerage commissions and other fees are generally higher for foreign investments than for U.S. investments. The procedures and rules governing foreign transactions and custody may also involve delays in payment, delivery or recovery of money or investments. * Lower yield: Common stocks of foreign companies have historically offered lower dividends than stocks of comparable U.S. companies. Foreign withholding taxes may further reduce the amount of income available to distribute to shareholders of the fund. The fund's yield is therefore expected to be lower than yields of most funds that invest mainly in U.S. companies. * Sovereign issuers: The willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic factors, including the issuer's balance of payments, overall debt level, and cash flow from tax or other revenues. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be changing rapidly, which can cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets, or to investments in U.S. companies that have significant foreign operations. Special U.S. tax considerations may apply to the fund's foreign investments. Other investments. In addition to the main investment strategies described above, we may make other investments, such as investments in preferred stocks, convertible securities, debt securities and derivatives, which may be subject to other risks as described in the statement of additional information (SAI.) Alternative strategies. At times we may judge that market conditions make pursuing the fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. Changes in policies. The Trust's Trustees may change any of the fund's goal, investment strategies and other policies without shareholder approval, except as otherwise indicated. Who manages the fund? The Trust's Trustees oversee the general conduct of the fund's business. The Trustees have retained Putnam Management to be the fund's investment manager, responsible for making investment decisions for the fund and managing the fund's other affairs and business. The fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. The fund paid Putnam Management a management fee of 0.54% of average net assets for the fund's last fiscal year. Putnam Management's address is One Post Office Square, Boston, MA 02109. The following officers of Putnam Management have primary responsibility for the day-to-day management of the fund's portfolio. Each officer's length of service to the fund and the officer's experience as portfolio manager or investment analyst over at least the last five years are shown.
Fund name Year Business experience (at least 5 years) Putnam VT New Opportunities Fund Daniel L. Miller 1994 1983-Present Putnam Management Managing Director Jeffrey R. Lindsey 1999 1994-Present Putnam Management Senior Vice President Kenneth Lang 1999 1997-Present Putnam Management Vice President Prior to April 1997 Montgomery Securities
How to buy and sell fund shares The Trust has an underwriting agreement relating to the fund with Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam Mutual Funds presently offers shares of the fund continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Mutual Funds accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Mutual Funds may, at its expense, provide promotional incentives to dealers that sell variable insurance products. Shares are sold or redeemed at the net asset value per share next determined after receipt of an order. Orders for purchases or sales of shares of the fund 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. No fee is charged to a separate account when it redeems fund shares. The fund currently does not foresee any disadvantages to policyowners arising out of the fact that the fund offers its shares to separate accounts of various insurance companies to serve as the investment medium for their variable products. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise, and to determine what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more insurance companies' separate accounts might be required to withdraw their investments in the fund and shares of another fund offered by the Trust may be substituted. This might force the fund to sell portfolio securities at disadvantageous prices. In addition, the Trustees may refuse to sell shares of the fund to any separate account or may suspend or terminate the offering of shares of the fund if such action is required by law or regulatory authority or is in the best interests of the shareholders of the fund. Under unusual circumstances, the Trust may suspend repurchases or postpone payment for up to seven days or longer, as permitted by federal securities law. How does the fund price its shares? The price of the fund's shares is based on its net asset value (NAV). The NAV per share of each class of shares equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. The fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. The fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect the fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of the fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of the fund's foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. Fund distributions and taxes The fund will distribute any net investment income and net realized capital gains at least annually. Both types of distributions will be made in shares of the fund unless an election is made on behalf of a separate account to receive some or all of the distributions in cash. Distributions are reinvested without a sales charge, using the net asset value determined on the ex-dividend date. Distributions on each share are determined in the same manner and are paid in the same amount, regardless of class, except for such differences as are attributable to differential class expenses. Generally, owners of variable annuity and variable life contracts are not taxed currently on income or gains realized with respect to such contracts. However, some distributions from such contracts may be taxable at ordinary income tax rates. In addition, distributions made to an owner who is younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own tax advisors for more information on their own tax situation, including possible foreign, state or local taxes. In order for investors to receive the favorable tax treatment available to holders of variable annuity and variable life contracts, the separate accounts underlying such contracts, as well as the funds in which such accounts invest, must meet certain diversification requirements. The fund intends to comply with these requirements. If the fund does not meet such requirements, income allocable to the contracts would be taxable currently to the holders of such contracts. The fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal income taxes on income and gains it distributes to the separate accounts. For information concerning federal income tax consequences for the holders of variable annuity contracts and variable life insurance policies, contract holders should consult the prospectus of the applicable separate account. Fund investments in foreign securities may be subject to withholding taxes at the source on dividend or interest payments. In that case, the fund's yield on those securities would be decreased. Financial highlights The financial highlights table is intended to help you understand the fund's recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from the fund's financial statements, which have been audited and reported on by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the fund's annual report to shareholders, which is available upon request.
Financial highlights (For a share outstanding throughout the period) Year ended December 31 ------------------------------------------------------- Per-share operating performance 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------- Net asset value, beginning of period $26.06 $21.23 $17.22 $15.63 $10.82 - ---------------------------------------------------------------------------------- Investment operations Net investment loss (.08) (a) (.04) -- (d) (.01) -- Net realized and unrealized gain on investments 17.93 5.19 4.01 1.60 4.84 - ---------------------------------------------------------------------------------- Total from investment operations 17.85 5.15 4.01 1.59 4.84 - ---------------------------------------------------------------------------------- Less distributions: From net investment income -- -- -- -- -- In excess of net investment income -- -- -- -- -- From net realized gain on investments (.37) (.32) -- -- (.02) In excess of net realized gain on investments -- -- -- -- -- From return of capital -- -- -- -- -- - ---------------------------------------------------------------------------------- Total distributions (.37) (.32) -- -- (.03) - ---------------------------------------------------------------------------------- Net asset value, end of period $43.54 $26.06 $21.23 $17.22 $15.63 - ---------------------------------------------------------------------------------- Ratios and supplemental data Total return at net asset value (%)(b) 69.35 24.38 23.29 10.17 44.87 Net assets, end of period (in thousands) $6,432,227 $3,586,225 $2,590,244 $1,674,197 $515,109 - ---------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .59 .61 .63 .72 .84 Ratio of net investment loss to average net assets (%) (.28) (.16) (.01) (.13) (.03) Portfolio turnover (%) 71.14 59.75 71.78 57.94 30.87 - ---------------------------------------------------------------------------------- a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period. b Total return assumes dividend reinvestment and does not reflect the effect of sales charges. c Includes amounts paid through expense offset and brokerage service arrangements. d Net investment income, distributions from net investment income and returns of capital were less than $0.01 per share.
For more information about Putnam VT New Opportunities Fund and Putnam Variable Trust The Trust's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the fund. The SAI, and the auditor's report and financial statements included in the Trust's most recent annual report to the fund's shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected the fund's performance during the fund's last fiscal year. You may get free copies of these materials, request other information about the funds and other Putnam funds, or make shareholder inquiries, by contacting your financial advisor or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about the fund, including the Trust's SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1- 202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: or by writing the Commission's Public Reference Section of the Commission, Washington, D.C. 20549- 0102. You may need to refer to the fund's file number. P U T N A M I N V E S T M E N T S One Post Office Square Boston, Massachusetts 02109 1-800-752-9894 Address correspondence to Putnam Investor Services P. O. Box 989 Boston, Massachusetts 02103 File No. 811-5346 Putnam Mutual Funds Corp. Member, NASD, Inc. Prospectus April 30, 2000 Putnam Variable Trust Class IA Shares Growth Funds Putnam VT International Growth Fund Putnam VT International New Opportunities Fund Putnam VT Vista Fund Growth and Income Funds Putnam VT Growth and Income Fund Putnam VT New Value Fund This prospectus explains what you should know about the funds in Putnam Variable Trust listed above, which are available for purchase by separate accounts of insurance companies. Putnam Investment Management, Inc. (Putnam Management), which has managed mutual funds since 1937, manages the funds. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS Fund summaries (including Goal, Main investment strategies, Main risks and Performance Information) What are the funds' main investment strategies and related risks? Who manages the funds? How to buy and sell fund shares How do the funds price their shares? Fund distributions and taxes Financial highlights Fund summaries The following summaries identify each fund's goal, main investment strategies and the main risks that could adversely affect the value of a fund's shares and the total return on your investment. Each summary also contains performance information that provides some indication of each fund's risks. The chart contained in each summary shows year-to-year changes in the performance of the fund's class IA shares. A table following each chart compares the fund's performance to that of broad measures of market performance. Of course, a fund's past performance is not necessarily an indication of future performance. None of the performance information reflects the impact of insurance-related charges or expenses. If it did, performance would be less than that shown. Please refer to the prospectus for your insurance contract for information about those charges and performance data reflecting those charges and expenses. More detailed descriptions of the funds, including the risks associated with investing in the funds, can be found further back in this prospectus. Please be sure to read this additional information before you invest. You can lose money by investing in any of the funds. A fund may not achieve its goal, and none of the funds is intended as a complete investment program. An investment in any fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. PUTNAM VT GROWTH AND INCOME FUND GOAL The fund seeks capital growth and current income. MAIN INVESTMENT STRATEGIES -- VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1990 1.96% 1991 19.05% 1992 9.75% 1993 14.27% 1994 0.35% 1995 36.71% 1996 21.92% 1997 24.15% 1998 15.42% 1999 1.59% Year-to-date performance through 3/31/2000 was -1.76%. During the periods shown in the bar chart, the highest return for a quarter was 16.62% (quarter ending 12/31/98) and the lowest return for a quarter was -10.14% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IA 1.59% 19.39% 14.00% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT INTERNATIONAL GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- INTERNATIONAL STOCKS We normally invest mostly in common stocks of companies outside the United States. We first select the countries and industries we believe are attractive. We then seek stocks offering opportunity for gain. We look for companies with stock prices that reflect a lower value than that which we place on the company. We also look for the presence of factors we think will cause the stock price to increase toward that value. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments in international markets. The risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1998 18.69% 1999 60.21% Year-to-date performance through 3/31/2000 was 6.10%. During the periods shown in the bar chart, the highest return for a quarter was 35.46% (quarter ending 12/31/99) and the lowest return for a quarter was -18.92% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IA 60.21% 30.33% MSCI EAFE Index 26.96% 15.76% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index of equity securities from Europe, Australia, and the Far East, with all values expressed in U.S. dollars. PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES -- INTERNATIONAL GROWTH STOCKS We normally invest mainly in common stocks of companies outside the United States. We invest mainly in growth stocks, which are those issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in earnings may lead to an increase in the price of the stock. We may invest in companies of any size. We may invest in both established and developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1998 15.58% 1999 102.96% Year-to-date performance through 3/31/2000 was 4.68%. During the periods shown in the bar chart, the highest return for a quarter was 57.18% (quarter ending 12/31/99) and the lowest return for a quarter was -16.61% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IA 102.96% 32.95% MSCI EAFE Index 26.96% 15.76% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index of international equity securities from Europe, Australia and the Far East, with all values expressed in U.S. dollars. PUTNAM VT NEW VALUE FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES -- VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in midsized and large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1998 6.26% 1999 0.27% Year-to-date performance through 3/31/2000 was -0.54%. During the periods shown in the bar chart, the highest return for a quarter was 16.45% (quarter ending 12/31/98) and the lowest return for a quarter was -13.75% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IA 0.27% 7.83% S&P 500 Index 21.04% 24.77% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT OTC & EMERGING GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies traded in the over-the-counter (OTC) market and "emerging growth" companies listed on securities exchanges, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. Emerging growth companies are those we believe have a leading or proprietary position in a growing industry or are gaining market share in an established industry. We invest mainly in small and midsized companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1999 126.52% Year-to-date performance through 3/31/2000 was 10.52%. During the periods shown in the bar chart, the highest return for a quarter was 76.22% (quarter ending 12/31/99) and the lowest return for a quarter was 8.03% (quarter ending 3/31/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (4/30/98) Class IA 126.52% 64.09% Russell 2000 Growth Index 43.09% 16.30% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1999. The fund's performance is compared to the Russell 2000 Growth Index, an unmanaged index composed of securities with greater-than-average growth orientation within the Russell 2000 Index. PUTNAM VT VISTA FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest mainly in midsized companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1998 19.48% 1999 52.90% Year-to-date performance through 3/31/2000 was 21.23%. During the periods shown in the bar chart, the highest return for a quarter was 41.28% (quarter ending 12/31/99) and the lowest return for a quarter was -17.22% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IA 52.90% 31.17% Russell Midcap Growth Index 51.29% 29.79% S&P 500 Index 21.04% 27.58% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index that measures the performance of those companies in the Russell Midcap Index that have higher prices relative to the book value of their assets and higher forecasted growth rates. The Russell Midcap Growth Index is replacing the S&P 500 Index because Putnam Management believes the Russell Midcap Growth Index is a more appropriate index against which to compare the fund's performance. What are the funds' main investment strategies and related risks? We generally manage the funds in styles similar to certain funds in the retail Putnam family of funds. However, the counterpart funds will not have identical portfolios or investment results, since we may employ different investment practices and invest in different securities for them. Any investment carries with it some level of risk that generally reflects its potential for reward. This section provides additional information on the investment strategies and related risks that are identified for each fund in "Fund summaries" at the beginning of this prospectus and discusses investment strategies and related risks that are common to a number of the funds. Not every investment strategy listed below applies to each fund. Please refer to your fund's strategy in the Fund summaries section to determine which risks apply to your fund. Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors relating directly to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. We may purchase stock that trades at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for the company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. Companies whose stock we believe is undervalued by the market may have experienced adverse business developments or may be subject to special risks that have caused their stocks to be out of favor. If our assessment of a company's prospects is wrong, or if other investors do not eventually recognize the value of the company, then price of the company's stock may fall or may not approach the value that we have placed on it. We will consider, among other things, a company's financial strength, competitive position in its industry, and projected future earnings, cash flows and dividends when deciding whether to buy or sell stocks. Smaller companies. We may invest in smaller companies. These companies, which may have market capitalizations of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may therefore be more vulnerable to adverse developments than those of larger companies. Foreign investments. Each of the funds may invest in securities of foreign issuers. Foreign investments involve certain special risks, including * Unfavorable changes in currency exchange rates: Foreign investments are typically issued and traded in foreign currencies. As a result, their values may be affected by changes in exchange rates between foreign currencies and the U.S. dollar. * Political and economic developments: Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or export of foreign currency, and tax increases. * Unreliable or untimely information: There may be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices as stringent as those in the United States. * Limited legal recourse: Legal remedies for investors may be more limited than the remedies available in the United States. * Limited markets: Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than U.S. investments, which means we may at times be unable to sell these foreign investments at desirable prices. For the same reason, we may at times find it difficult to value the fund's foreign investments. * Trading practices: Brokerage commissions and other fees are generally higher for foreign investments than for U.S. investments. The procedures and rules governing foreign transactions and custody may also involve delays in payment, delivery or recovery of money or investments. * Lower yield: Common stocks of foreign companies have historically offered lower dividends than stocks of comparable U.S. companies. Foreign withholding taxes may further reduce the amount of income available to distribute to shareholders of the fund. The fund's yield is therefore expected to be lower than yields of most funds that invest mainly in U.S. companies. * Sovereign issuers: The willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic factors, including the issuer's balance of payments, overall debt level, and cash flow from tax or other revenues. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be changing rapidly, which can cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets, or to investments in U.S. companies that have significant foreign operations. Special U.S. tax considerations may apply to the fund's foreign investments. Derivatives. We may engage in a variety of transactions involving derivatives, such as futures, options, warrants and swap contracts. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indexes or currencies. We may use derivatives both for hedging and non-hedging purposes. For example, the fund may use derivatives to increase or decrease its exposure to long- or short-term interest rates (in the United States or abroad). However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Derivatives involve special risks and may result in losses. The funds depend on our ability to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways, especially in unusual market conditions. Some derivatives are "leveraged" and therefore may magnify or otherwise increase investment losses. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund's derivative positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction will not meet its obligations. For further information about the risks of derivatives, see the Trust's statement of additional information (SAI). Frequent trading. We may buy and sell investments relatively often, which involves higher brokerage commissions and other expenses. Other investments. In addition to the main investment strategies described above, we may make other investments, such as investmetns in preferred stocks, convertible securities and debt securities which may be subject to other risks as described in the SAI. Alternative strategies. At times we may judge that market conditions make pursuing a fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the affected fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. Changes in policies. The Trust's Trustees may change any of the funds' goals, investment strategies and other policies without shareholder approval, except as otherwise indicated. Who manages the funds? The Trust's Trustees oversee the general conduct of each fund's business. The Trustees have retained Putnam Management to be the funds' investment manager, responsible for making investment decisions for the funds and managing the funds' other affairs and business. Each fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. Putnam Management's address is One Post Office Square, Boston, MA 02109. The funds paid Putnam Management management fees in the following amounts (reflected as a percentage of average net assets for each fund's last fiscal year): - ---------------------------------------------------------------- Management Putnam VT Fund Fees - ---------------------------------------------------------------- Putnam VT Global Growth Fund 0.61% - ---------------------------------------------------------------- Putnam VT International Growth Fund 0.80% - ---------------------------------------------------------------- Putnam VT International New Opportunities Fund 1.08% - ---------------------------------------------------------------- Putnam VT Vista Fund 0.65% - ---------------------------------------------------------------- The following officers of Putnam Management have primary responsibility for the day-to-day management of the relevant fund's portfolio. Each officer's length of service to the relevant fund and the officer's experience as portfolio manager or investment analyst over at least the last five years are shown.
Fund name Year Business experience (at least 5 years) Putnam VT Growth and Income Fund David L. King 1993 1983-Present Putnam Management Managing Director Hugh H. Mullin 1998 1986-Present Putnam Management Senior Vice President Sheldon N. Simon 1997 1984-Present Putnam Management Senior Vice President Putnam VT International Growth Fund Justin M. Scott 1996 1988-Present Putnam Management Managing Director Omid Kamshad 1996 1996-Present Putnam Management Managing Director Prior to Lombard Odier January 1996 International Mark D. Pollard 1999 1990-Present Putnam Management Managing Director Paul C. Warren 1999 1997-Prsent Putnam Management Senior Vice President Prior to IDS Fund Management May 1997 Joshua L. Byrne 2000 1993-Present Putnam Management Senior Vice President Putnam VT International New Opportunities Fund Robert J. Swift 1996 1995-Present Putnam Management Managing Director Prior to IAI International/ August 1995 Hill Samuel Investment Advisors Carmel Peters 1999 1997-Present Putnam Management Senior Vice President Prior to Wheelock Natwest May 1997 Investment Management, Hong Kong Prior to Rothschild Asset February 1996 Management Asia Pacific, Hong Kong Stephen P. Dexter 1999 1999-Present Putnam Management Senior Vice President Prior to Scudder Kemper June 1999 Inc. Putnam VT New Value Fund David L. King 1996 1983-Present Putnam Management Managing Director Putnam VT Vista Fund Eric Wetlaufer 1997 1997-Present Putnam Management Managing Director Prior to Cadence Capital November 1997 Management Anthony C. Santosus 1996 1985-Present Putnam Management Senior Vice President Margery C. Parker 1998 1997-Present Putnam Management Senior Vice President Prior to Keystone Investments December 1997 Dana Clark 1999 1987-Present Putnam Management Vice President
How to buy and sell fund shares The Trust has an underwriting agreement relating to the funds with Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam Mutual Funds presently offers shares of each fund of the Trust continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Mutual Funds accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Mutual Funds may, at its expense, provide promotional incentives to dealers that sell variable insurance products. Shares are sold or redeemed at the net asset value per share next determined after receipt of an order. Orders for purchases or sales of shares of a fund 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. No fee is charged to a separate account when it redeems fund shares. Please check with your insurance company to determine which funds are available under your variable annuity contract or variable life insurance policy. Certain funds may not be available in your state due to various insurance regulations. Inclusion in this prospectus of a fund that is not available in your state is not to be considered a solicitation. This prospectus should be read in conjunction with the prospectus of the separate account of the specific insurance product which accompanies this prospectus. The funds currently do not foresee any disadvantages to policyowners arising out of the fact that the funds offer their shares to separate accounts of various insurance companies to serve as the investment medium for their variable products. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise, and to determine what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more insurance companies' separate accounts might be required to withdraw their investments in one or more funds and shares of another fund may be substituted. This might force a fund to sell portfolio securities at disadvantageous prices. In addition, the Trustees may refuse to sell shares of any fund to any separate account or may suspend or terminate the offering of shares of any fund if such action is required by law or regulatory authority or is in the best interests of the shareholders of the fund. Under unusual circumstances, the Trust may suspend repurchases or postpone payment for up to seven days or longer, as permitted by federal securities law. How do the funds price their shares? The price of a fund's shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. Each fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. Putnam VT Money Market Fund values all of its investments at amortized cost. Each fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect each fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of each fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of each fund's foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. Fund distributions and taxes Each fund will distribute any net investment income and net realized capital gains at least annually. Both types of distributions will be made in shares of such funds unless an election is made on behalf of a separate account to receive some or all of the distributions in cash. Distributions are reinvested without a sales charge, using the net asset value determined on the ex-dividend date. Distributions on each share are determined in the same manner and are paid in the same amount, regardless of class, except for such differences as are attributable to differential class expenses. Generally, owners of variable annuity and variable life contracts are not taxed currently on income or gains realized with respect to such contracts. However, some distributions from such contracts may be taxable at ordinary income tax rates. In addition, distributions made to an owner who is younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own tax advisors for more information on their own tax situation, including possible foreign, state or local taxes. In order for investors to receive the favorable tax treatment available to holders of variable annuity and variable life contracts, the separate accounts underlying such contracts, as well as the funds in which such accounts invest, must meet certain diversification requirements. Each fund intends to comply with these requirements. If a fund does not meet such requirements, income allocable to the contracts would be taxable currently to the holders of such contracts. Each fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal income taxes on income and gains it distributes to the separate accounts. For information concerning federal income tax consequences for the holders of variable annuity contracts and variable life insurance policies, contract holders should consult the prospectus of the applicable separate account. Fund investments in foreign securities may be subject to withholding taxes at the source on dividend or interest payments. In that case, a fund's yield on those securities would be decreased. A fund's investments in certain debt obligations may cause the fund to recognize taxable income in excess of the cash generated by such obligations. Thus, the fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. Financial highlights The financial highlights table is intended to help you understand the funds' recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from each fund's financial statements, which have been audited and reported on by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the funds' annual report to shareholders, which is available upon request.
Financial Highlights Investment Operations Less Distributions: Net From Net Asset Net Realized and Total From In Excess Net In Excess of Value, Investment Unrealized from Net of Net Realized Net Realized Year Beginning Income Gain (Loss) on Investment Investment Investment Gain on Gain on ended of Period (Loss) Investments operations Income Income Investments Investments Putnam VT Growth and Income Fund 1999 $28.77 $.47(a) $0.01 $.48 $(.41) $ -- $(2.04) $ -- 1998 28.32 .44(a) 3.77 4.21 (.50) -- (3.26) -- 1997 24.56 .48 5.07 5.55 (.52) -- (1.27) -- 1996 21.47 .65(a) 3.84 4.49 (.51) -- (.89) -- 1995 16.44 .53 5.31 5.84 (.51) -- (.30) -- Putnam VT International Growth Fund 1999 $13.52 $.08(a) $8.06 $8.14 $ -- $ -- $ -- $ -- 1998 11.43 .11(a) 2.03 2.14 (.04) -- -- -- 1997*** 10.00 .05(b) 1.56 1.61 (.05) (.02) (.04) (.06) Putnam VT International New Opportunities Fund 1999 $11.49 $(.05)(a) $11.88 $11.83 $(.01) $ -- $ -- $ -- 1998 9.96 .04(a)(b) 1.59 1.55 (.02) -- -- -- 1997*** 10.00 .01(b) (.02) (.01) (.01) (.02) -- -- Putnam VT New Value Fund 1999 $12.03 $.18(a) $(.14) $.04 $ -- (e) $ -- $ (.21) $ -- 1998 11.76 .16(a) .57 .73 (.23) -- (.23) -- 1997*** 10.00 .18(a) 1.58 1.76 -- -- -- -- Putnam VT Vista Fund 1999 $14.72 $(.05)(a) $7.64 $7.59 $ -- $ -- $(1.63) $ -- 1998 12.32 (.02)(a) 2.42 2.40 -- -- -- -- 1997*** 10.00 -- (e) 2.32 2.32 -- (e) -- -- -- Total Ratio of Net Investment Ratio of Investment From Net Asset Return at Net Assets Expenses to Income (Loss) to Return of Total Value, End Net Asset End of Period Average Net Average Net Portfolio Capital Distributions of Period Value(%)(c) (in thousands) Assets(%)(d) Assets(%) Turnover(%) Putnam VT Growth and Income Fund 1999 $ -- $(2.45) $26.80 1.59 $9,567,077 .50 1.66 53.68 1998 -- (3.76) 28.77 15.42 9,948,386 .50 1.59 63.62 1997 -- (1.79) 28.32 24.15 8,337,334 .51 2.08 64.96 1996 -- (1.40) 24.56 21.92 5,679,100 .54 2.90 39.57 1995 -- (.81) 21.47 36.71 3,312,306 .57 3.34 50.87 Putnam VT International Growth Fund 1999 $ -- $ -- $21.66 60.21 $627,368 1.02 .51 107.38 1998 (.01) (.05) 13.52 18.69 317,602 1.07 .84 98.31 1997*** (.01) (.18) 11.43 16.13 150,884 1.20(b) .79(b) 75.18 Putnam VT International New Opportunities Fund 1999 $ -- $(.01) $23.31 102.96 $330,982 1.41 (.36) 196.53 1998 -- (.02) 11.49 15.58 135,451 1.60(b) (.36)(b) 157.72 1997*** -- (.03) 9.96 (.10) 107,000 1.60(b) .09(b) 131.89 Putnam VT New Value Fund 1999 $ -- $(.21) $11.86 .27 $249,092 .80 1.40 98.21 1998 -- (.46) 12.03 6.26 255,754 .81 1.34 130.96 1997*** -- -- 11.76 17.60 195,391 .85 1.59 64.15 Putnam Vista Fund 1999 $ -- $(1.63) $20.68 52.90 $542,491 .75 (.29) 133.32 1998 -- -- 14.72 19.48 311,612 .77 (.12) 116.48 1998*** --(e) -- 12.32 23.21 170,660 .87 -- 75.43 * Not annualized. ** For the period January 2, 1997 (commencement of operations) to December 31, 1997. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Reflects an expense limitation in effect during the period. As a result of such limitation, expenses of Putnam VT International Growth Fund for the period ended 1997 reflect a reduction of approximately $0.01 per share and expenses of Putnam VT International New Opportunities Fund for the period ended 1997 reflect a reduction of approximately $0.02 per share and for the period ended 1998 reflect a reduction of approximately less than $0.01 per share, expenses of Putnam VT Investors Fund for the period ended 1998 reflect a reduction of approximately less than $0.01 per share. (c) Total investment return assumes dividend reinvestment. (d) Includes amounts paid through expense offset and brokerage service arrangements. (e) Net investment income, distributions from net investment income and returns of capital were less than 0.01 per share.
For more information about the funds of Putnam Variable Trust The Trust's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the funds. The SAI, and the auditor's report and financial statements included in the Trust's most recent annual report to the funds' shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected the funds' performance during the funds' last fiscal year. You may get free copies of these materials, request other information about the funds and other Putnam funds, or make shareholder inquiries, by contacting your financial advisor, by visiting Putnam's Web site, or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about the funds, including the Trust's SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov. or by writing the Commission's Public Reference Section, Washington, D.C. 20549-0102. You may need to refer to the fund's file number. P U T N A M I N V E S T M E N T S One Post Office Square Boston, Massachusetts 02109 1-800-225-1581 Address correspondence to Putnam Investor Services P.O. Box 989 Boston, Massachusetts 02103 www.putnaminv.com File No. 811-5346 Prospectus April 30, 2000 Putnam Variable Trust Class IA Shares Growth Funds Putnam VT New Opportunities Fund Putnam VT Voyager Fund Growth and Income Funds Putnam VT Growth and Income Fund This prospectus explains what you should know about the funds in Putnam Variable Trust listed above, which are available for purchase by separate accounts of insurance companies. Putnam Investment Management, Inc. (Putnam Management), which has managed mutual funds since 1937, manages the funds. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS 2 Fund summaries (including Goal, Main investment strategies, Main risks and Performance Information) 4 What are the funds' main investment strategies and related risks? 5 Who manages the funds? 6 How to buy and sell fund shares 6 How do the funds price their shares? 7 Fund distributions and taxes 8 Financial highlights Fund summaries The following summaries identify each fund's goal, main investment strategies and the main risks that could adversely affect the value of a fund's shares and the total return on your investment. Each summary also contains performance information that provides some indication of each fund's risks. The chart contained in each summary shows year-to-year changes in the performance of the fund's class IA shares. A table following each chart compares the fund's performance to that of broad measures of market performance. Of course, a fund's past performance is not necessarily an indication of future performance. None of the performance information reflects the impact of insurance-related charges or expenses. If it did, performance would be less than that shown. Please refer to the prospectus for your insurance contract for information about those charges and performance data reflecting those charges and expenses. More detailed descriptions of the funds, including the risks associated with investing in the funds, can be found further back in this prospectus. Please be sure to read this additional information before you invest. You can lose money by investing in any of the funds. A fund may not achieve its goal, and none of the funds is intended as a complete investment program. An investment in any fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. PUTNAM VT GROWTH AND INCOME FUND GOAL The fund seeks capital growth and current income. MAIN INVESTMENT STRATEGIES - VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: Vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1990 1.96% 1991 19.05% 1992 9.75% 1993 14.27% 1994 0.35% 1995 36.71% 1996 21.92% 1997 24.15% 1998 15.42% 1999 1.59% Year-to-date performance through 3/31/2000 was -1.76%. During the periods shown in the bar chart, the highest return for a quarter was 16.62% (quarter ending 12/31/98) and the lowest return for a quarter was -10.14% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IA 1.59% 19.39% 14.00% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT NEW OPPORTUNITIES FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks in sectors of the economy that we believe have high growth potential. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. The growth sectors we currently target include communications, media/entertainment, medical technology/cost containment, industrial and environmental services, applied/advanced technology, financial services, consumer products and services and business services. We invest in companies of all sizes. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments , regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of investing in a limited group of market sectors. The vulnerability of the fund to factors affecting the sectors chosen may be significantly greater than that of a fund that invests in a broader range of sectors and may result in greater fund losses and volatility. PERFORMANCE INFORMATION [GRAPHIC OMITTED: Vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1995 44.87% 1996 10.17% 1997 23.29% 1998 24.38% 1999 69.35% Year-to-date performance through 3/31/2000 was 15.33%. During the periods shown in the bar chart, the highest return for a quarter was 49.47% (quarter ending 12/31/99) and the lowest return for a quarter was - -18.85% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (5/2/94) Class IA 69.35% 32.89% 30.36% Russell Midcap Growth Index 18.23% 21.86% 24.61% S&P 500 Index 21.04% 28.56% 25.66% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1994. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index of common stocks of midsized companies that are also listed on the Russell 1000 Growth Index. The Russell Midcap Growth Index has been added because Putnam Management believes this index is an appropriate index against which to compare the fund's performance. PUTNAM VT VOYAGER FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest in companies of all sizes. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: Vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES 1990 -2.03% 1991 46.09% 1992 10.36% 1993 18.70% 1994 1.04% 1995 40.67% 1996 12.97% 1997 26.51% 1998 24.36% 1999 58.22% Year-to-date performance through 3/31/2000 was 10.82%. During the periods shown in the bar chart, the highest return for a quarter was 41.38% (quarter ending 12/31/99) and the lowest return for a quarter was - 17.36% (quarter ending 9/30/90). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IA 58.22% 31.66% 22.31% Russell Midcap Growth Index 51.29% 28.03% 18.96% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index of common stocks of midsized companies that are also included on the Russell 1000 Growth Index. The Russell Midcap Growth Index has been added because Putnam Management believes this index is an appropriate index against which to compare the fund's performance. What are the funds' main investment strategies and related risks? We generally manage the funds in styles similar to certain funds in the retail Putnam family of funds. However, the counterpart funds will not have identical portfolios or investment results, since we may employ different investment practices and invest in different securities for them. Any investment carries with it some level of risk that generally reflects its potential for reward. This section provides additional information on the investment strategies and related risks that are identified for each fund in "Fund summaries" at the beginning of this prospectus and discusses investment strategies and related risks that are common to a number of the funds. Not every investment strategy listed below applies to each fund. Please refer to your fund's strategy in the Fund summaries section to determine which risks apply to your fund. Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors relating directly to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. We may purchase stock that trades at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for the company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. Companies whose stock we believe is undervalued by the market may have experienced adverse business developments or may be subject to special risks that have caused their stocks to be out of favor. If our assessment of a company's prospects is wrong, or if other investors do not eventually recognize the value of the company, then price of the company's stock may fall or may not approach the value that we have placed on it. We will consider, among other things, a company's financial strength, competitive position in its industry, and projected future earnings, cash flows and dividends when deciding whether to buy or sell stocks. Smaller companies. We may invest in smaller companies. These companies, which may have market capitalizations of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may therefore be more vulnerable to adverse developments than those of larger companies. Foreign investments. Each of the funds may invest in securities of foreign issuers. Foreign investments involve certain special risks, including * Unfavorable changes in currency exchange rates: Foreign investments are typically issued and traded in foreign currencies. As a result, their values may be affected by changes in exchange rates between foreign currencies and the U.S. dollar. * Political and economic developments: Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or export of foreign currency, and tax increases. * Unreliable or untimely information: There may be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices as stringent as those in the United States. * Limited legal recourse: Legal remedies for investors may be more limited than the remedies available in the United States. * Limited markets: Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than U.S. investments, which means we may at times be unable to sell these foreign investments at desirable prices. For the same reason, we may at times find it difficult to value the fund's foreign investments. * Trading practices: Brokerage commissions and other fees are generally higher for foreign investments than for U.S. investments. The procedures and rules governing foreign transactions and custody may also involve delays in payment, delivery or recovery of money or investments. * Lower yield: Common stocks of foreign companies have historically offered lower dividends than stocks of comparable U.S. companies. Foreign withholding taxes may further reduce the amount of income available to distribute to shareholders of the fund. The fund's yield is therefore expected to be lower than yields of most funds that invest mainly in U.S. companies. * Sovereign issuers: The willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic factors, including the issuer's balance of payments, overall debt level, and cash flow from tax or other revenues. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be changing rapidly, which can cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets, or to investments in U.S. companies that have significant foreign operations. Special U.S. tax considerations may apply to the fund's foreign investments. Other investments. In addition to the main investment strategies described above, we may make other investments, such as investments in preferred stocks, convertible securities, debt instruments and derivatives, which may be subject to other risks as described in the SAI. Alternative strategies. At times we may judge that market conditions make pursuing a fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the affected fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. Changes in policies. The Trust's Trustees may change any of the funds' goals, investment strategies and other policies without shareholder approval, except as otherwise indicated. Who manages the funds? The Trust's Trustees oversee the general conduct of each fund's business. The Trustees have retained Putnam Management to be the funds' investment manager, responsible for making investment decisions for the funds and managing the funds' other affairs and business. Each fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. Putnam Management's address is One Post Office Square, Boston, MA 02109. The funds paid Putnam Management management fees in the following amounts (reflected as a percentage of average net assets for each fund's last fiscal year): Putnam VT Fund Management Fees Putnam VT Growth and Income Fund 0.46% Putnam VT New Opportunities Fund 0.54% Putnam VT Voyager Fund 0.53% The following officers of Putnam Management have primary responsibility for the day-to-day management of the relevant fund's portfolio. Each officer's length of service to the relevant fund and the officer's experience as portfolio manager or investment analyst over at least the last five years are shown.
Fund name Year Business experience (at least 5 years) Putnam VT Growth and Income Fund David L. King 1993 1983-Present Putnam Management Managing Director Hugh H. Mullin 1998 1986-Present Putnam Management Senior Vice President Sheldon N. Simon 1997 1984-Present Putnam Management Senior Vice President Putnam VT New Opportunities Fund Daniel L. Miller 1994 1983-Present Putnam Management Managing Director Jeffrey R. Lindsey 1999 1994-Present Putnam Management Senior Vice President Kenneth Lang 1999 1997-Present Putnam Management Vice President Prior to April 1997 Montgomery Securities Putnam VT Voyager Fund Robert R. Beck 1995 1989-Present Putnam Management Managing Director Roland W. Gillis 1995 1995- Present Putnam Management Managing Director Prior to March 1995 Keystone Custodian Funds, Inc. Michael P. Stack Senior Vice President 1997 1997- Present Putnam Management Prior to November 1997 Independence Investment Associates, Inc. Charles H. Swanberg Senior Vice President 1994 1984-Present Putnam Management Paul Marrkand Senior Vice President 2000 1987-Present Putnam Management
How to buy and sell fund shares The Trust has an underwriting agreement relating to the funds with Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam Mutual Funds presently offers shares of each fund of the Trust continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Mutual Funds accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Mutual Funds may, at its expense, provide promotional incentives to dealers that sell variable insurance products. Shares are sold or redeemed at the net asset value per share next determined after receipt of an order. Orders for purchases or sales of shares of a fund 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. No fee is charged to a separate account when it redeems fund shares. Please check with your insurance company to determine which funds are available under your variable annuity contract or variable life insurance policy. Certain funds may not be available in your state due to various insurance regulations. Inclusion in this prospectus of a fund that is not available in your state is not to be considered a solicitation. This prospectus should be read in conjunction with the prospectus of the separate account of the specific insurance product which accompanies this prospectus. The funds currently do not foresee any disadvantages to policyowners arising out of the fact that the funds offer their shares to separate accounts of various insurance companies to serve as the investment medium for their variable products. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise, and to determine what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more insurance companies' separate accounts might be required to withdraw their investments in one or more funds and shares of another fund may be substituted. This might force a fund to sell portfolio securities at disadvantageous prices. In addition, the Trustees may refuse to sell shares of any fund to any separate account or may suspend or terminate the offering of shares of any fund if such action is required by law or regulatory authority or is in the best interests of the shareholders of the fund. Under unusual circumstances, the Trust may suspend repurchases or postpone payment for up to seven days or longer, as permitted by federal securities law. How do the funds price their shares? The price of a fund's shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. Each fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. Each fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect each fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of each fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of each fund's foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. Fund distributions and taxes Each fund will distribute any net investment income and net realized capital gains at least annually. Both types of distributions will be made in shares of such funds unless an election is made on behalf of a separate account to receive some or all of the distributions in cash. Distributions are reinvested without a sales charge, using the net asset value determined on the ex-dividend date . Distributions on each share are determined in the same manner and are paid in the same amount, regardless of class, except for such differences as are attributable to differential class expenses. Generally, owners of variable annuity and variable life contracts are not taxed currently on income or gains realized with respect to such contracts. However, some distributions from such contracts may be taxable at ordinary income tax rates. In addition, distributions made to an owner who is younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own tax advisors for more information on their own tax situation, including possible foreign, state or local taxes. In order for investors to receive the favorable tax treatment available to holders of variable annuity and variable life contracts, the separate accounts underlying such contracts, as well as the funds in which such accounts invest, must meet certain diversification requirements. Each fund intends to comply with these requirements. If a fund does not meet such requirements, income allocable to the contracts would be taxable currently to the holders of such contracts. Each fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal income taxes on income and gains it distributes to the separate accounts. For information concerning federal income tax consequences for the holders of variable annuity contracts and variable life insurance policies, contract holders should consult the prospectus of the applicable separate account. Fund investments in foreign securities may be subject to withholding taxes at the source on dividend or interest payments. In that case, a fund's yield on those securities would be decreased. A fund's investments in certain debt obligations may cause the fund to recognize taxable income in excess of the cash generated by such obligations. Thus, the fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. Financial highlights The financial highlights table is intended to help you understand the funds' recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from each fund's financial statements, which have been audited and reported on by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the funds' annual report to shareholders, which is available upon request.
Financial Highlights Investment Operations Less Distributions: Net Asset Net Realized From net In excess of Value, Net and Unrealized Total from From net Realized Net Realized Beginning Investment Gain (Loss) on Investment Investment Gain on Gain on Period ended of Period Income (Loss) Investments operations Income Investments Investments Putnam VT Growth and Income Fund 1999 $28.77 $.47(a) $0.01 $.48 $(.41) $-- $(2.04) 1998 28.32 .44(a) 3.77 4.21 (.50) -- (3.26) 1997 24.56 .48 5.07 5.55 (.52) -- (1.27) 1996 21.47 .65(a) 3.84 4.49 (.51) -- (.89) 1995 16.44 .53 5.31 5.84 (.51) -- (.30) Putnam VT New Opportunities Fund 1999 $26.06 $(.08)(a) $17.93 $17.85 $-- $-- $(.37) 1998 21.23 (.04) 5.19 5.15 -- -- (.32) 1997 17.22 --(d) 4.01 4.01 -- -- -- 1996 15.63 (.01) 1.60 1.59 -- -- -- 1995 10.82 -- 4.84 4.84 -- -- (.02) Putnam VT Voyager Fund 1999 $45.85 $.03(a) $24.59 $24.62 $(.05) $-- $(4.17) 1998 39.08 .05(a) 9.26 9.31 (.10) -- (2.44) 1997 32.53 .10 8.01 8.11 (.07) -- (1.49) 1996 30.50 .09 3.75 3.84 (.13) -- (1.68) 1995 22.20 .10 8.76 8.86 (.07) -- (.49)
Total Ratio of Net Investment Ratio of Investment From Net Asset Return at Net Assets Expenses to Income (Loss) to Return of Total Value, End Net Asset End of Period Average Net Average Net Portfolio Capital Distributions of Period Value(%)(b) (in thousands) Assets(%)(c) Assets(%) Turnover (%) Putnam VT Growth and Income Fund 1999 $-- $(2.45) $26.80 1.59 $9,567,077 .50 1.66 53.68 1998 -- (3.76) 28.77 15.42 9,948,386 .50 1.59 63.62 1997 -- (1.79) 28.32 24.15 8,337,334 .51 2.08 64.96 1996 -- (1.40) 24.56 21.92 5,679,100 .54 2.90 39.57 1995 -- (.81) 21.47 36.71 3,312,306 .57 3.34 50.87 Putnam VT New Opportunities Fund 1999 $-- $(.37) $43.54 69.35 $6,432,227 .59 (.28) 71.14 1998 -- (.32) 26.06 24.38 3,586,225 .61 (.16) 59.75 1997 -- -- 21.23 23.29 2,590,244 .63 (.01) 71.78 1996 -- -- 17.22 10.17 1,674,197 .72 (.13) 57.94 1995 (.01) (.03) 15.63 44.87 515,109 .84 (.03) 30.87 Putnam VT Voyager Fund 1999 $-- $(4.22) $66.25 58.22 $9,130,197 .57 .05 85.13 1998 -- (2.54) 45.85 24.36 5,803,073 .58 .14 62.99 1997 -- (1.56) 39.08 26.51 4,538,535 .59 .30 82.00 1996 -- (1.81) 32.53 12.97 3,281,490 .63 .36 63.87 1995 -- (.56) 30.50 40.67 2,000,232 .68 .49 57.51 (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total investment return assumes dividend reinvestment. (c) Includes amounts paid through expense offset and brokerage service arrangements. (d) Net investment income, distributions from net investment income and returns of capital were less than 0.01 per share.
For more information about the funds of Putnam Variable Trust The Trust's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the funds. The SAI, and the auditor's report and financial statements included in the Trust's most recent annual report to the funds' shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected the funds' performance during the funds' last fiscal year. You may get free copies of these materials, request other information about the funds and other Putnam funds, or make shareholder inquiries, by contacting your financial advisor, by visiting Putnam's Web site, or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about the funds, including the Trust's SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1- 202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov. or by writing the Commission's Public Reference Section , Washington, D.C. 20549- 0102. You may need to refer to the fund's file number. PUTNAM INVESTMENTS One Post Office Square Boston, Massachusetts 02109 1-800- 225-1581 Address correspondence to Putnam Investor Services P.O. Box 989 Boston, Massachusetts 02103 www.putnaminv.com File No. 811-5346 Prospectus April 30, 2000 Putnam Variable Trust Class IB Shares Growth Funds Putnam VT Asia Pacific Growth Fund Putnam VT Global Growth Fund Putnam VT Growth Opportunities Fund Putnam VT Health Sciences Fund Putnam VT International Growth Fund Putnam VT International New Opportunities Fund Putnam VT Investors Fund Putnam VT New Opportunities Fund Putnam VT OTC & Emerging Growth Fund Putnam VT Research Fund Putnam VT Vista Fund Putnam VT Voyager Fund Asset Allocation Fund Putnam VT Global Asset Allocation Growth and Income Funds Putnam VT The George Putnam Fund of Boston Putnam VT Growth and Income Fund Putnam VT International Growth and Income Fund Putnam VT New Value Fund Putnam VT Small Cap Value Fund Putnam VT Utilities Growth and Income Fund Income Funds Putnam VT American Government Income Fund Putnam VT Diversified Income Fund Putnam VT High Yield Fund Putnam VT Income Fund Money Market Fund Putnam VT Money Market Fund This prospectus explains what you should know about the funds in Putnam Variable Trust, which are available for purchase by separate accounts of insurance companies. Putnam Investment Management, Inc. (Putnam Management), which has managed mutual funds since 1937, manages the funds. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS Fund summaries (including Goal, Main investment strategies, Main risks and Performance Information) What are the funds' main investment strategies and related risks? Who manages the funds? How to buy and sell fund shares Distribution Plan How do the funds price their shares? Fund distributions and taxes Financial highlights Fund summaries The following summaries identify each fund's goal, main investment strategies and the main risks that could adversely affect the value of a fund's shares and the total return on your investment. Each summary also contains performance information that provides some indication of each fund's risks. The chart contained in each summary shows year-to-year changes in the performance of the fund's Class IB shares. A table following each chart compares the fund's performance to that of broad measures of market performance. Of course, a fund's past performance is not necessarily an indication of future performance. None of the performance information reflects the impact of insurance-related charges or expenses. If it did, performance would be less than that shown. Please refer to the prospectus for your insurance contract for information about those charges and performance data reflecting those charges and expenses. Class IB performance for the period prior to April 6, 1998 for Putnam VT Growth and Income Fund and for the period prior to April 30, 1998 for Putnam VT Global Growth Fund, Putnam VT Money Market Fund, Putnam VT New Value Fund are based on the performance of class IA shares of the fund (not offered in this prospectus), adjusted to reflect the fees paid by class IB shares, including a 12b-1 fee of 0.15%. More detailed descriptions of the funds, including the risks associated with investing in the funds, can be found further back in this prospectus. Please be sure to read this additional information before you invest. You can lose money by investing in any of the funds. A fund may not achieve its goal, and none of the funds is intended as a complete investment program. An investment in any fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although Putnam VT Money Market Fund seeks to preserve the value of your investment at $1.00 per share, you may lose money by investing in that fund. PUTNAM VT AMERICAN GOVERNMENT INCOME FUND GOAL The fund seeks high current income with preservation of capital as its secondary objective. MAIN INVESTMENT STRATEGIES - U.S. GOVERNMENT BONDS We invest mostly in bonds that * are obligations of the U.S. government, its agencies and instrumentalities, * are either backed by the full faith and credit of the United States, such as U.S. Treasury bonds and Ginnie Mae mortgage-backed bonds, or backed only by the credit of a federal agency or government sponsored entity, such as Fannie Mae mortgage-backed bonds, and * have intermediate- to long-term maturities (three years or longer). We may also invest in mortgage-backed investments of private issuers rated AAA or its equivalent, at the time of purchase, by a nationally recognized securities rating agency, or if unrated, that we determine to be of comparable quality. MAIN RISKS * The risk that movements in financial markets will adversely affect the value of the fund's investments. This risk includes interest rate risk, which means that the prices of the fund's investments are likely to fall if interest rates rise. Interest rate risk is generally highest for investments with long maturities. * The risk that the issuers of the fund's investments will not make timely payments of interest and principal. * The risk that, compared to other debt, mortgage-backed investments may increase in value less when interest rates decline, and decline in value more when interest rates rise. PERFORMANCE INFORMATION Performance information will be available after the fund completes a full calendar year of operation. PUTNAM VT ASIA PACIFIC GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - ASIAN AND PACIFIC BASIN STOCKS We normally invest mostly in common stocks of Asian or Pacific Basin companies. We first select the countries and industries we believe are attractive. We then seek stocks offering opportunity for gain. We look for companies with stock prices that reflect a lower value than that which we place on the company. We also look for the presence of factors we think will cause the stock price to increase toward that value. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risks of investing mostly in one geographic region. Investments in a single region, even though representing a number of different countries within the region, may be affected by common economic forces and other factors. This vulnerability to factors affecting Asian and Pacific Basin investments is significantly greater than for a more geographically diversified fund, which may result in greater losses and volatility. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1996 8.94% 1997 -14.78% 1998 -5.53% 1999 107.08% Year-to-date performance through 3/31/2000 was - 6.69%. During the periods shown in the bar chart, the highest return for a quarter was 41.63% (quarter ending 12/31/99) and the lowest return for a quarter was - -15.86% (quarter ending 12/31/97). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (5/1/95) Class IB 107.08% 14.17% MSCI Pacific Index 57.63% 2.11% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1995. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) Pacific Index, an unmanaged index of equity securities issued by companies located in one of five Asian countries and listed on the exchanges of Australia, New Zealand, Japan, Hong Kong, Singapore/Malaysia, with all values expressed in U.S. dollars. PUTNAM VT DIVERSIFIED INCOME FUND GOAL The fund seeks as high a level of current income as Putnam Management believes is consistent with preservation of capital. MAIN INVESTMENT STRATEGIES - MULTI-SECTOR BONDS We invest mostly in bonds that * are obligations of corporations and governments worldwide, * are a combination of investment-grade and below investment-grade securities (junk bonds), and * have intermediate- to long-term maturities (three years or longer). We invest a portion of the fund in each of three sectors: * U.S. and investment-grade sector: U.S. government securities and investment-grade bonds of U.S. corporations. * High yield sector: lower-rated bonds of U.S. corporations. * International sector: bonds of foreign governments and corporations, including both investment-grade and lower-rated securities. MAIN RISKS * The risk that movements in financial markets will adversely affect the value of the fund's investments. This risk includes interest rate risk, which means that the prices of the fund's investments are likely to fall if interest rates rise. Interest rate risk is generally highest for investments with long maturities. * The risk that the issuers of the fund's investments will not make timely payments of interest and principal. This credit risk is higher for debt that is below investment grade in quality. Because the fund invests significantly in junk bonds, this risk is heightened for the fund. Investors should carefully consider the risks associated with an investment in the fund. * The risk that, compared to other debt, mortgage-backed investments may increase in value less when interest rates decline, and decline in value more when interest rates rise. * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments in foreign markets. These risks are increased for investments in emerging markets. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1994 -4.38% 1995 18.95% 1996 8.65% 1997 7.22% 1998 -1.60% 1999 1.65% Year-to-date performance through 3/31/2000 was 0.59%. During the periods shown in the bar chart, the highest return for a quarter was 5.93% (quarter ending 6/30/95) and the lowest return for a quarter was - 4.94% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (9/15/93) Class IB 1.65% 6.74% 4.95% Lehman Brothers Mortgage-Backed Bond Index 1.85% 7.98% 6.21% Lehman Brothers Aggregate Bond Index -0.82% 7.73% 5.65% Salomon Brothers Non- U.S. World Government Bond Index -4.26% 6.42% 5.48% First Boston High Yield Bond Index 3.28% 9.08% 7.77% The fund's performance is compared to the Lehman Brothers Mortgage- Backed Bond Index, an unmanaged index of U.S. government and mortgage-backed securities; the Lehman Brothers Aggregate Bond Index, an unmanaged index that is frequently used as a broad market measure for U.S. denominated-investment grade fixed-income securities; the Salomon Brothers Non-U.S. World Government Bond Index, an unmanaged index of bonds issued by ten countries, excluding the United States; and the First Boston High Yield Bond Index, an unmanaged index of lower-rated, higher-yielding U.S. corporate bonds. The Lehman Brothers Aggregate Bond Index is replacing the Lehman Brothers Mortgage-Backed Bond Index because Putnam Management believes the Lehman Brothers Aggregate Bond Index is a more appropriate index against which to compare the fund's performance. PUTNAM VT THE GEORGE PUTNAM FUND OF BOSTON GOAL The fund seeks to provide a balanced investment composed of a well diversified portfolio of stocks and bonds which produce both capital growth and current income. MAIN INVESTMENT STRATEGIES - VALUE STOCKS AND BONDS We invest mainly in a combination of U.S. value stocks and bonds with a greater focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We buy bonds of governments and private companies that are mostly investment-grade in quality with intermediate- to long-term maturities (three years or longer). We invest mainly in large companies. Main risks * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk that prices of bonds we buy will fall if interest rates rise. Interest rate risk is generally higher for investments with longer maturities. * The risk that issuers of bonds we buy will not make timely payments of interest and principal. This credit risk is generally higher for debt that is below investment-grade in quality. * The risk that our allocation of investments between stocks and bonds may adversely affect the fund's performance. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1999 -0.41% Year-to-date performance through 3/31/2000 was -0.80%. During the periods shown in the bar chart, the highest return for a quarter was 4.92% (quarter ending 6/30/99) and the lowest return for a quarter was -6.89% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (4/30/98) Class IB -0.41% 1.94% S&P 500 Index 21.04% 19.80% Lehman Brothers Government/ Corporate Bond Index -2.16% 2.95% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended July 31, 1999. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Lehman Brothers Government/Corporate Bond Index, an unmanaged index of publicly issued U.S. governmental and corporate debt obligations used as a general measure of the performance of fixed-income securities. PUTNAM VT GLOBAL ASSET ALLOCATION FUND GOAL The fund seeks a high level of long-term total return consistent with preservation of capital. MAIN INVESTMENT STRATEGIES - ASSET ALLOCATION We invest in a wide variety of equity and fixed-income securities both of U.S. and foreign issuers. We may invest in securities in the following four investment categories, which we believe represent large, well-differentiated classes of securities with distinctive investment characteristics: * U.S. Equities: This sector will invest primarily in growth and value stocks of U.S. companies. Growth stocks are issued by companies whose earnings we believe are likely to grow faster than the economy as a whole. Growth in earnings may lead to an increase in the price of the stock. Value stocks are those we believe are currently undervalued compared to their true worth. If we are correct and other investors recognize the value of the company, the price of the stock may rise. * International Equities: This sector will invest primarily in growth and value stocks principally traded in foreign securities markets. * U.S. Fixed-income: This sector will invest primarily in fixed-income securities of U.S. companies or the U.S. government, its agencies or instrumentalities, mortgage-backed and asset-backed securities, convertible securities and preferred stock. * International Fixed-income: This sector will invest primarily in fixed-income securities denominated in foreign currencies of non-U.S. companies or foreign governmental issuers or supranational agencies. The allocation of fund assets assigned to each investment category will be reevaluated at least quarterly based on an assessment of the relative market opportunities and risks of each investment category taking into account various economic and market factors. The fund may from time to time invest in all or any one of the investment categories as we may consider appropriate in response to changing market conditions. We expect that under normal market conditions the fund will invest a majority of its assets in equity securities. We can invest in companies of any size. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. * The risk that prices of bonds we buy will fall if interest rates rise. Interest rate risk is generally highest for investments with longer maturities. * The risk that issuers of bonds we buy will not make timely payments of interest and principal. This credit risk is generally higher for debt that is below investment-grade in quality. * The risk that, compared to other debt, mortgage-backed investments may increase in value less when interest rates decline, and decline in value more when interest rates rise. * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risk that our allocation of investments between stocks and bonds may adversely affect the fund's performance. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 0.03% 1991 18.84% 1992 6.13% 1993 17.30% 1994 -2.64% 1995 24.92% 1996 15.45% 1997 19.49% 1998 13.53% 1999 11.76% Year-to-date performance through 3/31/2000 was 0.96%. During the periods shown in the bar chart, the highest return for a quarter was 14.57% (quarter ending 12/31/98) and the lowest return for a quarter was - 10.30% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB 11.76% 16.84% 12.12% MSCI World Index 24.94% 19.76% 11.43% The fund's performance is compared to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index of global equity securities, with all values expressed in U.S. dollars. PUTNAM VT GLOBAL GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GLOBAL GROWTH STOCKS We normally invest in common stocks of companies worldwide. We invest mainly in growth stocks, which are those issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in earnings may lead to an increase in the price of the stock. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry . This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1991 14.84% 1992 -0.51% 1993 32.20% 1994 -1.11% 1995 15.50% 1996 17.03% 1997 14.16% 1998 29.65% 1999 64.56% Year-to-date performance through 3/31/2000 was 4.60%. During the periods shown in the bar chart, the highest return for a quarter was 47.91% (quarter ending 12/31/99) and the lowest return for a quarter was - 12.18% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (5/1/90) Class IB 64.56% 26.90% 17.04% MSCI World Index 24.94% 19.76% 13.82% MSCI All-Country World Free 30.90% 12.39% 10.05% The fund's performance is compared to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index of global equity securities composed of companies in 22 Developed Market countries in North America, Europe and the Asia/Pacific Region with all values expressed in U.S. dollars. The fund's performance is also compared to the Morgan Stanley Capital International (MSCI) All-Country World Free Index, an unmanaged index of global equity securities of companies in 47 Developed and Emerging Market Countries in the Americas, Europe/Middle East and Asia/Pacific Region with all values expressed in U.S. dollars. The MSCI All-Country World Free Index is replacing the MSCI World Index because Putnam Management believes the MSCI All-Country World Free Index is a more appropriate index against which to compare the fund's performance. PUTNAM VT GROWTH AND INCOME FUND GOAL The fund seeks capital growth and current income. MAIN INVESTMENT STRATEGIES - VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 1.81% 1991 18.87% 1992 9.59% 1993 14.09% 1994 0.20% 1995 36.51% 1996 21.73% 1997 23.96% 1998 15.29% 1999 1.47% Year-to-date performance through 3/31/2000 was - 1.80%. During the periods shown in the bar chart, the highest return for a quarter was 16.59% (quarter ending 12/31/98) and the lowest return for a quarter was - 10.16% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years 10 years Class IB 1.47% 19.23% 13.83% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT GROWTH OPPORTUNITIES FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest in a relatively small number of companies that we believe will benefit from long-term trends in the economy, business conditions, consumer behavior or public perceptions of the economic environment. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of loss from investing in fewer issuers than a fund that invests more broadly. This vulnerability to factors affecting a single investment can result in greater fund losses and volatility. PERFORMANCE INFORMATION Performance information will be available after the fund completes a full calendar year of operation. PUTNAM VT HEALTH SCIENCES FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies in the health sciences industries, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest mainly in midsized and large companies. Industry focus. We invest primarily in companies that provide health care services, applied research and development, pharmaceutical products, and medical equipment and supplies, and companies that we believe will grow as a result of their products, patents or other market advantages in the health sciences industries. Events that affect the health sciences industries will have a greater effect on the fund than they would on a fund that is more widely diversified among a number of unrelated industries. Examples include technological advances that make existing products and services obsolete, and changes in regulatory policies concerning approvals of new drugs, medical devices or procedures. In addition, changes in governmental payment systems and use of managed care arrangements may be more likely to adversely affect the fund. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of investing in a single group of industries. Investments in the health sciences industries, even though representing interests in different companies within these industries, may be affected by common economic forces and other factors. This vulnerability to factors affecting the health sciences industries is significantly greater than for a fund that invests in a broader range of industries , and may result in greater fund losses and volatility. * The risk of loss from investing in fewer issuers than a fund that invests more broadly. The fund is "non-diversified," which means that it may invest more of its assets in the securities of fewer companies than a "diversified" fund. This vulnerability to factors affecting a single investment can result in greater fund losses and volatility. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1999 -3.90 Year-to-date performance through 3/31/2000 was 14.38%. During the periods shown in the bar chart, the highest return for a quarter was 9.20% (quarter ending 12/31/99) and the lowest return for a quarter was -5.69% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (4/30/98) Class IB -3.90% 3.04% S&P 500 Index 21.04% 19.80% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1999. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT HIGH YIELD FUND GOAL The fund seeks high current income. Capital growth is a secondary goal when consistent with high current income. MAIN INVESTMENT STRATEGIES - LOWER-RATED BONDS We invest mostly in bonds that * are obligations of U.S. corporations, * are below investment grade in quality (junk bonds), and * have intermediate- to long-term maturities (three years or longer). MAIN RISKS * The risk that movements in financial markets will adversely affect the value of the fund's investments. This risk includes interest rate risk, which means that the prices of the fund's investments are likely to fall if interest rates rise. Interest rate risk is generally highest for investments with long maturities. * The risk that the issuers of the fund's investments will not make timely payments of interest and principal. This credit risk is higher for debt that is below investment grade in quality. Because the fund invests mainly in junk bonds, this risk is heightened for the fund. Investors should carefully consider the risks associated with an investment in the fund. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 -10.11% 1991 44.01% 1992 18.80% 1993 19.39% 1994 -1.08% 1995 18.14% 1996 12.64% 1997 14.17% 1998 -5.90% 1999 5.81% Year-to-date performance through 3/31/2000 was - 0.55%. During the periods shown in the bar chart, the highest return for a quarter was 19.74% (quarter ending 3/31/91) and the lowest return for a quarter was - 9.95% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB 5.81% 8.63% 10.69% First Boston High Yield Bond Index 3.28% 9.08% 11.06% The fund's performance is compared to the First Boston High Yield Bond Index, an unmanaged index of lower-rated, higher-yielding U.S. corporate bonds. The First Boston High Yield Bond Index includes over 180 issues with an average maturity range of 7 to 10 years. PUTNAM VT INCOME FUND GOAL The fund seeks current income consistent with preservation of capital. MAIN INVESTMENT STRATEGIES - MULTI-SECTOR BONDS We invest mostly in bonds that * are obligations of corporations and governments worldwide denominated in U.S. dollars, * are a combination of investment grade and below investment-grade securities (junk bonds), and * have intermediate- to long-term maturities (three years or longer). MAIN RISKS * The risk that movements in financial markets will adversely affect the value of the fund's investments. This risk includes interest rate risk, which means that the prices of the fund's investments are likely to fall if interest rates rise. Interest rate risk is generally highest for investments with long maturities . * The risk that the issuers of the fund's investments will fail to make timely payments of interest and principal . This credit risk is higher for debt that is below investment-grade quality. Because the fund invests significantly in junk bonds, this risk is heightened for the fund. Investors should carefully consider the risks associated with an investment in the fund. * The risk that , compared to other debt, mortgage-backed investments may increase in value less when interest rates decline, and decline in value more when interest rates rise. PERFORMANCE INFORMATION Prior to April 9, 1999, the fund's policies required it to invest at least 25% of its assets in U.S. government securities and limited the amount of assets invested in securities rated below A. Consequently, the historic information in the table does not reflect the fund's performance under its current investment policies . [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 7.35% 1991 17.10% 1992 7.33% 1993 11.11% 1994 -3.43% 1995 20.26% 1996 2.26% 1997 8.48% 1998 8.20% 1999 -2.16% Year-to-date performance through 3/31/2000 was 1.28%. During the periods shown in the bar chart, the highest return for a quarter was 6.74% (quarter ending 6/30/95) and the lowest return for a quarter was -2.77% (quarter ending 3/31/94). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB -2.16% 7.15% 7.41% Lehman Brothers Aggregate Bond Index -0.82% 7.73% 7.70% The fund's performance is compared to the Lehman Brothers Aggregate Bond Index, an unmanaged index of investment-grade bonds. PUTNAM VT INTERNATIONAL GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - INTERNATIONAL STOCKS We normally invest mostly in common stocks of companies outside the United States. We first select the countries and industries we believe are attractive. We then seek stocks offering opportunity for gain. We look for companies with stock prices that reflect a lower value than that which we place on the company. We also look for the presence of factors we think will cause the stock price to increase toward that value. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments in international markets. The risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1998 18.47% 1999 60.01% Year-to-date performance through 3/31/2000 was 6.05%. During the periods shown in the bar chart, the highest return for a quarter was 35.44% (quarter ending 12/31/99) and the lowest return for a quarter was -18.92% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IB 60.10% 30.16% MSCI EAFE Index 26.96% 15.76% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index of equity securities from Europe, Australia, and the Far East, with all values expressed in U.S. dollars. PUTNAM VT INTERNATIONAL GROWTH AND INCOME FUND GOAL The fund seeks capital growth. Current income is a secondary objective. MAIN INVESTMENT STRATEGIES - INTERNATIONAL VALUE STOCKS We normally invest mostly in common stocks of companies outside the United States. We invest mainly in value stocks that offer the potential for income. We look for companies undergoing positive change. Value stocks are those that we believe are currently undervalued by the market. If we are correct and other investors recognize the value of the company, the price of these stocks may rise. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we buy. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1998 11.20% 1999 24.35% Year-to-date performance through 3/31/2000 was 2.63%. During the periods shown in the bar chart, the highest return for a quarter was 16.51% (quarter ending 12/31/98) and the lowest return for a quarter was - 17.32% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IB 24.35% 18.21% MSCI EAFE Index 26.96% 15.76% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index of equity securities from Europe, Australia, and the Far East, with all values expressed in U.S. dollars. PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES - INTERNATIONAL GROWTH STOCKS We normally invest mainly in common stocks of companies outside the United States. We invest mainly in growth stocks, which are those issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in earnings may lead to an increase in the price of the stock. We may invest in companies of any size. We may invest in both established and developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance , including both general financial market conditions and factors related to a specific company or industry . This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1998 15.42% 1999 102.80% Year-to-date performance through 3/31/2000 was 4.59%. During the periods shown in the bar chart, the highest return for a quarter was 57.09% (quarter ending 12/31/99) and the lowest return for a quarter was - 16.61% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IB 102.80% 32.79% MSCI EAFE Index 26.96% 15.76% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index of international equity securities from Europe, Australia and the Far East, with all values expressed in U.S. dollars. PUTNAM VT INVESTORS FUND GOAL The fund seeks long-term growth of capital and any increased income that results from this growth. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1999 29.98% Year-to-date performance through 3/31/2000 was 2.97%. During the periods shown in the bar chart, the highest return for a quarter was 24.63% (quarter ending 12/31/99) and the lowest return for a quarter was -5.01% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (4/30/98) Class IB 29.98% 28.23% S&P 500 Index 21.04% 19.80% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT MONEY MARKET FUND GOAL The fund seeks as high a rate of current income as Putnam Management believes is consistent with preservation of capital and maintenance of liquidity. MAIN INVESTMENT STRATEGIES - INCOME We seek to maintain a stable net asset asset value of $1.00 per share for the fund. We invest primarily in instruments that: * are high quality and * have a short-term maturity. Industry focus. We may invest without limit in money market investments from the banking, personal credit and business credit industries. We may invest over 25% of the fund's assets in money market investments from the personal credit or business credit industries only when we determine that the yields on those investments exceed the yields that are available from eligible investments of issuers in the banking industry. The value of the fund's shares may be more vulnerable than the values of shares of money market funds that invest in issuers in a greater number of industries. To the extent that a fund invests significantly in a particular industry, it runs an increased risk of loss if economic or other developments affecting that industry cause the prices of related money market investments to fall. MAIN RISKS * The risk that the value of your investment may be eroded over time by the effects of inflation. * The risk that, as a result of, for example, a deterioration in the credit quality of issuers whose securities the fund holds or an increase in interest rates, the fund may be unable to maintain a net asset value of $1.00 per share. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 7.81% 1991 5.76% 1992 3.42% 1993 2.64% 1994 3.67% 1995 5.30% 1996 4.93% 1997 5.06% 1998 5.12% 1999 4.66% Year-to-date performance through 3/31/2000 was 1.27%. During the periods shown in the bar chart, the highest return for a quarter was 1.95% (quarter ending 6/30/90) and the lowest return for a quarter was 0.80% (quarter ending 9/30/92). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB 4.66% 5.11% 4.85% Merrill Lynch 91-Day Treasury Bill Index 4.85% 5.35% 5.28% Lipper Money Market Average 4.49% 4.95% 4.80% The fund's performance is compared to the Merrill Lynch 91-Day Treasury Bill Index, an unmanaged index that seeks to measure the performance of United States Treasury bills currently available in the marketplace and the Lipper Money Market Average is an arithmetic average of the total return of all money market mutual funds tracked by Lipper , Inc. PUTNAM VT NEW OPPORTUNITIES FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks in sectors of the economy that we believe have high growth potential. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. The growth sectors we currently target include communications, media/entertainment, medical technology/cost containment, industrial and environmental services, applied/advanced technology, financial services, consumer products and services and business services. We invest in companies of all sizes. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of investing in a limited group of market sectors. The vulnerability of the fund to factors affecting the sectors chosen may be significantly greater than that of a fund that invests in a broader range of sectors and may result in greater fund losses and volatility. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1995 44.65% 1996 10.01% 1997 23.10% 1998 24.22% 1999 69.10% Year-to-date performance through 3/31/2000 was 15.27%. During the periods shown in the bar chart, the highest return for a quarter was 49.43% (quarter ending 12/31/99) and the lowest return for a quarter was - -18.85% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (5/2/94) Class IB 69.10% 32.69% 30.17% Russell Midcap Growth Index 18.23% 21.86% 24.61% S&P 500 Index 21.04% 28.56% 25.66% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1994. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index of common stocks of midsized companies that are also listed on the Russell 1000 Growth Index. The Russell Midcap Growth Index has been added because Putnam Management believes this index is an appropriate index against which to compare the fund's performance. PUTNAM VT NEW VALUE FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES - VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in midsized and large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1998 6.11% 1999 0.26% Year-to-date performance through 3/31/2000 was -0.58%. During the periods shown in the bar chart, the highest return for a quarter was 16.34% (quarter ending 12/31/98) and the lowest return for a quarter was -13.68% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IB 0.26% 7.72% S&P 500 Index 21.04% 24.77% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT OTC & EMERGING GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies traded in the over-the-counter (OTC) market and "emerging growth" companies listed on securities exchanges, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. Emerging growth companies are those we believe have a leading or proprietary position in a growing industry or are gaining market share in an established industry. We invest mainly in small and midsized companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1999 126.45% Year-to-date performance through 3/31/2000 was 10.49%. During the periods shown in the bar chart, the highest return for a quarter was 76.26% (quarter ending 12/31/99) and the lowest return for a quarter was 8.04% (quarter ending 3/31/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (4/30/98) Class IB 126.45% 63.94% Russell 2000 Growth Index 43.09% 16.30% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1999. The fund's performance is compared to the Russell 2000 Growth Index, an unmanaged index composed of securities with greater-than-average growth orientation within the Russell 2000 Index. PUTNAM VT RESEARCH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH AND VALUE STOCKS We invest mainly in common stocks of U.S. companies that we believe offer the opportunity for gain. We look for companies with stock prices that reflect a lower value than that which we place on the company. We also look for the presence of factors we think will cause the stock price to increase toward that value. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1998 19.48% 1999 27.58% Year-to-date performance through 3/31/2000 was 4.33%. During the periods shown in the bar chart, the highest return for a quarter was 20.13% (quarter ending 12/31/99) and the lowest return for a quarter was -5.36% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (9/30/98) Class IB 27.69% 39.93% S&P 500 Index 21.04% 35.93% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1999. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT SMALL CAP VALUE FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in small companies. These are companies of a size similar to those in the Russell 2000 Index, a commonly used index of small company stocks. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and fact ors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION Performance information will be available after the fund completes a full calendar year of operation. PUTNAM VT UTILITIES GROWTH AND INCOME FUND GOAL The fund seeks capital growth and current income. MAIN INVESTMENT STRATEGIES - VALUE STOCKS AND BONDS We invest mainly in a combination of bonds and U.S. value stocks of companies in the public utilities industries, with a significantly greater focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We buy bonds of governments and private companies that are mostly investment-grade in quality with intermediate- to long-term maturities (three years or longer). We invest mainly in large companies. Industry focus. We invest primarily in companies that produce or distribute electricity, gas or other types of energy, supply water or provide telecommunications services (but not public broadcasting or cable television). Events that affect these public utilities industries will have a greater effect on the fund than they would on a fund that is more widely diversified among a number of unrelated industries. Examples include increases in fuel and other operating costs, and technological advances that make existing plants, equipment or products obsolete. In addition, changes in regulatory policies concerning the environment, energy conservation, nuclear power and utility pricing, as well as deregulation of certain utility services, may be more likely to adversely affect the fund. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry . This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of investing in a single group of industries. Investments in the utilities industries, even though representing interests in different companies within these industries, may be affected by common economic forces and other factors. This vulnerability to factors affecting the utilities industries is significantly greater than for a fund that invests in a broader range of industries, and may result in greater fund losses and volatility. * The risk that prices of bonds we buy will fall if interest rates rise. Interest rate risk is generally higher for investments with longer maturities. * The risk that issuers of bonds we buy will not make timely payments of interest and principal. This credit risk is generally higher for debt that is below investment-grade in quality. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1993 13.25% 1994 -7.16% 1995 30.88% 1996 15.62% 1997 26.91% 1998 14.86% 1999 -0.79% Year-to-date performance through 3/31/2000 was 2.32%. During the periods shown in the bar chart, the highest return for a quarter was 12.28% (quarter ending 12/31/97) and the lowest return for a quarter was - 7.81% (quarter ending 3/31/99). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (5/4/92) Class IB -0.79% 16.97% 12.46% S&P Utilities Index -8.88% 13.66% 11.07% S&P 500 Index 21.04% 28.56% 20.58% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1992. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the S&P Utilities Index, an unmanaged list of common stocks issued by utility companies. The S&P Utilities Index is replacing the S&P 500 Index because Putnam Management believes the S&P Utilities Index is a more appropriate index against which to compare the fund's performance. PUTNAM VT VISTA FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest mainly in midsized companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1998 19.50% 1999 52.59% Year-to-date performance through 3/31/2000 was 21.21%. During the periods shown in the bar chart, the highest return for a quarter was 41.27% (quarter ending 12/31/99) and the lowest return for a quarter was - -17.29% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IB 52.59% 31.02% Russell Midcap Growth Index 51.29% 29.79% S&P 500 Index 21.04% 27.58% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index that measures the performance of those companies in the Russell Midcap Index that have higher prices relative to the book value of their assets and higher forecasted growth rates. The Russell Midcap Growth Index is replacing the S&P 500 Index because Putnam Management believes the Russell Midcap Growth Index is a more appropriate index against which to compare the fund's performance. PUTNAM VT VOYAGER FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest in companies of all sizes. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 -2.18% 1991 45.87% 1992 10.19% 1993 18.92% 1994 0.89% 1995 40.46% 1996 12.80% 1997 26.33% 1998 24.19% 1999 58.01% Year-to-date performance through 3/31/2000 was 10.80%. During the periods shown in the bar chart, the highest return for a quarter was 41.32% (quarter ending 12/31/99) and the lowest return for a quarter was - -17.39% (quarter ending 9/30/90). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB 58.01% 31.47% 22.14% Russell Midcap Growth Index 51.29% 28.03% 18.96% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to to the Russell Midcap Growth Index, an unmanaged index of common stocks of midsized companies that are also included on the Russell 1000 Growth Index. The Russell Midcap Growth Index has been added because Putnam Management believes this index is an appropriate index against which to compare the fund's performance. What are the funds' main investment strategies and related risks? We generally manage the funds in styles similar to certain funds in the retail Putnam family of funds. However, the counterpart funds will not have identical portfolios or investment results, since we may employ different investment practices and invest in different securities for them. Any investment carries with it some level of risk that generally reflects its potential for reward. This section provides additional information on the investment strategies and related risks that are identified for each fund in "Fund summaries" at the beginning of this prospectus and discusses investment strategies and related risks that are common to a number of the funds. Not every investment strategy listed below applies to each fund. Please refer to your fund's strategy in the Fund summaries section to determine which risks apply to your fund. Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors relating directly to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. We may purchase stock that trades at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for the company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. Companies whose stock we believe is undervalued by the market may have experienced adverse business developments or may be subject to special risks that have caused their stocks to be out of favor. If our assessment of a company's prospects is wrong, or if other investors do not eventually recognize the value of the company, then price of the company's stock may fall or may not approach the value that we have placed on it. We will consider, among other things, a company's financial strength, competitive position in its industry, and projected future earnings, cash flows and dividends when deciding whether to buy or sell stocks. Smaller companies. We may invest in smaller companies. These companies, which may have market capitalizations of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may therefore be more vulnerable to adverse developments than those of larger companies. Foreign investments. Each of the funds may invest in securities of foreign issuers. Foreign investments involve certain special risks, including * Unfavorable changes in currency exchange rates: Foreign investments are typically issued and traded in foreign currencies. As a result, their values may be affected by changes in exchange rates between foreign currencies and the U.S. dollar. * Political and economic developments: Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or export of foreign currency, and tax increases. * Unreliable or untimely information: There may be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices as stringent as those in the United States. * Limited legal recourse: Legal remedies for investors may be more limited than the remedies available in the United States. * Limited markets: Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than U.S. investments, which means we may at times be unable to sell these foreign investments at desirable prices. For the same reason, we may at times find it difficult to value the fund's foreign investments. * Trading practices: Brokerage commissions and other fees are generally higher for foreign investments than for U.S. investments. The procedures and rules governing foreign transactions and custody may also involve delays in payment, delivery or recovery of money or investments. * Lower yield: Common stocks of foreign companies have historically offered lower dividends than stocks of comparable U.S. companies. Foreign withholding taxes may further reduce the amount of income available to distribute to shareholders of the fund. The fund's yield is therefore expected to be lower than yields of most funds that invest mainly in U.S. companies. * Sovereign issuers: The willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic factors, including the issuer's balance of payments, overall debt level, and cash flow from tax or other revenues. For Putnam VT Income Fund, we may invest in U.S. dollar denominated fixed-income securities of foreign issuers, including Yankee bonds. For Putnam VT Money Market Fund, we may invest in money market instruments of foreign issuers that are denominated in U.S. dollars. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be changing rapidly, which can cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets, or to investments in U.S. companies that have significant foreign operations. Special U.S. tax considerations may apply to the fund's foreign investments. Fixed-income investments. Fixed-income securities, which typically pay an unchanging rate of interest or dividends, include bonds and other debt. Each of the funds may invest in fixed-income securities. The value of a fixed-income investment may fall as a result of factors directly relating to the issuer of the security, such as decisions made by its management or a reduction in its credit rating. An investment's value may also fall because of factors affecting not just the issuer, but other issuers, such as increases in production costs. The value of an investment may also be affected by general changes in financial market conditions, such as changing interest rates or currency exchange rates. We will consider, among other things, credit, interest rate and prepayment risks as well as general market conditions when deciding whether to buy or sell investments. * Interest rate risk. The values of bonds and other debt usually rise and fall in response to changes in interest rates. Declining interest rates generally increase the value of existing debt instruments, and rising interest rates generally decrease the value of existing debt instruments. Changes in a debt instrument's value usually will not affect the amount of interest income paid to the fund, but will affect the value of the fund's shares. Interest rate risk is generally greater for investments with longer maturities. Some investments give the issuer the option to call, or redeem, these investments before their maturity date. If an issuer "calls" its security during a time of declining interest rates, we might have to reinvest the proceeds in an investment offering a lower yield, and therefore might not benefit from any increase in value as a result of declining interest rates. "Premium investments" offer interest rates higher than prevailing market rates. However, they involve a greater risk of loss, because their values tend to decline over time. You may find it useful to compare the fund's yield, which factors out the effect of premium investments, with its current dividend rate, which does not factor out that effect. For Putnam VT Money Market Fund, average portfolio maturity will not exceed 90 days and the fund may not hold an investment with more than 397 days remaining to maturity. These short-term investments generally have lower yields than longer-term investments. Some investments have an interest rate that changes based on a market interest rate, and allow the holder to demand payment of principal and accrued interest before the scheduled maturity date. We measure the maturity of these obligations using the relatively short period in which payment could be demanded. Because the interest rate on these investments can change as market interest rates change, these investments are unlikely to be able to lock in favorable longer term interest rates. * Credit risk. Investors normally expect to be compensated in proportion to the risk they are assuming. Thus, debt of issuers with poor credit usually offers higher yields than debt of issuers with more secure credit. Higher-rated investments generally have lower-credit risk. For Putnam VT Income Fund, we invest most of the fund's assets in investment-grade investments. These are rated at least BBB or its equivalent by a nationally recognized securities rating agency, or are unrated investments we believe are of comparable quality. We may also invest the fund's assets in non-investment-grade investments. However, we may not invest in securities that are rated below B or the equivalent by each agency or are unrated investments we believe are of comparable quality. We will not necessarily sell an investment if its rating is reduced after we buy it. For Putnam VT The George Putnam Fund of Boston, we invest mostly in investment-grade debt instruments. These are rated at least BBB or its equivalent at the time of purchase by a nationally recognized securities rating agency, or are unrated investments that we believe are of comparable quality. We may invest in lower-rated instruments. However, we will not invest in securities rated lower than B or its equivalent by each rating agency rating the investment or unrated securities that we believe are of comparable quality. We will not necessarily sell an investment if its rating is reduced after we purchase it. For Putnam VT High Yield Fund, we invest mostly in higher-yielding, higher-risk debt investments that are rated below BBB or its equivalent at the time of purchase by each nationally recognized securities rating agency rating such investments, or are unrated investments that we believe are of comparable quality. For Putnam VT Diversified Income Fund, Putnam VT Global Asset Allocation and Putnam VT Utilities Growth and Income Fund, we may invest up to 70%, 35% and 20%, respectively, of the fund's total assets in non-investment grade securities using the investment criteria described above under Putnam VT High Yield Fund. For Putnam VT High Yield Fund and Putnam VT Diversified Income Fund, we may invest up to 15% and 5%, respectively, of the fund's total assets in debt investments rated below CCC or its equivalent, at the time of purchase, by each agency rating such investments and unrated investments that we believe are of comparable quality. We will not necessarily sell an investment if its rating is reduced after we buy it. Investments rated below BBB or its equivalent are known as "junk bonds." This rating reflects a greater possibility that the issuers may be unable to make timely payments of interest and principal and thus default. If this happens, or is perceived as likely to happen, the values of those investments will usually be more volatile and are likely to fall. A default or expected default could also make it difficult for us to sell the investments at prices approximating the values we had previously placed on them. Lower-rated debt usually has a more limited market than higher-rated debt, which may at times make it difficult for us to buy or sell certain debt instruments or to establish their fair value. Credit risk is generally greater for investments that are issued at less than their face value and make payments of interest only at maturity rather than at intervals during the life of the investment. Credit ratings are based largely on the issuer's historical financial condition and the rating agencies' investment analysis at the time of rating. The rating assigned to any particular investment does not necessarily reflect the issuer's current financial condition, and does not reflect an assessment of an investment's volatility or liquidity. Although we consider credit ratings in making investment decisions, we perform our own investment analysis and do not rely only on ratings assigned by the rating agencies. The fund depends more on our ability in buying lower-rated debt than it does in buying investment-grade debt. We may have to participate in legal proceedings or to take possession of and manage assets that secure the issuer's obligations. This could increase the fund's operating expenses and decrease its net asset value. Although investment-grade investments generally have lower credit risk, they may share some of the risks of lower-rated investments. U.S. government investments generally have the least credit risk, but are not completely free of credit risk. While some, such as U.S. Treasury obligations and Ginnie Mae certificates, are backed by the full faith and credit of the U.S. government, others are subject to varying degrees of risk. These risk factors include the creditworthiness of the issuer and, in the case of mortgage-backed securities, the ability of the underlying borrowers to meet their obligations. For Putnam VT Money Market Fund , we buy only high quality investments. These are: * rated in one of the two highest categories by at least two nationally recognized rating services, * rated by one rating service in one of the service's two highest categories (if only one rating service has provided a rating), or * unrated investments that we determine are of equivalent quality. If an issuer of a note does not have the credit rating usually required by the fund, another company may use its higher credit rating to back up the credit of the issuer of the note by selling the issuer a letter of credit. The main risk of investments backed by a letter of credit is that the entity issuing the letter of credit will be unable to fulfill its obligations to the fund. Insurance. We have bought liability insurance that insures the fund against a decrease in the value of its investments arising from the issuer's default or bankruptcy. The insurance covers most of the fund's investments, other than U.S. government securities. The insurance does not guarantee or ensure that the fund will be able to maintain a stable net asset value of $1.00 per share. The maximum total coverage for the fund is $30 million, with a deductible for each loss of $1 million or 0.30% of the fund's net assets, whichever is less. The $30 million maximum coverage is shared with four other Putnam money market funds. Recovery under the insurance is subject to certain conditions, including the condition that the other Putnam money market funds have not previously exhausted the insurance coverage, and the insurance might not be renewed when it expires. * Prepayment risk. Traditional debt investments typically pay a fixed rate of interest until maturity, when the entire principal amount is due. By contrast, payments on mortgage-backed investments typically include both interest and partial payment of principal. Principal may also be prepaid voluntarily, or as a result of refinancing or foreclosure. We may have to invest the proceeds from prepaid investments in other investments with less attractive terms and yields. Compared to debt that cannot be prepaid, mortgage-backed investments are less likely to increase in value during periods of declining interest rates and have a higher risk of decline in value during periods of rising interest rates. They may increase the volatility of a fund. Some mortgage-backed investments receive only the interest portion or the principal portion of payments on the underlying mortgages. The yields and values of these investments are extremely sensitive to changes in interest rates and in the rate of principal payments on the underlying mortgages. The market for these investments may be volatile and limited, which may make them difficult to buy or sell. Money market instruments. These include certificates of deposit, commercial paper, U.S. government debt and repurchase agreements, corporate obligations and bankers acceptances. For VT Money Market Fund, we buy bankers acceptances only if they are issued by banks with deposits in excess of $2 billion (or the foreign currency equivalent) at the close of the last calendar year. If the Trustees change this minimum deposit requirement, shareholders would be notified. Illiquid securities. We may invest up to 15% of a fund's assets (10% for Putnam VT Money Market Fund) in illiquid investments, which may be considered speculative. Illiquid investments are investments that may be difficult to sell. The sale of many of these investments is limited by law. We may not be able to sell a fund's illiquid investments when we consider it is desirable to do so or we may be able to sell them only at less than their market value. Derivatives. We may engage in a variety of transactions involving derivatives, such as futures, options, warrants and swap contracts. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indexes or currencies. We may use derivatives both for hedging and non-hedging purposes. For example, the fund may use derivatives to increase or decrease its exposure to long- or short-term interest rates (in the United States or abroad). However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Derivatives involve special risks and may result in losses. The funds depend on our ability to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways, especially in unusual market conditions. Some derivatives are "leveraged" and therefore may magnify or otherwise increase investment losses . Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund's derivative positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction will not meet its obligations . For further information about the risks of derivatives, see the Trust's statement of additional information (SAI). Frequent trading. We may buy and sell investments relatively often, which involves higher brokerage commissions and other expenses. Other investments. In addition to the main investment strategies described above, we may make other investments, which may be subject to other risks as described in the SAI. Alternative strategies. At times we may judge that market conditions make pursuing a fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the affected fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. Changes in policies. The Trust's Trustees may change any of the funds' goals, investment strategies and other policies without shareholder approval, except as otherwise indicated. Who manages the funds? The Trust's Trustees oversee the general conduct of each fund's business. The Trustees have retained Putnam Management to be the funds' investment manager, responsible for making investment decisions for the funds and managing the funds' other affairs and business. Each fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. Putnam Management's address is One Post Office Square, Boston, MA 02109. The funds paid Putnam Management management fees in the following amounts (reflected as a percentage of average net assets for each fund's last fiscal year): Management Putnam VT Fund Fees Putnam VT Asia Pacific Growth Fund 0.80% Putnam VT Diversified Income Fund 0.68% Putnam VT The George Putnam Fund of Boston 0.65% Putnam VT Global Asset Allocation 0.65% Putnam VT Global Growth Fund 0.61% Putnam VT Growth and Income Fund 0.46% Putnam VT Health Sciences Fund 0.70% Putnam VT High Yield Fund 0.65% Putnam VT Income Fund 0.60% Putnam VT International Growth 0.80% Putnam VT International Growth and Income Fund 0.80% Putnam VT International New Opportunities Fund 1.08% Putnam VT Investors Fund 0.63% Putnam VT Money Market Fund 0.41% Putnam VT New Opportunities Fund 0.54% Putnam VT New Value Fund 0.70% Putnam VT OTC & Emerging Growth Fund* 0.53% Putnam VT Research Fund* 0.54% Putnam VT Utilities Growth and Income Fund 0.65% Putnam VT Vista Fund 0.65% Putnam VT Voyager Fund 0.53% * The management fees shown in the table reflect an expense limitation then in effect or currently in effect. In the absence of an expense limitation, management fees would have been: Putnam VT OTC & Emerging Growth Fund 0.70% Putnam VT Research Fund 0.65% The following funds paid Putnam Management a quarterly management fee for these services at the annual rate of: Putnam VT American Government Income Fund: 0.65% of the first 500 million of average net assets, 0.55% of the next 500 million, 0.50% of the next 500 million, 0.45% of the next 5 billion, 0.425% of the next 5 billion, 0.405% of the next 5 billion, 0.39% of the next 5 billion, 0.38% of the next 5 billion, 0.37% of the next 5 billion, 0.36% of the next 5 billion, 0.35% of the next 5 billion and 0.34% of any excess thereafter. In order to limit expenses for Putnam VT American Government Income Fund, Putnam Management has agreed to limit its compensation (and, to the extent necessary, bear other expenses) through December 31, 2000 to the extent that the expenses of the fund (exclusive of brokerage, interest, taxes and extraordinary expenses, and payments under the fund's distribution plans) would exceed an annual rate of 0.90% of the fund's average net assets. For the purpose of determining any such limitation on Putnam Management's compensation, expenses of the fund do not reflect the application of commissions or cash management credits that may reduce designated fund expenses. Putnam VT Growth Opportunities Fund: 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, 0.43% of the next 5 billion and 0.42% of any excess thereafter. Putnam VT Small Cap Value Fund: 0.80% of the first 500 million of average net assets; 0.70% of the next 500 million; 0.65% of the next 500 million; 0.60% of the next 5 billion; 0.575% of the next 5 billion; 0.555% of the next 5 billion; 0.54% of the next 5 billion; and 0.53% of any excess thereafter. The following officers and advisor teams of Putnam Management have primary responsibility for the day-to-day management of the relevant fund's portfolio. Each officer's length of service to the relevant fund and the officer's experience as portfolio manager or investment analyst over at least the last five years are shown.
Fund name Year Business experience (at least 5 years) Putnam VT American Government Income Fund Kevin M. Cronin 2000 1997-Present Putnam Management Managing Director Prior to February 1997 MFS Investment Management Michael Martino 2000 1994-Present Putnam Management Managing Director Putnam VT Asia Pacific Growth Fund Paul Warren 1997 1997-Present Putnam Management Senior Vice President Prior to May 1997 IDS Fund Management Carmel Peters 1999 1997-Present Putnam Management Senior Vice President Prior to May 1997 Wheelock Natwest Investment Management, Hong Kong Prior to February 1996 Rothschild Asset Management Asia Pacific, Hong Kong Putnam VT Diversified Income Fund David L. Waldman 1998 1997-Present Putnam Management Managing Director Prior to June 1997 Lazard Freres The Core Fixed Income Team Putnam VT The George Putnam Fund of Boston David L. King 2000 1983-Present Putnam Management Managing Director Jeanne L. Mockard 2000 1990-Present Putnam Management Senior Vice President James M. Prusko 1998 1992-Present Putnam Management Senior Vice President The Core Fixed Income Team Putnam VT Global Asset Allocation The Global Asset Allocation Committee Putnam VT Global Growth Fund Robert J. Swift 1996 1995-Present Putnam Management Managing Director Prior to August 1995 IAI International/Hill Samuel Investment Advisors Kelly A. Morgan 1997 1996-Present Putnam Management Managing Director Prior to December 1996 Alliance Capital Management L.P. Lisa H. Svensson 1998 1994-Present Putnam Management Senior Vice President Prior to July 1994 Lord Abbett & Co. Manuel Weiss 1998 1987-Present Putnam Management Senior Vice President Stephen P. Dexter 2000 1999-Present Putnam Management Senior Vice President Prior to June 1999 Scudder Kemper Inc. Putnam VT Growth and Income Fund David L. King 1993 1983-Present Putnam Management Managing Director Hugh H. Mullin 1998 1986-Present Putnam Management Senior Vice President Sheldon N. Simon 1997 1984-Present Putnam Management Senior Vice President Putnam VT Growth Opportunities Fund C. Beth Cotner 2000 1995-Present Putnam Management Managing Director Prior to September 1995 Kemper Financial Services Jeffery R. Lindsey 2000 1994-Present Putnam Management Senior Vice President David J. Santos 2000 1986-Present Putnam Management Senior Vice President Putnam VT Health Sciences Fund Richard B. England 1998 1992-Present Putnam Management Senior Vice President David G. Carlson 1998 1992-Present Putnam Management Senior Vice President Margery C. Parker 1998 1997-Present Putnam Management Senior Vice President Prior to December 1997 Keystone Investments Putnam VT High Yield Fund Krishna K. Memani 1999 1998-Present Putnam Management Managing Director Prior to September 1998 Morgan Stanley & Co. The Credit Team Putnam VT Income Fund James M. Prusko 2000 1992-Present Putnam Management Senior Vice President The Core Fixed Income Team Putnam VT International Growth Fund Justin M. Scott 1996 1988-Present Putnam Management Managing Director Omid Kamshad 1996 1996-Present Putnam Management Managing Director Prior to January 1996 Lombard Odier International Mark D. Pollard 1999 1990-Present Putnam Management Managing Director Paul C. Warren 1999 1997-Prsent Putnam Management Senior Vice President Prior to May 1997 IDS Fund Management Joshua L. Byrne 2000 1993-Present Putnam Management Senior Vice President Putnam VT International Growth and Income Fund Deborah F. Kuenstner 1999 1997-Present Putnam Management Managing Director Prior to May 1997 DuPont Pension Fund Investment George Stairs 1999 1994-Present Putnam Management Senior Vice President Prior to July 1994 Value Quest Ltd. Putnam VT International New Opportunities Fund Robert J. Swift 1996 1995-Present Putnam Management Managing Director Prior to August 1995 IAI International/ Hill Samuel Investment Advisors Carmel Peters 1999 1997-Present Putnam Management Senior Vice President Prior to May 1997 Wheelock Natwest Investment Management, Hong Kong Prior to February 1996 Rothschild Asset Management Asia Pacific, Hong Kong Stephen P. Dexter 1999 1999-Present Putnam Management Senior Vice President Prior to June 1999 Scudder Kemper Inc. Putnam VT Investors Fund C. Beth Cotner 1998 1995-Present Putnam Management Senior Vice President Prior to September 1995 Kemper Financial Services Richard B. England 1998 1992-Present Putnam Management Senior Vice President Manuel H. Weiss 1998 1987-Present Putnam Management Senior Vice President Putnam VT New Opportunities Fund Daniel L. Miller 1994 1983-Present Putnam Management Managing Director Jeffrey R. Lindsey 1999 1994-Present Putnam Management Senior Vice President Kenneth Lang 1999 1997-Present Putnam Management Vice President Prior to April 1997 Montgomery Securities Putnam VT New Value Fund David L. King 1996 1983-Present Putnam Management Managing Director Putnam VT OTC & Emerging Growth Fund Steven L. Kirson 1998 1989-Present Putnam Management Senior Vice President Michael J. Mufson 1998 1993-Present Putnam Management Senior Vice President Putnam VT Research Fund The Global Equity Research Team Putnam VT Small Cap Value Fund Edward T. Shadek, Jr. 1999 1997-Present Putnam Management Managing Director Prior to March 1997 Newbold's Asset Management Co. Jeffrey Netols 1999 1993-Present Putnam Management Senior Vice President Putnam VT Utilities Growth and Income Fund Krishna K. Memani 1999 1998-Present Putnam Management Managing Director Prior to September 1998 Morgan Stanley & Co. Jeanne L. Mockard 1998 1990-Present Putnam Management Senior Vice President The Credit Team Putnam VT Vista Fund Eric Wetlaufer 1997 1997-Present Putnam Management Managing Director Prior to November 1997 Cadence Capital Management Anthony C. Santosus 1996 1985-Present Putnam Management Senior Vice President Margery C. Parker 1998 1997-Present Putnam Management Senior Vice President Prior to December 1997 Keystone Investments Dana Clark 1999 1987-Present Putnam Management Vice President Putnam VT Voyager Fund Robert R. Beck 1995 1989-Present Putnam Management Managing Director Roland W. Gillis 1995 1995-Present Putnam Management Managing Director Prior to March 1995 Keystone Custodian Funds, Inc. Michael P. Stack 1997 1997-Present Putnam Management Senior Vice President Prior to November 1997 Independence Investment Associates, Inc. Charles H. Swanberg 1994 1984-Present Putnam Management Senior Vice President Paul Marrkand 2000 1987-Present Putnam Management Senior Vice President
How to buy and sell fund shares The Trust has an underwriting agreement relating to the funds with Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam Mutual Funds presently offers shares of each fund of the Trust continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Mutual Funds accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Mutual Funds may, at its expense, provide promotional incentives to dealers that sell variable insurance products. Shares are sold or redeemed at the net asset value per share next determined after receipt of an order, except that, in the case of Putnam VT Money Market Fund, purchases will not be affected until the next determination of net asset value after federal funds have been made available to the Trust. Orders for purchases or sales of shares of a fund 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. No fee is charged to a separate account when it redeems fund shares. Please check with your insurance company to determine which funds are available under your variable annuity contract or variable life insurance policy. Certain funds may not be available in your state due to various insurance regulations. Inclusion in this prospectus of a fund that is not available in your state is not to be considered a solicitation. This prospectus should be read in conjunction with the prospectus of the separate account of the specific insurance product which accompanies this prospectus. The funds currently do not foresee any disadvantages to policyowners arising out of the fact that the funds offer their shares to separate accounts of various insurance companies to serve as the investment medium for their variable products. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise, and to determine what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more insurance companies' separate accounts might be required to withdraw their investments in one or more funds and shares of another fund may be substituted. This might force a fund to sell portfolio securities at disadvantageous prices. In addition, the Trustees may refuse to sell shares of any fund to any separate account or may suspend or terminate the offering of shares of any fund if such action is required by law or regulatory authority or is in the best interests of the shareholders of the fund. Under unusual circumstances, the Trust may suspend repurchases or postpone payment for up to seven days or longer, as permitted by federal securities law. Distribution Plan The Trust has adopted a Distribution Plan with respect to class IB shares to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of the class IB shares, including the payments to insurance companies and their affiliated dealers mentioned below. The plans provide for payments by each fund to Putnam Mutual Funds at the annual rate (expressed as a percentage of average net assets) of up to 0.35% on class IB shares. The Trustees currently limit payments on class IB shares to 0.15% of average net assets. Putnam Mutual Funds compensates insurance companies (or affiliated broker-dealers) whose separate accounts invest in the Trust through class IB shares for providing services to their contract holders investing in the Trust. Putnam Mutual Funds makes quarterly payments to dealers at the annual rate of up to 0.15% of the average net asset value of class IB shares. Putnam Mutual Funds may suspend or modify its payments to dealers. The payments are also subject to the continuation of the Distribution Plan, 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 do the funds price their shares? The price of a fund's shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. Each fund (other than Putnam VT Money Market Fund) values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. Putnam VT Money Market Fund values all of its investments at amortized cost. Each fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect each fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of each fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of each fund's foreign investments (other than Putnam VT Money Market Fund) occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. Fund distributions and taxes Each fund (other than Putnam VT Money Market Fund) will distribute any net investment income and net realized capital gains at least annually. Both types of distributions will be made in shares of such funds unless an election is made on behalf of a separate account to receive some or all of the distributions in cash. Putnam VT Money Market Fund will declare a dividend of its net investment income daily and distribute such dividend monthly. Each month's distributions will be paid on the first business day of the next month. Since the net income of Putnam VT Money Market Fund is declared as a dividend each time it is determined, the net asset value per share of the fund remains at $1.00 immediately after each determination and dividend declaration. Distributions are reinvested without a sales charge, using the net asset value determined on the ex-dividend date, except that with respect to Putnam VT Money Market Fund, distributions are reinvested using the net asset value determined on the day following the distribution payment date. Distributions on each share are determined in the same manner and are paid in the same amount, regardless of class, except for such differences as are attributable to differential class expenses. Generally, owners of variable annuity and variable life contracts are not taxed currently on income or gains realized with respect to such contracts. However, some distributions from such contracts may be taxable at ordinary income tax rates. In addition, distributions made to an owner who is younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own tax advisors for more information on their own tax situation, including possible foreign, state or local taxes. In order for investors to receive the favorable tax treatment available to holders of variable annuity and variable life contracts, the separate accounts underlying such contracts, as well as the funds in which such accounts invest, must meet certain diversification requirements. Each fund intends to comply with these requirements. If a fund does not meet such requirements, income allocable to the contracts would be taxable currently to the holders of such contracts. Each fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal income taxes on income and gains it distributes to the separate accounts. For information concerning federal income tax consequences for the holders of variable annuity contracts and variable life insurance policies, contract holders should consult the prospectus of the applicable separate account. Fund investments in foreign securities may be subject to withholding taxes at the source on dividend or interest payments. In that case, a fund's yield on those securities would be decreased. A fund's investments in certain debt obligations may cause the fund to recognize taxable income in excess of the cash generated by such obligations. Thus, the fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. Financial highlights The financial highlights table is intended to help you understand the funds' recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from each fund's financial statements, which have been audited and reported on by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the funds' annual report to shareholders, which is available upon request.
Financial Highlights Investment Operations Net Asset Net Realized Value, Net and Unrealized Total from Beginning Investment Gain (Loss) on Investment Period ended of Period Income (Loss) Investments operations Putnam VT Asia Pacific Growth Fund 1999 $8.33 $(.08)(a) $9.00 $8.92 1998***** 8.57 (.01)(a) (.23) (.24) Putnam VT Diversified Income Fund 1999 $10.47 $.78(a) $(.62) $.16 1998**** 10.95 .62(a) (1.10) (.48) Putnam VT The George Putnam Fund of Boston 1999 $10.28 $.30(a) $(.34) $(.04) 1998***** 10.00 .17(a)(b) .20 .37 Putnam VT Global Asset Allocation Fund 1999 $18.95 $.39(a) $1.69 $2.08 1998***** 18.16 .33(a) .46 .79 Putnam VT Global Growth Fund 1999 $20.28 $(.10)(a) $12.08 $11.98 1998***** 18.03 (.05)(a) 2.30 2.25 Putnam VT Growth and Income Fund 1999 $28.75 $.41(a) $.04 $.45 1998**** 28.02 .26(a) .47 .73 Putnam VT Health Sciences Fund 1999 $10.93 $--(a) $(.43) $(.43) 1998***** 10.00 (.01)(a)(b) .95 .94 Putnam VT High Yield Fund 1999 $11.70 $1.11(a) $(.47) $.64 1998***** 12.99 .79(a) (2.08) (1.29) Putnam VT Income Fund 1999 $13.73 $.76(a) $(1.04) $(.28) 1998***** 12.88 .50(a) .35 .85 Putnam VT International Growth Fund 1999 $13.51 $.05(a) $8.07 $8.12 1998***** 13.44 (.04)(a) .15 .11 Putnam VT International Growth and Income Fund 1999 $12.24 $.15(a) $2.83 $2.98 1998**** 13.36 (.01)(a) (.57) (.58) Putnam VT International New Opportunities Fund 1999 $11.48 $(.16)(a) $11.96 $11.80 1998***** 11.39 (.05)(a)(b) .14 .09 Putnam VT Investors Fund 1999 $11.64 $(.01)(a) $3.50 $3.49 1998***** 10.00 .01(a)(b) 1.64 1.65 Putnam VT Money Market Fund 1999 $1.00 $.0460 $-- $.0460 1998***** 1.00 .0338(a) - .0338 (.0338) Putnam VT New Opportunities Fund 1999 $26.04 $(.15)(a) $17.92 $17.77 1998***** 23.94 (.05)(a) 2.15 2.10 Putnam VT New Value Fund 1999 $12.02 $.17(a) $(.13) $.04 1998***** 11.91 .13(a) .13 .26 Putnam VT OTC & Emerging Growth Fund 1999 $10.08 $(.10)(a)(b) $12.84 $12.74 1998***** 10.00 .(03)(a)(b) .11 .08 Putnam VT Research Fund 1999 $11.90 $.02(a)(b) $3.23 $3.25 1998****** 10.00 .02(a)(b) 1.90 1.92 Putnam VT Small Cap Value Fund 1999******* $10.00 $(.03)(a) $.37 $.34 Putnam VT Utilities Growth and Income Fund 1999 $18.19 $.47(a) $(.69) $(.22) 1998***** 16.19 .29(a) 1.71 2.00 Putnam VT Vista Fund 1999 $14.73 $(.07)(a) $7.62 $7.55 1998***** 13.76 (.02)(a) .99 .97 Putnam VT Voyager Fund 1999 $45.81 $(.10)(a) $24.62 $24.52 1998***** 41.55 (.01)(a) 4.27 4.26
Financial Highlights (continued) Less Distributions: From net In excess of From net Realized Net Realized From Investment Gain on Gain on Return of Period ended Income Investments Investments Capital Putnam VT Asia Pacific Growth Fund 1999 $-- $-- $-- $-- 1998***** -- -- -- -- Putnam VT Diversified Income Fund 1999 $(.73) $-- $-- $-- 1998**** -- -- -- -- Putnam VT The George Putnam Fund of Boston 1999 $(.23) $(.02) $-- $(.01) 1998***** (.09) -- -- -- Putnam VT Global Asset Allocation Fund 1999 $(.37) $(1.06) $-- $-- 1998***** -- -- -- -- Putnam VT Global Growth Fund 1999 $(.08) $(1.77) $-- $-- 1998***** -- -- -- -- Putnam VT Growth and Income Fund 1999 $(.41) $(2.04) $-- $-- 1998**** -- -- -- -- Putnam VT Health Sciences Fund 1999 $--(e) $-- $-- $-- 1998***** (.01) -- --(e) -- Putnam VT High Yield Fund 1999 $(1.26) $-- $-- $-- 1998***** -- -- -- -- Putnam VT Income Fund 1999 $(.73) $(.21) $-- $-- 1998***** -- -- -- -- Putnam VT International Growth Fund 1999 $-- $-- $-- $-- 1998***** (.03) -- (.01) -- Putnam VT International Growth and Income Fund 1999 $-- $-- $-- $-- 1998**** (.11) (.19) (.18) (.06) Putnam VT International New Opportunities Fund 1999 $--(e) $-- $-- $-- 1998***** -- -- -- -- Putnam VT Investors Fund 1999 $-- $-- $-- $-- 1998***** (.01) -- -- --(e) Putnam VT Money Market Fund 1999 $(.0460) $-- $-- $-- 1998***** -- -- -- -- Putnam VT New Opportunities Fund 1999 $-- $(.37) $-- $-- 1998***** -- -- -- -- Putnam VT New Value Fund 1999 $-- $(.21) $-- $-- 1998***** (.13) (.02) -- --(e) Putnam VT OTC & Emerging Growth Fund 1999 $-- $(.06) $-- $-- 1998***** -- -- -- -- Putnam VT Research Fund 1999 $(.02) $(.46) $-- $-- 1998****** (.01) (.01) -- -- Putnam VT Small Cap Value Fund 1999******* $-- $-- $(.03) $(.01) Putnam VT Utilities Growth and Income Fund 1999 $(.50) $(.52) $-- $-- 1998***** -- -- -- -- Putnam VT Vista Fund 1999 $-- $(1.63) $-- $-- 1998***** -- -- -- -- Putnam VT Voyager Fund 1999 $(.05) $4.17 $-- $-- 1998***** -- -- -- --
Total Investment Net Asset Return at Net Assets Total Value, End Net Asset End of Period Distributions of Period Value(%)(c) (in thousands) Putnam VT Asia Pacific Growth Fund 1999 $-- $17.25 107.08 $6,866 1998***** -- 8.33 (2.80)* 111 Putnam VT Diversified Income Fund 1999 $(.73) $9.90 1.65 $23,182 1998**** -- 10.47 (4.38)* 1,963 Putnam VT The George Putnam Fund of Boston 1999 $(.26) $9.98 (.41) $38,566 1998***** (.09) 10.28 3.69* 1,924 Putnam VT Global Asset Allocation Fund 1999 $(1.43) $19.60 11.76 $6,617 1998***** -- 18.95 4.35* 1,319 Putnam VT Global Growth Fund 1999 $(1.85) $30.41 64.56 $28,909 1998***** -- 20.28 12.48* 823 Putnam VT Growth and Income Fund 1999 $(2.45) $26.75 1.47 $162,112 1998**** -- 28.75 2.61* 7,583 Putnam VT Health Sciences Fund 1999 $--(e) $10.50 (3.90) $20,162 1998***** (.01) 10.93 9.40* 2,129 Putnam High Yield Fund 1999 $(1.26) $11.08 5.81 $17,646 1998***** -- 11.70 (9.93)* 1,840 Putnam VT Income 1999 $(.94) $12.51 (2.16) $18,116 1998***** -- 13.73 6.60* 2,288 Putnam VT International Growth Fund 1999 $-- $21.63 60.10 $40,448 1998***** (.04) 13.51 .81* 1,234 Putnam VT International Growth and Income Fund 1999 $-- $15.22 24.35 $10,652 1998**** (.54) 12.24 (4.24)* 926 Putnam VT International New Opportunities Fund 1999 $--(e) $23.28 102.80 $33,554 1998***** -- 11.48 .79* 85 Putnam VT Investors Fund 1999 $-- $15.13 29.98 $101,795 1998***** (.01) 11.64 16.54* 2,619 Putnam VT Money Market Fund 1999 $(.0460) $1.00 4.66 $41,516 1998***** (.0338) 1.00 3.42* 13,188 Putnam VT New Opportunities Fund 1999 $(.37) $43.44 69.10 $62,977 1998***** -- 26.04 8.77* 1,359 Putnam VT New Value Fund 1999 $(.21) $11.85 .26 $9,541 1998***** (.15) 12.02 2.28* 414 Putnam VT OTC & Emerging Growth Fund 1999 $(.06) $22.76 126.45 $24,432 1998***** -- 10.08 .82* 541 Putnam VT Research Fund Fund 1999 $(.48) $14.67 27.69 $26,210 1998****** (.02) 11.90 19.19* 255 Putnam Small Cap Value Fund 1999******* $(.04) $10.30 3.37* $6,384 Putnam VT Utilities Growth and Income Fund 1999 (1.02) $16.95 (0.79) $11,337 1998***** -- 18.19 12.35* 1,799 Putnam Vista Fund 1999 $(1.63) $20.65 52.59 $37,506 1998***** -- 14.73 7.05* 851 Putnam VT Voyager Fund 1999 $(4.22) $66.11 58.01 $155,889 1998***** -- 45.81 10.25* 4,332 Ratio of Net Ratio of Investment Expenses to Income (Loss) to Average Net Average Net Portfolio Assets(%)(d) Assets(%) Turnover (%) Putnam VT Asia Pacific Growth Fund 1999 1.28 (.64) 145.51 1998***** .85* (.10)* 136.49 Putnam VT Diversified Income Fund 1999 .93 7.67 117.02 1998**** .69* 5.74* 186.80 Putnam VT The George Putnam Fund of Boston 1999 .98 3.00 173.41 1998***** .67(b)* 1.74(b)* 99.85* Putnam VT Global Asset Allocation Fund 1999 .92 2.15 149.82 1998***** .63* 1.82* 133.80 Putnam VT Global Growth Fund 1999 .88 (.43) 154.88 1998***** .59* (.34)* 164.56 Putnam VT Growth and Income Fund 1999 .65 1.55 53.68 1998**** .49* 1.20* 63.62 Putnam VT Health Sciences Fund 1999 .98 (.01) 82.45 1998***** .71(b)* (.11)(b)* 39.68* Putnam High Yield Fund 1999 .87 10.01 52.96 1998***** .58* 7.63* 52.00 Putnam VT Income 1999 .82 6.14 220.90 1998***** .56* 4.03* 233.04 Putnam VT International Growth Fund 1999 1.17 .31 107.38 1998***** .83* (.29)* 98.31 Putnam VT International Growth and Income Fund 1999 1.13 1.08 92.27 1998**** .84(b)* (.07)(b)* 62.61 Putnam VT International New Opportunities Fund 1999 1.56 (.97) 196.53 1998***** 1.18* (.44)(b)* 157.72 Putnam VT Investors Fund 1999 .86 (.11) 65.59 1998***** .67(b)* .03(b)* 42.97* Putnam VT Money Market Fund 1999 .64 4.61 -- 1998***** .46* 3.18* -- Putnam VT New Opportunities Fund 1999 .74 (.47) 71.14 1998***** .51* (.25)* 59.75 Putnam VT New Value Fund 1999 .95 1.43 98.21 1998***** .65* 1.26* 130.96 Putnam VT OTC & Emerging Growth Fund 1999 1.05(b) (.68)(b) 127.98 1998***** .71(b)* (.42)(b)* 59.93* Putnam VT Research Fund Fund 1999 1.00(b) .13(b) 169.16 1998****** .25(b)* .15(b)* 19.76* Putnam Small Cap Value Fund 1999******* 1.39* (.31)* 48.24* Putnam VT Utilities Growth and Income Fund 1999 .86 2.77 26.16 1998***** .59* 1.98* 24.77 Putnam Vista Fund 1999 .90 (.42) 133.32 1998***** .62* (.18)* 116.48 Putnam VT Voyager Fund 1999 .72 (.21) 85.13 1998***** .49* (.04)* 62.99 * Not annualized. ** For the period May 1, 1995 (commencement of operations) to December 31, 1995. *** For the period January 2, 1997 (commencement of operations) to December 31, 1997. **** For the period April 6, 1998 (commencement of operations) to December 31, 1998. ***** For the period April 30, 1998 (commencement of operations) to December 31, 1998. ****** For the period September 30, 1998 (commencement of operations) to December 31, 1998. ******* For the period April 30, 1999 (commencement of operations) to December 31, 1999. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
(b) Reflects an expense limitation in effect during the period. As a result of such limitation, expenses of Putnam VT The George Putnam Fund of Boston for the period ended 1998 reflect a reduction of approximately $0.03 per share, expenses of Putnam VT Health Sciences Fund for the period ended 1998 reflect a reduction of approximately $0.01 per share, expenses of Putnam VT International New Opportunities Fund for the period ended 1998 reflect a reduction of approximately less than $0.01 per share, expenses of Putnam VT Investors Fund for the period ended 1998 reflect a reduction of approximately less than $0.01 per share, expenses of Putnam VT OTC & Emerging Markets Fund for the periods ended 1999 and 1998 reflect a reduction of approximately $0.02 and $0.05, respectively, per share and expenses of Putnam VT Research Fund for the periods ended 1999 and 1998 reflect a reduction of approximately $0.01 and $0.03, respectively, per share. (c) Total investment return assumes dividend reinvestment. (d) Includes amounts paid through expense offset and brokerage service arrangements. (e) Net investment income, distributions from net investment income and returns of capital were less than 0.01 per share. For more information about the funds of Putnam Variable Trust The Trust's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the funds. The SAI, and the auditor's report and financial statements included in the Trust's most recent annual report to the funds' shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected the funds' performance during the funds' last fiscal year. You may get free copies of these materials, request other information about the funds and other Putnam funds, or make shareholder inquiries, by contacting your financial advisor, by visiting Putnam's Web site, or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about the funds, including the Trust's SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1- 202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov. or by writing the Commission's Public Reference Section , Washington, D.C. 20549- 0102. You may need to refer to the fund's file number. PUTNAM INVESTMENTS One Post Office Square Boston, Massachusetts 02109 1-800- 225-1581 Address correspondence to Putnam Investor Services P.O. Box 989 Boston, Massachusetts 02103 www.putnaminv.com File No. 811-5346 Prospectus April 30, 2000 Putnam Variable Trust Class IB Shares Growth Funds Putnam VT International New Opportunities Fund This prospectus explains what you should know about Putnam VT International New Opportunities Fund, one of the funds of Putnam Variable Trust, which offers shares of beneifical interest in separate investment portfolios for purchase by separate accounts of various insurance companies. Putnam Investment Management, Inc. (Putnam Management), which has managed mutual funds since 1937, manages the fund. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS 2 Fund summaries (including Goal, Main investment strategies, Main risks and Performance Information) 3 What are the funds' main investment strategies and related risks? 4 Who manages the funds? 5 How to buy and sell fund shares 5 Distribution Plan 5 How do the funds price their shares? 5 Fund distributions and taxes 7 Financial highlights Fund summary The following summary identifies the fund's goal, main investment strategies and the main risks that could adversely affect the value of the fund's shares and the total return on your investment. The summary also contains performance information that provides some indication of the fund's risks. The chart contained in the summary shows year-to-year changes in the performance of the fund's class IB shares. A table following the chart compares the fund's performance to that of broad measures of market performance. Of course, the fund's past performance is not necessarily an indication of future performance. None of the performance information reflects the impact of insurance-related charges or expenses. If it did, performance would be less than that shown. Please refer to the prospectus for your insurance contract for information about those charges and performance data reflecting those charges and expenses. Class IB performance for the period prior to April 30, 1998 is based on the performance of Class IA shares of the fund (not offered inthis prospectus), adjusted to reflect the fees paid by class IB shares, including a fee of 0.15%. A more detailed description of the fund, including the risks associated with investing in the fund, can be found further back in this prospectus. Please be sure to read this additional information before you invest. You can lose money by investing in the fund. The fund may not achieve its goal, and it is not intended as a complete investment program. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES -- INTERNATIONAL GROWTH STOCKS We normally invest mainly in common stocks of companies outside the United States. We invest mainly in growth stocks, which are those issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in earnings may lead to an increase in the price of the stock. We may invest in companies of any size. We may invest in both established and developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments. These risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1998 15.42% 1999 102.80% Year-to-date performance through 3/31/2000 was 4.59%. During the periods shown in the bar chart, the highest return for a quarter was 57.09% (quarter ending 12/31/99) and the lowest return for a quarter was -16.61% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IB 102.80% 32.79% MSCI EAFE Index 26.96% 15.76% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index of international equity securities from Europe, Australia and the Far East, with all values expressed in U.S. dollars. What are the fund's main investment strategies and related risks? We generally manage the fund in a style similar to the Putnam International New Opportunities Fund we also manage and whose shares are generally offered to the public. Putnam International New Opportunities Fund, however, employs different investment practices and may invest in securities different from those in which Putnam VT International New Opportunities Fund invests, and consequently the two funds will not have identical portfolios or experience identical investment results. Any investment carries with it some level of risk that generally reflects its potential for reward. Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors relating directly to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. We may purchase stock that trades at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for the company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. We will consider, among other things, a company's financial strength, competitive position in its industry, and projected future earnings, cash flows and dividends when deciding whether to buy or sell stocks. Smaller companies. We may invest in smaller companies. These companies, which may have market capitalizations of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may therefore be more vulnerable to adverse developments than those of larger companies. Foreign investments. The fund may invest in securities of foreign issuers. Foreign investments involve certain special risks, including * Unfavorable changes in currency exchange rates: Foreign investments are typically issued and traded in foreign currencies. As a result, their values may be affected by changes in exchange rates between foreign currencies and the U.S. dollar. * Political and economic developments: Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or export of foreign currency, and tax increases. * Unreliable or untimely information: There may be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices as stringent as those in the United States. * Limited legal recourse: Legal remedies for investors may be more limited than the remedies available in the United States. * Limited markets: Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than U.S. investments, which means we may at times be unable to sell these foreign investments at desirable prices. For the same reason, we may at times find it difficult to value the fund's foreign investments. * Trading practices: Brokerage commissions and other fees are generally higher for foreign investments than for U.S. investments. The procedures and rules governing foreign transactions and custody may also involve delays in payment, delivery or recovery of money or investments. * Lower yield: Common stocks of foreign companies have historically offered lower dividends than stocks of comparable U.S. companies. Foreign withholding taxes may further reduce the amount of income available to distribute to shareholders of the fund. The fund's yield is therefore expected to be lower than yields of most funds that invest mainly in U.S. companies. * Sovereign issuers: The willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic factors, including the issuer's balance of payments, overall debt level, and cash flow from tax or other revenues. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be changing rapidly, which can cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets, or to investments in U.S. companies that have significant foreign operations. Special U.S. tax considerations may apply to the fund's foreign investments. Derivatives. We may engage in a variety of transactions involving derivatives, such as futures, options, warrants and swap contracts. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indexes or currencies. We may use derivatives both for hedging and non-hedging purposes. For example, the fund may use derivatives to increase or decrease its exposure to long- or short-term interest rates (in the United States or abroad). However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Derivatives involve special risks and may result in losses. The funds depend on our ability to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways, especially in unusual market conditions. Some derivatives are "leveraged" and therefore may magnify or otherwise increase investment losses. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund's derivative positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction will not meet its obligations. For further information about the risks of derivatives, see the Trust's statement of additional information (SAI). Frequent trading. We may buy and sell investments relatively often, which involves higher brokerage commissions and other expenses. Other investments. In addition to the main investment strategies described above, we may make other investments, such as investments in preferred stocks, convertible securities, debt securities and derivatives, which may be subject to other risks as described in the statement of additional information (SAI.) Alternative strategies. At times we may judge that market conditions make pursuing the fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. Changes in policies. The Trust's Trustees may change the fund's goal, investment strategies and other policies without shareholder approval, except as otherwise indicated. Who manages the fund? The Trust's Trustees oversee the general conduct of the fund's business. The Trustees have retained Putnam Management to be the fund's investment manager, responsible for making investment decisions for the fund and managing the fund's other affairs and business. The fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. The fund paid Putnam Management a management fee of 1.08% of average net assets for the fund's last fiscal year. Putnam Management's address is One Post Office Square, Boston, MA 02109. The following officers of Putnam Management have primary responsibility for the day-to-day management of the fund's portfolio. Each officer's length of service to the fund and the officer's experience as portfolio manager or investment analyst over at least the last five years are shown.
Fund name Year Business experience (at least 5 years) Putnam VT International New Opportunities Fund Robert J. Swift 1996 1995-Present Putnam Management Managing Director Prior to August 1995 IAI International/Hill Samuel Investment Advisors Carmel Peters 1999 1997-Present Putnam Management Senior Vice President Prior to May 1997 Wheelock Natwest Investment Management, Hong Kong Prior to February 1996 Rothschild Asset Management Asia Pacific, Hong Kong Stephen P. Dexter 1999 1999-Present Putnam Management Senior Vice President Prior to June 1999 Scudder Kemper Inc.
How to buy and sell fund shares The Trust has an underwriting agreement relating to the fund with Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam Mutual Funds presently offers shares of the fund continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Mutual Funds accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Mutual Funds may, at its expense, provide promotional incentives to dealers that sell variable insurance products. Shares are sold or redeemed at the net asset value per share next determined after receipt of an order. Orders for purchases or sales of shares of the fund 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. No fee is charged to a separate account when it redeems fund shares. The fund currently does not foresee any disadvantages to policyowners arising out of the fact that the fund offers its shares to separate accounts of various insurance companies to serve as the investment medium for their variable products. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise, and to determine what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more insurance companies' separate accounts might be required to withdraw their investments in the fund and shares of another fund offered by the Trust may be substituted. This might force the fund to sell portfolio securities at disadvantageous prices. In addition, the Trustees may refuse to sell shares of the fund to any separate account or may suspend or terminate the offering of shares of the fund if such action is required by law or regulatory authority or is in the best interests of the shareholders of the fund. Under unusual circumstances, the Trust may suspend repurchases or postpone payment for up to seven days or longer, as permitted by federal securities law. Distribution Plan The Trust has adopted a Distribution Plan with respect to class IB shares to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of the class IB shares, including the payments to insurance companies and their affiliated dealers mentioned below. The plans provide for payments by each fund to Putnam Mutual Funds at the annual rate (expressed as a percentage of average net assets) of up to 0.35% on class IB shares. The Trustees currently limit payments on class IB shares to 0.15% of average net assets. Putnam Mutual Funds compensates insurance companies (or affiliated broker-dealers) whose separate accounts invest in the Trust through class IB shares for providing services to their contract holders investing in the Trust. Putnam Mutual Funds makes quarterly payments to dealers at the annual rate of up to 0.15% of the average net asset value of class IB shares. Putnam Mutual Funds may suspend or modify its payments to dealers. The payments are also subject to the continuation of the Distribution Plan, 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 does the fund price its shares? The price of the fund's shares is based on its net asset value (NAV). The NAV per share of each class of shares equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. The fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. The fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect the fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of the fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of the fund's foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. Fund distributions and taxes The fund will distribute any net investment income and net realized capital gains at least annually. Both types of distributions will be made in shares of the fund unless an election is made on behalf of a separate account to receive some or all of the distributions in cash. Distributions are reinvested without a sales charge, using the net asset value determined on the ex-dividend date. Distributions on each share are determined in the same manner and are paid in the same amount, regardless of class, except for such differences as are attributable to differential class expenses. Generally, owners of variable annuity and variable life contracts are not taxed currently on income or gains realized with respect to such contracts. However, some distributions from such contracts may be taxable at ordinary income tax rates. In addition, distributions made to an owner who is younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own tax advisors for more information on their own tax situation, including possible foreign, state or local taxes. In order for investors to receive the favorable tax treatment available to holders of variable annuity and variable life contracts, the separate accounts underlying such contracts, as well as the funds in which such accounts invest, must meet certain diversification requirements. The fund intends to comply with these requirements. If the fund does not meet such requirements, income allocable to the contracts would be taxable currently to the holders of such contracts. The fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal income taxes on income and gains it distributes to the separate accounts. For information concerning federal income tax consequences for the holders of variable annuity contracts and variable life insurance policies, contract holders should consult the prospectus of the applicable separate account. Fund investments in foreign securities may be subject to withholding taxes at the source on dividend or interest payments. In that case, the fund's yield on those securities would be decreased. Financial highlights The financial highlights table is intended to help you understand the fund's recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from the fund's financial statements, which have been audited and reported on by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the fund's annual report to shareholders, which is available upon request.
Financial highlights (For a share outstanding throughout the period) Year ended December 31 ---------------------------------- Per-share operating performance 1999 1998* - -------------------------------------------------------------------------- Net asset value, beginning of period $11.48 $11.39 - -------------------------------------------------------------------------- Investment operations Net investment income (loss) (.16) (a) (.05) (a)(b) Net realized and unrealized gain (loss) on investments 11.96 .14 - -------------------------------------------------------------------------- Total from investment operations 11.80 .09 - -------------------------------------------------------------------------- Less distributions: From net investment income -- (e) -- From net realized gain on investments -- .09 In excess of net realized gain on investments -- -- From return of capital -- -- - -------------------------------------------------------------------------- Total distributions -- (e) -- - -------------------------------------------------------------------------- Net asset value, end of period $23.28 $11.48 - -------------------------------------------------------------------------- Ratios and supplemental data Total return at net asset value (%)(c) 102.80 .79 ** Net assets, end of period (in thousands) $33,554 $85 - -------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(d) 1.56 1.18 ** Ratio of net investment loss to average net assets (%) (.97) (.44) (b)** Portfolio turnover (%) 196.53 157.72 - -------------------------------------------------------------------------- * For the period April 30, 1998 (commencement of operations) to December 31, 1998. ** Not annualized. a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period. b Reflects an expense limitation in effect during the period. As a result of such limitation, exepnses were reduced by $0.01 per share. c Total return assumes dividend reinvestment and does not reflect the effect of sales charges. d Includes amounts paid through expense offset and brokerage service arrangements. e Net investment income, distributions from net investment income and returns of capital were less than $0.01 per share.
For more information about the fund and Putnam Variable Trust The Trust's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the fund. The SAI, and the auditor's report and financial statements included in the Trust's most recent annual report to the fund's shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected the fund's performance during the fund's last fiscal year. You may get free copies of these materials, request other information about the funds and other Putnam funds, or make shareholder inquiries, by contacting your financial advisor or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about the fund, including the Trust's SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov or by writing the Commission's Public Reference Section of the Commission, Washington, D.C. 20549-0102. You may need to refer to the fund's file number. P U T N A M I N V E S T M E N T S One Post Office Square Boston, Massachusetts 02109 1-800-752-9894 Address correspondence to Putnam Investor Services P. O. Box 989 Boston, Massachusetts 02103 www.putnaminv.com File No. 811-5346 Putnam Mutual Funds Corp. Member, NASD, Inc. Prospectus April 30, 2000 Putnam Variable Trust Class IB Shares Growth Funds Putnam VT Vista Fund This prospectus explains what you should know about Putnam VT Vista Fund, one of the funds of Putnam Variable Trust, which offers shares of beneficial interest in separate investment portfolios for purchase by separate accounts of various insurance companies. Putnam Investment Management, Inc. (Putnam Management), which has managed mutual funds since 1937, manages the fund. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS 2 Fund summaries (including Goal, Main investment strategies, Main risks and Performance Information) 3 What are the funds' main investment strategies and related risks? 4 Who manages the funds? 5 How to buy and sell fund shares 5 Distribution Plan 5 How do the funds price their shares? 5 Fund distributions and taxes 7 Financial highlights Fund summary The following summary identifies the fund's goal, main investment strategies and the main risks that could adversely affect the value of the fund's shares and the total return on your investment. The summary also contains performance information that provides some indication of the fund's risks. The chart contained in the summary shows year-to-year changes in the performance of the fund's class IB shares. A table following the chart compares the fund's performance to that of broad measures of market performance. Of course, the fund's past performance is not necessarily an indication of future performance. None of the performance information reflects the impact of insurance-related charges or expenses. If it did, performance would be less than that shown. Please refer to the prospectus for your insurance contract for information about those charges and performance data reflecting those charges and expenses. Class IB performance for the period prior to April 30, 1998 is based on the performance of Class IA shares of the fund (not offered in this prospectus), adjusted to reflect the fees paid by class IB shares, including a fee of 0.15%. A more detailed description of the fund, including the risks associated with investing in the fund, can be found further back in this prospectus. Please be sure to read this additional information before you invest. You can lose money by investing in the fund. The fund may not achieve its goal, and it is not intended as a complete investment program. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. PUTNAM VT VISTA FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest mainly in midsized companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1998 19.50% 1999 52.59% Year-to-date performance through 3/31/2000 was 21.21%. During the periods shown in the bar chart, the highest return for a quarter was 41.27% (quarter ending 12/31/99) and the lowest return for a quarter was - -17.29% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (1/2/97) Class IB 52.59% 31.02% Russell Midcap Growth Index 51.29% 29.79% S&P 500 Index 21.04% 27.58% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index that measures the performance of those companies in the Russell Midcap Index that have higher prices relative to the book value of their assets and higher forecasted growth rates. The Russell Midcap Growth Index is replacing the S&P 500 Index because Putnam Management believes the Russell Midcap Growth Index is a more appropriate index against which to compare the fund's performance. What are the fund's main investment strategies and related risks? We generally manage the fund in a style similar to the Putnam Vista Fund we also manage and whose shares are generally offered to the public. Putnam Vista Fund, however, employs different investment practices and may invest in securities different from those in which Putnam VT Vista Fund invests, and consequently the two funds will not have identical portfolios or experience identical investment results. Any investment carries with it some level of risk that generally reflects its potential for reward. Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors relating directly to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. We may purchase stock that trades at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for the company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. We will consider, among other things, a company's financial strength, competitive position in its industry, and projected future earnings, cash flows and dividends when deciding whether to buy or sell stocks. Smaller companies. We may invest in smaller companies. These companies, which may have market capitalizations of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may therefore be more vulnerable to adverse developments than those of larger companies. Foreign investments. The fund may invest in securities of foreign issuers. Foreign investments involve certain special risks, including * Unfavorable changes in currency exchange rates: Foreign investments are typically issued and traded in foreign currencies. As a result, their values may be affected by changes in exchange rates between foreign currencies and the U.S. dollar. * Political and economic developments: Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or export of foreign currency, and tax increases. * Unreliable or untimely information: There may be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices as stringent as those in the United States. * Limited legal recourse: Legal remedies for investors may be more limited than the remedies available in the United States. * Limited markets: Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than U.S. investments, which means we may at times be unable to sell these foreign investments at desirable prices. For the same reason, we may at times find it difficult to value the fund's foreign investments. * Trading practices: Brokerage commissions and other fees are generally higher for foreign investments than for U.S. investments. The procedures and rules governing foreign transactions and custody may also involve delays in payment, delivery or recovery of money or investments. * Lower yield: Common stocks of foreign companies have historically offered lower dividends than stocks of comparable U.S. companies. Foreign withholding taxes may further reduce the amount of income available to distribute to shareholders of the fund. The fund's yield is therefore expected to be lower than yields of most funds that invest mainly in U.S. companies. * Sovereign issuers: The willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic factors, including the issuer's balance of payments, overall debt level, and cash flow from tax or other revenues. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be changing rapidly, which can cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets, or to investments in U.S. companies that have significant foreign operations. Special U.S. tax considerations may apply to the fund's foreign investments. Frequent trading. We may buy and sell investments relatively often, which involves higher brokerage commissions and other expenses. Other investments. In addition to the main investment strategies described above, we may make other investments, such as investments in preferred stocks, convertible securities, debt securities and derivatives, which may be subject to other risks as described in the statement of additional information (SAI.) Alternative strategies. At times we may judge that market conditions make pursuing the fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. Changes in policies. The Trust's Trustees may change the fund's goal, investment strategies and other policies without shareholder approval, except as otherwise indicated. Who manages the fund? The Trust's Trustees oversee the general conduct of the fund's business. The Trustees have retained Putnam Management to be the fund's investment manager, responsible for making investment decisions for the fund and managing the fund's other affairs and business. The fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. The fund paid Putnam Management a management fee of 0.65% of average net assets for the fund's last fiscal year. Putnam Management's address is One Post Office Square, Boston, MA 02109. The following officers of Putnam Management have primary responsibility for the day-to-day management of the fund's portfolio. Each officer's length of service to the fund and the officer's experience as portfolio manager or investment analyst over at least the last five years are shown.
Fund name Year Business experience (at least 5 years) Putnam VT Vista Fund Eric Wetlaufer 1997 1997-Present Putnam Management Managing Director Prior to November 1997 Cadence Capital Management Anthony C. Santosus 1996 1985-Present Putnam Management Senior Vice President Margery C. Parker 1998 1997-Present Putnam Management Senior Vice President Prior to December 1997 Keystone Investments Dana Clark 1999 1987-Present Putnam Management Vice President
How to buy and sell fund shares The Trust has an underwriting agreement relating to the fund with Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam Mutual Funds presently offers shares of the fund continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Mutual Funds accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Mutual Funds may, at its expense, provide promotional incentives to dealers that sell variable insurance products. Shares are sold or redeemed at the net asset value per share next determined after receipt of an order. Orders for purchases or sales of shares of the fund 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. No fee is charged to a separate account when it redeems fund shares. The fund currently does not foresee any disadvantages to policyowners arising out of the fact that the fund offers its shares to separate accounts of various insurance companies to serve as the investment medium for their variable products. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise, and to determine what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more insurance companies' separate accounts might be required to withdraw their investments in the fund and shares of another fund offered by the Trust may be substituted. This might force the fund to sell portfolio securities at disadvantageous prices. In addition, the Trustees may refuse to sell shares of the fund to any separate account or may suspend or terminate the offering of shares of the fund if such action is required by law or regulatory authority or is in the best interests of the shareholders of the fund. Under unusual circumstances, the Trust may suspend repurchases or postpone payment for up to seven days or longer, as permitted by federal securities law. Distribution Plan The Trust has adopted a Distribution Plan with respect to class IB shares to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of the class IB shares, including the payments to insurance companies and their affiliated dealers mentioned below. The plans provide for payments by each fund to Putnam Mutual Funds at the annual rate (expressed as a percentage of average net assets) of up to 0.35% on class IB shares. The Trustees currently limit payments on class IB shares to 0.15% of average net assets. Putnam Mutual Funds compensates insurance companies (or affiliated broker-dealers) whose separate accounts invest in the Trust through class IB shares for providing services to their contract holders investing in the Trust. Putnam Mutual Funds makes quarterly payments to dealers at the annual rate of up to 0.15% of the average net asset value of class IB shares. Putnam Mutual Funds may suspend or modify its payments to dealers. The payments are also subject to the continuation of the Distribution Plan, 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 does the fund price its shares? The price of the fund's shares is based on its net asset value (NAV). The NAV per share of each class of shares equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. The fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. The fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect the fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of the fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of the fund's foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. Fund distributions and taxes The fund will distribute any net investment income and net realized capital gains at least annually. Both types of distributions will be made in shares of the fund unless an election is made on behalf of a separate account to receive some or all of the distributions in cash. Distributions are reinvested without a sales charge, using the net asset value determined on the ex-dividend date. Distributions on each share are determined in the same manner and are paid in the same amount, regardless of class, except for such differences as are attributable to differential class expenses. Generally, owners of variable annuity and variable life contracts are not taxed currently on income or gains realized with respect to such contracts. However, some distributions from such contracts may be taxable at ordinary income tax rates. In addition, distributions made to an owner who is younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own tax advisors for more information on their own tax situation, including possible foreign, state or local taxes. In order for investors to receive the favorable tax treatment available to holders of variable annuity and variable life contracts, the separate accounts underlying such contracts, as well as the funds in which such accounts invest, must meet certain diversification requirements. The fund intends to comply with these requirements. If the fund does not meet such requirements, income allocable to the contracts would be taxable currently to the holders of such contracts. The fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal income taxes on income and gains it distributes to the separate accounts. For information concerning federal income tax consequences for the holders of variable annuity contracts and variable life insurance policies, contract holders should consult the prospectus of the applicable separate account. Fund investments in foreign securities may be subject to withholding taxes at the source on dividend or interest payments. In that case, the fund's yield on those securities would be decreased. Financial highlights The financial highlights table is intended to help you understand the fund's recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from the fund's financial statements, which have been audited and reported on by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the fund's annual report to shareholders, which is available upon request.
Financial highlights (For a share outstanding throughout the period) Year ended December 31 ---------------------------------- Per-share operating performance 1999 1998* - -------------------------------------------------------------------------- Net asset value, beginning of period $14.73 13.76 - -------------------------------------------------------------------------- Investment operations Net investment income (loss) (.07) (a) (.02) (a) Net realized and unrealized gain loss on investments 7.62 .99 - -------------------------------------------------------------------------- Total from investment operations 7.55 .97 - -------------------------------------------------------------------------- Less distributions: From net investment income -- -- From net realized gain on investments $(1.63) -- In excess of net realized gain on investments -- -- From return of capital -- -- - -------------------------------------------------------------------------- Total distributions $(1.63) -- - -------------------------------------------------------------------------- Net asset value, end of period $20.65 $14.73 - -------------------------------------------------------------------------- Ratios and supplemental data Total return at net asset value (%)(b) 52.59 7.05 ** Net assets, end of period (in thousands) $37,506 $851 - -------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .90 .62 ** Ratio of net investment loss to average net assets (%) (.42) (.18) Portfolio turnover (%) 133.32 116.48 - -------------------------------------------------------------------------- * For the period April 30, 1998 (commencement of operations) to December 31, 1998. ** Not annualized. a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period. b Total return assumes dividend reinvestment and does not reflect the effect of sales charges. c Includes amounts paid through expense offset and brokerage service arrangements.
For more information about the fund and Putnam Variable Trust The Trust's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the fund. The SAI, and the auditor's report and financial statements included in the Trust's most recent annual report to the fund's shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected the fund's performance during the fund's last fiscal year. You may get free copies of these materials, request other information about the funds and other Putnam funds, or make shareholder inquiries, by contacting your financial advisor or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about the fund, including the Trust's SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov or by writing the Commission's Public Reference Section of the Commission, Washington, D.C. 20549-0102. You may need to refer to the fund's file number. P U T N A M I N V E S T M E N T S One Post Office Square Boston, Massachusetts 02109 1-800-752-9894 Address correspondence to Putnam Investor Services P. O. Box 989 Boston, Massachusetts 02103 www.putnaminv.com File No. 811-5346 Putnam Mutual Funds Corp. Member, NASD, Inc. Prospectus April 30, 2000 Putnam Variable Trust Class IB Shares Growth Funds Putnam VT International Growth Fund Putnam VT Voyager Fund Growth and Income Funds Putnam VT Growth and Income Fund This prospectus explains what you should know about the funds in Putnam Variable Trust listed above, which are available for purchase by separate accounts of insurance companies. Putnam Investment Management, Inc. (Putnam Management), which has managed mutual funds since 1937, manages the funds. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS Fund summaries (including Goal, Main investment strategies, Main risks and Performance Information) What are the funds' main investment strategies and related risks? Who manages the funds? How to buy and sell fund shares Distribution Plan How do the funds price their shares? Fund distributions and taxes Financial highlights Fund summaries The following summaries identify each fund's goal, main investment strategies and the main risks that could adversely affect the value of a fund's shares and the total return on your investment. Each summary also contains performance information that provides some indication of each fund's risks. The chart contained in each summary shows year-to-year changes in the performance of the fund's Class IB shares. A table following each chart compares the fund's performance to that of broad measures of market performance. Of course, a fund's past performance is not necessarily an indication of future performance. None of the performance information reflects the impact of insurance-related charges or expenses. If it did, performance would be less than that shown. Please refer to the prospectus for your insurance contract for information about those charges and performance data reflecting those charges and expenses. Class IB performance for the period prior to April 6, 1998 for Putnam VT Growth and Income Fund and for the period prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Voyager Fund, are based upon the performance of class IA shares of the fund (not offered in this prospectus), adjusted to reflect the fees paid by class IB shares, including a 12b-1 fee of 0.15%. More detailed descriptions of the funds, including the risks associated with investing in the funds, can be found further back in this prospectus. Please be sure to read this additional information before you invest. You can lose money by investing in any of the funds. A fund may not achieve its goal, and none of the funds is intended as a complete investment program. An investment in any fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. PUTNAM VT GROWTH AND INCOME FUND GOAL The fund seeks capital growth and current income. MAIN INVESTMENT STRATEGIES -- VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 1.81% 1991 18.87% 1992 9.59% 1993 14.09% 1994 0.20% 1995 36.51% 1996 21.73% 1997 23.96% 1998 15.29% 1999 1.47% Year-to-date performance through 3/31/2000 was -1.80%. During the periods shown in the bar chart, the highest return for a quarter was 16.59% (quarter ending 12/31/98) and the lowest return for a quarter was -10.16% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB 1.47% 19.23% 13.83% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT INTERNATIONAL GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - INTERNATIONAL STOCKS We normally invest mostly in common stocks of companies outside the United States. We first select the countries and industries we believe are attractive. We then seek stocks offering opportunity for gain. We look for companies with stock prices that reflect a lower value than that which we place on the company. We also look for the presence of factors we think will cause the stock price to increase toward that value. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments in international markets. The risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1998 18.47% 1999 60.10% Year-to-date performance through 3/31/2000 was 6.05%. During the periods shown in the bar chart, the highest return for a quarter was 35.44% (quarter ending 12/31/99) and the lowest return for a quarter was -18.92% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Inception 1 year (5/2/94) Class IB 60.10% 30.16% MSCI EAFE Index 26.96% 15.76% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index of equity securities from Europe, Australia, and the Far East, with all values expressed in U.S. dollars. PUTNAM VT VOYAGER FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest in companies of all sizes. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 -2.18% 1991 45.87% 1992 10.19% 1993 18.92% 1994 0.89% 1995 40.46% 1996 12.80% 1997 26.33% 1998 24.19% 1999 58.01% Year-to-date performance through 3/31/2000 was 10.80%. During the periods shown in the bar chart, the highest return for a quarter was 41.32% (quarter ending 12/31/99) and the lowest return for a quarter was -17.39% (quarter ending 9/30/90). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB 58.01% 31.47% 22.14% Russell Midcap Growth Index 51.29% 28.03% 18.96% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to to the Russell Midcap Growth Index, an unmanaged index of common stocks of midsized companies that are also included on the Russell 1000 Growth Index. The Russell Midcap Growth Index has been added because Putnam Management believes this index is an appropriate index against which to compare the fund's performance. What are the funds' main investment strategies and related risks? We generally manage the funds in styles similar to certain funds in the retail Putnam family of funds. However, the counterpart funds will not have identical portfolios or investment results, since we may employ different investment practices and invest in different securities for them. Any investment carries with it some level of risk that generally reflects its potential for reward. This section provides additional information on the investment strategies and related risks that are identified for each fund in "Fund summaries" at the beginning of this prospectus and discusses investment strategies and related risks that are common to a number of the funds. Not every investment strategy listed below applies to each fund. Please refer to your fund's strategy in the Fund summaries section to determine which risks apply to your fund. Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors relating directly to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. We may purchase stock that trades at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for the company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. Companies whose stock we believe is undervalued by the market may have experienced adverse business developments or may be subject to special risks that have caused their stocks to be out of favor. If our assessment of a company's prospects is wrong, or if other investors do not eventually recognize the value of the company, then price of the company's stock may fall or may not approach the value that we have placed on it. We will consider, among other things, a company's financial strength, competitive position in its industry, and projected future earnings, cash flows and dividends when deciding whether to buy or sell stocks. Smaller companies. We may invest in smaller companies. These companies, which may have market capitalizations of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may therefore be more vulnerable to adverse developments than those of larger companies. Foreign investments. Each of the funds may invest in securities of foreign issuers. Foreign investments involve certain special risks, including * Unfavorable changes in currency exchange rates: Foreign investments are typically issued and traded in foreign currencies. As a result, their values may be affected by changes in exchange rates between foreign currencies and the U.S. dollar. * Political and economic developments: Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or export of foreign currency, and tax increases. * Unreliable or untimely information: There may be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices as stringent as those in the United States. * Limited legal recourse: Legal remedies for investors may be more limited than the remedies available in the United States. * Limited markets: Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than U.S. investments, which means we may at times be unable to sell these foreign investments at desirable prices. For the same reason, we may at times find it difficult to value the fund's foreign investments. * Trading practices: Brokerage commissions and other fees are generally higher for foreign investments than for U.S. investments. The procedures and rules governing foreign transactions and custody may also involve delays in payment, delivery or recovery of money or investments. * Lower yield: Common stocks of foreign companies have historically offered lower dividends than stocks of comparable U.S. companies. Foreign withholding taxes may further reduce the amount of income available to distribute to shareholders of the fund. The fund's yield is therefore expected to be lower than yields of most funds that invest mainly in U.S. companies. * Sovereign issuers: The willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic factors, including the issuer's balance of payments, overall debt level, and cash flow from tax or other revenues. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be changing rapidly, which can cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets, or to investments in U.S. companies that have significant foreign operations. Special U.S. tax considerations may apply to the fund's foreign investments. Derivatives. We may engage in a variety of transactions involving derivatives, such as futures, options, warrants and swap contracts. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indexes or currencies. We may use derivatives both for hedging and non-hedging purposes. For example, the fund may use derivatives to increase or decrease its exposure to long- or short-term interest rates (in the United States or abroad). However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Derivatives involve special risks and may result in losses. The funds depend on our ability to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways, especially in unusual market conditions. Some derivatives are "leveraged" and therefore may magnify or otherwise increase investment losses. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund's derivative positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction will not meet its obligations. For further information about the risks of derivatives, see the Trust's statement of additional information (SAI). Frequent trading. We may buy and sell investments relatively often, which involves higher brokerage commissions and other expenses. Other investments. In addition to the main investment strategies described above, we may make other investments, such as investments in preferred stocks, convertible securities and debt securities which may be subject to other risks as described in the SAI. Alternative strategies. At times we may judge that market conditions make pursuing a fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the affected fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. Changes in policies. The Trust's Trustees may change any of the funds' goals, investment strategies and other policies without shareholder approval, except as otherwise indicated. Who manages the funds? The Trust's Trustees oversee the general conduct of each fund's business. The Trustees have retained Putnam Management to be the funds' investment manager, responsible for making investment decisions for the funds and managing the funds' other affairs and business. Each fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. Putnam Management's address is One Post Office Square, Boston, MA 02109. The funds paid Putnam Management management fees in the following amounts (reflected as a percentage of average net assets for each fund's last fiscal year): Putnam VT Fund Management Fees Putnam VT Growth and Income Fund 0.46% Putnam VT International Growth 0.80% Putnam VT Voyager Fund 0.53% The following officers of Putnam Management have primary responsibility for the day-to-day management of the relevant fund's portfolio. Each officer's length of service to the relevant fund and the officer's experience as portfolio manager or investment analyst over at least the last five years are shown.
Fund name Year Business experience (at least 5 years) Putnam VT Growth and Income Fund David L. King 1993 1983-Present Putnam Management Managing Director Hugh H. Mullin 1998 1986-Present Putnam Management Senior Vice President Sheldon N. Simon 1997 1984-Present Putnam Management Senior Vice President Putnam VT International Growth Fund Justin M. Scott 1996 1988-Present Putnam Management Managing Director Omid Kamshad 1996 1996- Present Putnam Management Managing Director Prior to January 1996 Lombard Odier International Mark D. Pollard 1999 1990- Present Putnam Management Managing Director Paul C. Warren 1999 1997- Present Putnam Management Senior Vice President Prior to May 1997 IDS Fund Management Joshua L. Byrne 2000 1993-Present Putnam Management Senior Vice President Putnam VT Voyager Fund Robert R. Beck 1995 1989-Present Putnam Management Managing Director Roland W. Gillis 1995 1995- Present Putnam Management Managing Director Prior to March 1995 Keystone Custodian Funds, Inc. Michael P. Stack Senior Vice President 1997 1997- Present Putnam Management Prior to November 1997 Independence Investment Associates, Inc. Charles H. Swanberg Senior Vice President 1994 1984-Present Putnam Management Paul Marrkand Senior Vice President 2000 1987-Present Putnam Management
How to buy and sell fund shares The Trust has an underwriting agreement relating to the funds with Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam Mutual Funds presently offers shares of each fund of the Trust continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Mutual Funds accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Mutual Funds may, at its expense, provide promotional incentives to dealers that sell variable insurance products. Shares are sold or redeemed at the net asset value per share next determined after receipt of an order. Orders for purchases or sales of shares of a fund 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. No fee is charged to a separate account when it redeems fund shares. Please check with your insurance company to determine which funds are available under your variable annuity contract or variable life insurance policy. Certain funds may not be available in your state due to various insurance regulations. Inclusion in this prospectus of a fund that is not available in your state is not to be considered a solicitation. This prospectus should be read in conjunction with the prospectus of the separate account of the specific insurance product which accompanies this prospectus. The funds currently do not foresee any disadvantages to policyowners arising out of the fact that the funds offer their shares to separate accounts of various insurance companies to serve as the investment medium for their variable products. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise, and to determine what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more insurance companies' separate accounts might be required to withdraw their investments in one or more funds and shares of another fund may be substituted. This might force a fund to sell portfolio securities at disadvantageous prices. In addition, the Trustees may refuse to sell shares of any fund to any separate account or may suspend or terminate the offering of shares of any fund if such action is required by law or regulatory authority or is in the best interests of the shareholders of the fund. Under unusual circumstances, the Trust may suspend repurchases or postpone payment for up to seven days or longer, as permitted by federal securities law. Distribution Plan The Trust has adopted a Distribution Plan with respect to class IB shares to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of the class IB shares, including the payments to insurance companies and their affiliated dealers mentioned below. The plans provide for payments by each fund to Putnam Mutual Funds at the annual rate (expressed as a percentage of average net assets) of up to 0.35% on class IB shares. The Trustees currently limit payments on class IB shares to 0.15% of average net assets. Putnam Mutual Funds compensates insurance companies (or affiliated broker-dealers) whose separate accounts invest in the Trust through class IB shares for providing services to their contract holders investing in the Trust. Putnam Mutual Funds makes quarterly payments to dealers at the annual rate of up to 0.15% of the average net asset value of class IB shares. Putnam Mutual Funds may suspend or modify its payments to dealers. The payments are also subject to the continuation of the Distribution Plan, 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 do the funds price their shares? The price of a fund's shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. Each fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. Each fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect each fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of each fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of each fund's foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. Fund distributions and taxes Each fund will distribute any net investment income and net realized capital gains at least annually. Both types of distributions will be made in shares of such funds unless an election is made on behalf of a separate account to receive some or all of the distributions in cash. Distributions are reinvested without a sales charge, using the net asset value determined on the ex-dividend date. Distributions on each share are determined in the same manner and are paid in the same amount, regardless of class, except for such differences as are attributable to differential class expenses. Generally, owners of variable annuity and variable life contracts are not taxed currently on income or gains realized with respect to such contracts. However, some distributions from such contracts may be taxable at ordinary income tax rates. In addition, distributions made to an owner who is younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own tax advisors for more information on their own tax situation, including possible foreign, state or local taxes. In order for investors to receive the favorable tax treatment available to holders of variable annuity and variable life contracts, the separate accounts underlying such contracts, as well as the funds in which such accounts invest, must meet certain diversification requirements. Each fund intends to comply with these requirements. If a fund does not meet such requirements, income allocable to the contracts would be taxable currently to the holders of such contracts. Each fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal income taxes on income and gains it distributes to the separate accounts. For information concerning federal income tax consequences for the holders of variable annuity contracts and variable life insurance policies, contract holders should consult the prospectus of the applicable separate account. Fund investments in foreign securities may be subject to withholding taxes at the source on dividend or interest payments. In that case, a fund's yield on those securities would be decreased. A fund's investments in certain debt obligations may cause the fund to recognize taxable income in excess of the cash generated by such obligations. Thus, the fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. Financial highlights The financial highlights table is intended to help you understand the funds' recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from each fund's financial statements, which have been audited and reported on by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the funds' annual report to shareholders, which is available upon request.
Financial Highlights Investment Operations Less Distributions: Net Asset Net Realized From net In excess of Value, Net and Unrealized Total from From net Realized Net Realized From Beginning Investment Gain (Loss) on Investment Investment Gain on Gain on Return of Period ended of Period Income (Loss) Investments operations Income Investments Investments Capital Putnam VT Growth and Income Fund 1999 $28.75 $.41(a) $.04 $.45 $(.41) $(2.04) $-- $-- 1998** 28.02 .26(a) .47 .73 -- -- -- -- Putnam VT New Opportunities Fund 1999 $26.04 $(.15)(a) $17.92 $17.77 $-- $(.37) $-- $-- 1998*** 23.94 (.05)(a) 2.15 2.10 -- -- -- -- Putnam VT Voyager Fund 1999 $45.81 $(.10)(a) $24.62 $24.52 $(.05) $4.17 $-- $-- 1998*** 41.55 (.01)(a) 4.27 4.26 -- -- -- --
Total Ratio of Net Investment Ratio of Investment Net Asset Return at Net Assets Expenses to Income (Loss) to Total Value, End Net Asset End of Period Average Net Average Net Portfolio Distributions of Period Value(%)(b) (in thousands) Assets(%)(c) Assets(%) Turnover (%) Putnam VT Growth and Income Fund 1999 $(2.45) $26.75 1.47 $162,112 .65 1.55 53.68 1998**** -- 28.75 2.61* 7,583 .49* 1.20* 63.62 Putnam VT New Opportunities Fund 1999 $(.37) $43.44 69.10 $62,977 .74 (.47) 71.14 1998** -- 26.04 8.77* 1,359 .51* (.25)* 59.75 Putnam VT New Value Fund 1999 $(.21) $11.85 .26 $9,541 .95 1.43 98.21 1998*** (.15) 12.02 2.28* 414 .65* 1.26* 130.96 Putnam VT Voyager Fund 1999 $(4.22) $66.11 58.01 $155,889 .72 (.21) 85.13 1998*** -- 45.81 10.25* 4,332 .49* (.04)* 62.99 * Not annualized. ** For the period April 6, 1998 (commencement of operations) to December 31, 1998. *** For the period April 30, 1998 (commencement of operations) to December 31, 1998. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total investment return assumes dividend reinvestment. (c) Includes amounts paid through expense offset and brokerage service arrangements.
For more information about the funds of Putnam Variable Trust The Trust's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the funds. The SAI, and the auditor's report and financial statements included in the Trust's most recent annual report to the funds' shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected the funds' performance during the funds' last fiscal year. You may get free copies of these materials, request other information about the funds and other Putnam funds, or make shareholder inquiries, by contacting your financial advisor, by visiting Putnam's Web site, or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about the funds, including the Trust's SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov. or by writing the Commission's Public Reference Section, Washington, D.C. 20549-0102. You may need to refer to the fund's file number. PUTNAM INVESTMENTS One Post Office Square Boston, Massachusetts 02109 1-800-225-1581 Address correspondence to Putnam Investor Services P.O. Box 989 Boston, Massachusetts 02103 www.putnaminv.com File No. 811-5346 Prospectus April 30, 2000 Putnam Variable Trust Class IB Shares Growth Funds Putnam VT Global Growth Fund Putnam VT Growth Opportunities Fund Growth and Income Funds Putnam VT Growth and Income Fund Putnam VT New Value Fund Money Market Fund Putnam VT Money Market Fund This prospectus explains what you should know about the funds in Putnam Variable Trust listed above, which are available for purchase by separate accounts of insurance companies. Putnam Investment Management, Inc. (Putnam Management), which has managed mutual funds since 1937, manages the funds. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS 2 Fund summaries (including Goal, Main investment strategies, Main risks and Performance information) 5 What are the funds' main investment strategies and related risks? 8 Who manages the funds? 9 How to buy and sell fund shares 9 Distribution Plan 9 How do the funds price their shares? 10 Fund distributions and taxes 12 Financial highlights Fund summaries The following summaries identify each fund's goal, main investment strategies and the main risks that could adversely affect the value of a fund's shares and the total return on your investment. Each summary also contains performance information that provides some indication of each fund's risks. The chart contained in each summary shows year-to-year changes in the performance of the fund's Class IB shares. A table following each chart compares the fund's performance to that of broad measures of market performance. Of course, a fund's past performance is not necessarily an indication of future performance. None of the performance information reflects the impact of insurance-related charges or expenses. If it did, performance would be less than that shown. Please refer to the prospectus for your insurance contract for information about those charges and performance data reflecting those charges and expenses. Class IB performance for the period prior to April 6, 1998 for Putnam VT Growth and Income Fund and for the period prior to April 30, 1998 for Putnam VT Global Growth Fund, Putnam VT Money Market Fund and Putnam VT New Value Fund , based upon the performance of class IA shares of the fund (not offered in this prospectus), adjusted to reflect the fees paid by class IB shares, including a 12b-1 fee of 0.15%. More detailed descriptions of the funds, including the risks associated with investing in the funds, can be found further back in this prospectus. Please be sure to read this additional information before you invest. You can lose money by investing in any of the funds. A fund may not achieve its goal, and none of the funds is intended as a complete investment program. An investment in any fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although Putnam VT Money Market Fund seeks to preserve the value of your investment at $1.00 per share, you may lose money by investing in that fund. PUTNAM VT GLOBAL GROWTH FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GLOBAL GROWTH STOCKS We normally invest in common stocks of companies worldwide. We invest mainly in growth stocks, which are those issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in earnings may lead to an increase in the price of the stock. We invest mainly in midsized and large companies, although we can invest in companies of any size. Although we emphasize investments in developed countries, we may also invest in companies located in developing (also known as emerging) markets. MAIN RISKS * The risks of investing outside the United States, such as currency fluctuations, economic or financial instability, lack of timely or reliable financial information, or unfavorable political or legal developments .These risks are increased for investments in emerging markets. * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMMITTED: Vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1991 14.84% 1992 -0.51% 1993 32.20% 1994 -1.11% 1995 15.50% 1996 17.03% 1997 14.16% 1998 29.65% 1999 64.56% Year-to-date performance through 3/31/2000 was 4.60%. During the periods shown in the bar chart, the highest return for a quarter was 47.91% (quarter ending 12/31/99) and the lowest return for a quarter was -12.18% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (5/1/90) Class IB 64.56% 26.90% 17.04% MSCI World Index 24.94% 19.76% 13.82% MSCI All-Country World Free 30.90% 12.39% 10.05% The fund's performance is compared to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index of global equity securities composed of companies in 22 Developed Market countries in North America, Europe and the Asia/Pacific Region with all values expressed in U.S. dollars. The fund's performance is also compared to the Morgan Stanley Capital International (MSCI) All-Country World Free Index, an unmanaged index of global equity securities of companies in 47 Developed and Emerging Market countries in the Americas, Europe/Middle East and Asia/Pacific Region with all values expressed in U.S. dollars. The MSCI All-Country World Free Index is replacing the MSCI World Index because Putnam Management believes the MSCI All-Country World Free Index is a more appropriate index against which to compare the fund's performance. PUTNAM VT GROWTH AND INCOME FUND GOAL The fund seeks capital growth and current income. MAIN INVESTMENT STRATEGIES - VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMMITTED: Vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 1.81% 1991 18.87% 1992 9.59% 1993 14.09% 1994 0.20% 1995 36.51% 1996 21.73% 1997 23.96% 1998 15.29% 1999 1.47% Year-to-date performance through 3/31/2000 was -1.80%. During the periods shown in the bar chart, the highest return for a quarter was 16.59% (quarter ending 12/31/98) and the lowest return for a quarter was -10.16% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB 1.47% 19.23% 13.83% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT GROWTH OPPORTUNITIES FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest in a relatively small number of companies that we believe will benefit from long-term trends in the economy, business conditions, consumer behavior or public perceptions of the economic environment. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of loss from investing in fewer issuers than a fund that invests more broadly. This vulnerability to factors affecting a single investment can result in greater fund losses and volatility. PERFORMANCE INFORMATION Performance information will be available after the fund completes a full calendar year of operation. PUTNAM VT MONEY MARKET FUND GOAL The fund seeks as high a rate of current income as Putnam Management believes is consistent with preservation of capital and maintenance of liquidity. MAIN INVESTMENT STRATEGIES - INCOME We seek to maintain a stable net asset asset value of $1.00 per share for the fund. We invest primarily in instruments that: * are high quality and * have a short-term maturity. Industry focus. We may invest without limit in money market investments from the banking, personal credit and business credit industries. We may invest over 25% of the fund's assets in money market investments from the personal credit or business credit industries only when we determine that the yields on those investments exceed the yields that are available from eligible investments of issuers in the banking industry. The value of the fund's shares may be more vulnerable than the values of shares of money market funds that invest in issuers in a greater number of industries. To the extent that a fund invests significantly in a particular industry, it runs an increased risk of loss if economic or other developments affecting that industry cause the prices of related money market investments to fall. MAIN RISKS * The risk that the value of your investment may be eroded over time by the effects of inflation. * The risk that, as a result of, for example, a deterioration in the credit quality of issuers whose securities the fund holds or an increase in interest rates, the fund may be unable to maintain a net asset value of $1.00 per share. PERFORMANCE INFORMATION [GRAPHIC OMMITTED: Vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 7.81% 1991 5.76% 1992 3.42% 1993 2.64% 1994 3.67% 1995 5.30% 1996 4.93% 1997 5.06% 1998 5.12% 1999 4.66% Year-to-date performance through 3/31/2000 was 1.27%. During the periods shown in the bar chart, the highest return for a quarter was 1.95% (quarter ending 6/30/90) and the lowest return for a quarter was 0.80% (quarter ending 9/30/92). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB 4.66% 5.11% 4.85% Merrill Lynch 91-Day Treasury Bill Index 4.85% 5.35% 5.28% Lipper Money Market Average 4.49% 4.95% 4.80% The fund's performance is compared to the Merrill Lynch 91-Day Treasury Bill Index, an unmanaged index that seeks to measure the performance of United States Treasury bills currently available in the marketplace and the Lipper Money Market Average is an arithmetic average of the total return of all money market mutual funds tracked by Lipper , Inc. PUTNAM VT NEW VALUE FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES - VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in midsized and large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMMITTED: Vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1998 6.11% 1999 0.26% Year-to-date performance through 3/31/2000 was - 0.58%. During the periods shown in the bar chart, the highest return for a quarter was 16.34% (quarter ending 12/31/98) and the lowest return for a quarter was - -13.68% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Since Past Inception 5 years (5/1/90) Class IB 0.26% 7.72% S&P 500 Index 21.04% 24.77% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1998. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. What are the funds' main investment strategies and related risks? We generally manage the funds in styles similar to certain funds in the retail Putnam family of funds. However, the counterpart funds will not have identical portfolios or investment results, since we may employ different investment practices and invest in different securities for them. Any investment carries with it some level of risk that generally reflects its potential for reward. This section provides additional information on the investment strategies and related risks that are identified for each fund in "Fund summaries" at the beginning of this prospectus and discusses investment strategies and related risks that are common to a number of the funds. Not every investment strategy listed below applies to each fund. Please refer to your fund's strategy in the Fund summaries section to determine which risks apply to your fund. Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors relating directly to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. We may purchase stock that trades at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for the company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. Companies whose stock we believe is undervalued by the market may have experienced adverse business developments or may be subject to special risks that have caused their stocks to be out of favor. If our assessment of a company's prospects is wrong, or if other investors do not eventually recognize the value of the company, then price of the company's stock may fall or may not approach the value that we have placed on it. We will consider, among other things, a company's financial strength, competitive position in its industry, and projected future earnings, cash flows and dividends when deciding whether to buy or sell stocks. Smaller companies. We may invest in smaller companies. These companies, which may have market capitalizations of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may therefore be more vulnerable to adverse developments than those of larger companies. Foreign investments. Each of the funds may invest in securities of foreign issuers. Foreign investments involve certain special risks, including * Unfavorable changes in currency exchange rates: Foreign investments are typically issued and traded in foreign currencies. As a result, their values may be affected by changes in exchange rates between foreign currencies and the U.S. dollar. * Political and economic developments: Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or export of foreign currency, and tax increases. * Unreliable or untimely information: There may be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices as stringent as those in the United States. * Limited legal recourse: Legal remedies for investors may be more limited than the remedies available in the United States. * Limited markets: Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than U.S. investments, which means we may at times be unable to sell these foreign investments at desirable prices. For the same reason, we may at times find it difficult to value the fund's foreign investments. * Trading practices: Brokerage commissions and other fees are generally higher for foreign investments than for U.S. investments. The procedures and rules governing foreign transactions and custody may also involve delays in payment, delivery or recovery of money or investments. * Lower yield: Common stocks of foreign companies have historically offered lower dividends than stocks of comparable U.S. companies. Foreign withholding taxes may further reduce the amount of income available to distribute to shareholders of the fund. The fund's yield is therefore expected to be lower than yields of most funds that invest mainly in U.S. companies. * Sovereign issuers: The willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic factors, including the issuer's balance of payments, overall debt level, and cash flow from tax or other revenues. For Putnam VT Money Market Fund, we may invest in money market instruments of foreign issuers that are denominated in U.S. dollars. The risks of foreign investments are typically increased in less developed countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be changing rapidly, which can cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets, or to investments in U.S. companies that have significant foreign operations. Special U.S. tax considerations may apply to the fund's foreign investments. Fixed-income investments. Fixed-income securities, which typically pay an unchanging rate of interest or dividends, include bonds and other debt. Each of the funds may invest in fixed-income securities. The value of a fixed-income investment may fall as a result of factors directly relating to the issuer of the security, such as decisions made by its management or a reduction in its credit rating. An investment's value may also fall because of factors affecting not just the issuer, but other issuers, such as increases in production costs. The value of an investment may also be affected by general changes in financial market conditions, such as changing interest rates or currency exchange rates. We will consider, among other things, credit, interest rate and prepayment risks as well as general market conditions when deciding whether to buy or sell investments. * Interest rate risk. The values of bonds and other debt usually rise and fall in response to changes in interest rates. Declining interest rates generally increase the value of existing debt instruments, and rising interest rates generally decrease the value of existing debt instruments. Changes in a debt instrument's value usually will not affect the amount of interest income paid to the fund, but will affect the value of the fund's shares. Interest rate risk is generally greater for investments with longer maturities. Some investments give the issuer the option to call, or redeem, these investments before their maturity date. If an issuer "calls" its security during a time of declining interest rates, we might have to reinvest the proceeds in an investment offering a lower yield, and therefore might not benefit from any increase in value as a result of declining interest rates. "Premium investments" offer interest rates higher than prevailing market rates. However, they involve a greater risk of loss, because their values tend to decline over time. You may find it useful to compare the fund's yield, which factors out the effect of premium investments, with its current dividend rate, which does not factor out that effect. For Putnam VT Money Market Fund, average portfolio maturity will not exceed 90 days and the fund may not hold an investment with more than 397 days remaining to maturity. These short-term investments generally have lower yields than longer-term investments. Some investments have an interest rate that changes based on a market interest rate, and allow the holder to demand payment of principal and accrued interest before the scheduled maturity date. We measure the maturity of these obligations using the relatively short period in which payment could be demanded. Because the interest rate on these investments can change as market interest rates change, these investments are unlikely to be able to lock in favorable longer term interest rates. * Credit risk. Investors normally expect to be compensated in proportion to the risk they are assuming. Thus, debt of issuers with poor credit usually offers higher yields than debt of issuers with more secure credit. Higher-rated investments generally have lower-credit risk. For Putnam VT Money Market Fund, we buy only high quality investments. These are: * rated in one of the two highest categories by at least two nationally recognized rating services, * rated by one rating service in one of the service's two highest categories (if only one rating service has provided a rating), or * unrated investments that we determine are of equivalent quality. If an issuer of a note does not have the credit rating usually required by the fund, another company may use its higher credit rating to back up the credit of the issuer of the note by selling the issuer a letter of credit. The main risk of investments backed by a letter of credit is that the entity issuing the letter of credit will be unable to fulfill its obligations to the fund. Insurance. We have bought liability insurance that insures the fund against a decrease in the value of its investments arising from the issuer's default or bankruptcy. The insurance covers most of the fund's investments, other than U.S. government securities. The insurance does not guarantee or ensure that the fund will be able to maintain a stable net asset value of $1.00 per share. The maximum total coverage for the fund is $30 million, with a deductible for each loss of $1 million or 0.30% of the fund's net assets, whichever is less. The $30 million maximum coverage is shared with four other Putnam money market funds. Recovery under the insurance is subject to certain conditions, including the condition that the other Putnam money market funds have not previously exhausted the insurance coverage, and the insurance might not be renewed when it expires. Money market instruments. These include certificates of deposit, commercial paper, U.S. government debt and repurchase agreements, corporate obligations and bankers acceptances. For VT Money Market Fund, we buy bankers acceptances only if they are issued by banks with deposits in excess of $2 billion (or the foreign currency equivalent) at the close of the last calendar year. If the Trustees change this minimum deposit requirement, shareholders would be notified. Illiquid securities. We may invest up to 15% of a fund's assets (10% for Putnam VT Money Market Fund) in illiquid investments, which may be considered speculative. Illiquid investments are investments that may be difficult to sell. The sale of many of these investments is limited by law. We may not be able to sell a fund's illiquid investments when we consider it is desirable to do so or we may be able to sell them only at less than their market value. Derivatives. We may engage in a variety of transactions involving derivatives, such as futures, options, warrants and swap contracts. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indexes or currencies. We may use derivatives both for hedging and non-hedging purposes. For example, the fund may use derivatives to increase or decrease its exposure to long- or short-term interest rates (in the United States or abroad). However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Derivatives involve special risks and may result in losses. The funds depend on our ability to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways, especially in unusual market conditions. Some derivatives are "leveraged" and therefore may magnify or otherwise increase investment losses . Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund's derivative positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction will not meet its obligations . For further information about the risks of derivatives, see the Trust's statement of additional information (SAI). Frequent trading. We may buy and sell investments relatively often, which involves higher brokerage commissions and other expenses. Other investments. In addition to the main investment strategies described above, we may make other investments, which may be subject to other risks as described in the SAI. Alternative strategies. At times we may judge that market conditions make pursuing a fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the affected fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. Changes in policies. The Trust's Trustees may change any of the funds' goals, investment strategies and other policies without shareholder approval, except as otherwise indicated. Who manages the funds? The Trust's Trustees oversee the general conduct of each fund's business. The Trustees have retained Putnam Management to be the funds' investment manager, responsible for making investment decisions for the funds and managing the funds' other affairs and business. Each fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. Putnam Management's address is One Post Office Square, Boston, MA 02109. The funds paid Putnam Management management fees in the following amounts (reflected as a percentage of average net assets for each fund's last fiscal year): Putnam VT Global Growth Fund 0.61% Putnam VT Growth and Income Fund 0.46% Putnam VT Money Market Fund 0.41% Putnam VT New Value Fund 0.70% The following funds paid Putnam Management a quarterly management fee for these services at the annual rate of: Putnam VT Growth Opportunities Fund: 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, 0.43% of the next 5 billion and 0.42% of any excess thereafter. The following officers of Putnam Management have primary responsibility for the day-to-day management of the relevant fund's portfolio. Each officer's length of service to the relevant fund and the officer's experience as portfolio manager or investment analyst over at least the last five years are shown.
Fund name Year Business experience (at least 5 years) Putnam VT Global Growth Fund Robert J. Swift 1996 1995-Present Putnam Management Managing Director Prior to August IAI International/Hill 1995 Samuel Investment Advisors Kelly A. Morgan 1997 1996-Present Putnam Management Managing Director Prior to December 1996 Alliance Capital Management L.P. Lisa H. Svensson 1998 1994-Present Putnam Management Senior Vice President Prior to July 1994 Lord Abbett & Co. Manuel Weiss 1998 1987-Present Putnam Management Senior Vice President Stephen P. Dexter 2000 1999-Present Putnam Management Senior Vice President Prior to June 1999 Scudder Kemper Inc. Putnam VT Growth and Income Fund David L. King 1993 1983-Present Putnam Management Managing Director Hugh H. Mullin 1998 1986-Present Putnam Management Senior Vice President Sheldon N. Simon 1997 1984-Present Putnam Management Senior Vice President Putnam VT Growth Opportunities Fund C. Beth Cotner 2000 1995-Present Putnam Management Managing Director Prior to September 1995 Kemper Financial Services Jeffery R. Lindsey 2000 1994-Present Putnam Management Senior Vice President David J. Santos 2000 1986-Present Putnam Management Senior Vice President Putnam VT New Value Fund David L. King 1996 1983-Present Putnam Management Managing Director How to buy and sell fund shares The Trust has an underwriting agreement relating to the funds with Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam Mutual Funds presently offers shares of each fund of the Trust continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Mutual Funds accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Mutual Funds may, at its expense, provide promotional incentives to dealers that sell variable insurance products. Shares are sold or redeemed at the net asset value per share next determined after receipt of an order, except that, in the case of Putnam VT Money Market Fund, purchases will not be affected until the next determination of net asset value after federal funds have been made available to the Trust. Orders for purchases or sales of shares of a fund 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. No fee is charged to a separate account when it redeems fund shares. Please check with your insurance company to determine which funds are available under your variable annuity contract or variable life insurance policy. Certain funds may not be available in your state due to various insurance regulations. Inclusion in this prospectus of a fund that is not available in your state is not to be considered a solicitation. This prospectus should be read in conjunction with the prospectus of the separate account of the specific insurance product which accompanies this prospectus. The funds currently do not foresee any disadvantages to policyowners arising out of the fact that the funds offer their shares to separate accounts of various insurance companies to serve as the investment medium for their variable products. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise, and to determine what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more insurance companies' separate accounts might be required to withdraw their investments in one or more funds and shares of another fund may be substituted. This might force a fund to sell portfolio securities at disadvantageous prices. In addition, the Trustees may refuse to sell shares of any fund to any separate account or may suspend or terminate the offering of shares of any fund if such action is required by law or regulatory authority or is in the best interests of the shareholders of the fund. Under unusual circumstances, the Trust may suspend repurchases or postpone payment for up to seven days or longer, as permitted by federal securities law. Distribution Plan The Trust has adopted a Distribution Plan with respect to class IB shares to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of the class IB shares, including the payments to insurance companies and their affiliated dealers mentioned below. The plans provide for payments by each fund to Putnam Mutual Funds at the annual rate (expressed as a percentage of average net assets) of up to 0.35% on class IB shares. The Trustees currently limit payments on class IB shares to 0.15% of average net assets. Putnam Mutual Funds compensates insurance companies (or affiliated broker-dealers) whose separate accounts invest in the Trust through class IB shares for providing services to their contract holders investing in the Trust. Putnam Mutual Funds makes quarterly payments to dealers at the annual rate of up to 0.15% of the average net asset value of class IB shares. Putnam Mutual Funds may suspend or modify its payments to dealers. The payments are also subject to the continuation of the Distribution Plan, 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 do the funds price their shares? The price of a fund's shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. Each fund (other than Putnam VT Money Market Fund) values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. Putnam VT Money Market Fund values all of its investments at amortized cost. Each fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect each fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of each fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of each fund's foreign investments (other than Putnam VT Money Market Fund) occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. Fund distributions and taxes Each fund (other than Putnam VT Money Market Fund) will distribute any net investment income and net realized capital gains at least annually. Both types of distributions will be made in shares of such funds unless an election is made on behalf of a separate account to receive some or all of the distributions in cash. Putnam VT Money Market Fund will declare a dividend of its net investment income daily and distribute such dividend monthly. Each month's distributions will be paid on the first business day of the next month. Since the net income of Putnam VT Money Market Fund is declared as a dividend each time it is determined, the net asset value per share of the fund remains at $1.00 immediately after each determination and dividend declaration. Distributions are reinvested without a sales charge, using the net asset value determined on the ex-dividend date, except that with respect to Putnam VT Money Market Fund, distributions are reinvested using the net asset value determined on the day following the distribution payment date. Distributions on each share are determined in the same manner and are paid in the same amount, regardless of class, except for such differences as are attributable to differential class expenses. Generally, owners of variable annuity and variable life contracts are not taxed currently on income or gains realized with respect to such contracts. However, some distributions from such contracts may be taxable at ordinary income tax rates. In addition, distributions made to an owner who is younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own tax advisors for more information on their own tax situation, including possible foreign, state or local taxes. In order for investors to receive the favorable tax treatment available to holders of variable annuity and variable life contracts, the separate accounts underlying such contracts, as well as the funds in which such accounts invest, must meet certain diversification requirements. Each fund intends to comply with these requirements. If a fund does not meet such requirements, income allocable to the contracts would be taxable currently to the holders of such contracts. Each fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal income taxes on income and gains it distributes to the separate accounts. For information concerning federal income tax consequences for the holders of variable annuity contracts and variable life insurance policies, contract holders should consult the prospectus of the applicable separate account. Fund investments in foreign securities may be subject to withholding taxes at the source on dividend or interest payments. In that case, a fund's yield on those securities would be decreased. A fund's investments in certain debt obligations may cause the fund to recognize taxable income in excess of the cash generated by such obligations. Thus, the fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. Financial highlights The financial highlights table is intended to help you understand the funds' recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from each fund's financial statements, which have been audited and reported on by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the funds' annual report to shareholders, which is available upon request.
Financial Highlights Investment Operations Less Distributions: Net Asset Net Realized From net In excess of Value, Net and Unrealized Total from From net Realized Net Realized From Beginning Investment Gain (Loss) on Investment Investment Gain on Gain on Return of Period ended of Period Income (Loss) Investments operations Income Investments Investments Capital Putnam VT Global Growth Fund 1999 $20.28 $(.10)(a) $12.08 $11.98 $(.08) $(1.77) $-- $-- 1998*** 18.03 (.05)(a) 2.30 2.25 -- -- -- -- Putnam VT Growth and Income Fund 1999 $28.75 $.41(a) $.04 $.45 $(.41) $(2.04) $-- $-- 1998*** 28.02 .26(a) .47 .73 -- -- -- -- Putnam VT Money Market Fund 1999 $1.00 $.0460 $-- $.0460 $(.0460) $-- $-- $-- 1998*** 1.00 .0338(a) -- .0338 (.0338) -- -- -- Putnam VT New Value Fund 1999 $12.02 $.17(a) $(.13) $.04 $-- $(.21) $-- $-- 1998*** 11.91 .13(a) .13 .26 (.13) (.02) -- --
Total Ratio of Investment Ratio of Net Investment Net Asset Return at Net Assets Expenses to Income (Loss) to Total Value, End Net Asset End of Period Average Net Average Net Portfolio Distributions of Period Value(%)(b) (in thousands) Assets(%)(c) Assets(%) Turnover (%) Putnam VT Global Growth Fund 1999 $(1.85) $30.41 64.56 $28,909 .88 (.43) 154.88 1998*** -- 20.28 12.48* 823 .59* (.34)* 164.56 Putnam VT Growth and Income Fund 1999 $(2.45) $26.75 1.47 $162,112 .65 1.55 53.68 1998** -- 28.75 2.61* 7,583 .49* 1.20* 63.62 Putnam VT Money Market Fund 1999 $(.0460) $1.00 4.66 $41,516 .64 4.61 -- 1998*** (.0338) 1.00 3.42* 13,188 .46* 3.18* -- Putnam VT New Value Fund 1999 $(.21) $11.85 .26 $9,541 .95 1.43 98.21 1998*** (.15) 12.02 2.28* 414 .65* 1.26* 130.96 * Not annualized. ** For the period April 6, 1998 (commencement of operations) to December 31, 1998. *** For the period April 30, 1998 (commencement of operations) to December 31, 1998. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total investment return assumes dividend reinvestment. (c) Includes amounts paid through expense offset and brokerage service arrangements.
For more information about the funds of Putnam Variable Trust The Trust's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the funds. The SAI, and the auditor's report and financial statements included in the Trust's most recent annual report to the funds' shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected the funds' performance during the funds' last fiscal year. You may get free copies of these materials, request other information about the funds and other Putnam funds, or make shareholder inquiries, by contacting your financial advisor, by visiting Putnam's Web site, or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about the funds, including the Trust's SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1- 202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov. or by writing the Commission's Public Reference Section , Washington, D.C. 20549- 0102. You may need to refer to the fund's file number. Putnam INVESTMENTS One Post Office Square Boston, Massachusetts 02109 1-800- 225-1581 Address correspondence to Putnam Investor Services P.O. Box 989 Boston, Massachusetts 02103 www.putnaminv.com File No. 811-5346 - ------------------ COMPARISON OF FOOTERS ------------------ - -FOOTER 1- 16 Prospectus April 30, 2000 Putnam Variable Trust Class IB Shares Growth Funds Putnam VT New Opportunities Fund Putnam VT Voyager Fund Growth and Income Funds Putnam VT Growth and Income Fund This prospectus explains what you should know about the funds in Putnam Variable Trust listed above, which are available for purchase by separate accounts of insurance companies. Putnam Investment Management, Inc. (Putnam Management), which has managed mutual funds since 1937, manages the funds. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS 2 Fund summaries (including Goal, Main investment strategies, Main risks and Performance Information) 4 What are the funds' main investment strategies and related risks? 6 Who manages the funds? 6 How to buy and sell fund shares 7 Distribution Plan 7 How do the funds price their shares? 7 Fund distributions and taxes 8 Financial highlights Fund summaries The following summaries identify each fund's goal, main investment strategies and the main risks that could adversely affect the value of a fund's shares and the total return on your investment. Each summary also contains performance information that provides some indication of each fund's risks. The chart contained in each summary shows year-to-year changes in the performance of the fund's Class IB shares. A table following each chart compares the fund's performance to that of broad measures of market performance. Of course, a fund's past performance is not necessarily an indication of future performance. None of the performance information reflects the impact of insurance-related charges or expenses. If it did, performance would be less than that shown. Please refer to the prospectus for your insurance contract for information about those charges and performance data reflecting those charges and expenses. Class IB performance for the period prior to April 6, 1998 for Putnam VT Growth and Income Fund, and for the period prior to April 30, 1998 for Putnam VT New Opportunities Fund and Putnam VT Voyager Fund are based upon the performance of class IA shares of the fund (not offered in this prospectus), adjusted to reflect the fees paid by class IB shares, including a 12b-1 fee of 0.15%. More detailed descriptions of the funds, including the risks associated with investing in the funds, can be found further back in this prospectus. Please be sure to read this additional information before you invest. You can lose money by investing in any of the funds. A fund may not achieve its goal, and none of the funds is intended as a complete investment program. An investment in any fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. PUTNAM VT GROWTH AND INCOME FUND GOAL The fund seeks capital growth and current income. MAIN INVESTMENT STRATEGIES - VALUE STOCKS We invest mainly in common stocks of U.S. companies with a focus on value stocks. Value stocks are those we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of the stock may rise. We invest mainly in large companies. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: Vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 1.81% 1991 18.87% 1992 9.59% 1993 14.09% 1994 0.20% 1995 36.51% 1996 21.73% 1997 23.96% 1998 15.29% 1999 1.47% Year-to-date performance through 3/31/2000 was -1.80%. During the periods shown in the bar chart, the highest return for a quarter was 16.59% (quarter ending 12/31/98) and the lowest return for a quarter was -10.16% (quarter ending 9/30/99). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB 1.47% 19.23% 13.83% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. PUTNAM VT NEW OPPORTUNITIES FUND GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks in sectors of the economy that we believe have high growth potential. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. The growth sectors we currently target include communications, media/entertainment, medical technology/cost containment, industrial and environmental services, applied/advanced technology, financial services, consumer products and services and business services. We invest in companies of all sizes. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk of investing in a limited group of market sectors. The vulnerability of the fund to factors affecting the sectors chosen may be significantly greater than that of a fund that invests in a broader range of sectors and may result in greater fund losses and volatility. PERFORMANCE INFORMATION [GRAPHIC OMITTED: Vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1995 44.65% 1996 10.01% 1997 23.10% 1998 24.22% 1999 69.10% Year-to-date performance through 3/31/2000 was 15.27%. During the periods shown in the bar chart, the highest return for a quarter was 49.43% (quarter ending 12/31/99) and the lowest return for a quarter was -18.85% (quarter ending 9/30/98). Average annual total returns (for periods ending 12/31/99) Since Past Past Inception 1 year 5 years (5/2/94) Class IB 69.10% 32.69% 30.17% Russell Midcap Growth Index 18.23% 21.86% 24.61% S&P 500 Index 21.04% 28.56% 25.66% The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 1994. The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index of common stocks of midsized companies that are also listed on the Russell 1000 Growth Index. The Russell Midcap Growth Index has been added because Putnam Management believes this index is an appropriate index against which to compare the fund's performance. PUTNAM VT VOYAGER FUND GOAL The fund seeks capital appreciation. MAIN INVESTMENT STRATEGIES - GROWTH STOCKS We invest mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. We invest in companies of all sizes. MAIN RISKS * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. PERFORMANCE INFORMATION [GRAPHIC OMITTED: Vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES 1990 -2.18% 1991 45.87% 1992 10.19% 1993 18.92% 1994 0.89% 1995 40.46% 1996 12.80% 1997 26.33% 1998 24.19% 1999 58.01% Year-to-date performance through 3/31/2000 was 10.80%. During the periods shown in the bar chart, the highest return for a quarter was 41.32% (quarter ending 12/31/99) and the lowest return for a quarter was -17.39% (quarter ending 9/30/90). Average annual total returns (for periods ending 12/31/99) Past Past Past 1 year 5 years 10 years Class IB 58.01% 31.47% 22.14% Russell Midcap Growth Index 51.29% 28.03% 18.96% S&P 500 Index 21.04% 28.56% 18.21% The fund's performance is compared to the Standard & Poor's 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. The fund's performance is also compared to to the Russell Midcap Growth Index, an unmanaged index of common stocks of midsized companies that are also included on the Russell 1000 Growth Index. The Russell Midcap Growth Index has been added because Putnam Management believes this index is an appropriate index against which to compare the fund's performance. What are the funds' main investment strategies and related risks? We generally manage the funds in styles similar to certain funds in the retail Putnam family of funds. However, the counterpart funds will not have identical portfolios or investment results, since we may employ different investment practices and invest in different securities for them. Any investment carries with it some level of risk that generally reflects its potential for reward. This section provides additional information on the investment strategies and related risks that are identified for each fund in "Fund summaries" at the beginning of this prospectus and discusses investment strategies and related risks that are common to a number of the funds. Not every investment strategy listed below applies to each fund. Please refer to your fund's strategy in the Fund summaries section to determine which risks apply to your fund. Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors relating directly to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. We may purchase stock that trades at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for the company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. Companies whose stock we believe is undervalued by the market may have experienced adverse business developments or may be subject to special risks that have caused their stocks to be out of favor. If our assessment of a company's prospects is wrong, or if other investors do not eventually recognize the value of the company, then price of the company's stock may fall or may not approach the value that we have placed on it. We will consider, among other things, a company's financial strength, competitive position in its industry, and projected future earnings, cash flows and dividends when deciding whether to buy or sell stocks. Smaller companies. We may invest in smaller companies. These companies, which may have market capitalizations of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may therefore be more vulnerable to adverse developments than those of larger companies. Foreign investments. Each of the funds may invest in securities of foreign issuers. Foreign investments involve certain special risks, including * Unfavorable changes in currency exchange rates: Foreign investments are typically issued and traded in foreign currencies. As a result, their values may be affected by changes in exchange rates between foreign currencies and the U.S. dollar. * Political and economic developments: Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or export of foreign currency, and tax increases. * Unreliable or untimely information: There may be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices as stringent as those in the United States. * Limited legal recourse: Legal remedies for investors may be more limited than the remedies available in the United States. * Limited markets: Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than U.S. investments, which means we may at times be unable to sell these foreign investments at desirable prices. For the same reason, we may at times find it difficult to value the fund's foreign investments. * Trading practices: Brokerage commissions and other fees are generally higher for foreign investments than for U.S. investments. The procedures and rules governing foreign transactions and custody may also involve delays in payment, delivery or recovery of money or investments. * Lower yield: Common stocks of foreign companies have historically offered lower dividends than stocks of comparable U.S. companies. Foreign withholding taxes may further reduce the amount of income available to distribute to shareholders of the fund. The fund's yield is therefore expected to be lower than yields of most funds that invest mainly in U.S. companies. * Sovereign issuers: The willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic factors, including the issuer's balance of payments, overall debt level, and cash flow from tax or other revenues. Frequent trading. We may buy and sell investments relatively often, which involves higher brokerage commissions and other expenses. Other investments. In addition to the main investment strategies described above, we may make other investments, such as investments in preferred stocks, convertible securities, debt instruments and derivatives which may be subject to other risks as described in the SAI. Alternative strategies. At times we may judge that market conditions make pursuing a fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the affected fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. Changes in policies. The Trust's Trustees may change any of the funds' goals, investment strategies and other policies without shareholder approval, except as otherwise indicated. Who manages the funds? The Trust's Trustees oversee the general conduct of each fund's business. The Trustees have retained Putnam Management to be the funds' investment manager, responsible for making investment decisions for the funds and managing the funds' other affairs and business. Each fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. Putnam Management's address is One Post Office Square, Boston, MA 02109. The funds paid Putnam Management management fees in the following amounts (reflected as a percentage of average net assets for each fund's last fiscal year): Putnam VT Fund Management Fees Putnam VT Global Growth Fund 0.61% Putnam VT New Opportunities Fund 0.54% Putnam VT Voyager Fund 0.53% The following officers of Putnam Management have primary responsibility for the day-to-day management of the relevant fund's portfolio. Each officer's length of service to the relevant fund and the officer's experience as portfolio manager or investment analyst over at least the last five years are shown.
Fund name Year Business experience (at least 5 years) Putnam VT Growth and Income Fund David L. King 1993 1983-Present Putnam Management Managing Director Hugh H. Mullin 1998 1986-Present Putnam Management Senior Vice President Sheldon N. Simon 1997 1984-Present Putnam Management Senior Vice President Putnam VT New Opportunities Fund Daniel L. Miller 1994 1983-Present Putnam Management Managing Director Jeffrey R. Lindsey 1999 1994-Present Putnam Management Senior Vice President Kenneth Lang 1999 1997-Present Putnam Management Vice President Prior to April 1997 Montgomery Securities Putnam VT Voyager Fund Robert R. Beck 1995 1989-Present Putnam Management Managing Director Roland W. Gillis 1995 1995- Present Putnam Management Managing Director Prior to March 1995 Keystone Custodian Funds, Inc. Michael P. Stack Senior Vice President 1997 1997- Present Putnam Management Prior to November 1997 Independence Investment Associates, Inc. Charles H. Swanberg Senior Vice President 1994 1984-Present Putnam Management Paul Marrkand Senior Vice President 2000 1987-Present Putnam Management
How to buy and sell fund shares The Trust has an underwriting agreement relating to the funds with Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam Mutual Funds presently offers shares of each fund of the Trust continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Mutual Funds accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Mutual Funds may, at its expense, provide promotional incentives to dealers that sell variable insurance products. Shares are sold or redeemed at the net asset value per share next determined after receipt of an order. Orders for purchases or sales of shares of a fund 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. No fee is charged to a separate account when it redeems fund shares. Please check with your insurance company to determine which funds are available under your variable annuity contract or variable life insurance policy. Certain funds may not be available in your state due to various insurance regulations. Inclusion in this prospectus of a fund that is not available in your state is not to be considered a solicitation. This prospectus should be read in conjunction with the prospectus of the separate account of the specific insurance product which accompanies this prospectus. The funds currently do not foresee any disadvantages to policyowners arising out of the fact that the funds offer their shares to separate accounts of various insurance companies to serve as the investment medium for their variable products. Nevertheless, the Trustees intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise, and to determine what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more insurance companies' separate accounts might be required to withdraw their investments in one or more funds and shares of another fund may be substituted. This might force a fund to sell portfolio securities at disadvantageous prices. In addition, the Trustees may refuse to sell shares of any fund to any separate account or may suspend or terminate the offering of shares of any fund if such action is required by law or regulatory authority or is in the best interests of the shareholders of the fund. Under unusual circumstances, the Trust may suspend repurchases or postpone payment for up to seven days or longer, as permitted by federal securities law. Distribution Plan The Trust has adopted a Distribution Plan with respect to class IB shares to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of the class IB shares, including the payments to insurance companies and their affiliated dealers mentioned below. The plans provide for payments by each fund to Putnam Mutual Funds at the annual rate (expressed as a percentage of average net assets) of up to 0.35% on class IB shares. The Trustees currently limit payments on class IB shares to 0.15% of average net assets. Putnam Mutual Funds compensates insurance companies (or affiliated broker-dealers) whose separate accounts invest in the Trust through class IB shares for providing services to their contract holders investing in the Trust. Putnam Mutual Funds makes quarterly payments to dealers at the annual rate of up to 0.15% of the average net asset value of class IB shares. Putnam Mutual Funds may suspend or modify its payments to dealers. The payments are also subject to the continuation of the Distribution Plan, 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 do the funds price their shares? The price of a fund's shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. Each fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. Each fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect each fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of each fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of each fund's foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. Fund distributions and taxes Each fund will distribute any net investment income and net realized capital gains at least annually. Both types of distributions will be made in shares of such funds unless an election is made on behalf of a separate account to receive some or all of the distributions in cash. Distributions are reinvested without a sales charge, using the net asset value determined on the ex-dividend date. Distributions on each share are determined in the same manner and are paid in the same amount, regardless of class, except for such differences as are attributable to differential class expenses. Generally, owners of variable annuity and variable life contracts are not taxed currently on income or gains realized with respect to such contracts. However, some distributions from such contracts may be taxable at ordinary income tax rates. In addition, distributions made to an owner who is younger than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own tax advisors for more information on their own tax situation, including possible foreign, state or local taxes. In order for investors to receive the favorable tax treatment available to holders of variable annuity and variable life contracts, the separate accounts underlying such contracts, as well as the funds in which such accounts invest, must meet certain diversification requirements. Each fund intends to comply with these requirements. If a fund does not meet such requirements, income allocable to the contracts would be taxable currently to the holders of such contracts. Each fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal income taxes on income and gains it distributes to the separate accounts. For information concerning federal income tax consequences for the holders of variable annuity contracts and variable life insurance policies, contract holders should consult the prospectus of the applicable separate account. Fund investments in foreign securities may be subject to withholding taxes at the source on dividend or interest payments. In that case, a fund's yield on those securities would be decreased. A fund's investments in certain debt obligations may cause the fund to recognize taxable income in excess of the cash generated by such obligations. Thus, the fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. Financial highlights The financial highlights table is intended to help you understand the funds' recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from each fund's financial statements, which have been audited and reported on by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the funds' annual report to shareholders, which is available upon request.
Financial Highlights Investment Operations Less Distributions: Net Asset Net Realized From net In excess of Value, Net and Unrealized Total from From net Realized Net Realized From Beginning Investment Gain (Loss) on Investment Investment Gain on Gain on Return of Period ended of Period Income (Loss) Investments operations Income Investments Investments Capital Putnam VT Growth and Income Fund 1999 $28.75 $.41(a) $.04 $.45 $(.41) $(2.04) $-- $-- 1998** 28.02 .26(a) .47 .73 -- -- -- -- Putnam VT New Opportunities Fund 1999 $26.04 $(.15)(a) $17.92 $17.77 $-- $(.37) $-- $-- 1998*** 23.94 (.05)(a) 2.15 2.10 -- -- -- -- Putnam VT Voyager Fund 1999 $45.81 $(.10)(a) $24.62 $24.52 $(.05) $4.17 $-- $-- 1998*** 41.55 (.01)(a) 4.27 4.26 -- -- -- --
Total Ratio of Net Investment Ratio of Investment Net Asset Return at Net Assets Expenses to Income (Loss) to Total Value, End Net Asset End of Period Average Net Average Net Portfolio Distributions of Period Value(%)(b) (in thousands) Assets(%)(c) Assets(%) Turnover (%) Putnam VT Growth and Income Fund 1999 $(2.45) $26.75 1.47 $162,112 .65 1.55 53.68 1998**** -- 28.75 2.61* 7,583 .49* 1.20* 63.62 Putnam VT New Opportunities Fund 1999 $(.37) $43.44 69.10 $62,977 .74 (.47) 71.14 1998** -- 26.04 8.77* 1,359 .51* (.25)* 59.75 Putnam VT New Value Fund 1999 $(.21) $11.85 .26 $9,541 .95 1.43 98.21 1998*** (.15) 12.02 2.28* 414 .65* 1.26* 130.96 Putnam VT Voyager Fund 1999 $(4.22) $66.11 58.01 $155,889 .72 (.21) 85.13 1998*** -- 45.81 10.25* 4,332 .49* (.04)* 62.99 * Not annualized. ** For the period April 6, 1998 (commencement of operations) to December 31, 1998. *** For the period April 30, 1998 (commencement of operations) to December 31, 1998. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total investment return assumes dividend reinvestment. (c) Includes amounts paid through expense offset and brokerage service arrangements.
For more information about the funds of Putnam Variable Trust The Trust's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the funds. The SAI, and the auditor's report and financial statements included in the Trust's most recent annual report to the funds' shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected the funds' performance during the funds' last fiscal year. You may get free copies of these materials, request other information about the funds and other Putnam funds, or make shareholder inquiries, by contacting your financial advisor, by visiting Putnam's Web site, or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about the funds, including the Trust's SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov. or by writing the Commission's Public Reference Section, Washington, D.C. 20549-0102. You may need to refer to the fund's file number. PUTNAM INVESTMENTS One Post Office Square Boston, Massachusetts 02109 1-800-225-1581 Address correspondence to Putnam Investor Services P.O. Box 989 Boston, Massachusetts 02103 www.putnaminv.com File No. 811-5346 PUTNAM VARIABLE TRUST Putnam VT American Government Income Fund Putnam VT Asia Pacific Growth Fund Putnam VT Diversified Income Fund Putnam VT The George Putnam Fund of Boston Putnam VT Global Asset Allocation Fund Putnam VT Global Growth Fund Putnam VT Growth and Income Fund Putnam VT Growth Opportunities Fund Putnam VT Health Sciences Fund Putnam VT High Yield Fund Putnam VT Income Fund Putnam VT International Growth Fund Putnam VT International Growth and Income Fund Putnam VT International New Opportunities Fund Putnam VT Investors Fund Putnam VT Money Market Fund Putnam VT New Opportunities Fund Putnam VT New Value Fund Putnam VT OTC & Emerging Growth Fund Putnam VT Research Fund Putnam VT Small Cap Value Fund Putnam VT Utilities Growth and Income Fund Putnam VT Vista Fund Putnam VT Voyager Fund FORM N-1A PART B STATEMENT OF ADDITIONAL INFORMATION ("SAI") April 30, 2000 This SAI is not a prospectus and is only authorized for distribution when accompanied or preceded by the prospectuses of the Trust dated April 30, 2000, as revised from time to time. This SAI contains information which may be useful to investors but which is not included in the prospectus. If the Trust has more than one form of current prospectus, each reference to the prospectus in this SAI shall include all of the Trust's prospectuses, unless otherwise noted. The SAI should be read together with the applicable prospectus. Certain disclosure has been incorporated by reference from the Trust's annual report. For a free copy of the Trust's annual report or prospectus , call Putnam Investor Services at 1-800-225-1581 or write Putnam Investor Services, Mailing address: P.O. Box 41203, Providence, RI 02940-1203. Part I of this SAI contains specific information about each fund. Part II includes information about all of the funds. Table of Contents Part I TRUST ORGANIZATION AND CLASSIFICATION I-3 INVESTMENT RESTRICTIONS I-4 CHARGES AND EXPENSES I-8 INVESTMENT PERFORMANCE I-29 ADDITIONAL OFFICERS I-31 INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS I-34 Part II MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1 TAXES II-22 MANAGEMENT II-23 DETERMINATION OF NET ASSET VALUE II-31 DISTRIBUTION PLAN II-32 SUSPENSION OF REDEMPTIONS II-33 SHAREHOLDER LIABILITY II-33 STANDARD PERFORMANCE MEASURES II-33 COMPARISON OF PORTFOLIO PERFORMANCE II-34 SECURITIES RATINGS II-39 DEFINITIONS II-44 PUTNAM VARIABLE TRUST SAI TRUST ORGANIZATION AND CLASSIFICATION Putnam Variable Trust is a Massachusetts business trust organized on September 24, 1987. 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 January 1, 1997, the Trust was known as Putnam Capital Manager Trust and each of its series then in existence was designated PCM, rather than Putnam VT . Prior to April 30, 1999, Putnam VT Income Fund was known as Putnam VT U.S. Government and High Quality Bond Fund. The Trust is an open-end management investment company with an unlimited number of authorized shares of beneficial interest. Shares of the Trust may, without shareholder approval, be divided into two or more series of shares representing separate investment portfolios, and are currently divided into twenty- four series of shares, each representing a separate investment portfolio which is being offered to separate accounts of various insurance companies. Any series of shares may be further divided without shareholder approval into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees may determine. Shares of each series are currently divided into two classes: class IA shares and class IB shares. Class IB shares are subject to fees imposed pursuant to a distribution plan. The funds may also offer other classes of shares with different sales charges and expenses. Because of these different sales charges and expenses, the investment performance of the classes will vary. The two classes of shares are offered under a multiple class distribution system approved by the Trust's Trustees, and are designed to allow promotion of insurance products investing in the Trust through alternative distribution channels. The insurance company issuing a variable contract selects the class of shares in which the separate account funding the contract invests. Each share has one vote, with fractional shares voting proportionately. Shares vote as a single class without regard to series or classes of shares except (i) when required by the 1940 Act, or when the Trustees have determined that the matter affects one or more series or classes of shares materially differently, shares shall be voted by individual series or class, and (ii) when the Trustees have determined that the matter affects only the interests of one or more series or classes, only the shareholders of such series or class shall be entitled to vote. Shares are freely transferable, are entitled to dividends as declared by the Trustees, and, if the portfolio were liquidated, would receive the net assets of the portfolio. The Trust may suspend the sale of shares of any portfolio at any time and may refuse any order to purchase shares. Although the Trust 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 Agreement and Declaration of Trust. Shares of the funds may only be purchased by an insurance company separate account. For matters requiring shareholder approval, you may be able to instruct the insurance company separate account how to vote the fund shares attributable to your contract or policy. See the Voting Rights section of your insurance product prospectus. Each fund is a diversified investment company, except for Putnam VT Health Sciences Fund and Putnam VT Utilities Growth and Income Fund, each of which is a non-diversified investment company. INVESTMENT RESTRICTIONS As fundamental investment restrictions, which may not be changed as to any fund without a vote of a majority of the outstanding voting securities of that fund, the Trust may not and will not take any of the following actions with respect to that fund: (1)(a) (All funds except Putnam American Government Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Growth Opportunities Fund, Putnam VT Health Sciences Fund, Putnam VT Investors Fund, Putnam VT OTC & Emerging Growth Fund, Putnam VT Small Cap Value Fund and Putnam VT Voyager Fund) Borrow money in excess of 10% of the value (taken at the lower of cost or current value) of the fund's total assets (not including the amount borrowed) at the time the borrowing is made, and then only from banks as a temporary measure to facilitate the meeting of redemption requests (not for leverage) which might otherwise require the untimely disposition of portfolio investments or for extraordinary or emergency purposes. Such borrowings will be repaid before any additional investments are purchased. (1)(b) (Putnam VT Voyager Fund) Borrow more than 50% of the value of its total assets (excluding borrowings and stock index futures contracts and call options on stock index futures contracts and stock indices) less liabilities other than borrowings and stock index futures contracts and call options on stock index futures contracts and stock indices. (1)(c) (Putnam American Government Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Growth Opportunities Fund, Putnam VT Health Sciences Fund, Putnam VT Investors Fund, Putnam VT OTC & Emerging Growth Fund, Putnam VT Research Fund and Putnam VT Small Cap Value Fund) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at the time the borrowing is made. (2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws. (3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities which represent interests in real estate, and it may acquire and dispose of real estate or interests in real estate acquired through the exercise of its rights as a holder of debt obligations secured by real estate or interests therein. (4) (All funds except Putnam VT Research Fund) Purchase or sell commodities or commodity contracts, except that the fund may purchase and sell financial futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities. (4)(b) (Putnam VT Research Fund) Purchase or sell commodities or commodity contracts, except that the fund may purchase and sell financial futures contracts and options. (5)(a) (All funds except Putnam American Government Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Growth Opportunities Fund, Putnam VT Health Sciences Fund, Putnam VT Investors Fund, Putnam VT OTC & Emerging Growth Fund, Putnam VT Research Fund and Putnam VT Small Cap Value Fund) Make loans, except by purchase of debt obligations in which the fund may invest consistent with its investment policies, by entering into repurchase agreements, or by lending its portfolio securities. (5)(b) (Putnam American Government Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Growth Opportunities Fund, Putnam VT Health Sciences Fund, Putnam Investors Fund, Putnam OTC & Emerging Growth Fund, Putnam VT Research Fund and Putnam Small Cap Value Fund) Make loans, except by purchase of debt obligations in which the fund may invest consistent with its investment policies (including without limitation debt obligations issued by other Putnam Funds), by entering into repurchase agreements, or by lending its portfolio securities. (6)(a) (All funds except Putnam VT Health Sciences Fund and Putnam VT Utilities Growth and Income Fund) With respect to 75% of its total assets, invest in the securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities. (6)(b) (Putnam VT Health Sciences Fund and Putnam VT Utilities Growth and Income Fund) With respect to 50% of its total assets, invest in the securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities. (7)(a) (All funds except Putnam VT Health Sciences Fund and Putnam VT Utilities Growth and Income Fund) With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer. (7)(b) (Putnam VT Health Sciences Fund and Putnam VT Utilities Growth and Income Fund) With respect to 50% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer. (8) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, more than 25% of the fund's total assets would be invested in any one industry; except that Putnam VT Utilities Growth and Income Fund may invest more than 25% of its assets in any of the public utilities industries and Putnam VT Health Sciences Fund may invest more than 25% of its assets in companies that Putnam Management determines are principally engaged in the health sciences industries; and except that Putnam VT Money Market Fund may invest up to 100% of its assets (i) in the banking industry, (ii) in the personal credit institution or business credit institution industries when in the opinion of management yield differentials make such investments desirable, or (iii) any combination of these. (9) Issue any class of securities which is senior to the fund's shares of beneficial interest, except for permitted borrowings. The Investment Company Act of 1940 provides that a "vote of a majority of the outstanding voting securities" of a fund or the Trust means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of a fund or the Trust, as the case may be, or (2) 67% or more of the shares present at a meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy. The following non-fundamental policies may be changed without shareholder approval: (1) Each fund will not invest in (a) securities which are not readily marketable, (b) securities restricted as to resale (excluding securities determined by the Trustees of the fund (or the person designated by the Trustees of the Trust to make such determinations) to be readily marketable), and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 15% of the fund's net assets (taken at current value) would be invested in securities described in (a), (b) and (c) above. (2) (For Putnam VT American Government Fund only) We normally invest at least 65% of the fund's total assets in U.S. government securities. We may invest up to 35% of the fund's total assets in mortgage-backed securities that are privately issued and not supported by the credit of any government agency or instrumentality. (3) (For Putnam VT Asia Pacific Growth Fund only) Geographic focus. The fund considers the following to be "Asian or Pacific Basin" companies * companies organized under the laws of an Asian or a Pacific Basin country with a principal office in an Asian or a Pacific Basin country, * companies that earn 50% or more of their total revenues from business in Asia or the Pacific Basin, or * companies whose common stock is traded principally on a securities exchange in Asia or the Pacific Basin. The fund anticipates that under normal market conditions it will invest 85% of its assets in Asian or Pacific Basin companies and at least 65% of its assets will be invested in securities of issuers that meet at least one of the first two criteria listed above. Asian and Pacific Basin countries may include, for example, Australia, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the People's Republic of China, the Philippines, Singapore, Taiwan and Thailand. (4) (For Putnam VT Diversified Income Fund only) The fund may not invest less than 15% of its net assets in U.S. government securities. (5) (For Putnam VT The George Putnam Fund of Boston only) The fund will not usually invest more than 75% of its assets in stocks and that portion of the value of convertible securities attributable to conversion rights, although it may occasionally do so. (6) (For Putnam Global Growth Fund only) The fund normally invests at least 65% of its total assets in equity securities of companies located in at least three different countries, one of which may be the United States. (7) (For Putnam Health Sciences Fund only). The fund invests at least 80% of its assets (other than assets invested in U.S. government securities, short-term debt obligations and cash or money market instruments) in common stocks and other securities of companies in the health sciences industries, except when Putnam Management believes alternative strategies are appropriate to protect the fund against a market decline. (8) (For Putnam VT High Yield Fund) Normally the fund invests at least 80% of its assets in debt securities, convertible securities or preferred stock that are consistent with the fund's primary investment objective of high current income. (9) (For Putnam VT International Growth Fund, Putnam VT International Growth and Income Fund and Putnam VT International New Opportunities Fund only) We normally invest at least 65% of the fund's total assets in equity securities of companies located in at least three countries other than the United States. (10) (For Putnam VT OTC & Emerging Growth Fund only) The fund normally invests at least 65% of its total assets in common stocks traded in the over-the-counter (OTC) market and common stocks of "emerging growth" companies listed on securities exchanges. (11) (For Putnam VT Utilities Growth and Income Fund only) The fund normally invests at least 65% of its total assets in equity and debt securities of companies that, in Putnam Management's view, derive at least 50% of their assets, revenues or profits from producing or distributing electric, gas or other types of energy, supplying water, or providing telecommunications services such as telephone, microwave or other media (but not public broadcasting or cable television). (12) (For Putnam VT Diversified Income Fund only) We normally invest 15% - 65% of the fund's net assets in each sector described in the prospectus. We consider the following companies to be foreign companies: * companies domiciled outside the United States, or * companies whose principal operations are located outside the United States. All percentage limitations on investments (other than pursuant to non-fundamental restriction (1)) will apply at the time of the making of an investment and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment. ------------------------------------------------ CHARGES AND EXPENSES Management fees Under a Management Contract dated October 2, 1987, as most recently supplemented November 8, 1999, each fund pays a quarterly fee to Putnam Management based on the average net assets of the fund, as determined at the close of each business day during the quarter, at the annual rate of: Putnam VT International New Opportunities Fund: 1.00% of the first $500 million of average net assets; 0.90% of the next $500 million; 0.85% of the next $500 million; 0.80% of the next $5 billion; 0.775% of the next $5 billion; 0.755% of the next $5 billion; 0.74% of the next $5 billion; and 0.73% of any excess thereafter. Putnam VT Asia Pacific Growth Fund, Putnam VT Global Growth Fund, Putnam VT International Growth Fund, Putnam VT International Growth and Income Fund, and Putnam VT Small Cap Value Fund: 0.80% of the first $500 million of average net assets; 0.70% of the next $500 million; 0.65% of the next $500 million; 0.60% of the next $5 billion; 0.575% of the next $5 billion; 0.555% of the next $5 billion; 0.54% of the next $5 billion; and 0.53% of any excess thereafter. Putnam VT Growth Opportunities Fund: 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; 0.43% of the next $5 billion; and 0.42% of any excess thereafter. Putnam VT Diversified Income Fund, Putnam VT Global Asset Allocation Fund, Putnam VT Health Sciences Fund, Putnam VT High Yield Fund, Putnam VT New Opportunities Fund, Putnam VT New Value Fund, Putnam VT Utilities Growth and Income Fund, Putnam VT Voyager Fund and Putnam VT OTC Emerging Growth Fund: 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% of any excess thereafter. Putnam VT American Government Income Fund: 0.65% of the first $500 million of average net assets; 0.55% of the next $500 million; 0.50% of the next $500 million; 0.45% of the next $5 billion; 0.425% of the next $5 billion; 0.405% of the next $5 billion; 0.39% of the next $5 billion; 0.38% of the next $5 billion; 0.37% of the next $5 billion; 0.36% of the next $5 billion; 0.35% of the next $5 billion; and 0.34% of any excess thereafter. Putnam VT Growth and Income Fund, Putnam VT Income Fund, Putnam VT Vista Fund, Putnam VT Investors Fund, Putnam VT The George Putnam Fund of Boston and Putnam VT Research Fund: 0.65% of the first $500 million of average net assets; 0.55% of the next $500 million; 0.50% of the next $500 million; 0.45% of the next $5 billion; 0.425% of the next $5 billion; 0.405% of the next $5 billion; 0.39% of the next $5 billion; and 0.38% of any excess thereafter. Putnam VT Money Market Fund: 0.45% of the first $500 million of average net assets; 0.35% of the next $500 million; 0.30% of the next $500 million; 0.25% of the next $5 billion; 0.225% of the next $5 billion; 0.205% of the next $5 billion; 0.19% of the next $5 billion; and 0.18% of any excess thereafter. For the past three fiscal years, pursuant to the Management Contract (and a management contract in effect prior to July 1, 1999, under which the management fee payable to Putnam Management for Putnam VT International New Opportunities was paid at the rate of 1.20% of the first $500 million of average net assets; 1.10% of the next $500 million; 1.05% of the next $500 million; 1.00% of the next $5 billion; 0.975% of the next $5 billion; 0.955% of the next $5 billion; 0.94% of the next $5 billion; and 0.93% of any excess thereafter and a management contract in effect prior to November 8, 1999, under which the management fee payable to Putnam Management for Putnam VT Global Growth Fund was paid at the rate of 0.60% of average net assets), each fund incurred the following fees:
Reflecting a reduction in the following Fiscal Management amounts pursuant to Fund name year fee paid an expense limitation - ---------------------------------- ------ ---------- ----------------------- Putnam VT Asia Pacific Growth Fund 1999 $1,137,746 1998 $769,751 1997 $1,076,596 Putnam VT Diversified Income Fund 1999 $4,451,958 1998 $4,373,212 1997 $3,811,378 Putnam VT The George Putnam Fund of Boston 1999 $1,472,017 1998+ $207,992 $133,702 Putnam VT Global Asset Allocation Fund 1999 $6,440,908 1998 $6,476,330 1997 $5,755,350 Putnam VT Global Growth Fund 1999 $13,249,535 1998 $10,690,208 1997 $9,366,376 Putnam VT Growth and Income Fund 1999 $47,064,877 1998 $42,223,532 1997 $34,012,687 Putnam VT Health Sciences Fund 1999 $1,345,233 1998+ $295,300 $43,829 Putnam VT High Yield Fund 1999 $6,608,763 1998 $6,936,557 1997 $5,842,951 Putnam VT Income Fund 1999 $6,048,200 1998 $5,276,417 1997 $4,731,739 Putnam VT International Growth Fund 1999 $3,317,297 1998 $1,920,623 1997* $608,193 $55,502 Putnam VT International Growth and Income Fund 1999 $2,773,645 1998 $2,185,230 1997* $871,531 Putnam VT International New Opportunities Fund 1999 $1,927,272 1998 $1,488,974 $25,296 1997* $893,002 $206,574 Putnam VT Investors Fund 1999 $3,490,704 1998+ $425,193 $15,450 Putnam VT Money Market Fund 1999 $3,048,110 1998 $2,267,755 1997 $2,090,282 Putnam VT New Opportunities Fund 1999 $22,883,384 1998 $16,639,549 1997 $12,267,574 Putnam VT New Value Fund 1999 $1,909,355 1998 $1,622,770 1997* $757,486 Putnam VT OTC & Emerging Growth Fund 1999 $483,385 $115,869 1998+ $62,785 $93,939 Putnam VT Research Fund 1999 $512,755 $86,363 1998++ $19,146 $28,096 Putnam VT Small Cap Value Fund 1999+++ $46,193 Putnam VT Utilities Growth and Income Fund 1999 $6,510,389 1998 $5,824,579 1997 $4,703,343 Putnam VT Vista Fund 1999 $2,459,639 1998 $1,526,540 1997* $600,249 Putnam VT Voyager Fund 1999 $34,843,021 1998 $26,815,677 1997 $21,134,308
* Commencement of operations January 2, 1997 * Commencement of operations April 30, 1998 * Commencement of operations September 30, 1998 * Commencement of operations April 30, 1999 Expense limitation. In order to limit Putnam VT American Government Income Fund's expenses, Putnam Management has agreed to limit its compensation (and, to the extent necessary, bear other expenses of the fund) through December 31, 2000 to the extent that expenses of the fund (exclusive of brokerage, interest, taxes, and deferred extraordinary expenses, and payments under the fund's distribution plans) would exceed an annual rate of 0.90% of the fund's average net assets. For the purpose of determining any such limitation on Putnam Management's compensation, expenses of the fund do not reflect the application of commissions or cash management credits that may reduce designated fund expenses. Brokerage commissions The following table shows brokerage commissions paid during the fiscal periods indicated:
Fiscal Brokerage Fund name year commissions - ------------------------------------------- ------ ----------------- Putnam VT Asia Pacific Growth Fund 1999 $987,378 1998 $567,025 1997 $679,699 Putnam VT Diversified Income Fund 1999 $51,146 1998 $24,354 1997 $32,813 Putnam VT The George Putnam Fund of Boston 1999 $336,485 1998** $59,761 Putnam VT Global Asset Allocation Fund 1999 $1,251,384 1998 $1,315,749 1997 $1,043,014 Putnam VT Global Growth Fund 1999 9,490,488 1998 $9,323,318 1997 $8,339,967 Putnam VT Growth and Income 1999 $10,640,457 1998 $9,816,504 1997 $8,609,589 Putnam VT Health Sciences Fund 1999 $323,763 1998** $71,364 Putnam VT High Yield Fund 1999 $118,697 1998 $687 1997 $9,384 Putnam VT Income Fund 1999 $766,612 1998 $64,214 1997 $85,584 Putnam VT International Growth Fund 1999 $1,989,539 1998 $1,195,025 1997* $553,235 Putnam VT International Growth and Income Fund 1999 $1,278,301 1998 $788,632 1997* $659,464 Putnam VT International New Opportunities Fund 1999 $1,632,088 1998 $870,433 1997* $733,380 Putnam VT Investors Fund 1999 $641,643 1998** $153,269 Putnam VT Money Market 1999 $300 1998 $0 1997 $0 Putnam VT New Opportunities Fund 1999 $3,275,075 1998 $2,762,099 1997 $2,268,158 Putnam VT New Value Fund 1999 $562,716 1998 $644,506 1997 $292,442 Putnam VT OTC & Emerging Growth Fund 1999 $27,441 1998** $11,546 Putnam VT Research Fund 1999 $263,029 1998*** $12,374 Putnam VT Small Cap Value Fund 1999**** $29,509 Putnam VT Utilities Growth and Income Fund 1999 $519,476 1998 $430,952 1997 $785,994 Putnam VT Vista Fund 1999 $733,659 1998 $450,722 1997* $174,221 Putnam VT Voyager Fund 1999 $8,097,663 1998 $5,065,820 1997 $3,624,594 * Commencement of operations January 2, 1997. ** Commencement of operations April 30, 1998. *** Commencement of operations September 30, 1998. **** Commencement of operations April 30, 1999.
The following table shows transactions placed with brokers and dealers during the most recent fiscal year to recognize research, statistical and quotation services received by Putnam Management and its affiliates:
Percentage Dollar value of of total Amount of these transactions transactions commissions Putnam VT Asia Pacific Growth Fund $373,190,298 84.96% $901,396 Putnam VT Diversified Income Fund -- 0.00% -- Putnam VT The George Putnam Fund of Boston 120,923,020 29.98% 149,772 Putnam VT Global Asset Allocation Fund 675,622,794 13.12% 883,013 Putnam VT Global Growth Fund 4,817,209,398 83.17% 8,487,540 Putnam VT Growth and Income Fund 5,255,686,869 48.87% 5,530,345 Putnam VT Health Sciences Fund 136,984,250 38.01% 172,960 Putnam VT High Yield Fund -- 0.00% -- Putnam VT Income Fund -- 0.00% -- Putnam VT International Growth Fund 862,624,153 89.65% 1,815,127 Putnam VT International Growth and Income 526,921,588 84.54% 1,158,134 Putnam VT International New Opportunities Fund 670,385,541 90.00% 1,511,304 Putnam VT Investors Fund 525,012,316 42.61% 434,005 Putnam VT Money Market Fund -- -- -- Putnam VT New Opportunities Fund 1,532,086,260 41.72% 1,685,261 Putnam VT New Value Fund 222,969,817 42.45% 274,830 Putnam VT OTC & Emerging Growth Fund 6,904,278 10.73% 9,601 Putnam VT Research Fund 111,115,277 36.60% 121,564 Putnam VT Small Cap Value Fund 3,074,339 19.75% 10,591 Putnam VT Utilities Growth and Income Fund 202,080,623 47.88% 303,337 Putnam VT Vista Fund 451,740,279 59.49% 571,210 Putnam VT Voyager Fund 3,375,495,309 40.13% 4,071,932
Administrative expense reimbursement Each fund reimbursed Putnam Management for administraive services during fiscal 1999, including compensation of certain fund officers and contributions to the Putnam Investments, Inc. Profit Sharing Retirement Plan for their benefit, as follows:
Portion of total reimbursement for Total compensation and reimbursement contributions Putnam VT Asia Pacific Growth Fund $6,609 $5,349 Putnam VT Diversified Income Fund $10,735 $8,688 Putnam VT The George Putnam Fund of Boston $7,137 $5,776 Putnam VT Global Asset Allocation Fund $16,080 $13,014 Putnam VT Global Growth Fund $21,487 $17,390 Putnam VT Growth and Income Fund $39,787 $32,201 Putnam VT Health Sciences Fund $7,447 $6,027 Putnam VT High Yield Fund $14,877 $12,040 Putnam VT Income Fund $19,839 $16,056 Putnam VT International Growth Fund $7,517 $6,084 Putnam VT International Growth and Income $7,425 $6,009 Putnam VT International New Opportunities Fund $7,177 $5,809 Putnam VT Investors Fund $9,529 $7,712 Putnam VT Money Market Fund $9,674 $7,830 Putnam VT New Opportunities Fund $33,176 $26,851 Putnam VT New Value Fund $6,715 $5,435 Putnam VT OTC & Emerging Growth Fund $5,602 $4,534 Putnam VT Research Fund $5,484 $4,438 Putnam VT Small Cap Value Fund $351 $284 Putnam VT Utilities Growth and Income Fund $14,783 $11,964 Putnam VT Vista Fund $6,846 $5,541 Putnam VT Voyager Fund $36,260 $29,346
Trustee responsibilities and fees The Trustees are responsible for generally overseeing the conduct of fund 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. The Trust pays each Trustee a fee for his or her services. Each Trustee also receives fees for serving as Trustee of other Putnam funds. The Trustees periodically review their fees to assure that such fees continue to be appropriate in light of their responsibilities as well as in relation to fees paid to trustees of other mutual fund complexes. The Trustees meet monthly over a two-day period, except in August. The Board Policy Committee, which consists solely of Trustees not affiliated with Putnam Management and is responsible for recommending Trustee compensation, estimates that Committee and Trustee meeting time together with the appropriate preparation requires the equivalent of at least three business days per Trustee meeting. The following table shows the year each Trustee was first elected a Trustee of the Putnam funds the fees paid to each Trustee by each Putnam VT fund for fiscal 1999 (except for Putnam VT American Government Income Fund and Putnam VT Growth Opportunities Fund for which fees expected to be paid for the first full fiscal year are shown), and the fees paid to each Trustee by all of the Putnam funds for the year ended December 31, 1999: COMPENSATION TABLE Aggregate compensation (1) from:
Putnam VT Putnam VT Putnam VT The Putnam VT Putnam VT Putnam VT Asia Pacific Diversified George Putnam Global Asset Global Growth Growth and Trustee/Year Growth Fund Income Fund Fund of Boston Allocation Fund Fund Income Fund Jameson A. Baxter/1994 (4) $805 $1,105 $602 $1,143 $2,178 $5,559 Hans H. Estin/1972 800 1,099 598 1,137 2,167 5,533 John A. Hill/1985 (4)(5) 856 1,249 661 1,342 2,602 7,469 Ronald J. Jackson/1996 (4) 809 1,111 605 1,148 2,189 5,591 Paul L. Joskow/1997 (4) 805 1,105 602 1,143 2,178 5,559 Elizabeth T. Kennan/1992 800 1,099 598 1,137 2,167 5,533 Lawrence J. Lasser/1992 796 1,093 595 1,130 2,155 5,507 John H. Mullin, III/1997(4) 819 1,125 612 1,163 2,217 5,665 Robert E. Patterson/1984 801 1,102 600 1,138 2,170 5,533 William F. Pounds/1971(5) 830 1,213 642 1,305 2,533 7,283 George Putnam/1957 800 1,099 598 1,137 2,167 5,533 George Putnam, III/1984 800 1,099 598 1,137 2,167 5,533 A.J.C. Smith/1986 792 1,087 591 1,124 2,143 5,481 W. Thomas Stephens(4) 792 1,087 591 1,124 2,144 5,480 W. Nicholas Thorndike/1992 796 1,094 595 1,131 2,151 5,508 COMPENSATION TABLE (continued) Aggregate compensation (1) from: Putnam VT Putnam VT Putnam VT International Health Putnam VT Putnam VT International New Putnam VT Sciences High Yield Putnam VT International Growth and Opportunities Investors Trustee/Year Fund Fund Income Fund Growth Fund Income Fund Fund Fund Jameson A. Baxter/1994 (4) $708 $1,571 $1,325 $923 $943 $816 $701 Hans H. Estin/1972 704 1,561 1,317 919 939 812 697 John A. Hill/1985 (4)(5) 763 1,763 1,533 1,023 1,031 872 822 Ronald J. Jackson/1996 (4) 711 1,577 1,330 928 948 820 704 Paul L. Joskow/1997 (4) 708 1,571 1,325 923 943 816 701 Elizabeth T. Kennan/1992 704 1,561 1,317 919 939 812 697 Lawrence J. Lasser/1992 700 1,554 1,308 914 934 808 691 John H. Mullin, III/1997(4) 721 1,597 1,347 940 960 831 713 Robert E. Patterson/1984 705 1,566 1,323 919 939 813 698 William F. Pounds/1971(5) 740 1,739 1,493 993 1,001 845 800 George Putnam/1957 704 1,561 1,317 919 939 812 697 George Putnam, III/1984 704 1,561 1,317 919 939 812 697 A.J.C. Smith/1986 696 1,547 1,299 909 929 803 686 W. Thomas Stephens(4) 696 1,541 1,299 910 930 804 689 W. Nicholas Thorndike/1992 700 1,554 1,311 913 929 808 691 COMPENSATION TABLE (continued) Aggregate compensation (1) from: Putnam VT Putnam VT Putnam VT New Putnam OTC & Putnam VT Putnam VT Money Market New Value Opportunities Emerging Growth Research Small Cap Trustee/Year Fund Fund Fund Fund Fund Value Fund Jameson A. Baxter/1994 (4) $713 $682 $3,155 $566 $320 $67 Hans H. Estin/1972 708 678 3,137 564 318 66 John A. Hill/1985 (4)(5) 859 749 3,959 597 349 76 Ronald J. Jackson/1996 (4) 716 685 3,169 570 322 67 Paul L. Joskow/1997 (4) 713 682 3,155 566 320 66 Elizabeth T. Kennan/1992 708 678 3,137 564 318 66 Lawrence J. Lasser/1992 703 674 3,118 561 315 65 John H. Mullin, III/1997(4) 724 693 3,209 577 328 68 Robert E. Patterson/1984 712 679 3,145 564 318 66 William F. Pounds/1971(5) 837 727 3,860 578 335 74 George Putnam/1957 708 678 3,137 564 318 66 George Putnam, III/1984 708 678 3,137 564 318 66 A.J.C. Smith/1986 698 670 3,100 558 313 64 W. Thomas Stephens(4) 699 670 3,101 558 313 64 W. Nicholas Thorndike/1992 703 674 3,118 560 314 65 COMPENSATION TABLE (continued) Aggregate compensation (1) from: Putnam VT Total compensation Utilities Growth Putnam VT Putnam VT All Putnam from all Putnam Trustee/Year and Income Fund Vista Fund Voyager Fund funds (2) funds (3) Jameson A. Baxter/1994 (4) $1,539 $703 $4,162 $95,000 $191,000 Hans H. Estin/1972 1,529 699 4,141 95,000 190,000 John A. Hill/1985 (4)(5) 1,753 788 5,401 115,000 239,750 Ronald J. Jackson/1996 (4) 1,546 706 4,184 95,000 193,500 Paul L. Joskow/1997 (4) 1,539 703 4,162 95,000 191,000 Elizabeth T. Kennan/1992 1,529 699 4,141 95,000 190,000 Lawrence J. Lasser/1992 1,523 695 4,119 95,000 189,000 John H. Mullin, III/1997(4) 1,565 715 4,238 95,000 196,000 Robert E. Patterson/1984 1,535 700 4,146 95,000 190,250 William F. Pounds/1971(5) 1,704 766 5,265 115,000 231,000 George Putnam/1957 1,529 699 4,141 95,000 190,000 George Putnam, III/1984 1,529 699 4,141 95,000 190,000 A.J.C. Smith/1986 1,516 691 4,098 95,000 188,000 W. Thomas Stephens(4) 1,510 691 4,098 95,000 188,000 W. Nicholas Thorndike/1992 1,523 695 4,119 95,000 190,000 COMPENSATION TABLE (continued) Estimated Aggregate compensation (1) from: Putnam VT American Government Putnam VT Growth Trustee/Year Income Fund Opportunities Fund Jameson A. Baxter/1994 (4) $130 $280 Hans H. Estin/1972 122 272 John A. Hill/1985 (4)(5) 130 301 Ronald J. Jackson/1996 (4) 131 285 Paul L. Joskow/1997 (4) 122 272 Elizabeth T. Kennan/1992 128 278 Lawrence J. Lasser/1992 121 271 John H. Mullin, III/1997(4) 127 285 Robert E. Patterson/1984 121 268 William F. Pounds/1971(5) 122 280 George Putnam/1957 121 271 George Putnam, III/1984 121 271 A.J.C. Smith/1986 118 265 W. Thomas Stephens(4) 121 269 W. Nicholas Thorndike/1992 122 272
[CAPTION] COMPENSATION TABLE Pension or retirement benefits accrued as part of fund expenses (3) from: Putnam VT Putnam VT Putnam VT American Putnam VT Putnam VT The George Global Asset Putnam VT Putnam VT Government Asia Pacific Diversified Putnam Fund Allocation Global Growth Growth and Trustee/Year Income Fund Growth Fund Income Fund of Boston Fund Fund Income Fund Jameson A. Baxter/1994 (4) $0 $195 $252 $122 $268 $501 $1,482 Hans H. Estin/1972 0 470 606 293 645 1,205 3,566 John A. Hill/1985 (4)(5) 0 234 302 146 321 601 1,777 Ronald J. Jackson/1996 (4) 0 222 286 138 304 568 1,682 Paul L. Joskow/1997 (4) 0 71 92 44 97 182 539 Elizabeth T. Kennan/1992 0 291 376 182 399 747 2,208 Lawrence J. Lasser/1992 0 222 286 139 305 569 1,685 John H. Mullin, III/1997(4) 0 107 138 67 146 274 810 Robert E. Patterson/1984 0 157 202 98 215 402 1,191 William F. Pounds/1971(5) 0 523 676 327 719 1,343 3,973 George Putnam/1957 0 480 620 300 659 1,231 3,643 George Putnam, III/1984 0 106 137 66 146 273 807 A.J.C. Smith/1986 0 335 432 209 460 859 2,542 W. Thomas Stephens(4) 0 100 129 62 137 256 756 W. Nicholas Thorndike/1992 0 408 527 255 560 1,047 3,098
COMPENSATION TABLE (continued) Pension or retirement benefits accrued as part of fund expenses (3) from: Putnam VT Putnam VT Putnam VT International Growth Putnam VT Putnam VT Putnam VT International New Opportunities Health High Yield Putnam VT International Growth and Opportunities Trustee/Year Fund Sciences Fund Fund Income Fund Growth Fund Income Fund Fund Jameson A. Baxter/1994 (4) $0 $160 $314 $225 $230 $230 $201 Hans H. Estin/1972 0 384 757 541 554 554 483 John A. Hill/1985 (4)(5) 0 192 377 269 276 276 241 Ronald J. Jackson/1996 (4) 0 181 357 255 261 261 228 Paul L. Joskow/1997 (4) 0 58 114 82 84 84 73 Elizabeth T. Kennan/1992 0 238 469 335 343 343 299 Lawrence J. Lasser/1992 0 182 357 255 262 262 228 John H. Mullin, III/1997(4) 0 87 172 123 126 126 110 Robert E. Patterson/1984 0 128 253 181 185 185 161 William F. Pounds/1971(5) 0 428 843 603 617 617 538 George Putnam/1957 0 393 773 552 566 566 493 George Putnam, III/1984 0 87 171 122 125 125 109 A.J.C. Smith/1986 0 274 539 385 395 395 344 W. Thomas Stephens(4) 0 82 160 115 117 117 102 W. Nicholas Thorndike/1992 0 334 657 470 481 481 420 COMPENSATION TABLE (continued) Pension or retirement benefits accrued as part of fund expenses (3) from: Putnam VT Putnam VT Putnam VT Putnam VT Putnam VT New OTC & Putnam VT Investors Money Market New Value Opportunities Emerging Putnam VT Small Cap Trustee/Year Fund Fund Fund Fund Growth Fund Research Fund Value Fund Jameson A. Baxter/1994 (4) $141 $114 $152 $674 $141 $27 $0 Hans H. Estin/1972 339 274 365 1,623 339 66 0 John A. Hill/1985 (4)(5) 169 136 182 809 169 33 0 Ronald J. Jackson/1996 (4) 160 129 172 765 160 31 0 Paul L. Joskow/1997 (4) 51 41 55 245 51 10 0 Elizabeth T. Kennan/1992 210 169 226 1,005 210 41 0 Lawrence J. Lasser/1992 160 129 172 767 160 31 0 John H. Mullin, III/1997(4) 77 62 83 368 77 15 0 Robert E. Patterson/1984 113 91 122 542 113 22 0 William F. Pounds/1971(5) 378 305 406 1,808 378 73 0 George Putnam/1957 347 280 373 1,658 347 67 0 George Putnam, III/1984 77 62 83 367 77 15 0 A.J.C. Smith/1986 242 195 260 1,157 242 47 0 W. Thomas Stephens(4) 72 58 77 344 72 14 0 W. Nicholas Thorndike/1992 295 238 317 1,410 295 57 0 COMPENSATION TABLE (continued) Pension or retirement benefits accrued as part of fund expenses (3) from: Putnam VT Utilities Growth Putnam VT Putnam VT Trustee/Year and Income Fund Vista Fund Voyager Fund Jameson A. Baxter/1994 (4) $301 $160 $1,011 Hans H. Estin/1972 724 384 2,432 John A. Hill/1985 (4)(5) 361 192 1,212 Ronald J. Jackson/1996 (4) 341 181 1,147 Paul L. Joskow/1997 (4) 109 58 367 Elizabeth T. Kennan/1992 448 238 1,506 Lawrence J. Lasser/1992 342 182 1,149 John H. Mullin, III/1997(4) 164 87 552 Robert E. Patterson/1984 242 128 812 William F. Pounds/1971(5) 806 428 2,710 George Putnam/1957 739 393 2,484 George Putnam, III/1984 164 87 550 A.J.C. Smith/1986 516 274 1,733 W. Thomas Stephens(4) 153 82 516 W. Nicholas Thorndike/1992 629 334 2,113
+ Reflects estimated amounts to be paid for the current fiscal year. ++ For certain newly created funds, actual pension or retirement benefit information is not yet available. (1) Includes an annual retainer and an attendance fee for each meeting attended. (2) Assumes that each Trustee retires at the normal retirement date. Estimated benefits for each Trustee are based on Trustee fee rates in effect during calendar 1998. (3) As of December 31, 1999, there were 114 funds in the Putnam family. (4) Includes compensation deferred pursuant to a Trustee Compensation Deferral Plan. The total amount of deferred compensation payable to Ms. Baxter as of December 31, 1999 by Putnam VT Growth and Income Fund and Putnam VT Voyager Fund was $7,378 and $9,376, respectively, including income earned on such amount. The total amount of deferred compensation payable to Mr. Hill as of December 31, 1999 by Putnam VT Growth and Income Fund, Putnam VT Voyager Fund, Putnam VT Global Asset Allocation Fund, Putnam VT Global Growth Fund, Putnam VT High Yield Fund, Putnam VT New Opportunities Fund, Putnam VT Income Fund and Putnam VT Utilities Growth and Income Fund, was $44,898, $36,228, $10,524, $18,331, $11,407, $17,621, $10,287 and $11,489, respectively, including income earned on such amount. The total amount of deferred compensation payable to Mr. Jackson as of December 31, 1999 by Putnam VT Growth and Income Fund, Putnam VT Voyager Fund, Putnam VT Global Asset Allocation Fund, Putnam VT Global Growth Fund, Putnam VT High Yield Fund, Putnam VT New Opportunities Fund, Putnam VT Income Fund and Putnam VT Utilities Growth and Income Fund , was $23,124, $20,860, $5,031, $11,586, $6,606, $15,579, $4,568 and $6,931 respectively, including income earned on such amount. The total amount of deferred compensation payable to Mr. Joskow as of December 31, 1999 by Putnam VT Growth and Income Fund, Putnam VT Voyager Fund, Putnam VT Global Asset Allocation Fund, Putnam VT Global Growth Fund, Putnam VT High Yield Fund, Putnam VT New Opportunities Fund, Putnam VT Income Fund and Putnam VT Utilities Growth and Income Fund, was $12,436, $8,738, $1,398, $2,204, $1,644, $5,066, $1,043 and $2,323, respectively, including income earned on such amount. The total amount of deferred compensation payable to Mr. Mullin as of December 31, 1999 by Putnam VT Growth and Income Fund, Putnam VT Voyager Fund, Putnam VT Global Asset Allocation Fund, Putnam VT Global Growth Fund, Putnam VT High Yield Fund, Putnam VT New Opportunities Fund, Putnam VT Income Fund and Putnam VT Utilities Growth and Income Fund, was $11,883, $10,443, $2,204, $5,468, $3,557, $8,443, $2,210 and $3,511, respectively, including income earned on such amount. The total amount of deferred compensation payable to Mr. Stephens as of December 31, 1999 by Putnam VT Growth and Income Fund, Putnam VT Voyager Fund, Putnam VT Global Asset Allocation Fund, Putnam VT Global Growth Fund, Putnam VT High Yield Fund, Putnam VT New Opportunities Fund, Putnam VT Income Fund and Putnam VT Utilities Growth and Income Fund, was $14,003, $9,728, $2,798, $5,131, $3,478, $6,707, $2,543 and $3,020, respectively, including income earned on such amount. (5) Includes additional compensation for service as Vice Chairman of the Putnam funds. Under a Retirement Plan for Trustees of the Putnam funds (the "Plan"), each Trustee who retires with at least five years of service as a Trustee of the funds is entitled to receive an annual retirement benefit equal to one-half of the average annual compensation paid to such Trustee for the last three years of service prior to retirement. This retirement benefit is payable during a Trustee's lifetime, beginning the year following retirement, for a number of years equal to such Trustee's years of service. A death benefit, also available under the Plan , assures that the Trustee and his or her beneficiaries will receive benefit payments for the lesser of an aggregate period of (i) ten years or (ii) such Trustee's total years of service. The Plan Administrator (a committee comprised of Trustees that are not "interested persons" of the fund, as defined in the Investment Company Act of 1940) may terminate or amend the Plan at any time, but no termination or amendment will result in a reduction in the amount of benefits (i) currently being paid to a Trustee at the time of such termination or amendment, or (ii) to which a current Trustee would have been entitled had he or she retired immediately prior to such termination or amendment. For additional information concerning the Trustees, see "Management" in this SAI. Share ownership At March 31, 2000 the officers and Trustees as a group owned directly no shares of the Trust or any fund. As of that date, less than 1% of the value of the accumulation units with respect to any fund was attributable to the officers and Trustees of the Trust, as a group, owning variable annuity contracts or variable life insurance policies issued by the insurers listed in the following tables or by other insurers that may hold shares of a fund. Except to the extent set forth below, no person owned of record or to the knowledge of the Trust beneficially 5% or more of the shares of any fund as of March 31, 2000.
Fund and Class Shareholder name and address Percentage owned - -------------------- ---------------------------- ---------------- Putnam VT American Government Income Fund Class IA Hartford Life **** 100.00% Class IB Allstate * 96.84% Putnam VT Asia Pacific Fund Class IA Hartford Life **** 96.35% Class IB Allstate * 85.23% Class IB Hartford Life **** 14.77% Putnam VT Diversified Income Fund Class IA Hartford Life **** 96.94% Class IB Allstate * 73.90% Class IB American Express *** 11.14% Class IB Hartford Life **** 12.20% Putnam VT The George Putnam Fund of Boston Class IA Hartford Life **** 100.00% Class IB Allstate * 81.05% Class IB Hartford Life **** 18.95% Putnam VT Global Asset Allocation Fund Class IA Hartford Life **** 99.99% Class IB Allstate * 54.96% Class IB Hartford Life **** 39.05% Class IB Principal ****** 6.00% Putnam VT Global Growth Fund Class IA Hartford Life **** 99.89% Class IB Allstate * 66.96% Class IB Hartford Life **** 18.72% Class IB PFL ***** 14.32% Putnam VT Growth and Income Fund Class IA Hartford Life **** 97.95% Class IB Allstate * 80.71% Class IB Hartford Life **** 12.29% Putnam VT Growth Opportunities Fund Class IA Hartford Life **** 100.00% Class IB Hartford Life **** 13.60% Class IB Allstate * 86.38% Putnam VT Health Sciences Fund Class IA Hartford Life **** 100.00% Class IB Allstate * 77.70% Class IB Hartford Life **** 22.30% Putnam VT High Yield Fund Class IA Hartford Life **** 99.30% Class IB Allstate * 63.89% Class IB American Express *** 13.71% Class IB Hartford Life **** 22.40% Putnam VT Income Fund Class IA Hartford Life **** 98.79% Class IB Allstate * 78.62% Class IB Hartford Life **** 21.38% Putnam VT International Growth and Income Fund Class IA Hartford Life **** 100.00% Class IB Allstate * 68.84% Class IB American General ** 14.38% Class IB Hartford Life **** 16.68% Putnam VT International Growth Fund Class IA Hartford Life **** 96.61% Class IB Allstate * 72.98% Class IB Hartford Life **** 26.29% Putnam VT International New Opportunities Class IA Hartford Life **** 98.92% Class IB Allstate * 24.50% Class IB American Express *** 70.47% Class IB Hartford Life **** 5.03% Putnam VT Investors Fund Class IA Hartford Life **** 100.00% Class IB Allstate * 86.26% Class IB Hartford Life **** 13.74% Putnam VT Money Market Fund Class IA Hartford Life **** 98.56% Class IB Allstate * 41.16% Class IB Hartford Life **** 51.68% Class IB PFL ***** 7.16% Putnam VT New Opportunities Fund Class IA Hartford Life **** 71.86% Class IA American Express *** 25.95% Class IB Allstate * 82.73% Class IB Hartford Life **** 17.27% Putnam VT New Value Fund Class IA Hartford Life **** 99.66% Class IB Allstate * 74.25% Class IB Hartford Life **** 12.40% Class IB PFL ***** 13.35% Putnam VT OTC & Emerging Growth Fund Class IA Hartford Life **** 100.00% Class IB Allstate * 76.51% Class IB Hartford Life **** 23.49% Putnam VT Research Fund Class IA Hartford Life **** 100.00% Class IB Allstate * 90.50% Class IB Hartford Life **** 9.50% Putnam VT Small Cap Value Fund Class IA Hartford Life **** 100.00% Class IB Allstate * 96.37% Putnam VT Utilities Growth and Income Fund Class IA Hartford Life **** 98.55% Class IB Allstate * 76.69% Class IB Hartford Life **** 23.31% Putnam VT Vista Fund Class IA Hartford Life **** 98.46% Class IB Allstate * 32.92% Class IB American Express *** 56.32% Class IB Hartford Life **** 8.72% Putnam VT Voyager Fund Class IA Hartford Life **** 96.66% Class IB Allstate * 76.56% Class IB Hartford Life **** 14.16% Class IB Principal ****** 5.32% The addresses for the shareholders listed above are: * Allstate Life Insurance Co., 3100 Sanders Rd., Northbrook, IL 60062 ** American General Life Insurance Company, 2727-A Allen Parkway, Houston, TX 77019 *** American Express Financial Advisors, 733 Marquette Avenue, Minneapolis, MN 55041 **** The Hartford, 200 Hopmeadow St., Simsbury, CT 06089. ***** PFL Life Insurance Company, 4333 Edgewood Rd., NE, Cedar Rapids, Iowa 52499 ****** Principal Mutual Life Insurance Co., 711 High St., DesMoines, IA 50392
Each of the insurance companies has agreed to vote its shares in proportion to and in the manner instructed by contract and policy owners. Allstate Life Insurance Co., American General Life Insurance Company, American Express Financial Advisors, The Hartford, PFL Life Insurance Company and Principal Mutual Life Insurance Co., or any of them together, may be deemed to be a controlling person of each of the funds. Distribution fees During fiscal 1999, class IB shares of the funds paid the following 12b-1 fees to Putnam Mutual Funds: Putnam VT Asia Pacific Growth Fund $2,189 Putnam VT Diversified Income Fund $12,794 Putnam VT The George Putnam Fund of Boston $20,058 Putnam VT Global Asset Allocation Fund $4,159 Putnam VT Global Growth Fund $11,075 Putnam VT Growth and Income Fund $80,349 Putnam VT Health Sciences Fund $10,568 Putnam VT High Yield Fund $11,078 Putnam VT Income Fund $11,674 Putnam VT International Growth Fund $13,479 Putnam VT International Growth and Income Fund $5,507 Putnam VT International New Opportunities Fund $6,543 Putnam VT Investors Fund $39,842 Putnam VT Money Market Fund $24,804 Putnam VT New Opportunities Fund $20,470 Putnam VT New Value Fund $5,407 Putnam VT OTC & Emerging Growth Fund $6,159 Putnam VT Research Fund $8,390 Putnam VT Small Cap Value Fund $2,159 Putnam VT Utilities Growth and Income Fund $7,515 Putnam VT Vista Fund $10,196 Putnam VT Voyager Fund $58,792 Investor servicing and custody fees and expenses During fiscal 1999, the Trust incurred $17,875,314 in fees and out-of-pocket expenses for investor servicing and custody services provided by Putnam Fiduciary Trust Company. Each fund incurred the following fees and out-of-pocket expenses for investor servicing and custody services provided by Putnam Fiduciary Trust Company: Putnam VT Asia Pacific Growth Fund $403,073 Putnam VT Diversified Income Fund 543,545 Putnam VT The George Putnam Fund of Boston 264,143 Putnam VT Global Asset Allocation Fund 1,040,466 Putnam VT Global Growth Fund 2,187,283 Putnam VT Growth and Income Fund 3,648,340 Putnam VT Health Sciences Fund 192,602 Putnam VT High Yield Fund 532,663 Putnam VT Income fund 559,422 Putnam VT International Growth Fund 744,184 Putnam VT International Growth and Income 537,344 Putnam VT International New Opportunities Fund 525,684 Putnam VT Investors Fund 359,116 Putnam VT Money Market Fund 410,977 Putnam VT New Opportunities Fund 1,685,136 Putnam VT New Value Fund 210,499 Putnam VT OTC & Emerging Growth Fund 202,513 Putnam VT Research Fund 197,380 Putnam VT Small Cap Value Fund 34,352 Putnam VT Utilities Growth and Income Fund 519,553 Putnam VT Vista Fund 299,617 Putnam VT Voyager Fund 2,777,422 INVESTMENT PERFORMANCE OF THE TRUST Standard Performance Measures (for periods ended December 31, 1999)
CLASS IA SHARES Average Annual Total Return 10 Putnam VT Fund Inception 1 5 years/ Date Yield* year years Life of fund American Government Income Fund 1/31/00 -- -- -- -- Asia Pacific Growth Fund 5/1/95 -- 107.56 -- 14.33 Diversified Income Fund 9/15/93 8.77 1.66 6.89 5.10 The George Putnam Fund of Boston 4/30/98 3.51 -0.36 -- 1.97 Global Asset Allocation Fund 1/14/88 2.14 11.85 16.97 12.26 Global Growth Fund 5/1/90 -- 65.00 27.10 17.21 Growth and Income Fund 1/14/88 1.64 1.59 19.39 14.00 Growth Opportunities Fund 1/31/00 -- -- -- -- Health Sciences Fund 4/30/98 -- -3.93 -- 3.08 High Yield Fund 1/14/88 10.97 5.92 8.76 10.83 Income Fund 1/14/88 7.15 -2.07 7.27 7.56 International Growth Fund 1/2/97 -- 60.21 -- 30.33 International Growth and Income Fund 1/2/97 1.05 24.59 -- 18.37 International New Opportunities Fund 1/2/97 -- 102.96 -- 32.95 Investors Fund 4/30/98 -- 30.13 -- 28.40 Money Market Fund 1/14/88 5.49 4.86 5.16 4.98 New Opportunities Fund 5/2/94 -- 69.35 32.89 30.36 New Value Fund 1/2/97 1.59 0.27 -- 7.83 OTC & Emerging Growth Fund 4/30/98 -- 126.52 -- 64.09 Research Fund 9/30/98 -- 27.58 -- 40.14 Small Cap Value Fund 4/30/99 0.37 -- -- 3.47 Utilities Growth and Income Fund 5/4/92 3.35 -0.66 17.10 12.62 Vista Fund 1/2/97 -- 52.90 -- 31.17 Voyager Fund 1/14/88 -- 58.22 31.66 22.31 * Information shown for all funds except Putnam VT Money Market Fund represents 30-day yield. Information shown for Putnam VT Money Market Fund represents 7-day yield.
CLASS IB SHARES Average annual Total Return 10 Putnam VT Fund Inception 1 5 years/ Date Yield* year years Life of fund American Government Income Fund 1/31/00 -- -- -- -- Asia Pacific Growth Fund 5/1/95 -- 107.08 -- 14.17 Diversified Income Fund 9/15/93 8.61 1.65 6.74 4.95 The George Putnam Fund of Boston 4/30/98 3.36 -0.41 -- 1.94 Global Asset Allocation Fund 1/14/88 2.00 11.76 16.84 12.12 Global Growth Fund 5/1/90 -- 64.56 26.90 17.04 Growth and Income Fund 1/14/88 1.49 1.47 19.23 13.83 Growth Opportunities Fund 1/31/00 -- -- -- -- Health Sciences Fund 4/30/98 -- -3.90 -- 3.04 High Yield Fund 1/14/88 10.83 5.81 8.63 10.69 Income Fund 1/14/88 7.00 -2.16 7.15 7.41 International Growth Fund 1/2/97 -- 60.10 -- 30.16 International Growth and Income Fund 1/2/97 0.91 24.35 -- 18.21 International New Opportunities Fund 1/2/97 -- 102.80 -- 32.79 Investors Fund 4/30/98 -- 29.98 -- 28.23 Money Market Fund 1/14/88 5.22 4.66 5.11 4.85 New Opportunities Fund 5/2/94 -- 69.10 32.69 30.17 New Value Fund 1/2/97 1.44 0.26 -- 7.72 OTC & Emerging Growth Fund 4/30/98 -- 126.45 -- 63.94 Research Fund 9/30/98 -- 27.69 -- 39.93 Small Cap Value Fund 4/30/99 0.23 -- -- 3.37 Utilities Growth and Income Fund 5/4/92 3.18 -0.79 16.97 12.46 Vista Fund 1/2/97 -- 52.59 -- 31.02 Voyager Fund 1/14/88 -- 58.01 31.47 22.14 * Information shown for all funds except Putnam VT Money Market Fund represents 30-day yield. Information shown for Putnam VT Money Market Fund represents 7-day yield.
The foregoing performance information reflects an expense limitation applicable to Putnam VT Utilities Growth and Income Fund for fiscal 1992, Putnam VT New Opportunities Fund for fiscal 1994, Putnam VT Asia Pacific Growth Fund for fiscal 1995, and Putnam VT International Growth Fund, Putnam VT International Growth and Income Fund, Putnam VT International New Opportunities Fund, Putnam New Value Fund and Putnam VT Vista Fund for fiscal 1997 , Putnam VT The George Putnam Fund of Boston through July, 1999 and Putnam VT Health Sciences Fund, Putnam VT Investors Fund, Putnam VT OTC & Emerging Growth Fund and Putnam VT Research Fund for fiscal 1998 and 1999. In the absence of the expense limitation applicable to these funds for such periods, total return (and yield, in the case of Putnam VT The George Putnam Fund of Boston) shown would have been lower. The per share amount of the applicable expense limitation is set forth in the section of the prospectus entitled "Financial highlights." Performance information presented for the funds should not be compared directly with performance information of other insurance products without taking into account insurance-related charges and expenses payable under their variable annuity contracts. These charges and expenses are not reflected in the funds' performance and would reduce an investor's return under the annuity contract. See "Standard performance measures" in Part II of this SAI for information on how performance is calculated. ADDITIONAL OFFICERS In addition to the persons listed as officers of the Trust in Part II of this SAI, each of the following persons is also a Vice President of the Trust and certain of the other Putnam funds, the total of which is noted parenthetically. Officers of Putnam Management hold the same offices in Putnam Management's parent company, Putnam Investments, Inc. Robert R. Beck (59) (4 funds), Managing Director of Putnam Management. Edward P. Bousa (41) (5 funds), Senior Vice President of Putnam Management. Joshua L. Byrne (35) (3 funds), Senior Vice President of Putnam Management. David G. Carlson (38) (2 funds), Senior Vice President of Putnam Management. Dana Clark (44) (2 funds), Vice President of Putnam Management. C. Beth Cotner (47) (6 funds), Managing Director of Putnam Management. Prior to September 1995, Ms. Cotner was employed at Kemper Financial Services. Kevin M. Cronin (38) (4 funds), Managing Director of Putnam Management. Prior to February 1997, Mr. Cronin was employed at MFS Investment Management. Steven Dexter (41) (4 funds), Senior Vice President of Putnam Management. Prior to June 1999, Mr. Dexter was employed at Scudder Kemper Inc. Joanne M. Driscoll (29) (2 funds), Vice President of Putnam Management. Richard B. England (41) (4 funds), Senior Vice President of Putnam Management. Roland W. Gillis (50) (6 funds), Managing Director of Putnam Management. Peter J. Hadden (38) (2 funds), Senior Vice President of Putnam Management. Omid Kamshad (37) (7 funds), Managing Director of Putnam Management. Prior to January 1996, Mr. Kamshad was employed at Lomdard Odier International. David L. King (43) (4 funds), Managing Director of Putnam Management. Steven L. Kirson (39) (2 funds), Senior Vice President of Putnam Management. Deborah Kuenstner (41) (14 funds), Managing Director of Putnam Management. Prior to March 1997, Ms. Kuenstner was employed at Dupont Pension Fund Investment. William J. Landes (47) (23 funds), Managing Director of Putnam Management. Kenneth W. Lang (33) (2 funds), Vice President of Putnam Management. Prior to April 1997, Mr. Lang was employed at Montgomery Securities. Jeffrey R. Lindsey (37) (6 funds), Senior Vice President of Putnam Management. Saba S. Malak (34) (2 funds), Senior Vice President of Putnam Management. Prior to October 1997, Mr. Malak was a Consultant/Manager at The Boston Consulting Group. Paul Marrkand (41) (4 funds), Senior Vice President of Putnam Management. Michael Martino (47) (5 funds), Managing Director of Putnam Management. Krishna K. Memani (39) (3 funds), Managing Director of Putnam Management. Prior to September 1998, Mr. Memani was employed at Morgan Stanley & Co. Daniel L. Miller (42) (2 funds), Managing Director of Putnam Management. Jeanne L. Mockard (36) (4 funds), Senior Vice President of Putnam Management. Kelly A. Morgan (37) (2 funds), Senior Vice President of Putnam Management. Prior to December 1996, Ms. Morgan was employed at Alliance Capital Management L.P. Michael J. Mufson (36) (2 funds), Senior Vice President of Putnam Management. Hugh H. Mullin (37) (3 funds), Senior Vice President of Putnam Management. Jeffrey Netols (46) (2 funds), Senior Vice President of Putnam Management. Steven Oristaglio (44) (73 funds), Senior Managing Director of Putnam Management. Prior to July 1998, Mr. Oristaglio was a Managing Director at Swiss Bank Corp. Margery C. Parker (49) (4 funds), Senior Vice President of Putnam Management. Prior to December 1997, Ms. Parker was employed at Keystone Investments. Carmel Peters (48) (6 funds), Senior Vice President of Putnam Management. Prior to May 1997, Ms. Peters was employed at Wheelock Natwest Investment Management, Hong Kong, and prior to February 1996 was employed at Rothschild Asset Management Asia Pacific, Hong Kong. Mark D. Pollard (40) (3 funds), Senior Vice President of Putnam Management. James Prusko (33) (6 funds), Senior Vice President of Putnam Management. David J. Santos (42) (4 funds), Senior Vice President of Putnam Management. Anthony C. Santosus (41) (2 funds), Senior Vice President of Putnam Management. Justin M. Scott (42) (14 funds), Managing Director of Putnam Management. Edward T. Shadek, Jr. (39) (4 funds), Managing Director of Putnam Management. Prior to March 1997, Mr. Shadek was employed at Newbold's Asset Management Co. Sheldon N. Simon (42) (2 funds), Senior Vice President of Putnam Management. Michael P. Stack (41) (4 funds), Senior Vice President of Putnam Management. Prior to November 1997, Mr. Stack was employed at Independence Investment Associates, Inc. George W. Stairs (50) (3 funds), Senior Vice President of Putnam Management. Lisa Svensson (37) (2 funds), Senior Vice President of Putnam Management. Charles H. Swanberg (51) (4 funds), Senior Vice President of Putnam Management. Robert Swift (39) (5 funds), Managing Director of Putnam Management. Prior to August 1995, Mr. Swift was employed at IAI International/Hill Samuel Investments Advisors. Rosemary H. Thomsen (39) (4 funds), Senior Vice President of Putnam Management. David L. Waldman (33) (5 funds), Managing Director of Putnam Management. Prior to June 1997, Mr. Waldman was employed at Lazard Freres and prior to April 1995 was employed at Goldman Sachs. Paul Warren (39) (7 funds), Senior Vice President of Putnam Management. Prior to May 1997, Mr. Warren was employed at IDS Fund Management. Manuel Weiss (51) (5 funds), Senior Vice President of Putnam Management. Eric M. Wetlaufer (37) (2 funds), Managing Director of Putnam Management. Prior to November 1997, Mr. Wetlaufer was employed at Cadence Capital Management. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110, are the Trust's independent accountants, providing audit services, tax return review and other tax consulting services and assistance and consultation in connection with the review of various Securities and Exchange Commission filings. The Report of Independent Accountants, financial highlights and financial statements included in the Trust's Annual Report for the fiscal year ended December 31, 1999, filed electronically on March 6, 2000 (File No. 811-5346), are incorporated by reference into this SAI. The financial highlights included in the prospectuses and incorporated by reference into this SAI have been so included and incorporated in reliance upon the report of the independent accountants, given on their authority as experts in auditing and accounting. TABLE OF CONTENTS MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1 TAXES II-22 MANAGEMENT II-23 DETERMINATION OF NET ASSET VALUE II-31 DISTRIBUTION PLAN II-33 SUSPENSION OF REDEMPTIONS II-33 SHAREHOLDER LIABILITY II-33 STANDARD PERFORMANCE MEASURES II-33 COMPARISON OF PORTFOLIO PERFORMANCE II-34 SECURITIES RATINGS II-39 DEFINITIONS II-44 PUTNAM VARIABLE TRUST STATEMENT OF ADDITIONAL INFORMATION ("SAI") PART II As noted in the prospectus, in addition to the principal investment strategies and the principal risks described in the prospectus, a fund may employ other investment practices and may be subject to other risks, which are described below. Because the following is a combined description of investment strategies of all of the Putnam funds, certain matters described herein may not apply to your fund. Unless a strategy or policy described below is specifically prohibited by the investment restrictions explained in a fund's prospectus or part I of this SAI, or by applicable law, the fund may engage in each of the practices described below. MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS Foreign Investments The fund may invest in securities of foreign issuers. These foreign investments involve certain special risks described below. Foreign securities are normally denominated and traded in foreign currencies. As a result, the value of the fund's foreign investments and the value of its shares may be affected favorably or unfavorably by changes in currency exchange rates relative to the U.S. dollar. There may be less information publicly available about a foreign issuer than about a U.S. issuer, and foreign issuers 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 issuers are less liquid and at times more volatile than securities of comparable U.S. issuers. 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 investments in U.S. markets. In addition, the fund's investments in foreign securities may be subject to the risk of nationalization or expropriation of assets, imposition of currency exchange controls, foreign withholding taxes or restrictions on the repatriation of foreign currency, confiscatory taxation, political or financial instability and diplomatic developments which could affect the value of the fund's investments in certain foreign countries. Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to foreign withholding taxes, and special U.S. tax considerations may apply. 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 organized under the laws of those foreign countries. The risks described above, including the risks of nationalization or expropriation of assets, are typically increased in connection with investments in "emerging markets." For example, political and economic structures in these countries may be in their infancy and developing rapidly, and such countries may lack the social, political and economic stability characteristic of more developed countries. Certain of these countries have in the past failed to recognize private property rights and have at times nationalized and expropriated the assets of private companies. High rates of inflation or currency devaluations may adversely affect the economies and securities markets of such countries. Investments in emerging markets may be considered speculative. The currencies of certain emerging market countries have experienced a steady devaluation relative to the U.S. dollar, and continued devaluations may adversely affect the value of a fund's assets denominated in such currencies. Many emerging market companies have experienced substantial, and in some periods extremely high, rates of inflation or deflation for many years, and continued inflation may adversely affect the economies and securities markets of such countries. In addition, unanticipated political or social developments may affect the value of the fund's investments in emerging markets and the availability to the fund of additional investments in these markets. The small size, limited trading volume and relative inexperience of the securities markets in these countries may make the fund's investments in securities traded in emerging markets illiquid and more volatile than investments in securities traded in more developed countries, and the fund may be required to establish special custodial or other arrangements before making investments in securities traded in emerging markets. There may be little financial or accounting information available with respect to issuers of emerging market securities, and it may be difficult as a result to assess the value of prospects of an investment in such securities. Certain of the foregoing risks may also apply to some extent to securities of U.S. issuers that are denominated in foreign currencies or that are traded in foreign markets, or securities of U.S. issuers having significant foreign operations. Foreign Currency Transactions The fund may engage without limit in currency exchange transactions, including purchasing and selling foreign currency, foreign currency options, foreign currency forward contracts and foreign currency futures contracts and related options, to manage its exposure to foreign currencies. In addition, the fund may write covered call and put options on foreign currencies for the purpose of increasing its current return. Generally, the fund may engage in both "transaction hedging" and "position hedging." The fund may also engage in foreign currency transactions for non-hedging purposes, subject to applicable law. When it engages in transaction hedging, the fund enters into foreign currency transactions with respect to specific receivables or payables, generally arising in connection with the purchase or sale of portfolio securities. The fund will engage in transaction hedging when it desires to "lock in" the U.S. dollar price of a security it has agreed to purchase or sell, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. By transaction hedging the fund will attempt to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is earned, and the date on which such payments are made or received. The fund may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency. If conditions warrant, for transaction hedging purposes the fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and purchase and sell foreign currency futures contracts. A foreign currency forward contract is a negotiated agreement to exchange currency at a future time at a rate or rates that may be higher or lower than the spot rate. Foreign currency futures contracts are standardized exchange-traded contracts and have margin requirements. In addition, for transaction hedging purposes the fund may also purchase or sell exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies. The fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and purchase and sell foreign currency futures contracts. For transaction hedging purposes the fund may also purchase exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives the fund the right to assume a short position in the futures contract until the expiration of the option. A put option on a currency gives the fund the right to sell the currency at an exercise price until the expiration of the option. A call option on a futures contract gives the fund the right to assume a long position in the futures contract until the expiration of the option. A call option on a currency gives the fund the right to purchase the currency at the exercise price until the expiration of the option. The fund may engage in position hedging to protect against a decline in the value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of the currency in which the securities the fund intends to buy are denominated, when the fund holds cash or short-term investments). For position hedging purposes, the fund may purchase or sell, on exchanges or in over-the-counter markets, foreign currency futures contracts, foreign currency forward contracts and options on foreign currency futures contracts and on foreign currencies. In connection with position hedging, the fund may also purchase or sell foreign currency on a spot basis. It is impossible to forecast with precision the market value of portfolio securities at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary for the fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency the fund is obligated to deliver and a decision is made to sell the security or securities and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities if the market value of such security or securities exceeds the amount of foreign currency the fund is obligated to deliver. Transaction and position hedging do not eliminate fluctuations in the underlying prices of the securities which the fund owns or intends to purchase or sell. They simply establish a rate of exchange which one can achieve at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they tend to limit any potential gain which might result from the increase in value of such currency. See "Risk factors in options transactions." The fund may seek to increase its current return or to offset some of the costs of hedging against fluctuations in current exchange rates by writing covered call options and covered put options on foreign currencies. The fund receives a premium from writing a call or put option, which increases the fund's current return if the option expires unexercised or is closed out at a net profit. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The fund's currency hedging transactions may call for the delivery of one foreign currency in exchange for another foreign currency and may at times not involve currencies in which its portfolio securities are then denominated. Putnam Management will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the fund. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge. The fund may also engage in non-hedging currency transactions. For example, Putnam Management may believe that exposure to a currency is in the fund's best interest but that securities denominated in that currency are unattractive. In that case the fund may purchase a currency forward contract or option in order to increase its exposure to the currency. In accordance with SEC regulations, the fund will segregate liquid assets in its portfolio to cover forward contracts used for non-hedging purposes. The value of any currency, including U.S. dollars and foreign currencies, may be affected by complex political and economic factors applicable to the issuing country. In addition, the exchange rates of foreign currencies (and therefore the values of foreign currency options, forward contracts and futures contracts) may be affected significantly, fixed, or supported directly or indirectly by U.S. and foreign government actions. Government intervention may increase risks involved in purchasing or selling foreign currency options, forward contracts and futures contracts, since exchange rates may not be free to fluctuate in response to other market forces. The value of a foreign currency option, forward contract or futures contract reflects the value of an exchange rate, which in turn reflects relative values of two currencies, the U.S. dollar and the foreign currency in question. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be involved in the exercise of foreign currency options, forward contracts and futures contracts, investors may be disadvantaged by having to deal in an odd-lot market for the underlying foreign currencies in connection with options at prices that are less favorable than for round lots. Foreign governmental restrictions or taxes could result in adverse changes in the cost of acquiring or disposing of foreign currencies. There is no systematic reporting of last sale information for foreign currencies and there is no regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Available quotation information is generally representative of very large round-lot transactions in the interbank market and thus may not reflect exchange rates for smaller odd-lot transactions (less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that options markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that cannot be reflected in the options markets. The decision as to whether and to what extent the fund will engage in foreign currency exchange transactions will depend on a number of factors, including prevailing market conditions, the composition of the fund's portfolio and the availability of suitable transactions. Accordingly, there can be no assurance that the fund will engage in foreign currency exchange transactions at any given time or from time to time. Currency forward and futures contracts. A forward foreign currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract as agreed by the parties, at a price set at the time of the contract. In the case of a cancelable forward contract, the holder has the unilateral right to cancel the contract at maturity by paying a specified fee. The contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. A foreign currency futures contract is a standardized contract for the future delivery of a specified amount of a foreign currency at a price set at the time of the contract. Foreign currency futures contracts traded in the United States are designed by and traded on exchanges regulated by the CFTC, such as the New York Mercantile Exchange. Forward foreign currency exchange contracts differ from foreign currency futures contracts in certain respects. For example, the maturity date of a forward contract may be any fixed number of days from the date of the contract agreed upon by the parties, rather than a predetermined date in a given month. Forward contracts may be in any amount agreed upon by the parties rather than predetermined amounts. Also, forward foreign exchange contracts are traded directly between currency traders so that no intermediary is required. A forward contract generally requires no margin or other deposit. At the maturity of a forward or futures contract, the fund either may accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract. Closing transactions with respect to futures contracts are effected on a commodities exchange; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts. Positions in the foreign currency futures contracts may be closed out only on an exchange or board of trade which provides a secondary market in such contracts. Although the fund intends to purchase or sell foreign currency futures contracts only on exchanges or boards of trade where there appears to be an active secondary market, there is no assurance that a secondary market on an exchange or board of trade will exist for any particular contract or at any particular time. In such event, it may not be possible to close a futures position and, in the event of adverse price movements, the fund would continue to be required to make daily cash payments of variation margin. Foreign currency options. In general, options on foreign currencies operate similarly to options on securities and are subject to many of the risks described above. Foreign currency options are traded primarily in the over-the-counter market, although options on foreign currencies are also listed on several exchanges. Options are traded not only on the currencies of individual nations, but also on the euro, the joint currency of most countries in the European Union. The fund will only purchase or write foreign currency options when Putnam Management believes that a liquid secondary market exists for such options. There can be no assurance that a liquid secondary market will exist for a particular option at any specific time. Options on foreign currencies are affected by all of those factors which influence foreign exchange rates and investments generally. Settlement procedures. Settlement procedures relating to the fund's investments in foreign securities and to the fund's foreign currency exchange transactions may be more complex than settlements with respect to investments in debt or equity securities of U.S. issuers, and may involve certain risks not present in the fund's domestic investments. For example, settlement of transactions involving foreign securities or foreign currencies may occur within a foreign country, and the fund may be required to accept or make delivery of the underlying securities or currency in conformity with any applicable U.S. or foreign restrictions or regulations, and may be required to pay any fees, taxes or charges associated with such delivery. Such investments may also involve the risk that an entity involved in the settlement may not meet its obligations. Foreign currency conversion. Although foreign exchange dealers do not charge a fee for currency conversion, they do realize a profit based on the difference (the "spread") between prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the fund at one rate, while offering a lesser rate of exchange should the fund desire to resell that currency to the dealer. Options on Securities Writing covered options. The fund may write covered call options and covered put options on optionable securities held in its portfolio, when in the opinion of Putnam Management such transactions are consistent with the fund's investment objective(s) and policies. Call options written by the fund give the purchaser the right to buy the underlying securities from the fund at a stated exercise price; put options give the purchaser the right to sell the underlying securities to the fund at a stated price. The fund may write only covered options, which means that, so long as the fund is obligated as the writer of a call option, it will own the underlying securities subject to the option (or comparable securities satisfying the cover requirements of securities exchanges). In the case of put options, the fund will hold cash and/or high-grade short-term debt obligations equal to the price to be paid if the option is exercised. In addition, the fund will be considered to have covered a put or call option if and to the extent that it holds an option that offsets some or all of the risk of the option it has written. The fund may write combinations of covered puts and calls on the same underlying security. The fund will receive a premium from writing a put or call option, which increases the fund's return on the underlying security in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, the fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. By writing a put option, the fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. The fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. If the fund writes a call option but does not own the underlying security, and when it writes a put option, the fund may be required to deposit cash or securities with its broker as "margin," or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations. Purchasing put options. The fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. Purchasing call options. The fund may purchase call options to hedge against an increase in the price of securities that the fund wants ultimately to buy. Such hedge protection is provided during the life of the call option since the fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. Risk Factors in Options Transactions The successful use of the fund's options strategies depends on the ability of Putnam Management to forecast correctly interest rate and market movements. For example, if the fund were to write a call option based on Putnam Management's expectation that the price of the underlying security would fall, but the price were to rise instead, the fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the fund were to write a put option based on Putnam Management's expectation that the price of the underlying security would rise, but the price were to fall instead, the fund could be required to purchase the security upon exercise at a price higher than the current market price. When the fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the fund will lose part or all of its investment in the option. This contrasts with an investment by the fund in the underlying security, since the fund will not realize a loss if the security's price does not change. The effective use of options also depends on the fund's ability to terminate option positions at times when Putnam Management deems it desirable to do so. There is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events -- such as volume in excess of trading or clearing capability -- were to interrupt its normal operations. A market may at times find it necessary to impose restrictions on particular types of options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the fund, as option writer, would remain obligated under the option until expiration or exercise. Disruptions in the markets for the securities underlying options purchased or sold by the fund could result in losses on the options. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options. The fund, as holder of such a put option, could lose its entire investment if the prohibition remained in effect until the put option's expiration. Foreign-traded options are subject to many of the same risks presented by internationally-traded securities. In addition, because of time differences between the United States and various foreign countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States. Over-the-counter ("OTC") options purchased by the fund and assets held to cover OTC options written by the fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the fund's ability to invest in illiquid securities. Investments in Miscellaneous Fixed-Income Securities If the fund may invest in inverse floating obligations, premium securities, or interest-only or principal-only classes of mortgage-backed securities (IOs and POs), it may do so without limit. The fund, however, currently does not intend to invest more than 15% of its assets in inverse floating obligations or more than 35% of its assets in IOs and POs under normal market conditions. Lower-rated Securities The fund may invest in lower-rated fixed-income securities (commonly known as "junk bonds"). The lower ratings of certain securities held by the fund reflect a greater possibility that adverse changes in the financial condition of the issuer or in general economic conditions, or both, or an unanticipated rise in interest rates, may impair the ability of the issuer to make payments of interest and principal. The inability (or perceived inability) of issuers to make timely payment of interest and principal would likely make the values of securities held by the fund more volatile and could limit the fund's ability to sell its securities at prices approximating the values the fund had placed on such securities. In the absence of a liquid trading market for securities held by it, the fund at times may be unable to establish the fair value of such securities. Securities ratings are based largely on the issuer's historical financial condition and the rating agencies' analysis at the time of rating. Consequently, the rating assigned to any particular security is not necessarily a reflection of the issuer's current financial condition, which may be better or worse than the rating would indicate. In addition, the rating assigned to a security by Moody's Investors Service, Inc. or Standard & Poor's (or by any other nationally recognized securities rating agency) does not reflect an assessment of the volatility of the security's market value or the liquidity of an investment in the security. See "Securities ratings." Like those of other fixed-income securities, the values of lower-rated securities fluctuate in response to changes in interest rates. A decrease in interest rates will generally result in an increase in the value of the fund's assets. Conversely, during periods of rising interest rates, the value of the fund's assets will generally decline. The values of lower-rated securities may often be affected to a greater extent by changes in general economic conditions and business conditions affecting the issuers of such securities and their industries. Negative publicity or investor perceptions may also adversely affect the values of lower-rated securities. Changes by nationally recognized securities rating agencies in their ratings of any fixed-income security and changes in the ability of an issuer to make payments of interest and principal may also affect the value of these investments. Changes in the value of portfolio securities generally will not affect income derived from these securities, but will affect the fund's net asset value. The fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Putnam Management will monitor the investment to determine whether its retention will assist in meeting the fund's investment objective(s). Issuers of lower-rated securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. Such issuers may not have more traditional methods of financing available to them and may be unable to repay outstanding obligations at maturity by refinancing. The risk of loss due to default in payment of interest or repayment of principal by such issuers is significantly greater because such securities frequently are unsecured and subordinated to the prior payment of senior indebtedness. At times, a substantial portion of the fund's assets may be invested in securities of which the fund, by itself or together with other funds and accounts managed by Putnam Management or its affiliates, holds all or a major portion. Although Putnam Management generally considers such securities to be liquid because of the availability of an institutional market for such securities, it is possible that, under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell these securities when Putnam Management believes it advisable to do so or may be able to sell the securities only at prices lower than if they were more widely held. Under these circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value. In order to enforce its rights in the event of a default of such securities, the fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on such securities. This could increase the fund's operating expenses and adversely affect the fund's net asset value. In the case of tax-exempt funds, any income derived from the fund's ownership or operation of such assets would not be tax-exempt. The ability of a holder of a tax-exempt security to enforce the terms of that security in a bankruptcy proceeding may be more limited than would be the case with respect to securities of private issuers. In addition, the fund's intention to qualify as a "regulated investment company" under the Internal Revenue Code may limit the extent to which the fund may exercise its rights by taking possession of such assets. Certain securities held by the fund may permit the issuer at its option to "call," or redeem, its securities. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. The fund may invest without limit in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in-kind bonds do not pay current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. The fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders even though such bonds do not pay current interest in cash. Thus, it may be necessary at times for the fund to liquidate investments in order to satisfy its dividend requirements. To the extent the fund invests in securities in the lower rating categories, the achievement of the fund's goals is more dependent on Putnam Management's investment analysis than would be the case if the fund were investing in securities in the higher rating categories. This may be particularly true with respect to tax-exempt securities, as the amount of information about the financial condition of an issuer of tax-exempt securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. Loan Participations The fund may invest in "loan participations." By purchasing a loan participation, the fund acquires some or all of the interest of a bank or other lending institution in a loan to a particular borrower. Many such loans are secured, and most impose restrictive covenants which must be met by the borrower. The loans in which the fund may invest are typically made by a syndicate of banks, represented by an agent bank which has negotiated and structured the loan and which is responsible generally for collecting interest, principal, and other amounts from the borrower on its own behalf and on behalf of the other lending institutions in the syndicate and for enforcing its and their other rights against the borrower. Each of the lending institutions, including the agent bank, lends to the borrower a portion of the total amount of the loan, and retains the corresponding interest in the loan. The fund's ability to receive payments of principal and interest and other amounts in connection with loan participations held by it will depend primarily on the financial condition of the borrower. The failure by the fund to receive scheduled interest or principal payments on a loan participation would adversely affect the income of the fund and would likely reduce the value of its assets, which would be reflected in a reduction in the fund's net asset value. Banks and other lending institutions generally perform a credit analysis of the borrower before originating a loan or participating in a lending syndicate. In selecting the loan participations in which the fund will invest, however, Putnam Management will not rely solely on that credit analysis, but will perform its own investment analysis of the borrowers. Putnam Management's analysis may include consideration of the borrower's financial strength and managerial experience, debt coverage, additional borrowing requirements or debt maturity schedules, changing financial conditions, and responsiveness to changes in business conditions and interest rates. Because loan participations in which the fund may invest are not generally rated by independent credit rating agencies, a decision by the fund to invest in a particular loan participation will depend almost exclusively on Putnam Management's, and the original lending institution's, credit analysis of the borrower. Loan participations may be structured in different forms, including novations, assignments, and participating interests. In a novation, the fund assumes all of the rights of a lending institution in a loan, including the right to receive payments of principal and interest and other amounts directly from the borrower and to enforce its rights as a lender directly against the borrower. The fund assumes the position of a co-lender with other syndicate members. As an alternative, the fund may purchase an assignment of a portion of a lender's interest in a loan. In this case, the fund may be required generally to rely upon the assigning bank to demand payment and enforce its rights against the borrower, but would otherwise be entitled to all of such bank's rights in the loan. The fund may also purchase a participating interest in a portion of the rights of a lending institution in a loan. In such case, it will be entitled to receive payments of principal, interest, and premium, if any, but will not generally be entitled to enforce its rights directly against the agent bank or the borrower, but must rely for that purpose on the lending institution. The fund may also acquire a loan participation directly by acting as a member of the original lending syndicate. The fund will in many cases be required to rely upon the lending institution from which it purchases the loan participation to collect and pass on to the fund such payments and to enforce the fund's rights under the loan. As a result, an insolvency, bankruptcy, or reorganization of the lending institution may delay or prevent the fund from receiving principal, interest, and other amounts with respect to the underlying loan. When the fund is required to rely upon a lending institution to pay to the fund principal, interest, and other amounts received by it, Putnam Management will also evaluate the creditworthiness of the lending institution. The borrower of a loan in which the fund holds a participation interest may, either at its own election or pursuant to terms of the loan documentation, prepay amounts of the loan from time to time. There is no assurance that the fund will be able to reinvest the proceeds of any loan prepayment at the same interest rate or on the same terms as those of the original loan participation. Corporate loans in which the fund may purchase a loan participation are made generally to finance internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs, and other corporate activities. Under current market conditions, most of the corporate loan participations purchased by the fund will represent interests in loans made to finance highly leveraged corporate acquisitions, known as "leveraged buy-out" transactions. The highly leveraged capital structure of the borrowers in such transactions may make such loans especially vulnerable to adverse changes in economic or market conditions. In addition, loan participations generally are subject to restrictions on transfer, and only limited opportunities may exist to sell such participations in secondary markets. As a result, the fund may be unable to sell loan participations at a time when it may otherwise be desirable to do so or may be able to sell them only at a price that is less than their fair market value. Certain of the loan participations acquired by the fund may involve revolving credit facilities under which a borrower may from time to time borrow and repay amounts up to the maximum amount of the facility. In such cases, the fund would have an obligation to advance its portion of such additional borrowings upon the terms specified in the loan participation. To the extent that the fund is committed to make additional loans under such a participation, it will at all times hold and maintain in a segregated account liquid assets in an amount sufficient to meet such commitments. Certain of the loan participations acquired by the fund may also involve loans made in foreign currencies. The fund's investment in such participations would involve the risks of currency fluctuations described above with respect to investments in the foreign securities. Floating Rate and Variable Rate Demand Notes Certain funds may purchase floating rate and variable rate demand notes and bonds. These securities may have a stated maturity in excess of one year, but permit a holder to demand payment of principal plus accrued interest upon a specified number of days notice. Frequently, such obligations are secured by letters of credit or other credit support arrangements provided by banks. The issuer has a corresponding right, after a given period, to prepay in its discretion the outstanding principal of the obligation plus accrued interest upon a specific number of days notice to the holders. The interest rate of a floating rate instrument may be based on a known lending rate, such as a bank's prime rate, and is reset whenever such rate is adjusted. The interest rate on a variable rate demand note is reset at specified intervals at a market rate. Mortgage Related and Asset-backed Securities The fund may invest in mortgage-backed securities, including collateralized mortgage obligations ("CMOs") and certain stripped mortgage-backed securities. CMOs and other mortgage-backed securities represent a participation in, or are secured by, mortgage loans. The fund may also invest in asset-backed securities. Asset-backed securities are structured like mortgage-backed securities, but instead of mortgage loans or interests in mortgage loans, the underlying assets may include such items as motor vehicle installment sales or installment loan contracts, leases of various types of real and personal property, and receivables from credit card agreements. The ability of an issuer of asset-backed securities to enforce its security interest in the underlying assets may be limited. Mortgage-backed securities have yield and maturity characteristics corresponding to the underlying assets. Unlike traditional debt securities, which may pay a fixed rate of interest until maturity, when the entire principal amount comes due, payments on certain mortgage-backed securities include both interest and a partial repayment of principal. Besides the scheduled repayment of principal, repayments of principal may result from the voluntary prepayment, refinancing, or foreclosure of the underlying mortgage loans. If property owners make unscheduled prepayments of their mortgage loans, these prepayments will result in early payment of the applicable mortgage-related securities. In that event the fund may be unable to invest the proceeds from the early payment of the mortgage-related securities in an investment that provides as high a yield as the mortgage-related securities. Consequently, early payment associated with mortgage-related securities may cause these securities to experience significantly greater price and yield volatility than that experienced by traditional fixed-income securities. The occurrence of mortgage prepayments is affected by factors including the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. During periods of falling interest rates, the rate of mortgage prepayments tends to increase, thereby tending to decrease the life of mortgage-related securities. During periods of rising interest rates, the rate of mortgage prepayments usually decreases, thereby tending to increase the life of mortgage-related securities. If the life of a mortgage-related security is inaccurately predicted, the fund may not be able to realize the rate of return it expected. Mortgage-backed and asset-backed securities are less effective than other types of securities as a means of "locking in" attractive long-term interest rates. One reason is the need to reinvest prepayments of principal; another is the possibility of significant unscheduled prepayments resulting from declines in interest rates. These prepayments would have to be reinvested at lower rates. As a result, these securities may have less potential for capital appreciation during periods of declining interest rates than other securities of comparable maturities, although they may have a similar risk of decline in market value during periods of rising interest rates. Prepayments may also significantly shorten the effective maturities of these securities, especially during periods of declining interest rates. Conversely, during periods of rising interest rates, a reduction in prepayments may increase the effective maturities of these securities, subjecting them to a greater risk of decline in market value in response to rising interest rates than traditional debt securities, and, therefore, potentially increasing the volatility of the fund. Prepayments may cause losses on securities purchased at a premium. At times, some of the mortgage-backed and asset-backed securities in which the fund may invest will have higher than market interest rates and therefore will be purchased at a premium above their par value. Unscheduled prepayments, which are made at par, will cause the fund to experience a loss equal to any unamortized premium. CMOs may be issued by a U.S. government agency or instrumentality or by a private issuer. Although payment of the principal of, and interest on, the underlying collateral securing privately issued CMOs may be guaranteed by the U.S. government or its agencies or instrumentalities, these CMOs represent obligations solely of the private issuer and are not insured or guaranteed by the U.S. government, its agencies or instrumentalities or any other person or entity. Prepayments could cause early retirement of CMOs. CMOs are designed to reduce the risk of prepayment for investors by issuing multiple classes of securities, each having different maturities, interest rates and payment schedules, and with the principal and interest on the underlying mortgages allocated among the several classes in various ways. Payment of interest or principal on some classes or series of CMOs may be subject to contingencies or some classes or series may bear some or all of the risk of default on the underlying mortgages. CMOS of different classes or series are generally retired in sequence as the underlying mortgage loans in the mortgage pool are repaid. If enough mortgages are repaid ahead of schedule, the classes or series of a CMO with the earliest maturities generally will be retired prior to their maturities. Thus, the early retirement of particular classes or series of a CMO held by the fund would have the same effect as the prepayment of mortgages underlying other mortgage-backed securities. Conversely, slower than anticipated prepayments can extend the effective maturities of CMOs, subjecting them to a greater risk of decline in market value in response to rising interest rates than traditional debt securities, and, therefore, potentially increasing the volatility of the fund. Prepayments could result in losses on stripped mortgage-backed securities. Stripped mortgage-backed securities are usually structured with two classes that receive different portions of the interest and principal distributions on a pool of mortgage loans. The fund may invest in both the interest-only or "IO" class and the principal-only or "PO" class. The yield to maturity on an IO class of stripped mortgage-backed securities is extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the underlying assets. A rapid rate of principal prepayments may have a measurable adverse effect on the fund's yield to maturity to the extent it invests in IOs. If the assets underlying the IO experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, POs tend to increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The secondary market for stripped mortgage-backed securities may be more volatile and less liquid than that for other mortgage-backed securities, potentially limiting the fund's ability to buy or sell those securities at any particular time. Structured notes A fund may be able to invest in so-called structured notes. These securities are generally derivative instruments whose value is tied to an underlying index or other security or asset class. Such structured notes may include, for example, notes that allow a fund to invest indirectly in certain foreign investments which the fund would otherwise would not be able to directly invest often because of restrictions imposed by local laws. Convertible Securities Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into or exchanged for, at a specific price or formula within a particular period of time, a prescribed amount of common stock or other equity securities of the same or a different issuer. Convertible securities entitle the holder to receive interest paid or accrued on debt or dividends paid or accrued on preferred stock until the security matures or is redeemed, converted or exchanged. The market value of a convertible security is a function of its "investment value" and its "conversion value." A security's "investment value" represents the value of the security without its conversion feature (i.e., a nonconvertible fixed income security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value is dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. A security's "conversion value" is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current price of the underlying security. If the conversion value of a convertible security is significantly below its investment value, the convertible security will trade like nonconvertible debt or preferred stock and its market value will not be influenced greatly by fluctuations in the market price of the underlying security. Conversely, if the conversion value of a convertible security is near or above its investment value, the market value of the convertible security will be more heavily influenced by fluctuations in the market price of the underlying security. The fund's investments in convertible securities may at times include securities that have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities at a specified date and a specified conversion ratio, or that are convertible at the option of the issuer. Because conversion of the security is not at the option of the holder, the fund may be required to convert the security into the underlying common stock even at times when the value of the underlying common stock or other equity security has declined substantially. The fund's investments in convertible securities, particularly securities that are convertible into securities of an issuer other than the issuer of the convertible security, may be illiquid. The fund may not be able to dispose of such securities in a timely fashion or for a fair price, which could result in losses to the fund. Private Placements The fund may invest in securities that are purchased in private placements and, accordingly, are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell such securities when Putnam Management believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. At times, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value. While such private placements may often offer attractive opportunities for investment not otherwise available on the open market, the securities so purchased are often "restricted securities," i.e., securities which cannot be sold to the public without registration under the Securities Act of 1933 or the availability of an exemption from registration (such as Rules 144 or 144A), or which are "not readily marketable" because they are subject to other legal or contractual delays in or restrictions on resale. The absence of a trading market can make it difficult to ascertain a market value for illiquid investments. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the fund to sell them promptly at an acceptable price. The fund may have to bear the extra expense of registering such securities for resale and the risk of substantial delay in effecting such registration. Also market quotations are less readily available. The judgment of Putnam Management may at times play a greater role in valuing these securities than in the case of unrestricted securities. Generally speaking, restricted securities may be sold only to qualified institutional buyers, or in a privately negotiated transaction to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration, or in a public offering for which a registration statement is in effect under the Securities Act of 1933. The funds may be deemed to be an "underwriter" for purposes of the Securities Act of 1933 when selling restricted securities to the public, and in such event the fund may be liable to purchasers of such securities if the registration statement prepared by the issuer, or the prospectus forming a part of it, is materially inaccurate or misleading. Futures Contracts and Related Options Subject to applicable law the fund may invest without limit in futures contracts and related options for hedging and non-hedging purposes, such as to manage the effective duration of the fund's portfolio or as a substitute for direct investment. A financial futures contract sale creates an obligation by the seller to deliver the type of financial instrument called for in the contract in a specified delivery month for a stated price. A financial futures contract purchase creates an obligation by the purchaser to take delivery of the type of financial instrument called for in the contract in a specified delivery month at a stated price. The specific instruments delivered or taken, respectively, at settlement date are not determined until on or near that date. The determination is made in accordance with the rules of the exchange on which the futures contract sale or purchase was made. Futures contracts are traded in the United States only on commodity exchanges or boards of trade -- known as "contract markets" -- approved for such trading by the Commodity Futures Trading Commission (the "CFTC"), and must be executed through a futures commission merchant or brokerage firm which is a member of the relevant contract market. Although futures contracts (other than index futures) by their terms call for actual delivery or acceptance of commodities or securities, in most cases the contracts are closed out before the settlement date without the making or taking of delivery. Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity with the same delivery date. If the price of the initial sale of the futures contract exceeds the price of the offsetting purchase, the seller is paid the difference and realizes a gain. Conversely, if the price of the offsetting purchase exceeds the price of the initial sale, the seller realizes a loss. If the fund is unable to enter into a closing transaction, the amount of the fund's potential loss is unlimited. The closing out of a futures contract purchase is effected by the purchaser's entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the purchaser realizes a gain, and if the purchase price exceeds the offsetting sale price, he realizes a loss. In general, 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the CFTC is treated as short-term gain or loss, and 60% is treated as long-term gain or loss. Unlike when the fund purchases or sells a security, no price is paid or received by the fund upon the purchase or sale of a futures contract. Upon entering into a contract, the fund is required to deposit with its custodian in a segregated account in the name of the futures broker an amount of liquid assets. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds to finance the transactions. Rather, initial margin is similar to a performance bond or good faith deposit which is returned to the fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Futures contracts also involve brokerage costs. Subsequent payments, called "variation margin" or "maintenance margin," to and from the broker (or the custodian) are made on a daily basis as the price of the underlying security or commodity fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as "marking to the market." For example, when the fund has purchased a futures contract on a security and the price of the underlying security has risen, that position will have increased in value and the fund will receive from the broker a variation margin payment based on that increase in value. Conversely, when the fund has purchased a security futures contract and the price of the underlying security has declined, the position would be less valuable and the fund would be required to make a variation margin payment to the broker. The fund may elect to close some or all of its futures positions at any time prior to their expiration in order to reduce or eliminate a hedge position then currently held by the fund. The fund may close its positions by taking opposite positions which will operate to terminate the fund's position in the futures contracts. Final determinations of variation margin are then made, additional cash is required to be paid by or released to the fund, and the fund realizes a loss or a gain. Such closing transactions involve additional commission costs. The fund does not intend to purchase or sell futures or related options for other than hedging purposes, if, as a result, the sum of the initial margin deposits on the fund's existing futures and related options positions and premiums paid for outstanding options on futures contracts would exceed 5% of the fund's net assets. Options on futures contracts. The fund may purchase and write call and put options on futures contracts it may buy or sell and enter into closing transactions with respect to such options to terminate existing positions. In return for the premium paid, options on futures contracts give the purchaser the right to assume a position in a futures contract at the specified option exercise price at any time during the period of the option. The fund may use options on futures contracts in lieu of writing or buying options directly on the underlying securities or purchasing and selling the underlying futures contracts. For example, to hedge against a possible decrease in the value of its portfolio securities, the fund may purchase put options or write call options on futures contracts rather than selling futures contracts. Similarly, the fund may purchase call options or write put options on futures contracts as a substitute for the purchase of futures contracts to hedge against a possible increase in the price of securities which the fund expects to purchase. Such options generally operate in the same manner as options purchased or written directly on the underlying investments. As with options on securities, the holder or writer of an option may terminate his position by selling or purchasing an offsetting option. There is no guarantee that such closing transactions can be effected. The fund will be required to deposit initial margin and maintenance margin with respect to put and call options on futures contracts written by it pursuant to brokers' requirements similar to those described above in connection with the discussion of futures contracts. Risks of transactions in futures contracts and related options. Successful use of futures contracts by the fund is subject to Putnam Management's ability to predict movements in various factors affecting securities markets, including interest rates. Compared to the purchase or sale of futures contracts, the purchase of call or put options on futures contracts involves less potential risk to the fund because the maximum amount at risk is the premium paid for the options (plus transaction costs). However, there may be circumstances when the purchase of a call or put option on a futures contract would result in a loss to the fund when the purchase or sale of a futures contract would not, such as when there is no movement in the prices of the hedged investments. The writing of an option on a futures contract involves risks similar to those risks relating to the sale of futures contracts. The use of options and futures strategies also involves the risk of imperfect correlation among movements in the prices of the securities underlying the futures and options purchased and sold by the fund, of the options and futures contracts themselves, and, in the case of hedging transactions, of the securities which are the subject of a hedge. The successful use of these strategies further depends on the ability of Putnam Management to forecast interest rates and market movements correctly. There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain market clearing facilities inadequate, and thereby result in the institution by exchanges of special procedures which may interfere with the timely execution of customer orders. To reduce or eliminate a position held by the fund, the fund may seek to close out such position. The ability to establish and close out positions will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop or continue to exist for a particular futures contract or option. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain contracts or options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of contracts or options, or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of contracts or options (or a particular class or series of contracts or options), in which event the secondary market on that exchange for such contracts or options (or in the class or series of contracts or options) would cease to exist, although outstanding contracts or options on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. U.S. Treasury security futures contracts and options. U.S. Treasury security futures contracts require the seller to deliver, or the purchaser to take delivery of, the type of U.S. Treasury security called for in the contract at a specified date and price. Options on U.S. Treasury security futures contracts give the purchaser the right in return for the premium paid to assume a position in a U.S. Treasury security futures contract at the specified option exercise price at any time during the period of the option. Successful use of U.S. Treasury security futures contracts by the fund is subject to Putnam Management's ability to predict movements in the direction of interest rates and other factors affecting markets for debt securities. For example, if the fund has sold U.S. Treasury security futures contracts in order to hedge against the possibility of an increase in interest rates which would adversely affect securities held in its portfolio, and the prices of the fund's securities increase instead as a result of a decline in interest rates, the fund will lose part or all of the benefit of the increased value of its securities which it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the fund has insufficient cash, it may have to sell securities to meet daily maintenance margin requirements at a time when it may be disadvantageous to do so. There is also a risk that price movements in U.S. Treasury security futures contracts and related options will not correlate closely with price movements in markets for particular securities. For example, if the fund has hedged against a decline in the values of tax-exempt securities held by it by selling Treasury security futures and the values of Treasury securities subsequently increase while the values of its tax-exempt securities decrease, the fund would incur losses on both the Treasury security futures contracts written by it and the tax-exempt securities held in its portfolio. Index futures contracts. An index futures contract is a contract to buy or sell units of an index at a specified future date at a price agreed upon when the contract is made. Entering into a contract to buy units of an index is commonly referred to as buying or purchasing a contract or holding a long position in the index. Entering into a contract to sell units of an index is commonly referred to as selling a contract or holding a short position. A unit is the current value of the index. The fund may enter into stock index futures contracts, debt index futures contracts, or other index futures contracts appropriate to its objective(s). The fund may also purchase and sell options on index futures contracts. For example, the Standard & Poor's 500 Composite Stock Price Index ("S&P 500") is composed of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The S&P 500 assigns relative weightings to the common stocks included in the Index, and the value fluctuates with changes in the market values of those common stocks. In the case of the S&P 500, contracts are to buy or sell 500 units. Thus, if the value of the S&P 500 were $150, one contract would be worth $75,000 (500 units x $150). The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. For example, if the fund enters into a futures contract to buy 500 units of the S&P 500 at a specified future date at a contract price of $150 and the S&P 500 is at $154 on that future date, the fund will gain $2,000 (500 units x gain of $4). If the fund enters into a futures contract to sell 500 units of the stock index at a specified future date at a contract price of $150 and the S&P 500 is at $152 on that future date, the fund will lose $1,000 (500 units x loss of $2). There are several risks in connection with the use by the fund of index futures. One risk arises because of the imperfect correlation between movements in the prices of the index futures and movements in the prices of securities which are the subject of the hedge. Putnam Management will, however, attempt to reduce this risk by buying or selling, to the extent possible, futures on indices the movements of which will, in its judgment, have a significant correlation with movements in the prices of the securities sought to be hedged. Successful use of index futures by the fund is also subject to Putnam Management's ability to predict movements in the direction of the market. For example, it is possible that, where the fund has sold futures to hedge its portfolio against a decline in the market, the index on which the futures are written may advance and the value of securities held in the fund's portfolio may decline. If this occurred, the fund would lose money on the futures and also experience a decline in value in its portfolio securities. It is also possible that, if the fund has hedged against the possibility of a decline in the market adversely affecting securities held in its portfolio and securities prices increase instead, the fund will lose part or all of the benefit of the increased value of those securities it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements at a time when it is disadvantageous to do so. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the index futures and the portion of the portfolio being hedged, the prices of index futures may not correlate perfectly with movements in the underlying index due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the index and futures markets. Second, margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the securities market does. Increased participation by speculators in the futures market may also cause temporary price distortions. Due to the possibility of price distortions in the futures market and also because of the imperfect correlation between movements in the index and movements in the prices of index futures, even a correct forecast of general market trends by Putnam Management may still not result in a profitable position over a short time period. Options on stock index futures. Options on index futures are similar to options on securities except that options on index futures give the purchaser the right, in return for the premium paid, to assume a position in an index futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account which represents the amount by which the market price of the index futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the index future. If an option is exercised on the last trading day prior to its expiration date, the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing level of the index on which the future is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid. Options on Indices As an alternative to purchasing call and put options on index futures, the fund may purchase and sell call and put options on the underlying indices themselves. Such options would be used in a manner identical to the use of options on index futures. Index Warrants The fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If the fund were not to exercise an index warrant prior to its expiration, then the fund would lose the amount of the purchase price paid by it for the warrant. The fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Although the fund will normally invest only in exchange-listed warrants, index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the fund's ability to exercise the warrants at such time, or in such quantities, as the fund would otherwise wish to do. Short-term Trading In seeking the fund's objective(s), Putnam Management will buy or sell portfolio securities whenever Putnam Management believes it appropriate to do so. In deciding whether to sell a portfolio security, Putnam Management does not consider how long the fund has owned the security. From time to time the fund will buy securities intending to seek short-term trading profits. A change in the securities held by the fund is known as "portfolio turnover" and generally involves some expense to the fund. This expense may include brokerage commissions or dealer markups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. As a result of the fund's investment policies, under certain market conditions the fund's portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly average of the value of portfolio securities -- excluding securities whose maturities at acquisition were one year or less. The fund's portfolio turnover rate is not a limiting factor when Putnam Management considers a change in the fund's portfolio. Securities Loans The fund may make secured loans of its portfolio securities, on either a short-term or long-term basis, amounting to not more than 25% of its total assets, thereby realizing additional income. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. As a matter of policy, securities loans are made to broker-dealers pursuant to agreements requiring that the loans be continuously secured by collateral consisting of cash or short-term debt obligations at least equal at all times to the value of the securities on loan, "marked-to-market" daily. The borrower pays to the fund an amount equal to any dividends or interest received on securities lent. The fund retains all or a portion of the interest received on investment of the cash collateral or receives a fee from the borrower. Although voting rights, or rights to consent, with respect to the loaned securities may pass to the borrower, the fund retains the right to call the loans at any time on reasonable notice, and it will do so to enable the fund to exercise voting rights on any matters materially affecting the investment. The fund may also call such loans in order to sell the securities. Repurchase Agreements The fund, unless it is a money market fund, may enter into repurchase agreements, amounting to not more than 25% of its total assets. Money Market funds may invest without limit in repurchase agreements. A repurchase agreement is a contract under which the fund acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller to repurchase and the fund to resell such security at a fixed time and price (representing the fund's cost plus interest). It is the fund's present intention to enter into repurchase agreements only with commercial banks and registered broker-dealers and only with respect to obligations of the U.S. government or its agencies or instrumentalities. Repurchase agreements may also be viewed as loans made by the fund which are collateralized by the securities subject to repurchase. Putnam Management will monitor such transactions to ensure that the value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including the interest factor. If the seller defaults, the fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate. Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. Restricted Securities The SEC Staff currently takes the view that any delegation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the funds) must be pursuant to written procedures established by the Trustees. It is the present intention of the funds' Trustees that, if the Trustees decide to delegate such determinations to Putnam Management or another person, they would do so pursuant to written procedures, consistent with the Staff's position. Should the Staff modify its position in the future, the Trustees would consider what action would be appropriate in light of the Staff's position at that time. Forward Commitments The fund may enter into contracts to purchase securities for a fixed price at a future date beyond customary settlement time ("forward commitments") if the fund sets aside, on the books and records of its custodian, liquid assets in an amount sufficient to meet the purchase price, or if the fund enters into offsetting contracts for the forward sale of other securities it owns. In the case of to-be-announced ("TBA") purchase commitments, the unit price and the estimated principal amount are established when the fund enters into a contract, with the actual principal amount being within a specified range of the estimate. Forward commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund's other assets. Where such purchases are made through dealers, the fund relies on the dealer to consummate the sale. The dealer's failure to do so may result in the loss to the fund of an advantageous yield or price. Although the fund will generally enter into forward commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so. The fund may realize short-term profits or losses upon the sale of forward commitments. The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as "cover" for the transaction. Unsettled TBA sale commitments are valued at current market value of the underlying securities. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss on the commitment without regard to any unrealized gain or loss on the underlying security. If the fund delivers securities under the commitment, the fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. Swap Agreements The fund may enter into swap agreements and other types of over-the-counter transactions with broker-dealers or other financial institutions. Depending on their structures, swap agreements may increase or decrease a fund's exposure to long-or short-term interest rates (in the United States or abroad), foreign currency values, mortgage securities, corporate borrowing rates, or other factors such as security prices or inflation rates. The value of a fund's swap positions would increase or decrease depending on the changes in value of the underlying rates, currency values, or other indices or measures. A fund's ability to engage in certain swap transactions may be limited by tax considerations. The fund's ability to realize a profit from such transactions will depend on the ability of the financial institutions with which it enters into the transactions to meet their obligations to the fund. Under certain circumstances, suitable transactions may not be available to the fund, or the fund may be unable to close out its position under such transactions at the same time, or at the same price, as if it had purchased comparable publicly traded securities. Derivatives Certain of the instruments in which the fund may invest, such as futures contracts, options and forward contracts, are considered to be "derivatives." Derivatives are financial instruments whose value depends upon, or is derived from, the value of an underlying asset, such as a security or an index. Further information about these instruments and the risks involved in their use is included elsewhere in the prospectus or in this SAI. TAXES Tax requirements for variable annuity and variable life insurance separate accounts. Internal Revenue Service regulations applicable to variable annuity and variable life insurance separate accounts generally require that portfolios that serve as the funding vehicles for such separate accounts meet a diversification requirement. A portfolio will meet this requirement if it invests no more than 55% of the value of its assets in one investment, 70% in two investments, 80% in three investments, and 90% in four investments. Alternatively, a portfolio will be treated as meeting this diversification requirement for any quarter of its taxable year if, as of the close of such quarter, the portfolio meets the diversification requirements applicable to regulated investment companies described below and no more than 55% of the value of its total assets consist of cash and cash items (including receivables), U.S. government securities and securities of other regulated investment companies. Each of the funds intends to comply with these requirements. Please refer to the prospectus of the separate accounts that hold interests in the funds for a discussion of the tax consequences of variable annuity and variable life contracts. Taxation of the fund. Each fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In order to qualify for the special tax treatment accorded regulated investment companies and their shareholders, a fund must, among other things: (a) Derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, and gains from the sale of stock, securities and foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies; (b) distribute with respect to each taxable year at least 90% of the sum of its taxable net investment income, its net tax-exempt income, and the excess, if any, of net short-term capital gains over net long-term capital losses for such year; and (c) diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the market value of the fund's assets is represented by cash and cash items, U.S. government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the fund's total assets and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities (other than those of the U.S. Government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related trades or businesses. If a fund qualifies as a regulated investment company that is accorded special tax treatment, the fund will not be subject to federal income tax on income paid to its shareholders in the form of dividends (including capital gain dividends). If a fund failed to qualify as a regulated investment company accorded special tax treatment in any taxable year, the fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment. If a fund fails to distribute in a calendar year substantially all of its ordinary income for such year and substantially all of its capital gain net income for the one-year period ending October 31 (or later if the fund is permitted so to elect and so elects), plus any retained amount from the prior year, the fund will be subject to a 4% excise tax on the undistributed amounts. A dividend paid to shareholders by the fund in January of a year generally is deemed to have been paid by the fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. Each fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax. Securities issued or purchased at a discount. A fund's investment in securities issued at a discount and certain other obligations will (and investments in securities purchased at a discount may) require the fund to accrue and distribute income not yet received. In order to generate sufficient cash to make the requisite distributions, a fund may be required to sell securities in its portfolio that it otherwise would have continued to hold. Capital loss carryover. Distributions from capital gains are generally made after applying any available capital loss carryovers. The amounts and expiration dates of any capital loss carryovers available to each fund are shown in Note 1 (Federal income taxes) to the financial statements included in Part I of this SAI or incorporated by reference into this SAI. Passive foreign investment companies. Investment by a fund in "passive foreign investment companies" could subject the fund to a U.S. federal income tax or other charge on the proceeds from the sale of its investment in such a company; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a "qualified electing fund." A "passive foreign investment company" is any foreign corporation: (i) 75 percent or more of the income of which for the taxable year is passive income, or (ii) the average percentage of the assets of which (generally by value, but by adjusted tax basis in certain cases) that produce or are held for the production of passive income is at least 50 percent. Generally, passive income for this purpose means dividends, interest (including income equivalent to interest), royalties, rents, annuities, the excess of gains over losses from certain property transactions and commodities transactions, and foreign currency gains. Passive income for this purpose does not include rents and royalties received by the foreign corporation from active business and certain income received from related persons. MANAGEMENT Trustees Name (Age) *+George Putnam (73), Chairman and President. Chairman and Director of Putnam Management and Putnam Mutual Funds. Director, Freeport Copper and Gold, Inc. (a mining and natural resource company), Houghton Mifflin Company (a major publishing company) and Marsh & McLennan Companies, Inc. John A. Hill (58), Vice Chairman. Chairman and Managing Director, First Reserve Corporation (a registered investment adviser investing in companies in the world-wide energy industry on behalf of institutional investors). Director of Snyder Oil Corporation, TransMontaigne Oil Company and various private companies owned by First Reserve Corporation, such as James River Coal and Anker Coal Corporation. +William F. Pounds (71), Vice Chairman. Professor Emeritus of Management, Alfred P. Sloan School of Management, Massachusetts Institute of Technology. Director of IDEXX Laboratories, Inc. (a provider of diagnostic products and services for the animal health and food and environmental industries), Management Sciences for Health, Inc. (a non-profit organization), and Sun Company, Inc. (a petroleum refining and marketing company). Jameson A. Baxter (56), Trustee. President, Baxter Associates, Inc. (a management consulting and private investments firm). Director of MB Financial, Inc., ASHTA Chemicals, Inc., Banta Corporation (printing and digital imaging), and Ryerson Tull, Inc. (America's largest steel service corporation). Chairman Emeritus of the Board of Trustees, Mount Holyoke College. +Hans H. Estin (71), Trustee. Chartered Financial Analyst and Vice Chairman, North American Management Corp. (a registered investment adviser). Ronald J. Jackson (56), Trustee. Former Chairman, President and Chief Executive Officer of Fisher-Price, Inc. (a major toy manufacturer). *Paul L. Joskow (52), Trustee. Professor of Economics and Management and Director of the Center for Energy and Environmental Policy Research, Massachusetts Institute of Technology. Director, New England Electric System (a public utility holding company), State Farm Indemnity Company (an automobile insurance company) and the Whitehead Institute for Biomedical Research (a non-profit research institution). Elizabeth T. Kennan (62), Trustee. President Emeritus and Professor, Mount Holyoke College. Director, Bell Atlantic (a telecommunications company), the Kentucky Home Life Insurance Companies, Bell Atlantic, Northeast Utilities and Talbots (a distributor of women's apparel). *Lawrence J. Lasser (57), Trustee and Vice President. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Investment Management, Inc. Director of Marsh & McLennan Companies, Inc. and the United Way of Massachusetts Bay. John H. Mullin, III (58), Trustee. Chairman and CEO of Ridgeway Farm, Director of ACX Technologies, Inc. (a company engaged in the manufacture of industrial ceramics and packaging products), Alex. Brown Realty, Inc. and The Liberty Corporation (a company engaged in the life insurance and broadcasting industries) and Carolina Power & Light (a utility company). +Robert E. Patterson (54), Trustee. President and Trustee of Cabot Industrial Trust (a publicly traded real estate investment trust). Director of Brandywine Trust Company. *George Putnam III (48), Trustee. President, New Generation Research, Inc. (a publisher of financial advisory and other research services relating to bankrupt and distressed companies) and New Generation Advisers, Inc. (a registered investment adviser). Director of The Boston Family Office, L.L.C. (a registered investment advisor). *A.J.C. Smith (65), Trustee. Chairman and Chief Executive Officer, Marsh & McLennan Companies, Inc. Director, Trident Partnership (a $667 million 10-year limited partnership with over 30 institutional investors). W. Thomas Stephens (57), Trustee. President and Chief Executive Officer of MacMillan Bloedel Ltd. (a major forest products company). Director, Qwest Communications (a fiber optics manufacturer) and New Century Energies (a public utility company). W. Nicholas Thorndike (66), Trustee. Director of various corporations and charitable organizations, including Courier Corporation (a book manufacturer), Data General Corporation (a provider of customized computer solutions), Bradley Real Estate, Inc., and Providence Journal Co. Officers Name (Age) Charles E. Porter (61), Executive Vice President. Managing Director of Putnam Investments, Inc. and Putnam Management. Patricia C. Flaherty (53), Vice President. Senior Vice President of Putnam Investments, Inc. and Putnam Management. Gordon H. Silver (52), Vice President. Director and Senior Managing Director of Putnam Investments, Inc. and Putnam Management. Brett C. Browchuk (37), Vice President. Managing Director of Putnam Management. Ian C. Ferguson (42), Vice President. Senior Managing Director of Putnam Investments, Inc. and Putnam Management. Richard A. Monaghan (45), Vice President. Managing Director of Putnam Investments, Inc., Putnam Management and Putnam Mutual Funds. Richard G. Leibovitch (36), Vice President. Managing Director of Putnam Management. Prior to February 1999, Mr. Leibovitch was a Managing Director at J.P. Morgan. John R. Verani (60), Vice President. Senior Vice President of Putnam Investments, Inc. and Putnam Management. John D. Hughes (65), Senior Vice President and Treasurer. *Trustees who are or may be deemed to be "interested persons" (as defined in the Investment Company Act of 1940) of the fund, Putnam Management or Putnam Mutual Funds. Messrs. Putnam, Lasser and Smith are deemed "interested persons" by virtue of their positions as officers or shareholders of the fund, or directors of Putnam Management, Putnam Mutual Funds, or Marsh & McLennan Companies, Inc., the parent company of Putnam Management and Putnam Mutual Funds. Mr. George Putnam, III, Mr. Putnam's son, is also an "interested person" of the fund, Putnam Management, and Putnam Mutual Funds. Mr. Joskow is not currently an "interested person" of the fund but could be deemed by the Securities and Exchange Commission to be an "interested person" on account of his prior consulting relationship with National Economic Research Associates, Inc., a wholly-owned subsidiary of Marsh & McLennan Companies, Inc., which was terminated as of August 31, 1998. The balance of the Trustees are not "interested persons." +Members of the Executive Committee of the Trustees. The Executive Committee meets between regular meetings of the Trustees as may be required to review investment matters and other affairs of the fund and may exercise all of the powers of the Trustees. - ----------------- Certain other officers of Putnam Management are officers of the fund. See "Additional officers" in Part I of this SAI. The mailing address of each of the officers and Trustees is One Post Office Square, Boston, Massachusetts 02109. Except as stated below, the principal occupations of the officers and Trustees for the last five years have been with the employers as shown above, although in some cases they have held different positions with such employers. Prior to September 1998, Mr. Joskow was a consultant to National Economic Research Associates. Prior to June 1995, Dr. Kennan was President of Mount Holyoke College. Prior to 1996, Mr. Stephens was Chairman of the Board of Directors, President and Chief Executive Officer of Johns Manville Corporation. Prior to April 1996, Mr. Ferguson was CEO at Hong Kong Shanghai Banking Corporation. Prior to February 1998, Mr. Patterson was Executive Vice President and Director of Acquisitions of Cabot Partners Limited Partnership. Prior to November 1998, Mr. Monaghan was Managing Director at Merrill Lynch. Each Trustee of the fund receives an annual fee and an additional fee for each Trustees' meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings and for special services rendered in that connection. All of the Trustees are Trustees of all the Putnam funds and each receives fees for his or her services. For details of Trustees' fees paid by the fund and information concerning retirement guidelines for the Trustees, see "Charges and expenses" in Part I of this SAI. The Agreement and Declaration of Trust of the fund provides that the fund will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the fund, except if it is determined in the manner specified in the Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the fund or that such indemnification would relieve any officer or Trustee of any liability to the fund or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. The fund, at its expense, provides liability insurance for the benefit of its Trustees and officers. Putnam Management and its affiliates Putnam Management is one of America's oldest and largest money management firms. Putnam Management's staff of experienced portfolio managers and research analysts selects securities and constantly supervises the fund's portfolio. By pooling an investor's money with that of other investors, a greater variety of securities can be purchased than would be the case individually; the resulting diversification helps reduce investment risk. Putnam Management has been managing mutual funds since 1937. As of December 31, 1999, the firm serves as the investment manager for the funds in the Putnam Family, with over $289 billion in assets in nearly 12 million shareholder accounts. An affiliate, The Putnam Advisory Company, Inc., manages domestic and foreign institutional accounts and mutual funds, including the accounts of many Fortune 500 companies. Another affiliate, Putnam Fiduciary Trust Company, provides investment advice to institutional clients under its banking and fiduciary powers. At December 31, 1999, Putnam Management and its affiliates managed $391 billion in assets, including nearly $17 billion in tax-exempt securities and over $99 billion in retirement plan assets. Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust Company are subsidiaries of Putnam Investments, Inc., a holding company which in turn is, except for a minority stake owned by employees, 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. Trustees and officers of the fund who are also officers of Putnam Management or its affiliates or who are stockholders of Marsh & McLennan Companies, Inc. will benefit from the advisory fees, sales commissions, distribution fees, custodian fees and transfer agency fees paid or allowed by the fund. The Management Contract Under a Management Contract between the fund and Putnam Management, subject to such policies as the Trustees may determine, Putnam Management, at its expense, furnishes continuously an investment program for the fund and makes investment decisions on behalf of the fund. Subject to the control of the Trustees, Putnam Management also manages, supervises and conducts the other affairs and business of the fund, furnishes office space and equipment, provides bookkeeping and clerical services (including determination of the fund's net asset value, but excluding shareholder accounting services) and places all orders for the purchase and sale of the fund's portfolio securities. Putnam Management may place fund portfolio transactions with broker-dealers which furnish Putnam Management, without cost to it, certain research, statistical and quotation services of value to Putnam Management and its affiliates in advising the fund and other clients. In so doing, Putnam Management may cause the fund to pay greater brokerage commissions than it might otherwise pay. For details of Putnam Management's compensation under the Management Contract, see "Charges and expenses" in Part I of this SAI. Putnam Management's compensation under the Management Contract may be reduced in any year if the fund's expenses exceed the limits on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the fund are qualified for offer or sale. The term "expenses" is defined in the statutes or regulations of such jurisdictions, and generally excludes brokerage commissions, taxes, interest, extraordinary expenses and, if the fund has a distribution plan, payments made under such plan. Under the Management Contract, Putnam Management may reduce its compensation to the extent that the fund's expenses exceed such lower expense limitation as Putnam Management may, by notice to the fund, declare to be effective. The expenses subject to this limitation are exclusive of brokerage commissions, interest, taxes, deferred organizational and extraordinary expenses and, if the fund has a distribution plan, payments required under such plan. For the purpose of determining any such limitation on Putnam Management's compensation, expenses of the fund shall not reflect the application of commissions or cash management credits that may reduce designated fund expenses. The terms of any expense limitation from time to time in effect are described in the prospectus and/or Part I of this SAI. In addition to the fee paid to Putnam Management, the fund reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their assistants who provide certain administrative services for the fund and the other Putnam funds, each of which bears an allocated share of the foregoing costs. The aggregate amount of all such payments and reimbursements is determined annually by the Trustees. The amount of this reimbursement for the fund's most recent fiscal year is included in "Charges and Expenses" in Part I of this SAI. Putnam Management pays all other salaries of officers of the fund. The fund pays all expenses not assumed by Putnam Management including, without limitation, auditing, legal, custodial, investor servicing and shareholder reporting expenses. The fund pays the cost of typesetting for its prospectuses and the cost of printing and mailing any prospectuses sent to its shareholders. Putnam Mutual Funds pays the cost of printing and distributing all other prospectuses. The Management Contract provides that Putnam Management shall not be subject to any liability to the fund or to any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of Putnam Management. The Management Contract may be terminated without penalty by vote of the Trustees or the shareholders of the fund, or by Putnam Management, on 30 days' written notice. It may be amended only by a vote of the shareholders of the fund. The Management Contract also terminates without payment of any penalty in the event of its assignment. The Management Contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the Investment Company Act of 1940. Portfolio Transactions Investment decisions. Investment decisions for the fund and for the other investment advisory clients of Putnam Management and its affiliates are made with a view to achieving their respective investment objectives. Investment decisions are the product of many factors in addition to basic suitability for the particular client involved. Thus, a particular security may be bought or sold for certain clients even though it could have been bought or sold for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling the security. In some instances, one client may sell a particular security to another client. It also sometimes happens that two or more clients simultaneously purchase or sell the same security, in which event each day's transactions in such security are, insofar as possible, averaged as to price and allocated between such clients in a manner which in Putnam Management's opinion is equitable to each and in accordance with the amount being purchased or sold by each. There may be circumstances when purchases or sales of portfolio securities for one or more clients will have an adverse effect on other clients. Brokerage and research services. Transactions on U.S. stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by the fund of negotiated brokerage commissions. Such commissions vary among different brokers. A particular broker may charge different commissions according to such factors as the difficulty and size of the transaction. Transactions in foreign investments often involve the payment of fixed brokerage commissions, which may be higher than those in the United States. There is generally no stated commission in the case of securities traded in the over-the-counter markets, but the price paid by the fund usually includes an undisclosed dealer commission or mark-up. In underwritten offerings, the price paid by the fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer. It is anticipated that most purchases and sales of securities by funds investing primarily in tax-exempt securities and certain other fixed-income securities will be with the issuer or with underwriters of or dealers in those securities, acting as principal. Accordingly, those funds would not ordinarily pay significant brokerage commissions with respect to securities transactions. See "Charges and expenses" in Part I of this SAI for information concerning commissions paid by the fund. It has for many years been a common practice in the investment advisory business for advisers of investment companies and other institutional investors to receive brokerage and research services (as defined in the Securities Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that execute portfolio transactions for the clients of such advisers and from third parties with which such broker-dealers have arrangements. Consistent with this practice, Putnam Management receives brokerage and research services and other similar services from many broker-dealers with which Putnam Management places the fund's portfolio transactions and from third parties with which these broker-dealers have arrangements. These services include such matters as general economic and market reviews, industry and company reviews, evaluations of investments, recommendations as to the purchase and sale of investments, newspapers, magazines, pricing services, quotation services, news services and personal computers utilized by Putnam Management's managers and analysts. Where the services referred to above are not used exclusively by Putnam Management for research purposes, Putnam Management, based upon its own allocations of expected use, bears that portion of the cost of these services which directly relates to their non-research use. Some of these services are of value to Putnam Management and its affiliates in advising various of their clients (including the fund), although not all of these services are necessarily useful and of value in managing the fund. The management fee paid by the fund is not reduced because Putnam Management and its affiliates receive these services even though Putnam Management might otherwise be required to purchase some of these services for cash. Putnam Management places all orders for the purchase and sale of portfolio investments for the fund and buys and sells investments for the fund through a substantial number of brokers and dealers. In so doing, Putnam Management uses its best efforts to obtain for the fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution, Putnam Management, having in mind the fund's best interests, considers all factors it deems relevant, including, by way of illustration, price, the size of the transaction, the nature of the market for the security or other investment, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions. As permitted by Section 28(e) of the 1934 Act, and by the Management Contract, Putnam Management may cause the fund to pay a broker-dealer which provides "brokerage and research services" (as defined in the 1934 Act) to Putnam Management an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the fund on an agency basis in excess of the commission which another broker-dealer would have charged for effecting that transaction. Putnam Management's authority to cause the fund to pay any such greater commissions is also subject to such policies as the Trustees may adopt from time to time. Putnam Management does not currently intend to cause the fund to make such payments. It is the position of the staff of the Securities and Exchange Commission that Section 28(e) does not apply to the payment of such greater commissions in "principal" transactions. Accordingly Putnam Management will use its best effort to obtain the most favorable price and execution available with respect to such transactions, as described above. The Management Contract provides that commissions, fees, brokerage or similar payments received by Putnam Management or an affiliate in connection with the purchase and sale of portfolio investments of the fund, less any direct expenses approved by the Trustees, shall be recaptured by the fund through a reduction of the fee payable by the fund under the Management Contract. Putnam Management seeks to recapture for the fund soliciting dealer fees on the tender of the fund's portfolio securities in tender or exchange offers. Any such fees which may be recaptured are likely to be minor in amount. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable price and execution available and such other policies as the Trustees may determine, 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 to execute portfolio transactions for the fund. Principal Underwriter Putnam Mutual Funds is the principal underwriter of shares of the fund and the other continuously offered Putnam funds. Putnam Mutual Funds is not obligated to sell any specific amount of shares of the fund and will purchase shares for resale only against orders for shares. See "Charges and expenses" in Part I of this SAI for information on sales charges and other payments received by Putnam Mutual Funds. Personal Investments by Employees of Putnam Management and Putnam Mutual Funds and Officers and Trustees of the Fund Employees of Putnam Management and Putnam Mutual Funds and officers and Trustees of the fund are subject to significant restrictions on engaging in personal securities transactions. These restrictions are set forth in the Codes of Ethics adopted by Putnam Management and Putnam Mutual Funds (The Putnam Investments' Code of Ethics) and by the fund (the Putnam Funds' Code of Ethics). The Putnam Investments' Code of Ethics and the Putnam Funds' Code of Ethics, in accordance with rule 17j-1 of the Investment Company Act of 1940, as amended, contain provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the fund. The Putnam Investments' Code of Ethics does not prohibit personnel from investing in securities that may be purchased or held by the fund. However, the Putnam Investments' Code, consistent with standards recommended by the Investment Company Institute's Advisory Group on Personal Investing and requirements established by rule 17j-1, among other things, prohibits personal securities investments without pre-clearance, imposes time periods during which personal transactions may not be made in certain securities by employees with access to investment information, and requires the timely submission of broker confirmations and quarterly reporting of personal securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process. The Putnam Funds' Code of Ethics incorporates and applies the restrictions of Putnam Investments' Code of Ethics to officers and Trustees of the fund who are affiliated with Putnam Investments. The Putnam Funds' Code does not prohibit unaffiliated officers and Trustees from investing in securities that may be held by the fund; however, the Putnam Funds' Code regulates the personal securities transactions of unaffiliated Trustees of the fund, including limiting the time periods during which they may personally buy and sell certain securities and requiring them to submit quarterly reports of personal securities transactions. The fund's Trustees, in compliance with rule 17j-1, approve Putnam Investments' and the Putnam Funds' Codes of Ethics and are required to approve any material changes to these Codes. The Trustees also provide continued oversight of personal investment policies and annually evaluate the implementation and effectiveness of the Codes of Ethics. Investor Servicing Agent and Custodian Putnam Investor Services, a division of Putnam Fiduciary Trust Company ("PFTC"), is the fund's investor servicing agent (transfer, plan and dividend disbursing agent), for which it receives fees which are paid monthly by the fund as an expense of all its shareholders. The fee paid to Putnam Investor Services is determined on the basis of the number of shareholder accounts, the number of transactions and the assets of the fund. Putnam Investor Services has won the DALBAR Service Award eight times in the past nine years. In 1997 and 1998, Putnam was the only company to win all three DALBAR Awards: for service to investors, to financial advisors, and to variable annuity contract holders. DALBAR, Inc. an independent research firm, presents the awards to financial services firms that provide consistently excellent service. PFTC is the custodian of the fund's assets. In carrying out its duties under its custodian contract, PFTC may employ one or more subcustodians whose responsibilities include safeguarding and controlling the fund's cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on the fund's investments. PFTC and any subcustodians employed by it have a lien on the securities of the fund (to the extent permitted by the fund's investment restrictions) to secure charges and any advances made by such subcustodians at the end of any day for the purpose of paying for securities purchased by the fund. The fund expects that such advances will exist only in unusual circumstances. Neither PFTC nor any subcustodian determines the investment policies of the fund or decides which securities the fund will buy or sell. PFTC pays the fees and other charges of any subcustodians employed by it. The fund may from time to time pay custodial expenses in full or in part through the placement by Putnam Management of the fund's portfolio transactions with the subcustodians or with a third-party broker having an agreement with the subcustodians. The fund pays PFTC an annual fee based on the fund's assets, securities transactions and securities holdings and reimburses PFTC for certain out-of-pocket expenses incurred by it or any subcustodian employed by it in performing custodial services. See "Charges and expenses" in Part I of this SAI for information on fees and reimbursements for investor servicing and custody received by PFTC. The fees may be reduced by credits allowed by PFTC. DETERMINATION OF NET ASSET VALUE The fund determines the net asset value per share of each class of shares once each day the New York Stock Exchange (the "Exchange") is open. Currently, the Exchange is closed Saturdays, Sundays and the following holidays: New Year's Day, Rev. Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July, Labor Day, Thanksgiving and Christmas. The fund determines net asset value as of the close of regular trading on the Exchange, currently 4:00 p.m. However, equity options held by the fund are priced as of the close of trading at 4:10 p.m., and futures contracts on U.S. government and other fixed-income securities and index options held by the fund are priced as of their close of trading at 4:15 p.m. Securities for which market quotations are readily available are valued at prices which, in the opinion of Putnam Management, most nearly represent the market values of such securities. Currently, such prices are determined using the last reported sale price or, if no sales are reported (as in the case of some securities traded over-the-counter), the last reported bid price, except that certain securities are valued at the mean between the last reported bid and asked prices. Short-term investments having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. Liabilities are deducted from the total, and the resulting amount is divided by the number of shares of the class outstanding. Reliable market quotations are not considered to be readily available for long-term corporate bonds and notes, certain preferred stocks, tax-exempt securities, and certain foreign securities. These investments are valued at fair value on the basis of valuations furnished by pricing services, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. If any securities held by the fund are restricted as to resale, Putnam Management determines their fair value following procedures approved by the Trustees. The fair value of such securities is generally determined as the amount which the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the securities (including any registration expenses that might be borne by the fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted securities of the same class, the size of the holding, the prices of any recent transactions or offers with respect to such securities and any available analysts' reports regarding the issuer. Generally, trading in certain securities (such as foreign securities) is substantially completed each day at various times prior to the close of the Exchange. The values of these securities used in determining the net asset value of the fund's shares are computed as of such times. Also, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain securities (such as convertible bonds, U.S. government securities, and tax-exempt securities) are determined based on market quotations collected earlier in the day at the latest practicable time prior to the close of the Exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the Exchange which will not be reflected in the computation of the fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value following procedures approved by the Trustees. In addition, securities held by some of the funds may be traded in foreign markets that are open for business on days that a fund is not, and the trading of such securities on those days may have an impact on the value of a shareholder's investment at a time when the shareholder cannot buy and sell shares of the fund. Money market funds generally value their portfolio securities at amortized cost according to Rule 2a-7 under the Investment Company Act of 1940. DISTRIBUTION PLAN The Trust has adopted a distribution plan with respect to class IB shares, the principal features of which are described in the prospectus. This SAI contains additional information which may be of interest to investors. Continuance of the plan is subject to annual approval by a vote of the Trustees, including a majority of the Trustees who are not interested persons of a fund and who have no direct or indirect interest in the plan or related arrangements (the "Qualified Trustees"), cast in person at a meeting called for that purpose. All material amendments to the plan must be likewise approved by the Trustees and the Qualified Trustees. The plan may not be amended in order to increase materially the costs which a fund may bear for distribution pursuant to such plan without also being approved by a majority of the outstanding voting securities of a fund or relevant class of the fund, as the case may be. The plan terminates automatically in the event of its assignment and may be terminated without penalty, at any time, by a vote of a majority of the Qualified Trustees or by a vote of a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be. Putnam Mutual Funds pays service fees to insurance companies and their affiliated dealers at the rates set forth in the Prospectus. Service fees are paid quarterly to the insurance company or dealer of record for that quarter. Financial institutions receiving payments from Putnam Mutual Funds as described above may be required to comply with various state and federal regulatory requirements, including among others those regulating the activities of insurance companies and securities brokers or dealers. Except as otherwise agreed between Putnam Mutual Funds and a dealer, for purposes of determining the amounts payable to insurance companies or their affiliates, "average net asset value" means the product of (i) the average daily share balance in such account(s) and (ii) the average daily net asset value of the relevant class of shares over the quarter. SUSPENSION OF REDEMPTIONS The fund may not suspend shareholders' right of redemption, or postpone payment for more than seven days, unless the Exchange is closed for other than customary weekends or holidays, or if permitted by the rules of the Securities and Exchange Commission during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the fund to dispose of its securities or to determine fairly the value of its net assets, or during any other period permitted by order of the Commission for protection of investors. SHAREHOLDER LIABILITY Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the fund. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the fund and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the fund or the Trustees. The Agreement and Declaration of Trust provides for indemnification out of fund property for all loss and expense of any shareholder held personally liable for the obligations of the fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the fund would be unable to meet its obligations. The likelihood of such circumstances is remote. STANDARD PERFORMANCE MEASURES Yield and total return data for the fund may from time to time be presented in Part I of this SAI and in advertisements. In the case of funds with more than one class of shares, all performance information is calculated separately for each class. The data is calculated as follows. Total return for one-, five- and ten-year periods (or for such shorter periods as the fund has been in operation or shares of the relevant class have been outstanding) is determined by calculating the actual dollar amount of investment return on a $1,000 investment in the fund made at the beginning of the period, at the maximum public offering price for class A shares and class M shares and net asset value for other classes of shares, and then calculating the annual compounded rate of return which would produce that amount. Total return for a period of one year is equal to the actual return of the fund during that period. Total return calculations assume deduction of the fund's maximum sales charge or CDSC, if applicable, and reinvestment of all fund distributions at net asset value on their respective reinvestment dates. The fund's yield is presented for a specified thirty-day period (the "base period"). Yield is based on the amount determined by (i) calculating the aggregate amount of dividends and interest earned by the fund during the base period less expenses for that period, and (ii) dividing that amount by the product of (A) the average daily number of shares of the fund outstanding during the base period and entitled to receive dividends and (B) the per share net asset value for class IA and IB shares of the fund on the last day of the base period. The result is annualized on a compounding basis to determine the yield. For this calculation, interest earned on debt obligations held by the fund is generally calculated using the yield to maturity (or first expected call date) of such obligations based on their market values (or, in the case of receivables-backed securities such as the Government National Mortgage Association ("GNMAs"), based on cost). Dividends on equity securities are accrued daily at their stated dividend rates. The amount of expenses used in determining the fund's yield includes, in addition to expenses actually accrued by the fund, an estimate of the amount of expenses that the fund would have incurred if brokerage commissions had not been used to reduce such expenses. If the fund is a money market fund, yield is computed by determining the percentage net change, excluding capital changes, in the value of an investment in one share over the seven-day period for which yield is presented (the "base period"), and multiplying the net change by 365/7 (or approximately 52 weeks). Effective yield represents a compounding of the yield by adding 1 to the number representing the percentage change in value of the investment during the base period, raising that sum to a power equal to 365/7, and subtracting 1 from the result. If the fund is a tax-exempt fund, the tax-equivalent yield during the base period may be presented for shareholders in one or more stated tax brackets. Tax-equivalent yield is calculated by adjusting the tax-exempt yield by a factor designed to show the approximate yield that a taxable investment would have to earn to produce an after-tax yield equal, for that shareholder, to the tax-exempt yield. The tax-equivalent yield will differ for shareholders in other tax brackets. At times, Putnam Management may reduce its compensation or assume expenses of the fund in order to reduce the fund's expenses. The per share amount of any such fee reduction or assumption of expenses during the fund's past five fiscal years (or for the life of the fund, if shorter) is set forth in the footnotes to the table in the section entitled "Financial highlights" in the prospectus. Any such fee reduction or assumption of expenses would increase the fund's yield and total return for periods including the period of the fee reduction or assumption of expenses. All data are based on past performance and do not predict future results. COMPARISON OF PORTFOLIO PERFORMANCE Independent statistical agencies measure the fund's investment performance and publish comparative information showing how the fund, and other investment companies, performed in specified time periods. Three agencies whose reports are commonly used for such comparisons are set forth below. From time to time, the fund may distribute these comparisons to its shareholders or to potential investors. The agencies listed below measure performance based on their own criteria rather than on the standardized performance measures described in the preceding section. Lipper Analytical Services, Inc. distributes mutual fund rankings monthly. The rankings are based on total return performance calculated by Lipper, generally reflecting changes in net asset value adjusted for reinvestment of capital gains and income dividends. They do not reflect deduction of any sales charges. Lipper rankings cover a variety of performance periods, including year-to-date, 1-year, 5-year, and 10-year performance. Lipper classifies mutual funds by investment objective and asset category. Morningstar, Inc. distributes mutual fund ratings twice a month. The ratings are divided into five groups: highest, above average, neutral, below average and lowest. They represent a fund's historical risk/reward ratio relative to other funds in its broad investment class as determined by Morningstar, Inc. Morningstar ratings cover a variety of performance periods, including 1-year, 3-year, 5-year, 10-year and overall performance. The performance factor for the overall rating is a weighted-average assessment of the fund's 1-year, 3-year, 5-year, and 10-year total return performance (if available) reflecting deduction of expenses and sales charges. Performance is adjusted using quantitative techniques to reflect the risk profile of the fund. The ratings are derived from a purely quantitative system that does not utilize the subjective criteria customarily employed by rating agencies such as Standard & Poor's and Moody's Investor Service, Inc. CDA/Wiesenberger's Management Results publishes mutual fund rankings and is distributed monthly. The rankings are based entirely on total return calculated by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-year. Mutual funds are ranked in general categories (e.g., international bond, international equity, municipal bond, and maximum capital gain). Weisenberger rankings do not reflect deduction of sales charges or fees. Independent publications may also evaluate the fund's performance. The fund may from time to time refer to results published in various periodicals, including Barrons, Financial World, Forbes, Fortune, Investor's Business Daily, Kiplinger's Personal Finance Magazine, Money, U.S. News and World Report and The Wall Street Journal. Independent, unmanaged indexes, such as those listed below, may be used to present a comparative benchmark of fund performance. The performance figures of an index reflect changes in market prices, reinvestment of all dividend and interest payments and, where applicable, deduction of foreign withholding taxes, and do not take into account brokerage commissions or other costs. Because the fund is a managed portfolio, the securities it owns will not match those in an index. Securities in an index may change from time to time. The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is a commonly used measure of the rate of inflation. The index shows the average change in the cost of selected consumer goods and services and does not represent a return on an investment vehicle. The Dow Jones Industrial Average is an index of 30 common stocks frequently used as a general measure of stock market performance. The Dow Jones Utilities Average is an index of 15 utility stocks frequently used as a general measure of stock market performance for the utilities industry. First Boston High Yield Index is a market-weighted index including publicly traded bonds having a rating below BBB by Standard & Poor's and Baa by Moody's. The Lehman Brothers Aggregate Bond Index is an index composed of securities from The Lehman Brothers Government/Corporate Bond Index, The Lehman Brothers Mortgage-Backed Securities Index and The Lehman Brothers Asset-Backed Securities Index and is frequently used as a broad market measure for fixed-income securities. The Lehman Brothers Asset-Backed Securities Index is an index composed of credit card, auto, and home equity loans. Included in the index are pass-through, bullet (noncallable), and controlled amortization structured debt securities; no subordinated debt is included. All securities have an average life of at least one year. The Lehman Brothers Corporate Bond Index is an index of publicly issued, fixed-rate, non-convertible investment-grade domestic corporate debt securities frequently used as a general measure of the performance of fixed-income securities. The Lehman Brothers Government Bond Index is an index of publicly issued U.S. Treasury obligations and debt obligations of U.S. government agencies (including mortgage-backed securities) frequently used as a general gauge of the market for fixed-income, government securities. The Lehman Brothers Government/Corporate Bond Index is an index of publicly issued U.S. Treasury obligations, debt obligations of U.S. government agencies (excluding mortgage-backed securities), fixed-rate, non-convertible, investment-grade corporate debt securities and U.S. dollar-denominated, SEC-registered non-convertible debt issued by foreign governmental entities or international agencies used as a general measure of the performance of fixed-income securities. The Lehman Brothers GNMA Index is an index of GNMA bonds frequently used as a general gauge of the market for GNMA securities. The Lehman Brothers Intermediate Government Bond Index is an index of publicly issued U.S. Treasury obligations and debt obligations of U.S. government agencies (excluding mortgage-backed securities) with maturities of up to ten years frequently used as a general gauge of the market for intermediate-term, fixed-income, government securities. The Lehman Brothers Intermediate Treasury Bond Index is an index of publicly issued U.S. Treasury obligations with maturities of up to ten years and is used as a general gauge of the market for intermediate-term fixed-income securities. The Lehman Brothers Long-Term Treasury Bond Index is an index of publicly issued U.S. Treasury obligations (excluding flower bonds and foreign-targeted issues) that are U.S. dollar-denominated and have maturities of 10 years or greater. The Lehman Brothers Mortgage-Backed Securities Index is an index that includes 15- and 30-year fixed rate securities backed by mortgage pools of the Government National Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association. The Lehman Brothers Municipal Bond Index is an index of long-term, investment-grade, fixed-rate tax-exempt bonds. The Lehman Brothers Treasury Bond Index is an index of publicly issued U.S. Treasury obligations (excluding flower bonds and foreign-targeted issues) that are U.S. dollar denominated, have a minimum of one year to maturity, and are issued in amounts over $50 million. The Lipper Money Market Average is an arithmetic average of the total return of all money market mutual funds tracked by Lipper, Inc. The Lipper Natural Resources Average is an arithmetic average of the total return of all mutual funds tracked by Lipper, Inc. that invest more than 65% of their equity holdings in the natural resources industries. The Lipper Tax Exempt Money Market Average is an arithmetic average of the total return of all tax exempt money market mutual funds tracked by Lipper, Inc. The Merrill Lynch All-Convertible Index is an index of convertible securities that is commonly used as a general measure of performance for the convertible securities market. The Merrill Lynch 91-Day Treasury Bill Index is an index that measures the performance of U.S. Treasury bills currently available in the marketplace. The Merrill Lynch Perpetual Preferred Index is an index of perpetual preferred securities that is commonly used as a general measure of performance for the preferred-stock market. The Morgan Stanley Capital International Emerging Markets Index is an index of equity securities issued by companies located in emerging markets with all values expressed in U.S. dollars. The Morgan Stanley Capital International Emerging Markets Free Index is an index of equity securities issued by companies located in emerging markets, available to non-domestic investors, with all values expressed in U.S. dollars. The Morgan Stanley Capital International EAFE Index is an index of equity securities issued by companies located in Europe, Australasia and the Far East, with all values expressed in U.S. dollars. The Morgan Stanley Capital International Europe Index is an index of equity securities issued by companies located in one of the 15 European countries, with all values expressed in U.S. dollars. The Morgan Stanley Capital International Pacific Index is an index of equity securities issued by companies located in one of five Asian countries and listed on the exchanges of Australia, New Zealand, Japan, Hong Kong, Singapore/Malaysia, with all values expressed in U.S. dollars. The Morgan Stanley Capital International World Index is an index of global equity securities with all values expressed in U.S. dollars. The Morgan Stanley Capital International World Free Index is an index of global equity securities, available to non-domestic investors, with all values expressed in U.S. dollars. The NASDAQ Industrial Average is an index of stocks traded in The Nasdaq Stock Market, Inc. National Market System. The Russell 1000 Index is an index composed of the 1,000 largest companies in the Russell 3000 Index, representing approximately 89% of the Russell 3000 total market capitalization. The Russell 1000 Growth Index is an index composed of securities with greater-than-average growth orientation within the Russell 1000 Index. Companies in this index tend to exhibit higher price-to-book and price-earnings ratios, lower dividend yields and higher forecasted growth values than other companies in the Russell 1000 Index. The Russell 2000 Index is an index composed of the 2,000 smallest companies in the Russell 3000 Index, representing approximately 11% of the Russell 3000 total market capitalization. The Russell 2000 Growth Index is an index composed of securities with greater-than-average growth orientation within the Russell 2000 Index. Companies in this index tend to exhibit higher price-to-book and price-earnings ratios, lower dividend yields and higher forecasted growth values than other companies in the Russell 2000 Index. The Russell 3000 Index is an index composed of the 3,000 largest U.S. companies ranked by total market capitalization, representing approximately 98% of the U.S. investable equity market. The Russell Midcap Index is an index composed of the 800 smallest companies in the Russell 1000 Index, representing approximately 26% of the Russell 1000 total market capitalization. The Russell Midcap Growth Index is an index composed of securities with greater-than-average growth orientation within the Russell Midcap Index. Each security's growth orientation is determined by a composite score of the security's price-to-book ratio and forecasted growth rate. Growth stocks tend to have higher price-to-book ratios and forecasted growth rates than value stocks. The Salomon Brothers Extended Market Index is an index of global equity securities of smaller companies with all values expressed in U.S. dollars. The Salomon Brothers Long-Term High-Grade Corporate Bond Index is an index of publicly traded corporate bonds having a rating of at least AA by Standard & Poor's or Aa by Moody's and is frequently used as a general measure of the performance of fixed-income securities. The Salomon Brothers Long-Term Treasury Index is an index of U.S. government securities with maturities greater than 10 years. The Salomon Brothers World Government Bond Index is an index that tracks the performance of the 18 government bond markets of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Ireland, Spain, Sweden, Switzerland, United Kingdom, United States and Portugal. Country eligibility is determined by market capitalization and investability criteria. The Salomon Brothers Non-U.S. World Government Bond Index is an index of foreign government bonds calculated to provide a measure of performance in the government bond markets outside of the United States. Standard & Poor's 500 Composite Stock Price Index is an index of common stocks frequently used as a general measure of stock market performance. Standard & Poor's 40 Utilities Index is an index of 40 utility stocks. Standard & Poor's/Barra Value Index is an index constructed by ranking the securities in the Standard & Poor's 500 Composite Stock Price Index by price-to-book ratio and including the securities with the lowest price-to-book ratios that represent approximately half of the market capitalization of the Standard & Poor's 500 Composite Stock Price Index. In addition, Putnam Mutual Funds may distribute to shareholders or prospective investors illustrations of the benefits of reinvesting tax-exempt or tax-deferred distributions over specified time periods, which may include comparisons to fully taxable distributions. These illustrations use hypothetical rates of tax-advantaged and taxable returns and are not intended to indicate the past or future performance of any fund. SECURITIES RATINGS The ratings of securities in which the fund may invest will be measured at the time of purchase and, to the extent a security is assigned a different rating by one or more of the various rating agencies, Putnam Management will use the highest rating assigned by any agency. Putnam Management will not necessarily sell an investment if its rating is reduced. The following rating services describe rated securities as follows: Moody's Investors Service, Inc. Bonds Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities. A -- Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa -- Bonds which are rated Baa are considered as medium grade obligations, (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca -- Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Notes (for Money Market funds only) MIG 1/VMIG 1 -- This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. MIG 2/VMIG 2 -- This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group. Commercial paper (for Money Market funds only) Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by the following characteristics: - -- Leading market positions in well established industries. - -- High rates of return on funds employed. - -- Conservative capitalization structure with moderate reliance on debt and ample asset protection. - -- Broad margins in earnings coverage of fixed financial charges and high internal cash generation. - -- Well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Standard & Poor's Bonds AAA -- An obligation rated AAA has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA -- An obligation rated AA differs from the highest-rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A -- An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB -- An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. Obligations rated BB, B, CCC, CC and C are regarded as having significant speculative characteristics. BB indicates the lowest degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. BB -- An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B -- An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligations. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation. CCC -- An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. CC -- An obligation rated CC is currently highly vulnerable to nonpayment. C -- The C rating may be used to cover a situation where a bankruptcy petition has been filed, or similar action has been taken, but payments on this obligation are being continued. D -- An obligation rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition, or the taking of a similar action if payments on an obligation are jeopardized. Notes (for Money Market funds only) SP-1 -- Strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics are given a plus (+) designation. SP-2 -- Satisfactory capacity to pay principal and interest. SP-3 -- Speculative capacity to pay principal and interest. Commercial paper (for Money Market funds only) A-1 -- This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 -- Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated `A-1'. A-3 -- Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. Duff & Phelps Corporation Long-Term Debt AAA -- Highest credit quality. The risk factors are negligible, being only slightly more than for risk-free U.S. Treasury debt. AA+, AA, AA- -- High credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. A+, A, A- -- Protection factors are average but adequate. However, risk factors are more variable and greater in periods of economic stress. BBB+, BBB, BBB- -- Below-average protection factors but still considered sufficient for prudent investment. Considerable variability in risk during economic cycles. BB+, BB, BB- -- Below investment grade but deemed likely to meet obligations when due. Present or prospective financial protection factors fluctuate according to industry conditions or company fortunes. Overall quality may move up or down frequently within this category. B+, B, B- -- Below investment grade and possessing risk that obligations will not be met when due. Financial protection factors will fluctuate widely according to economic cycles, industry conditions and/or company fortunes. Potential exists for frequent changes in the rating within this category or into a higher or lower rating grade. CCC -- Well below investment-grade securities. Considerable uncertainty exists as to timely payment of principal, interest or preferred dividends. Protection factors are narrow and risk can be substantial with unfavorable economic/industry conditions, and/or with unfavorable company developments. DD -- Defaulted debt obligations. Issuer failed to meet scheduled principal and/or interest payments. Fitch Investors Service, Inc. AAA -- Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA -- Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. A -- Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB -- Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. BB -- Bonds considered to be speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements. B -- Bonds are considered highly speculative. Bonds in this class are lightly protected as to the obligor's ability to pay interest over the life of the issue and repay principal when due. CCC -- Bonds have certain characteristics which, with passing of time, could lead to the possibility of default on either principal or interest payments. CC -- Bonds are minimally protected. Default in payment of interest and/or principal seems probable. C -- Bonds are in actual or imminent default in payment of interest or principal. DDD -- Bonds are in default and in arrears in interest and/or principal payments. Such bonds are extremely speculative and should be valued only on the basis of their value in liquidation or reorganization of the obligor. DEFINITIONS "Putnam Management" -- Putnam Investment Management, Inc., the fund's investment manager. "Putnam Mutual Funds" -- Putnam Mutual Funds Corp., the fund's principal underwriter. "Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company, Company" the fund's custodian. "Putnam Investor Services" -- Putnam Investor Services, a division of Putnam Fiduciary Trust Company, the fund's investor servicing agent. PUTNAM VARIABLE TRUST FORM N-1A PART C OTHER INFORMATION Item 23. Exhibits 1. Agreement and Declaration of Trust dated September 24, 1987, as revised January 1, 1997 -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement. 2. By-Laws, as amended through January 30, 1997 -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement. 3a. Portions of Agreement and Declaration of Trust Relating to Shareholders' Rights -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement. 3b. Portions of By-Laws Relating to Shareholders' Rights -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement. 4. Management Contract dated October 2, 1987, as supplemented March 2, 1990, as further supplemented February 27, 1992, July 9, 1993, April 5, 1994, June 2, 1994, April 7, 1995, July 13, 1995, July 11, 1996, December 20, 1996, February 6, 1998, July 10, 1998, March 4, 1999, July 1, 1999 and November 8, 1999 -- Incorporated by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement. 5a. Distributor's Contract dated May 6, 1994 -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. 5b. Form of Specimen Dealer Sales Contract -- Incorporated by reference to Post-Effective Amendment No. 11 to the Registrant's Registration Statement. 5c. Form of Specimen Financial Institution Sales Contract -- Incorporated by reference to Post-Effective Amendment No. 11 to the Registrant's Registration Statement. 6. Not applicable. 7. Custodian Agreement with Putnam Fiduciary Trust Company dated May 3, 1991, as amended July 13, 1992 -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. 8. Investor Servicing Agreement dated June 3, 1991 with Putnam Fiduciary Trust Company -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. 9. Opinion of Ropes & Gray, including consent -- Incorporated by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement. 10. Not applicable. 11. Not applicable. 12. Investment Letters from Putnam Investment Management, Inc. to the Registrant -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. 13a. Class IB Distribution Plan and Agreement -- Exhibit 1. 13b. Form of Specimen Dealer Service Agreement -- Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement. 13c. Form of Specimen Financial Institution Service Agreement -- Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement. 14. Rule 18f-3(d) Plan -- Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement. 15a. The Putnam Funds Code of Ethics - Exhibit 2. 15b. Putnam Investments Code of Ethics - Exhibit 3. Item 24. Persons Controlled by or under Common Control with the Fund None. Item 25. Indemnification The information required by this item is incorporated by reference to the Registrant's Initial Registration Statement on Form N-1A under the Investment Company Act of 1940 (File No. 811-5346). Item 26. Business and Other Connections of Investment Adviser Except as set forth below, the directors and officers of the Registrant's investment adviser have been engaged during the past two fiscal years in no business, vocation or employment of a substantial nature other than as directors or officers of the investment adviser or certain of its corporate affiliates. Certain officers of the investment adviser serve as officers of some or all of the Putnam funds. The address of the investment adviser, its corporate affiliates and the Putnam Funds is one Post Office Square, Boston, Massachusetts 02109.
Name Non-Putnam business and other connections - ---- ----------------------------------------- Pankaj Agrrawal Prior to April 1998, Quantitative Analyst, Vestek Vice President Systems, 388 Market St., Suite 700, San Francisco, CA 94111 Lauren Allansmith Prior to August 1999, Analyst, Loomis Sayles, Senior Vice President One Financial Center, Boston, MA 02111 Blake Anderson Trustee, Salem Female Charitable Society, Managing Director Salem MA 01970 Paul A. Aston Prior to June, 1999, Senior Quantitative Vice President Strategist, Santander Global Advisors, 28 State Street, Boston, MA 02109 Jane N. Barlow Prior to January 2000, Office Management, Assistant Vice President Distinction Resourcing Limited, 2/4 Great Eastern Street, London, EC2A 3NT; Prior to January 1999, Office Manager, D.E. Shaw Securities International, Finsbury Dials, 20 Finsbury Street, London, EC3M Robert R. Beck Director, Charles Bridge Publishing, 85 Main St., Senior Vice President Watertown, MA 02172; Board of Overseers, Beth Israel Deaconess Medical Center, 330 Brookline Ave., Boston, MA 02215 Kirsten A. Bjerklie Prior to June 1998, Assistant Vice President, Assistant Vice President Scudder, Stevens & Clark, Two International Place, Boston, MA 02110 Richard L. Block Prior to June 1998, Principal, Head International Senior Vice President Equity Trader, Morgan Stanley Asset Management, 1221 Avenue of the Americas, New York, NY 10036 Rob A. Bloemker Prior to September 1999, Managing Director, Senior Vice President Lehman Brothers, 555 California St., 30th floor, San Francisco, CA 94104 Claudio Brocado Prior to August 1999, independent consultant by Vice President Stires, O'Donnell & Co. 12 East 44th St., New York, NY 10017; Prior to January 1999, independent consultant by Coast Partners, 601 California St., San Francisco, CA 94108; Prior to November 1997, Head of Latin America Business Development, Dresdner RCM Global Investors, Four Embarcadero Center, San Francisco, CA 94111 Anna Bulkovshteyn Prior to July 1999, Quantitative Analyst, Sun Life Assistant Vice President Investment Management, 200 King Street West, Toronto, Ontario M5H 3T4 Canada David N. Burnham Prior to July 1998, Director - Finance, Fidelity Vice President Investments, 82 Devonshire Street, Boston, MA 02109 Richard P. Cervone Prior to August 1998, Equity Analyst, Loomis, Vice President Sayles & Co., One Financial Center, Boston, MA, 02216. Christopher Ceruolo Prior to July 1998, Associate, Ropes & Gray, Assistant Vice President One International Place, Boston, MA 02110 Mark Chameih Prior to May 1999, Vice President, Chase Manhattan, Vice President 125 London Wall, London, UK Bihua Chen Prior to July 1998, Research Associate, ProNeuron, Assistant Vice President Inc., 1531 E. Jefferson St., Rockville, MD 20847 C. Beth Cotner Director, The Lyric Stage Theater, 140 Clarendon St., Senior Vice President Boston, MA 02116 Stephen P. Cotto Prior to March 1998, Facilities Supervisor, Assistant Vice President Unicco Service Co., 4 Copley Place, Boston, MA 02116 Lindsey L. Curley Prior to June 1999, Portfolio Analyst, Standish, Assistant Vice President Ayer & Wood, Inc., One Financial Center, Boston, MA 02110. Prior to March, 1998,. Fixed-Income Research Assistant, Invesco Management & Research, Inc., 101 Federal St., Boston, MA 02110 Joseph F. Cushing Prior to June 1998, Investment Analyst - Fixed Assistant Vice President Income, Metropolitan Life Insurance Company, 334 Madison Avenue, Convent Station, NJ 07961 John R.S. Cutler Member, Burst Media, L.L.C., 10 New England Vice President Executive Park, Burlington, MA 01803 Kenneth Daly President, Andover River Rd. TMA, River Road Managing Director Transportation Management Association, 7 Shattuck Rd., Andover, MA 01810 Donna M. Daylor Prior to April 1998, Director of Training, Vice President UniCare Life & Health Ins. Co., 1350 Main St., Springfield, MA John C. Delano Prior to July 1998, Senior Foreign Exchange Assistant Vice President Trader, Nationsbank, 233 So. Wacker Drive, Chicago, IL 60606 Ralph C. Derbyshire Board Member, MSPCC, 399 Boylston St., Senior Vice President Boston, MA; Board Member, Winchester After School Program, Skillings Rd., Winchester, MA Stephen P. Dexter Prior to June 1999, Senior Vice President and Senior Vice President Senior Portfolio Manger, Scudder Kemper, Inc. One International Place, Boston, MA Michael G. Dolan Chairman-Finance Council, St. Mary's Parish, Assistant Vice President 44 Myrtle St., Melrose, MA 02176; Member, School Advisory Board, St. Mary's School, 44 Myrtle St., Melrose, MA 02176 Edward Driscoll Prior to September 1999, Equity Trader, Fidelity Vice President Research and Management, 82 Devonshire St., Boston, MA 02109 Douglas Dunn Prior to November 1999, Director of Research, Vice President Brandywine Asset Management, 381 Brinton Lake Road, Thornton, PA 19317; Prior to May 1998, Quantitative Analyst, Westpeak Investment Advisors, 1011 Walnut St., Suite 400, Boulder, CO 80303 Emily Durbin Board of Directors, Family Service, Inc., Vice President Lawrence, MA 01840 Karnig H. Durgarian Board Member, EBRI, Suite 600, 2121 K St., Managing Director N.W., Washington, DC 20037-1896. Trustee, American Assembly, 122 C. St., N.W., Suite 350, Washington, DC 20001 Christine Durkee Prior to June 1998, Project Manager, Foundation Assistant Vice President Technologies, Inc., 78 4th Ave., Waltham, MA 02451 Nathan Eigerman Trustee, Flower Hill Trust, 298 Marlborough St., Senior Vice President #4, Boston, MA 02116 Tony H. Elavia Prior to September 1999, Executive Vice President, Senior Vice President Voyageur Asset Management, 90 S. 7th Street, Minneapolis, MN 55402 Lisa V. Emerick Prior to September 1998, Asian Sales Trader, Vice President BWZ Securities Asia, Inc., Citibank Tower, 3 Garden Road, Hong Kong Irene M. Esteves Board of Director Member, American Management Managing Director Association Finance council, 1601 Broadway, New York, NY; Board of Director Member, First Night Boston, 20 Park Plaza, Suite 927, Boston, MA; Board of Director Member, SC Johnson Commercialmarkets, 8310 16th St., Stutevant, WI 53177; Board of Director Member, Massachusetts Taxpayers Foundation, 24 Province St., Boston, MA; Board of Director Member, Mrs. Bairds Bakeries, 515 Jones St., Suite 200, Fort Worth, Texas 76102 Ian Ferguson Trustee, Park School, 171 Goddard Avenue, Brookline, Senior Managing Director MA 02146 John Ferry Prior to September 1998, Vice President, Vice President Scudder Kemper Investments, 101 California St., San Francisco, CA 94111. Peter M. Fleisher Prior to July 1999, Senior Vice President, Fleet Senior Vice President National Bank, 75 State Street, Boston, MA 02109 Henrietta Fraser Prior to October, 1998, Manager, Fleming Investment Vice President Management, 25 Copthall Ave., London EC2R 7DR Matthew R. Gage Prior to December, 1999, Audit Manager, Ernst Assistant Vice President & Young LLP, 200 Clarendon St., Boston, MA 02116 Stephen C. Gibbs Prior to June 1998, Senior Financial Analyst, Vice President Fidelity Investments, 82 Devonshire St., Boston, MA 02109 Ken S. Gordon Prior to July, 1998, Vice President, Union Bank Vice President of Switzerland, 2-2-2 Otemachi, Chiyoda-Ku, Tokyo, Japan Andrew Graham Prior to October 1999, Fund Manager, Scottish Senior Vice President Widows Investment Management, Port Hamilton, 67 Morrison St., Edinburgh Scotland J. Peter Grant Trustee, The Dover Church, Dover, MA 02030 Senior Vice President Patrice Graviere Prior to March 1998, Regional Director for Latin Senior Vice President America, MFS International, LTD, Buenos Aires, Brazil Paul E. Haagensen Director, Haagensen Research Foundation, 630 Senior Vice President West 168th St., New York, NY 10032 Andrew J. Hachey Prior to July 1998. Associate, Skadden, Arps, Assistant Vice President Slate, Meagher & Flom, LLP, One Beacon Street, Boston, MA 02108 David E. Hamlin Prior to August 1998, Principal, The Vanguard Group, Senior Vice President 100 Vanguard Blvd., Valley Forge, PA 19355 Deborah R. Healey Corporator, New England Baptist Hospital, 125 Senior Vice President Parker Hill Ave., Boston, MA 02120; Director, NEB Enterprises, 125 Parket Hill Ave., Boston, MA 02120 Kim Heller Prior to April 1998, Senior Human Resources Assistant Vice President Specialist, Fidelity Investments, 82 Devonshire St., Boston, MA 02109 Jonathan S. Horwitz Prior to August 1998, Vice President - Corporate Senior Vice President Planning, Keystone Group, 200 Berkely St., Boston, MA 02116 Ronald Hua Prior to August 1999, Quantitative Analyst, Vice President Fidelity Investments, 82 Devonshire St., Boston, MA 02109 Amrit Kanwal Prior to August 1999, Vice President, Corporate Managing Director Development and Strategy, Sequa Corporation, 200 Park Avenue, New York, NY 10166 Jeffrey Kaufman Prior to July 1998, Vice President and Portfolio Senior Vice President Manager, MFS Investment Management, 500 Boylston St., Boston, MA 02116 Ira C. Kalus-Bystricky Prior to March 1998, Consultant, Arthur D. Little, Vice President 25 Acorn Park, Cambridge, MA 02114 Hiroshi Kato Prior to August 1998, Manager, Senior Analyst, Vice President Daiwa Institute of Research, 15-6 Fuyuki, Koutou-ku, Tokyo, 135-8460 Kevin J. Keleher Prior to August 1998, Support Manager, Digital Assistant Vice President Equipment Co., 111 Powder Mill Rd., Maynard, MA 01754 Richard T. Kircher Prior to April 1998, Assistant Vice President and Assistant Vice President Compliance Manager, T. Rowe Price Associates, Inc., 100 E. Pratt Street, Baltimore, MD 21202 Deborah F. Kuenstner Director, Board of Pensions, Presbyterian Church, Managing Director 1001 Market St., Philadelphia, PA Lawrence J. Lasser Director, Marsh & McLennan Companies, Inc., 1221 Avenue President, Director and Chief Executive of the Americas, New York, NY 10020; Board of Governors and Executive Committee, Investment Company Institute, 1401 H. St., N.W. Suite 1200, Washington, DC 20005; Board of Overseers, Museum of Fine Arts, 465 Huntington, Ave., Boston, MA 02115; Trustee, Beth Israel Deaconess Medical Center, 330 Brookline Ave., Boston, MA; Member of the Council on Foreign Relations, 58 East 68th St., New York, NY 10021; Member of the Board of Directors of the United Way of Massachusetts Bay, 245 Summer St., Suite 1401, Boston, MA 02110; Trustee of the Vineyard Open Land Foundation, RFD Box 319X, Vineyard Haven, MA 02568 Gordon R. Lawrence Prior to July 1999, summer associate, J.P. Morgan Investment Assistant Vice President Management, 522 Fifth Ave., New York, NY 10009, Prior to July, 1997, Associate Lehman Brothers, 3 World Financial Center, New York, NY 10285 Maura W. Leddy Prior to October 1998, Bookkeeper, Davol/Taunton Printing, Vice President 330 Winthrop Street Taunton, MA 02780. Richard Leibovitch Prior to February 1999, Managing Director, J.P. Morgan, Managing Director 60 Wall St., New York, NY 10260 Mark G. Lohr Prior to March 1998, Senior Vice President, Fidelity Managing Director Investmetns, 82 Devonshire St., Boston, MA 02109 Noboru Machida Prior to October 1998, Senior Analyst, The Nikko Vice President Research Center Ltd., Nihonbashi Kayabacho, Chuou-ku Tokyo, Japan 103 Kevin Maloney Institutional Director, Financial Management Association, Managing Director University of South Florida, College of Business Administration, Suite 3331, Tampa, FL 33620 Sarah Marshall Prior to August 1999, Associate, McKinsey & Company, Vice President Inc., 55 E. 52nd St., New York, NY 10010 Paul McHugh Prior to June, 1998, Principal, Robertson Stephens & Vice President Company, One International Place, Boston, MA 02110 Nicholas J. Melhuish Prior to August 1999, Assistant Director of Schroder Vice President Investment Management, 31 Gresham St., London,England ECZV8AQ Krishna Memani Prior to September 1998, Principal, Morgan Stanley & Co., Managing Director 1585 Broadway, New York, NY 10039 Peter V. Meyer Prior to July 1999, Conseco Capital Management, Vice President 11825 N. Pennsylvania Ave., Carmel, IN 46032 Stacy M. Mills Prior to April 1999, Vice President, Manager-Financial Vice President Accounting and Internal Reporting, State Street Corporation, 225 Franklin Street, Boston, MA 02110 Reena Mithal Prior to July 1999, Vice President, Deutsche Bank Vice President Securities, 31 W. 52nd Street., New York, NY 10019 Jeanne L. Mockard Trustee, The Bryn Mawr School, 109, W. Melrose Senior Vice President Avenue, Baltimore, MA 21210 Dirk Morris Prior to October 1999, Vice President-Global Strategist, Managing Director Bankers Trust, Chifley Tower, Sydney NSW 2000 Australia Donald E. Mullin Corporate Representative and Board Member, Delta Dental Senior Vice President Plan of Massachusetts, 10 Presidents Landing, P.O. Box 94104, Medford, MA 02155 Jennifer P. Murphy Prior to September 1999, Managing Director, Morgan Managing Director Stanley, 1585 Broadway, New York, NY 10036 Kenneth W. Murphy, Jr. Prior to May 1998, Senior Financial Analyst, Merck & Assistant Vice President Co., Inc., One Merck Drive, Whitehouse Station, NJ 08889 Philip M. Murphy Prior to June 1999, Marketing and Client Relations Assistant Vice President Association, GE Investments, 3003 Summer Street, Stamford, CT 06904. Prior to March 1998, Analyst, McLagan Partners, Inc., Four Stamford Plaza, Suite 400, 107 Elm Street, Stamford, CT 06902 Toshio Nagashima Prior to July 1999, General Manager, Product Dept., Managing Director Investment Trust Preparation, Sumitomo Bank, 1-3-2- Marunouchi, Chiyoda-ku, Tokyo 100-0005 Japan Maria Julia Nisbet Prior to May 1999, Project Manager, Cisalpina Assistant Vice President Gestioni, Via Boito, 10, Milan, Italy 20121 Nancy O'Brien Prior to September 1999, Manager Corporate Disbursements, Assistant Vice President Fidelity Investments, 82 Devonshire St., Boston, MA 02129 Teresa O'Day Prior to April 1999, Operations Manager, Compaq Computer Vice President Corp., 334 South Street, Shrewsbury, MA 01545 Stephen M. Oristaglio Prior to July 1998, Managing Director Global Head Senior Managing Director of Fixed Income, Swiss Bank Corp/UBS Organization, 222 Broadway, New York, NY 10022 Carlos Pampliega Prior to March 1998, Regional Manager, Massachusetts Vice President Financial Services, 500 Boylston St., Boston, MA 02116 Jeffrey F. Peters Prior to June 1999, Principal, McKinsey & Company, Managing Director 75 Park Plaza, Boston, MA 02116 Joseph P. Petitti Prior to May 1998, Senior Treasury Analyst, Liberty Vice President Mutual Insurance Co., 175 Berkely St., Boston, MA 02122 Randolph Petralia Prior to May 1998, First Vice President, Lehman Senior Vice President Brothers, 3 World Financial Center, New York, NY 10285 Keith Plapinger Chairman and Trustee, Advent School, 17 Brimmer St., Vice President Boston, MA 02108 Lisa M. Platia Prior toDecember 1999, Vice President, Windham Assistant Vice President Capital Management, 5 Revere St., Cambridge MA 02138 James A. Polk Prior to June 1998, Investment Officer, Massachusetts Vice President Financial Services, 500 Boylston St., Boston, MA 02116 Charles E. Porter Trustee, Anatolia College, 130 Bowdoin St., Suite 1201, Executive Vice President Boston, MA 02108; Governor, Handel & Hayden Society, Horticulture Hall, 300 Massachusetts Ave., Boston, MA 02115 Quintin R.S. Price Prior to December 1998, Corporate Development Director, Managing Director The Boots Company PLC, Group Headquarters, Nottingham NG2 3AA England; Prior to June 1998, Managing Director of Pan European Equities and Global Head of Research, HSBC Investment Bank PLC, Thames Exchange, 10 Queen St Place, London, EC4R 1BL George Putnam Chairman and Director, Putnam Mutual Funds Corp.; Chairman and Director Director, The Boston Company, Inc., One Boston Place, Boston, MA 02108; Director, Boston Safe Deposit and Trust Company, One Boston Place, Boston, MA 02108; Director, Freeport-McMoRan, Inc., 200 Park Avenue, New York, NY 10166; Director, General Mills, Inc., 9200 Wayzata Boulevard, Minneapolis, MN 55440; Director, Houghton Mifflin Company, One Beacon Street, Boston, MA 02108; Director, Marsh & McLennan Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020; Director, Rockefeller Group, Inc., 1230 Avenue of the Americas, New York, NY 10020; Trustee, Massachusetts General Hospital, Fruit Street, Boston, Ma 02114; McLean Hospital 115 Mill St., Belmont, MA 02178; The Colonial Williamsburg Foundation, Post Office Box 1776, Williamsburg, VA 23187; The Museum of Fine Arts, 465 Huntington Avenue, Boston, MA 02115; WGBH Foundation, 125 Western Avenue, Boston, MA 02134; The Nature Conservancy, Post Office Square Building, 79 Milk St., Suite 300, Boston, MA 02109; Trustee, The Jackson Laboratory, 600 Main St., Bar Harbor, ME Nadine McQueen-Reed Prior to March, 1999, Key Account Executive, Fidelity Assistant Vice President Investments, 130 Tonbridge Road, Hildenborough, Kent, England, TN11 9DZ Thomas V. Reilly Trustee, Knox College, 2 East South St., Galesburg, Managing Director IL 61401 Kevin J. Rogers Prior to September 1998, Managing Director-Portfolio Senior Vice President Manager, Invesco, NY Organization, 1066 Avenue of the Americas, New York, NY 10036 Jeff B. Sacknowitz Investment Associate, Independence Investment Associates, Vice President 53 State St., Boston, MA 02109 Paul D. Scanlon Prior to October 1999, Senior Vice President, Olympus Vice President Healthcare Group, 775 Trapelo Road, Waltham, MA 02452 Saied Simozar Prior to March 1998, Manager, Portfolio Analytics, Senior Vice President DuPont Pension fund Investment, One Righter Parkway, Suite 3200, Wilmington, DE 198903 Justin M. Scott Director, DSI Proprieties (Neja) Ltd., Epping Rd., Managing Director Reydon, Essex CM19 5RD Denise D. Selden Prior to June 1998, Managing Director, Lehman Brothers, Senior Vice President 260 Franklin St., Boston, MA 02110 Jean I. Sievert Prior to October 1998, Vice President, Salomon Smith Senior Vice President Barney, Seven World Trade Center, New York, NY 10048 Gordon H. Silver Trustee, Wang Center for the Performing Arts, 270 Managing Director Tremont St., Boston, MA 02116 David M. Silk Member of Board of Directors, Jobs for Bay State Senior Vice President Graduates, 451 Andover St., Suite 305, North Andover, MA 01845 Steven Spiegel Director, Ultra Diamond and Gold Outlet, 29 East Senior Managing Director Madison St., Suite 1800, Chicago, IL 60602; Director, FACES New York University Medical Center, 550 First Avenue, New York, NY 10016; Trustee, Babson College, One College Drive, Wellesley, MA 02157 Raman Srivastava Prior to July 1999, Market Risk Analyst, Bank of Assistant Vice President Nova Scotia, 20 King St., W., Toronto, ON James St. John Prior to July 1998, Investment Analyst, University of Assistant Vice President Rochester, Rochester, NY 14627 Toshifumi Sugimoto Prior to October 1998, Portfolio Manager, Deputy Senior Vice President General Manager, Nikko Securities Investment Trust & Management, Fixed Income Department, 4-3 Nihonbashi, Hakozakicho, Chuou-ku, Tokyo, Japan, 103-0015 William J. Sullivan Prior to June 1999, Executive Director, SBC Warburg Senior Vice President Dillion Read, 677 Washington Blvd, Stamford, CT, 06901 John C. Talanian Member of Board of Directors, the Japan Society of Managing Director Boston, One Milk Street, Boston, MA 02109 Nicole J. Thorpe Prior to February 1999, President/Owner, Thorpe Assistant Vice President Resources, P.O. Box 1895, Brockton, MA 02301 Robert J. Ullman Prior to September, 1998, Assistant Vice President, Assistant Vice President State Street Bank, Two International Place, Boston, MA 02109 Vincent Vliebergh Prior to May 1998, Senior Consultant, Garnett Consulting, Vice President 30 Monument Square, Concord, MA 01742 Christopher C. Watt Prior to July 1999, Finance Manager, Procter & Vice President Gamble, 1 Procter & Gamble Plaza, Cincinnati, OH 45202 Eric Wetlaufer President and Member of Board of Directors, The Boston Managing Director Security Analysts Society, Inc., 100 Boylston St., Suite 1050, Boston, MA 02110 Edward F. Whalen Member of the Board of Directors, Hockomock Area YMCA, Senior Vice President 300 Elmwood St., North Attleboro, MA 02760 Kelly A. Woolbert Prior to November 1999, Investment Analyst, MetLife Assistant Vice President Investment Services, 99 High Street, Boston, MA 02110 Edmund F. Wright Jr. Prior to July 1998, Controller, CBE Technologies, Assistant Vice President Inc., 50 Redfield St., Boston, MA 02122 Richard P. Wyke Director, Salem YMCA, One Sewall St., Salem, MA 01970 Senior Vice President
Item 27. Principal Underwriter (a) Putnam Mutual Funds Corp. is the principal underwriter for each of the following investment companies, including the Registrant: Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds, Putnam Balanced Retirement Fund, Putnam California Tax Exempt Income Fund, Putnam California Tax Exempt Money Market Fund, Putnam Capital Appreciation Fund, Putnam Convertible Income-Growth Trust, Putnam Diversified Income Trust, Putnam Equity Income Fund, Putnam Europe Growth Fund, Putnam Florida Tax Exempt Income Fund, Putnam Funds Trust, The George Putnam Fund of Boston, Putnam Global Equity Fund, Putnam Global Governmental Income Trust, Putnam Global Growth Fund, Putnam Global Natural Resources Fund, The Putnam Fund for Growth and Income, Putnam Growth and Income Fund II, Putnam Health Sciences Trust, Putnam High Yield Trust, Putnam High Yield Advantage Fund, Putnam Income Fund, Putnam Intermediate U.S. Government Income Fund, Putnam International Growth Fund, Putnam Investment Funds, Putnam Investors Fund, Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam Money Market Fund, Putnam Municipal Income Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam New Opportunities Fund, Putnam New York Tax Exempt Income Fund, Putnam New York Tax Exempt Money Market Fund, Putnam New York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income Fund, Putnam OTC & Emerging Growth Fund, Putnam Pennsylvania Tax Exempt Income Fund, Putnam Preferred Income Fund, Putnam Strategic Income Fund, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Tax-Free Income Trust, Putnam Tax Smart Funds Trust, Putnam U.S. Government Income Trust, Putnam Utilities Growth and Income Fund, Putnam Variable Trust, Putnam Vista Fund, Putnam Voyager Fund, Putnam Voyager Fund II. (b) The directors and officers of the Registrant's principal underwriter are listed below. None of the officers are officers of the Registrant except: Name Position and Offices with Registrant Richard Monaghan Vice President George Putnam Chairman and President Gordon Silver Vice President The principal business address of each person is One Post Office Square, Boston, MA 02109: Name Position and Offices with Underwriter - ----------------------------------------------------------------------------- Adduci,John V. Vice President Alberts,Richard W. Asst. Vice President Alden,Donald F. Vice President Alexander,Michael R. Vice President Alpaugh,Christopher S. Vice President Altomare,Mario P. Vice President Amisano,Paulette C. Vice President Arends,Michael K. Senior Vice President Armon,Lori E. Asst. Vice President Asher,Steven E. Senior Vice President Avery,Scott A. Senior Vice President Aymond,Christian E. Senior Vice President Aymond,Colin C. Vice President Babcock III,Warren W. Senior Vice President Baltimore,Mark H.W. Asst. Vice President Barlow,Jane Asst. Vice President Barnett,William E. Asst. Vice President Barrett,Thomas Vice President Battit,Suzanne J Vice President Beatty,Steven M. Senior Vice President Bent,John J. Senior Vice President Beringer,Thomas C. Vice President Boester,Eric C. Asst. Vice President Boneparth,John F. Managing Director Bouchard,Keith R. Senior Vice President Boudreau,Stephen T. Asst. Vice President Bradford Jr.,Linwood E. Senior Vice President Bresnahan,Leslee R. Managing Director Brockelman,James D. Senior Vice President Brookman,Joel S. Vice President Brown,Timothy K. Senior Vice President Buckner,Gail D. Senior Vice President Burnham,David N. Vice President Burrill,Gregory J. Vice President Buzzell,Paul F. Asst. Vice President Cabana,Susan D. Vice President Cartwright,Patricia A. Asst. Vice President Casey,David M. Vice President Castle Jr.,James R. Senior Vice President Chamieh,Mark Vice President Chapman,Frederick Vice President Chapman,Thomas E. Vice President Chase,Mary Claire Senior Vice President Chrostowski,Louis F. Senior Vice President Church,Daniel J. Vice President Clark,Richard B. Senior Vice President Clermont,Mary Vice President Clinton,John C. Asst. Vice President Cohen,Jeff M. Asst. Vice President Collman,Kathleen M. Sr Managing Director Commane,Karen L. Asst. Vice President Coneeny,Mark L. Senior Vice President Connelly,Donald A. Senior Vice President Connolly,William T. Managing Director Cooper,John S. Vice President Corbett,Dennis Vice President Corvinus,F. Nicholas Senior Vice President Cote,Marie C. Asst. Vice President Cotto,Stephen P Asst. Vice President Cotton,Rick Vice President Crane III,George H. Senior Vice President Cristo,Chad H. Vice President Critchell Jr.,D.Alan Asst. Vice President Curran,Peter J. Senior Vice President Dahill,Jessica E. Vice President Daly,Kenneth L. Managing Director Daylor,Donna M. Vice President Days,Nancy M. Asst. Vice President Deluse,Laura R. Asst. Vice President deMont,Lisa M. Vice President Diaz,Roger Vice President Dirstine,Michael T. Vice President DiStasio,Karen E. Vice President Divney,Kevin M. Senior Vice President Dolan,Michael G. Vice President Donaldson,Scott M. Vice President Dougherty,Thomas Vice President Durbin,Emily J. Vice President Durkee,Christine Asst. Vice President Edlin,David B. Managing Director Eidelberg,Kathleen E. Asst. Vice President Elder,Michael D. Vice President Emhof,Joseph R. Vice President English,James M. Senior Vice President Esposito,Vincent Managing Director Favaloro,Beth A. Vice President Feldman,Susan H. Senior Vice President Fisher,C. Nancy Managing Director Fishman,Mitchell B. Senior Vice President Fiumara,Joseph C. Vice President Flaherty,Patricia C. Senior Vice President Fleisher,Kate Vice President Fleming,Ellen E. Asst. Vice President Foley,Timothy P. Vice President Foran,Carey L. Vice President Frost,Karen T. Senior Vice President Gage,Matthew R. Asst. Vice President Gaudette,Marjorie B. Vice President Gibbs,Stephen C. Vice President Gindel,Caroline E. Asst. Vice President Goodfellow,Mark D. Vice President Goodman,Robert Managing Director Gould,Carol J. Asst. Vice President Grace,Linda K. Vice President Grant,Mitchell T. Managing Director Graviere,Patrice Senior Vice President Grey,Eric M. Vice President Grossberg,Jill Asst. Vice President Grove,Denise Vice President Guerin,Donnalee Vice President Hachey,Andrew J Asst. Vice President Hadley,Christopher Asst. Vice President Halloran,James E. Vice President Halloran,Thomas W. Senior Vice President Hansen,Christine M. Asst. Vice President Harring,Linda Senior Vice President Harrington,Shannon W. Vice President Hartig,Robert Vice President Hartigan,Craig W. Vice President Hartley,Deborah M. Asst. Vice President Hayes-Castro,Deanna R. Vice President Hedstrom,Gayle A. Asst. Vice President Heller,Kim G. Asst. Vice President Holmes,Maureen A. Vice President Hooley Jr.,Daniel F. Vice President Horwitz,Jonathan S. Senior Vice President Hotchkiss,Michael F. Senior Vice President Howes,Douglas E. Asst. Vice President Hoyt,Paula J. Asst. Vice President Hurley,William J. Managing Director & CFO Hutcherson,Eric A. Asst. Vice President Hutchins,Robert B. Vice President Iino,Yoshiro Vice President Jacobsen,Dwight D. Managing Director Kaminsky,Gregory C. Vice President Kanwal,Amrit Managing Director Kapinos,Peter J. Vice President Keleher,Kevin J. Asst. Vice President Kelley,Brian J. Vice President Kelly,David Vice President Kennedy,Alicia C. Asst. Vice President Kinsman,Anne Senior Vice President Kircher,Richard T. Asst. Vice President Kirk,Deborah H. Senior Vice President Koontz,Jill A. Senior Vice President Kringdon,Joseph D. Senior Vice President Landers,Bruce M. Vice President Lane,Linda L. Asst. Vice President LaPierre,Christopher W Asst. Vice President Lathrop,James D. Senior Vice President Lawlor,Stephanie T. Asst. Vice President Leary,Joan M. Vice President Ledbetter,Charles C. Vice President Leddy,Maura W. Vice President Leipsitz,Margaret Asst. Vice President Lemire,Kevin Vice President Levy,Eric S. Senior Vice President Levy,Norman S. Vice President Lewandowski Jr.,Edward V. Vice President Lewandowski,Edward V. Senior Vice President Lewis,Paul Asst. Vice President Li,Mei Asst. Vice President Lieberman,Samuel L. Senior Vice President Lifsitz,David M. Vice President Lilien,David R. Vice President Link,Christopher H. Asst. Vice President Linquata,Louis K. Asst. Vice President Litant,Lisa M. Vice President Lockwood,Maura A. Senior Vice President Loew,Christopher R. Asst. Vice President Lohmeier,Andrew Asst. Vice President Lohr,Mark G. Managing Director Lomba,Rufino R. Senior Vice President Lord,Caroline F. Asst. Vice President Lucey,Robert F. Director Lucey,Thomas J. Director Luskin,James M. Asst. Vice President Lyons,Robert F. Asst. Vice President MacDonald,Richard A. Senior Vice President Maloof,Renee L. Asst. Vice President Mancini,Dana Asst. Vice President Mancini,Jane M. Managing Director Manthorne,Heather M. Asst. Vice President Maravel,Alexi A. Asst. Vice President Martens,Erwin W. Managing Director Maxwell,Scott M. Managing Director McAvoy,Bridget Vice President McCafferty,Karen A. Vice President McCarthy,Anne B. Asst. Vice President McConville,Paul D. Senior Vice President McCracken,Brian Asst. Vice President McCutcheon,Bruce A Senior Vice President McDermott,Robert J. Vice President McKenna,Mark J. Senior Vice President McNamara,Laura Vice President McNamee,Mary G. Vice President Meagher,Dorothy B. Vice President Mehta,Ashok Vice President Metelmann,Claye A. Vice President Michejda,Marek A. Vice President Miller,Bart D. Senior Vice President Miller,Gregory T. Vice President Miller,Jeffrey M. Managing Director Mills,Ronald K. Vice President Mills,Stacy M. Vice President Minsk,Judith Asst. Vice President Monaghan,Richard A. Director Monahan,Kimberly A. Vice President Moody,Paul R. Vice President Moret,Mitchell L. Senior Vice President Morey,John P. Senior Vice President Mosher,Barry L. Vice President Mullen,Donald E. Senior Vice President Munson,Brian D. Vice President Murphy Jr.,Kenneth W. Asst. Vice President Murray,Brendan R. Senior Vice President Nadherny,Robert Senior Vice President Nagashima,Toshio Managing Director Natale,Lisa A. Asst. Vice President Nauen,Kimberly Page Vice President Neary,Ellen R. Vice President Neher,Stacey P. Asst. Vice President Nelson,Andrew E. Vice President Newell,Amy Jane Vice President Nickodemus,John P. Senior Vice President Nickse,Gail A. Asst. Vice President Nicolazzo,Jon C. Vice President Nisbet,M. Julia Asst. Vice President O'Brien,Lois C. Vice President O'Brien,Nancy M. Asst. Vice President O'Connell,Gayle M. Vice President O'Connor,Brian P. Vice President O'Connor,Matthew P. Asst. Vice President O'Day,Teresa S. Vice President Orr,Kevin Vice President Palmer,Patrick J. Vice President Pampliega,Carlos Vice President Panek,Raymond S. Asst. Vice President Parker,Michael T. Asst. Vice President Parr,Cynthia O. Senior Vice President Patton,Robert J. Vice President Perkins,Erin M. Asst. Vice President Peters,Jeffrey F. Managing Director Petitti,Joseph P. Vice President Petralia,Randolph S. Senior Vice President Phoenix,John G. Senior Vice President Phoenix,Joseph Senior Vice President Pilibosian,George J. Vice President Plapinger,Keith Senior Vice President Powers,Brian S. Asst. Vice President Present,Howard B. Senior Vice President Puddle,David G. Senior Vice President Pulkrabek,Scott M. Vice President Putnam,George Director Quinn,Lisa F. Asst. Vice President Reed,Nadine McQueen Asst. Vice President Rider,Wendy A. Vice President Riley,Megan G. Asst. Vice President Rodammer,Kris Senior Vice President Rodts,Jennifer M. Asst. Vice President Rogers,Deborah A. Vice President Rowe,Robert B. Vice President Ryan,Carolyn M. Asst. Vice President Ryan,Deborah A. Vice President Ryan,William M. Vice President Saccocia,Cynthia M Asst. Vice President Saunders,Catherine A. Senior Vice President Saur,Karl W. Vice President Scanlon,Michael M. Vice President Schlosberg,Alan R. Asst. Vice President Schofield,Shannon D. Senior Vice President Schultz,Mitchell D. Managing Director Scordato,Christine A. Senior Vice President Segers,Elizabeth R. Senior Vice President Selden,Denise D. Senior Vice President Shamburg,John B. Vice President Shanahan,Christopher W. Vice President Sharpless,Kathy G. Managing Director Shelby,Robert Vice President Short,Jonathan D. Senior Vice President Siebold,Mark J. Asst. Vice President Siemon Jr.,Frank E. Asst. Vice President Silva,J. Paul Vice President Silver,Gordon H. Sr Managing Director Skistimas Jr,John J. Vice President Smeglin,Maryann C. Asst. Vice President Solan,Meenakshi S. Asst. Vice President Soule,Scott W. Asst. Vice President Spiegel,Steven Sr Managing Director Sprague,David L. Vice President Starishevsky,Daniel Vice President Starr,Loren M. Managing Director Statuta,Jason M. Vice President Steinberg,Lauren B. Asst. Vice President Stern,Derek A. Asst. Vice President Stickney,Paul R. Senior Vice President Strumpf,Casey Senior Vice President Sugimoto,Toshifumi Senior Vice President Sullivan,Brian L. Senior Vice President Sullivan,Donna G Vice President Sullivan,Elaine M. Senior Vice President Sullivan,Maryann Asst. Vice President Suzuki,Toshimi Senior Vice President Sweeney,Janet C. Senior Vice President Talanian,John C. Managing Director Tanner,B Iris Vice President Tavares,April M. Asst. Vice President Telling,John R. Senior Vice President Tibbetts,Richard B. Managing Director Tirado,Patrice M. Vice President Troped Blacker,Bonnie Senior Vice President Upham,Scott E. Vice President Veale,David B. Asst. Vice President Wallack,William F. Asst. Vice President Walsh,Stephen M. Vice President Warde,Elizabeth A. Asst. Vice President Washburn,Andrew O. Vice President Waters,Mitchell J. Vice President Watt,Christopher C. Vice President Welch III,William A. Asst. Vice President Whalen,Brian Vice President Whalen,Edward F. Senior Vice President Whitaker,J. Greg Vice President White,Patrick J. Asst. Vice President Wolfson,Jane Senior Vice President Woodlock,Ronald J. Asst. Vice President Woolbert,Kelly A. Asst. Vice President Woolverton,William H. Managing Director Wright Jr.,Edmund F. Asst. Vice President Yan,Yanfang Vice President Young,Jason P. Vice President Zografos,Laura J. Senior Vice President Zukowski,Virginia A. Senior Vice President Item 28. Location of Accounts and Records Persons maintaining physical possession of accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are Registrant's Associate Clerk, Judith Cohen; Registrant's investment adviser, Putnam Investment Management, Inc.; Registrant's principal underwriter, Putnam Mutual Funds Corp.; Registrant's custodian, Putnam Fiduciary Trust Company ("PFTC"); and Registrant's transfer and dividend disbursing agent, Putnam Investor Services, a division of PFTC. The address of the Associate Clerk, investment adviser, principal underwriter, custodian and transfer and dividend disbursing agent is One Post Office Square, Boston, Massachusetts 02109. Item 29. Management Services None. Item 30. Undertakings None. CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Prospectuses and Statement of Additional Information constituting parts of Post-Effective Amendment No. 24 to the Registration Statement of Putnam Variable Trust on Form N-1A (File No. 33-17486) of our report dated February 15, 2000, on our audit of the financial statements and financial highlights of the Trust, which report is included in the Annual Report for Putnam Variable Trust for the year ended December 31, 1999 which is incorporated by reference into the Registration Statement. We also consent to the references to our firm under the caption "Independent Accountants and Financial Statements" in the Statement of Additional Information and under the heading "financial highlights" in such Prospectuses. PriceWaterhouseCoopers LLP Boston, Massachusetts April 27, 2000 NOTICE A copy of the Agreement and Declaration of Trust of Putnam Variable Trust is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Registrant. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the fund certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston, and The Commonwealth of Massachusetts, on the 28th day of April, 2000. Putnam Variable Trust By: Gordon H. Silver, Vice President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement of Putnam Variable Trust has been signed below by the following persons in the capacities and on the dates indicated: Signature Title George Putnam President and Chairman of the Board; Principal Executive Officer; Trustee John D. Hughes Senior Vice President; Treasurer and Principal Financial Officer Paul G. Bucuvalas Assistant Treasurer and Principal Accounting Officer Jameson A. Baxter Trustee Hans H. Estin Trustee John A. Hill Trustee Ronald J. Jackson Trustee Paul L. Joskow Trustee Elizabeth T. Kennan Trustee Lawrence J. Lasser Trustee John H. Mullin, III Trustee Robert E. Patterson Trustee William F. Pounds Trustee George Putnam, III Trustee A.J.C. Smith Trustee W. Thomas Stephens Trustee W. Nicholas Thorndike Trustee By: Gordon H. Silver, as Attorney-in-Fact April 28, 2000 Exhibit Index 13a. Class IB Distribution Plan and Agreement -- Exhibit 1. 15a. The Putnam Funds Code of Ethics - Exhibit 2. 15b. Putnam Investments Code of Ethics - Exhibit 3. PUTNAM VARIABLE TRUST FORM N-1A PART C OTHER INFORMATION Item 23. Exhibits 1. Agreement and Declaration of Trust dated September 24, 1987, as revised January 1, 1997 -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement. 2. By-Laws, as amended through January 30, 1997 -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement. 3a. Portions of Agreement and Declaration of Trust Relating to Shareholders' Rights -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement. 3b. Portions of By-Laws Relating to Shareholders' Rights -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement. 4. Management Contract dated October 2, 1987, as supplemented March 2, 1990, as further supplemented February 27, 1992, July 9, 1993, April 5, 1994, June 2, 1994, April 7, 1995, July 13, 1995, July 11, 1996, December 20, 1996, February 6, 1998, July 10, 1998, March 4, 1999, July 1, 1999 and November 8, 1999 -- Incorporated by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement. 5a. Distributor's Contract dated May 6, 1994 -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. 5b. Form of Specimen Dealer Sales Contract -- Incorporated by reference to Post-Effective Amendment No. 11 to the Registrant's Registration Statement. 5c. Form of Specimen Financial Institution Sales Contract -- Incorporated by reference to Post-Effective Amendment No. 11 to the Registrant's Registration Statement. 6. Not applicable. 7. Custodian Agreement with Putnam Fiduciary Trust Company dated May 3, 1991, as amended July 13, 1992 -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. 8. Investor Servicing Agreement dated June 3, 1991 with Putnam Fiduciary Trust Company -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. 9. Opinion of Ropes & Gray, including consent -- Incorporated by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement. 10. Not applicable. 11. Not applicable. 12. Investment Letters from Putnam Investment Management, Inc. to the Registrant -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. 13a. Class IB Distribution Plan and Agreement -- Exhibit 1. 13b. Form of Specimen Dealer Service Agreement -- Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement. 13c. Form of Specimen Financial Institution Service Agreement -- Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement. 14. Rule 18f-3(d) Plan -- Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement. 15a. The Putnam Funds Code of Ethics - Exhibit 2. 15b. Putnam Investments Code of Ethics - Exhibit 3. Item 24. Persons Controlled by or under Common Control with the Fund None. Item 25. Indemnification The information required by this item is incorporated by reference to the Registrant's Initial Registration Statement on Form N-1A under the Investment Company Act of 1940 (File No. 811-5346). Item 26. Business and Other Connections of Investment Adviser Except as set forth below, the directors and officers of the Registrant's investment adviser have been engaged during the past two fiscal years in no business, vocation or employment of a substantial nature other than as directors or officers of the investment adviser or certain of its corporate affiliates. Certain officers of the investment adviser serve as officers of some or all of the Putnam funds. The address of the investment adviser, its corporate affiliates and the Putnam Funds is one Post Office Square, Boston, Massachusetts 02109.
Name Non-Putnam business and other connections - ---- ----------------------------------------- Pankaj Agrrawal Prior to April 1998, Quantitative Analyst, Vestek Vice President Systems, 388 Market St., Suite 700, San Francisco, CA 94111 Lauren Allansmith Prior to August 1999, Analyst, Loomis Sayles, Senior Vice President One Financial Center, Boston, MA 02111 Blake Anderson Trustee, Salem Female Charitable Society, Managing Director Salem MA 01970 Paul A. Aston Prior to June, 1999, Senior Quantitative Vice President Strategist, Santander Global Advisors, 28 State Street, Boston, MA 02109 Jane N. Barlow Prior to January 2000, Office Management, Assistant Vice President Distinction Resourcing Limited, 2/4 Great Eastern Street, London, EC2A 3NT; Prior to January 1999, Office Manager, D.E. Shaw Securities International, Finsbury Dials, 20 Finsbury Street, London, EC3M Robert R. Beck Director, Charles Bridge Publishing, 85 Main St., Senior Vice President Watertown, MA 02172; Board of Overseers, Beth Israel Deaconess Medical Center, 330 Brookline Ave., Boston, MA 02215 Kirsten A. Bjerklie Prior to June 1998, Assistant Vice President, Assistant Vice President Scudder, Stevens & Clark, Two International Place, Boston, MA 02110 Richard L. Block Prior to June 1998, Principal, Head International Senior Vice President Equity Trader, Morgan Stanley Asset Management, 1221 Avenue of the Americas, New York, NY 10036 Rob A. Bloemker Prior to September 1999, Managing Director, Senior Vice President Lehman Brothers, 555 California St., 30th floor, San Francisco, CA 94104 Claudio Brocado Prior to August 1999, independent consultant by Vice President Stires, O'Donnell & Co. 12 East 44th St., New York, NY 10017; Prior to January 1999, independent consultant by Coast Partners, 601 California St., San Francisco, CA 94108; Prior to November 1997, Head of Latin America Business Development, Dresdner RCM Global Investors, Four Embarcadero Center, San Francisco, CA 94111 Anna Bulkovshteyn Prior to July 1999, Quantitative Analyst, Sun Life Assistant Vice President Investment Management, 200 King Street West, Toronto, Ontario M5H 3T4 Canada David N. Burnham Prior to July 1998, Director - Finance, Fidelity Vice President Investments, 82 Devonshire Street, Boston, MA 02109 Richard P. Cervone Prior to August 1998, Equity Analyst, Loomis, Vice President Sayles & Co., One Financial Center, Boston, MA, 02216. Christopher Ceruolo Prior to July 1998, Associate, Ropes & Gray, Assistant Vice President One International Place, Boston, MA 02110 Mark Chameih Prior to May 1999, Vice President, Chase Manhattan, Vice President 125 London Wall, London, UK Bihua Chen Prior to July 1998, Research Associate, ProNeuron, Assistant Vice President Inc., 1531 E. Jefferson St., Rockville, MD 20847 C. Beth Cotner Director, The Lyric Stage Theater, 140 Clarendon St., Senior Vice President Boston, MA 02116 Stephen P. Cotto Prior to March 1998, Facilities Supervisor, Assistant Vice President Unicco Service Co., 4 Copley Place, Boston, MA 02116 Lindsey L. Curley Prior to June 1999, Portfolio Analyst, Standish, Assistant Vice President Ayer & Wood, Inc., One Financial Center, Boston, MA 02110. Prior to March, 1998,. Fixed-Income Research Assistant, Invesco Management & Research, Inc., 101 Federal St., Boston, MA 02110 Joseph F. Cushing Prior to June 1998, Investment Analyst - Fixed Assistant Vice President Income, Metropolitan Life Insurance Company, 334 Madison Avenue, Convent Station, NJ 07961 John R.S. Cutler Member, Burst Media, L.L.C., 10 New England Vice President Executive Park, Burlington, MA 01803 Kenneth Daly President, Andover River Rd. TMA, River Road Managing Director Transportation Management Association, 7 Shattuck Rd., Andover, MA 01810 Donna M. Daylor Prior to April 1998, Director of Training, Vice President UniCare Life & Health Ins. Co., 1350 Main St., Springfield, MA John C. Delano Prior to July 1998, Senior Foreign Exchange Assistant Vice President Trader, Nationsbank, 233 So. Wacker Drive, Chicago, IL 60606 Ralph C. Derbyshire Board Member, MSPCC, 399 Boylston St., Senior Vice President Boston, MA; Board Member, Winchester After School Program, Skillings Rd., Winchester, MA Stephen P. Dexter Prior to June 1999, Senior Vice President and Senior Vice President Senior Portfolio Manger, Scudder Kemper, Inc. One International Place, Boston, MA Michael G. Dolan Chairman-Finance Council, St. Mary's Parish, Assistant Vice President 44 Myrtle St., Melrose, MA 02176; Member, School Advisory Board, St. Mary's School, 44 Myrtle St., Melrose, MA 02176 Edward Driscoll Prior to September 1999, Equity Trader, Fidelity Vice President Research and Management, 82 Devonshire St., Boston, MA 02109 Douglas Dunn Prior to November 1999, Director of Research, Vice President Brandywine Asset Management, 381 Brinton Lake Road, Thornton, PA 19317; Prior to May 1998, Quantitative Analyst, Westpeak Investment Advisors, 1011 Walnut St., Suite 400, Boulder, CO 80303 Emily Durbin Board of Directors, Family Service, Inc., Vice President Lawrence, MA 01840 Karnig H. Durgarian Board Member, EBRI, Suite 600, 2121 K St., Managing Director N.W., Washington, DC 20037-1896. Trustee, American Assembly, 122 C. St., N.W., Suite 350, Washington, DC 20001 Christine Durkee Prior to June 1998, Project Manager, Foundation Assistant Vice President Technologies, Inc., 78 4th Ave., Waltham, MA 02451 Nathan Eigerman Trustee, Flower Hill Trust, 298 Marlborough St., Senior Vice President #4, Boston, MA 02116 Tony H. Elavia Prior to September 1999, Executive Vice President, Senior Vice President Voyageur Asset Management, 90 S. 7th Street, Minneapolis, MN 55402 Lisa V. Emerick Prior to September 1998, Asian Sales Trader, Vice President BWZ Securities Asia, Inc., Citibank Tower, 3 Garden Road, Hong Kong Irene M. Esteves Board of Director Member, American Management Managing Director Association Finance council, 1601 Broadway, New York, NY; Board of Director Member, First Night Boston, 20 Park Plaza, Suite 927, Boston, MA; Board of Director Member, SC Johnson Commercialmarkets, 8310 16th St., Stutevant, WI 53177; Board of Director Member, Massachusetts Taxpayers Foundation, 24 Province St., Boston, MA; Board of Director Member, Mrs. Bairds Bakeries, 515 Jones St., Suite 200, Fort Worth, Texas 76102 Ian Ferguson Trustee, Park School, 171 Goddard Avenue, Brookline, Senior Managing Director MA 02146 John Ferry Prior to September 1998, Vice President, Vice President Scudder Kemper Investments, 101 California St., San Francisco, CA 94111. Peter M. Fleisher Prior to July 1999, Senior Vice President, Fleet Senior Vice President National Bank, 75 State Street, Boston, MA 02109 Henrietta Fraser Prior to October, 1998, Manager, Fleming Investment Vice President Management, 25 Copthall Ave., London EC2R 7DR Matthew R. Gage Prior to December, 1999, Audit Manager, Ernst Assistant Vice President & Young LLP, 200 Clarendon St., Boston, MA 02116 Stephen C. Gibbs Prior to June 1998, Senior Financial Analyst, Vice President Fidelity Investments, 82 Devonshire St., Boston, MA 02109 Ken S. Gordon Prior to July, 1998, Vice President, Union Bank Vice President of Switzerland, 2-2-2 Otemachi, Chiyoda-Ku, Tokyo, Japan Andrew Graham Prior to October 1999, Fund Manager, Scottish Senior Vice President Widows Investment Management, Port Hamilton, 67 Morrison St., Edinburgh Scotland J. Peter Grant Trustee, The Dover Church, Dover, MA 02030 Senior Vice President Patrice Graviere Prior to March 1998, Regional Director for Latin Senior Vice President America, MFS International, LTD, Buenos Aires, Brazil Paul E. Haagensen Director, Haagensen Research Foundation, 630 Senior Vice President West 168th St., New York, NY 10032 Andrew J. Hachey Prior to July 1998. Associate, Skadden, Arps, Assistant Vice President Slate, Meagher & Flom, LLP, One Beacon Street, Boston, MA 02108 David E. Hamlin Prior to August 1998, Principal, The Vanguard Group, Senior Vice President 100 Vanguard Blvd., Valley Forge, PA 19355 Deborah R. Healey Corporator, New England Baptist Hospital, 125 Senior Vice President Parker Hill Ave., Boston, MA 02120; Director, NEB Enterprises, 125 Parket Hill Ave., Boston, MA 02120 Kim Heller Prior to April 1998, Senior Human Resources Assistant Vice President Specialist, Fidelity Investments, 82 Devonshire St., Boston, MA 02109 Jonathan S. Horwitz Prior to August 1998, Vice President - Corporate Senior Vice President Planning, Keystone Group, 200 Berkely St., Boston, MA 02116 Ronald Hua Prior to August 1999, Quantitative Analyst, Vice President Fidelity Investments, 82 Devonshire St., Boston, MA 02109 Amrit Kanwal Prior to August 1999, Vice President, Corporate Managing Director Development and Strategy, Sequa Corporation, 200 Park Avenue, New York, NY 10166 Jeffrey Kaufman Prior to July 1998, Vice President and Portfolio Senior Vice President Manager, MFS Investment Management, 500 Boylston St., Boston, MA 02116 Ira C. Kalus-Bystricky Prior to March 1998, Consultant, Arthur D. Little, Vice President 25 Acorn Park, Cambridge, MA 02114 Hiroshi Kato Prior to August 1998, Manager, Senior Analyst, Vice President Daiwa Institute of Research, 15-6 Fuyuki, Koutou-ku, Tokyo, 135-8460 Kevin J. Keleher Prior to August 1998, Support Manager, Digital Assistant Vice President Equipment Co., 111 Powder Mill Rd., Maynard, MA 01754 Richard T. Kircher Prior to April 1998, Assistant Vice President and Assistant Vice President Compliance Manager, T. Rowe Price Associates, Inc., 100 E. Pratt Street, Baltimore, MD 21202 Deborah F. Kuenstner Director, Board of Pensions, Presbyterian Church, Managing Director 1001 Market St., Philadelphia, PA Lawrence J. Lasser Director, Marsh & McLennan Companies, Inc., 1221 Avenue President, Director and Chief Executive of the Americas, New York, NY 10020; Board of Governors and Executive Committee, Investment Company Institute, 1401 H. St., N.W. Suite 1200, Washington, DC 20005; Board of Overseers, Museum of Fine Arts, 465 Huntington, Ave., Boston, MA 02115; Trustee, Beth Israel Deaconess Medical Center, 330 Brookline Ave., Boston, MA; Member of the Council on Foreign Relations, 58 East 68th St., New York, NY 10021; Member of the Board of Directors of the United Way of Massachusetts Bay, 245 Summer St., Suite 1401, Boston, MA 02110; Trustee of the Vineyard Open Land Foundation, RFD Box 319X, Vineyard Haven, MA 02568 Gordon R. Lawrence Prior to July 1999, summer associate, J.P. Morgan Investment Assistant Vice President Management, 522 Fifth Ave., New York, NY 10009, Prior to July, 1997, Associate Lehman Brothers, 3 World Financial Center, New York, NY 10285 Maura W. Leddy Prior to October 1998, Bookkeeper, Davol/Taunton Printing, Vice President 330 Winthrop Street Taunton, MA 02780. Richard Leibovitch Prior to February 1999, Managing Director, J.P. Morgan, Managing Director 60 Wall St., New York, NY 10260 Mark G. Lohr Prior to March 1998, Senior Vice President, Fidelity Managing Director Investmetns, 82 Devonshire St., Boston, MA 02109 Noboru Machida Prior to October 1998, Senior Analyst, The Nikko Vice President Research Center Ltd., Nihonbashi Kayabacho, Chuou-ku Tokyo, Japan 103 Kevin Maloney Institutional Director, Financial Management Association, Managing Director University of South Florida, College of Business Administration, Suite 3331, Tampa, FL 33620 Sarah Marshall Prior to August 1999, Associate, McKinsey & Company, Vice President Inc., 55 E. 52nd St., New York, NY 10010 Paul McHugh Prior to June, 1998, Principal, Robertson Stephens & Vice President Company, One International Place, Boston, MA 02110 Nicholas J. Melhuish Prior to August 1999, Assistant Director of Schroder Vice President Investment Management, 31 Gresham St., London,England ECZV8AQ Krishna Memani Prior to September 1998, Principal, Morgan Stanley & Co., Managing Director 1585 Broadway, New York, NY 10039 Peter V. Meyer Prior to July 1999, Conseco Capital Management, Vice President 11825 N. Pennsylvania Ave., Carmel, IN 46032 Stacy M. Mills Prior to April 1999, Vice President, Manager-Financial Vice President Accounting and Internal Reporting, State Street Corporation, 225 Franklin Street, Boston, MA 02110 Reena Mithal Prior to July 1999, Vice President, Deutsche Bank Vice President Securities, 31 W. 52nd Street., New York, NY 10019 Jeanne L. Mockard Trustee, The Bryn Mawr School, 109, W. Melrose Senior Vice President Avenue, Baltimore, MA 21210 Dirk Morris Prior to October 1999, Vice President-Global Strategist, Managing Director Bankers Trust, Chifley Tower, Sydney NSW 2000 Australia Donald E. Mullin Corporate Representative and Board Member, Delta Dental Senior Vice President Plan of Massachusetts, 10 Presidents Landing, P.O. Box 94104, Medford, MA 02155 Jennifer P. Murphy Prior to September 1999, Managing Director, Morgan Managing Director Stanley, 1585 Broadway, New York, NY 10036 Kenneth W. Murphy, Jr. Prior to May 1998, Senior Financial Analyst, Merck & Assistant Vice President Co., Inc., One Merck Drive, Whitehouse Station, NJ 08889 Philip M. Murphy Prior to June 1999, Marketing and Client Relations Assistant Vice President Association, GE Investments, 3003 Summer Street, Stamford, CT 06904. Prior to March 1998, Analyst, McLagan Partners, Inc., Four Stamford Plaza, Suite 400, 107 Elm Street, Stamford, CT 06902 Toshio Nagashima Prior to July 1999, General Manager, Product Dept., Managing Director Investment Trust Preparation, Sumitomo Bank, 1-3-2- Marunouchi, Chiyoda-ku, Tokyo 100-0005 Japan Maria Julia Nisbet Prior to May 1999, Project Manager, Cisalpina Assistant Vice President Gestioni, Via Boito, 10, Milan, Italy 20121 Nancy O'Brien Prior to September 1999, Manager Corporate Disbursements, Assistant Vice President Fidelity Investments, 82 Devonshire St., Boston, MA 02129 Teresa O'Day Prior to April 1999, Operations Manager, Compaq Computer Vice President Corp., 334 South Street, Shrewsbury, MA 01545 Stephen M. Oristaglio Prior to July 1998, Managing Director Global Head Senior Managing Director of Fixed Income, Swiss Bank Corp/UBS Organization, 222 Broadway, New York, NY 10022 Carlos Pampliega Prior to March 1998, Regional Manager, Massachusetts Vice President Financial Services, 500 Boylston St., Boston, MA 02116 Jeffrey F. Peters Prior to June 1999, Principal, McKinsey & Company, Managing Director 75 Park Plaza, Boston, MA 02116 Joseph P. Petitti Prior to May 1998, Senior Treasury Analyst, Liberty Vice President Mutual Insurance Co., 175 Berkely St., Boston, MA 02122 Randolph Petralia Prior to May 1998, First Vice President, Lehman Senior Vice President Brothers, 3 World Financial Center, New York, NY 10285 Keith Plapinger Chairman and Trustee, Advent School, 17 Brimmer St., Vice President Boston, MA 02108 Lisa M. Platia Prior toDecember 1999, Vice President, Windham Assistant Vice President Capital Management, 5 Revere St., Cambridge MA 02138 James A. Polk Prior to June 1998, Investment Officer, Massachusetts Vice President Financial Services, 500 Boylston St., Boston, MA 02116 Charles E. Porter Trustee, Anatolia College, 130 Bowdoin St., Suite 1201, Executive Vice President Boston, MA 02108; Governor, Handel & Hayden Society, Horticulture Hall, 300 Massachusetts Ave., Boston, MA 02115 Quintin R.S. Price Prior to December 1998, Corporate Development Director, Managing Director The Boots Company PLC, Group Headquarters, Nottingham NG2 3AA England; Prior to June 1998, Managing Director of Pan European Equities and Global Head of Research, HSBC Investment Bank PLC, Thames Exchange, 10 Queen St Place, London, EC4R 1BL George Putnam Chairman and Director, Putnam Mutual Funds Corp.; Chairman and Director Director, The Boston Company, Inc., One Boston Place, Boston, MA 02108; Director, Boston Safe Deposit and Trust Company, One Boston Place, Boston, MA 02108; Director, Freeport-McMoRan, Inc., 200 Park Avenue, New York, NY 10166; Director, General Mills, Inc., 9200 Wayzata Boulevard, Minneapolis, MN 55440; Director, Houghton Mifflin Company, One Beacon Street, Boston, MA 02108; Director, Marsh & McLennan Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020; Director, Rockefeller Group, Inc., 1230 Avenue of the Americas, New York, NY 10020; Trustee, Massachusetts General Hospital, Fruit Street, Boston, Ma 02114; McLean Hospital 115 Mill St., Belmont, MA 02178; The Colonial Williamsburg Foundation, Post Office Box 1776, Williamsburg, VA 23187; The Museum of Fine Arts, 465 Huntington Avenue, Boston, MA 02115; WGBH Foundation, 125 Western Avenue, Boston, MA 02134; The Nature Conservancy, Post Office Square Building, 79 Milk St., Suite 300, Boston, MA 02109; Trustee, The Jackson Laboratory, 600 Main St., Bar Harbor, ME Nadine McQueen-Reed Prior to March, 1999, Key Account Executive, Fidelity Assistant Vice President Investments, 130 Tonbridge Road, Hildenborough, Kent, England, TN11 9DZ Thomas V. Reilly Trustee, Knox College, 2 East South St., Galesburg, Managing Director IL 61401 Kevin J. Rogers Prior to September 1998, Managing Director-Portfolio Senior Vice President Manager, Invesco, NY Organization, 1066 Avenue of the Americas, New York, NY 10036 Jeff B. Sacknowitz Investment Associate, Independence Investment Associates, Vice President 53 State St., Boston, MA 02109 Paul D. Scanlon Prior to October 1999, Senior Vice President, Olympus Vice President Healthcare Group, 775 Trapelo Road, Waltham, MA 02452 Saied Simozar Prior to March 1998, Manager, Portfolio Analytics, Senior Vice President DuPont Pension fund Investment, One Righter Parkway, Suite 3200, Wilmington, DE 198903 Justin M. Scott Director, DSI Proprieties (Neja) Ltd., Epping Rd., Managing Director Reydon, Essex CM19 5RD Denise D. Selden Prior to June 1998, Managing Director, Lehman Brothers, Senior Vice President 260 Franklin St., Boston, MA 02110 Jean I. Sievert Prior to October 1998, Vice President, Salomon Smith Senior Vice President Barney, Seven World Trade Center, New York, NY 10048 Gordon H. Silver Trustee, Wang Center for the Performing Arts, 270 Managing Director Tremont St., Boston, MA 02116 David M. Silk Member of Board of Directors, Jobs for Bay State Senior Vice President Graduates, 451 Andover St., Suite 305, North Andover, MA 01845 Steven Spiegel Director, Ultra Diamond and Gold Outlet, 29 East Senior Managing Director Madison St., Suite 1800, Chicago, IL 60602; Director, FACES New York University Medical Center, 550 First Avenue, New York, NY 10016; Trustee, Babson College, One College Drive, Wellesley, MA 02157 Raman Srivastava Prior to July 1999, Market Risk Analyst, Bank of Assistant Vice President Nova Scotia, 20 King St., W., Toronto, ON James St. John Prior to July 1998, Investment Analyst, University of Assistant Vice President Rochester, Rochester, NY 14627 Toshifumi Sugimoto Prior to October 1998, Portfolio Manager, Deputy Senior Vice President General Manager, Nikko Securities Investment Trust & Management, Fixed Income Department, 4-3 Nihonbashi, Hakozakicho, Chuou-ku, Tokyo, Japan, 103-0015 William J. Sullivan Prior to June 1999, Executive Director, SBC Warburg Senior Vice President Dillion Read, 677 Washington Blvd, Stamford, CT, 06901 John C. Talanian Member of Board of Directors, the Japan Society of Managing Director Boston, One Milk Street, Boston, MA 02109 Nicole J. Thorpe Prior to February 1999, President/Owner, Thorpe Assistant Vice President Resources, P.O. Box 1895, Brockton, MA 02301 Robert J. Ullman Prior to September, 1998, Assistant Vice President, Assistant Vice President State Street Bank, Two International Place, Boston, MA 02109 Vincent Vliebergh Prior to May 1998, Senior Consultant, Garnett Consulting, Vice President 30 Monument Square, Concord, MA 01742 Christopher C. Watt Prior to July 1999, Finance Manager, Procter & Vice President Gamble, 1 Procter & Gamble Plaza, Cincinnati, OH 45202 Eric Wetlaufer President and Member of Board of Directors, The Boston Managing Director Security Analysts Society, Inc., 100 Boylston St., Suite 1050, Boston, MA 02110 Edward F. Whalen Member of the Board of Directors, Hockomock Area YMCA, Senior Vice President 300 Elmwood St., North Attleboro, MA 02760 Kelly A. Woolbert Prior to November 1999, Investment Analyst, MetLife Assistant Vice President Investment Services, 99 High Street, Boston, MA 02110 Edmund F. Wright Jr. Prior to July 1998, Controller, CBE Technologies, Assistant Vice President Inc., 50 Redfield St., Boston, MA 02122 Richard P. Wyke Director, Salem YMCA, One Sewall St., Salem, MA 01970 Senior Vice President
Item 27. Principal Underwriter (a) Putnam Mutual Funds Corp. is the principal underwriter for each of the following investment companies, including the Registrant: Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds, Putnam Balanced Retirement Fund, Putnam California Tax Exempt Income Fund, Putnam California Tax Exempt Money Market Fund, Putnam Capital Appreciation Fund, Putnam Convertible Income-Growth Trust, Putnam Diversified Income Trust, Putnam Equity Income Fund, Putnam Europe Growth Fund, Putnam Florida Tax Exempt Income Fund, Putnam Funds Trust, The George Putnam Fund of Boston, Putnam Global Equity Fund, Putnam Global Governmental Income Trust, Putnam Global Growth Fund, Putnam Global Natural Resources Fund, The Putnam Fund for Growth and Income, Putnam Growth and Income Fund II, Putnam Health Sciences Trust, Putnam High Yield Trust, Putnam High Yield Advantage Fund, Putnam Income Fund, Putnam Intermediate U.S. Government Income Fund, Putnam International Growth Fund, Putnam Investment Funds, Putnam Investors Fund, Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam Money Market Fund, Putnam Municipal Income Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam New Opportunities Fund, Putnam New York Tax Exempt Income Fund, Putnam New York Tax Exempt Money Market Fund, Putnam New York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income Fund, Putnam OTC & Emerging Growth Fund, Putnam Pennsylvania Tax Exempt Income Fund, Putnam Preferred Income Fund, Putnam Strategic Income Fund, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Tax-Free Income Trust, Putnam Tax Smart Funds Trust, Putnam U.S. Government Income Trust, Putnam Utilities Growth and Income Fund, Putnam Variable Trust, Putnam Vista Fund, Putnam Voyager Fund, Putnam Voyager Fund II. (b) The directors and officers of the Registrant's principal underwriter are listed below. None of the officers are officers of the Registrant except: Name Position and Offices with Registrant Richard Monaghan Vice President George Putnam Chairman and President Gordon Silver Vice President The principal business address of each person is One Post Office Square, Boston, MA 02109: Name Position and Offices with Underwriter - ----------------------------------------------------------------------------- Adduci,John V. Vice President Alberts,Richard W. Asst. Vice President Alden,Donald F. Vice President Alexander,Michael R. Vice President Alpaugh,Christopher S. Vice President Altomare,Mario P. Vice President Amisano,Paulette C. Vice President Arends,Michael K. Senior Vice President Armon,Lori E. Asst. Vice President Asher,Steven E. Senior Vice President Avery,Scott A. Senior Vice President Aymond,Christian E. Senior Vice President Aymond,Colin C. Vice President Babcock III,Warren W. Senior Vice President Baltimore,Mark H.W. Asst. Vice President Barlow,Jane Asst. Vice President Barnett,William E. Asst. Vice President Barrett,Thomas Vice President Battit,Suzanne J Vice President Beatty,Steven M. Senior Vice President Bent,John J. Senior Vice President Beringer,Thomas C. Vice President Boester,Eric C. Asst. Vice President Boneparth,John F. Managing Director Bouchard,Keith R. Senior Vice President Boudreau,Stephen T. Asst. Vice President Bradford Jr.,Linwood E. Senior Vice President Bresnahan,Leslee R. Managing Director Brockelman,James D. Senior Vice President Brookman,Joel S. Vice President Brown,Timothy K. Senior Vice President Buckner,Gail D. Senior Vice President Burnham,David N. Vice President Burrill,Gregory J. Vice President Buzzell,Paul F. Asst. Vice President Cabana,Susan D. Vice President Cartwright,Patricia A. Asst. Vice President Casey,David M. Vice President Castle Jr.,James R. Senior Vice President Chamieh,Mark Vice President Chapman,Frederick Vice President Chapman,Thomas E. Vice President Chase,Mary Claire Senior Vice President Chrostowski,Louis F. Senior Vice President Church,Daniel J. Vice President Clark,Richard B. Senior Vice President Clermont,Mary Vice President Clinton,John C. Asst. Vice President Cohen,Jeff M. Asst. Vice President Collman,Kathleen M. Sr Managing Director Commane,Karen L. Asst. Vice President Coneeny,Mark L. Senior Vice President Connelly,Donald A. Senior Vice President Connolly,William T. Managing Director Cooper,John S. Vice President Corbett,Dennis Vice President Corvinus,F. Nicholas Senior Vice President Cote,Marie C. Asst. Vice President Cotto,Stephen P Asst. Vice President Cotton,Rick Vice President Crane III,George H. Senior Vice President Cristo,Chad H. Vice President Critchell Jr.,D.Alan Asst. Vice President Curran,Peter J. Senior Vice President Dahill,Jessica E. Vice President Daly,Kenneth L. Managing Director Daylor,Donna M. Vice President Days,Nancy M. Asst. Vice President Deluse,Laura R. Asst. Vice President deMont,Lisa M. Vice President Diaz,Roger Vice President Dirstine,Michael T. Vice President DiStasio,Karen E. Vice President Divney,Kevin M. Senior Vice President Dolan,Michael G. Vice President Donaldson,Scott M. Vice President Dougherty,Thomas Vice President Durbin,Emily J. Vice President Durkee,Christine Asst. Vice President Edlin,David B. Managing Director Eidelberg,Kathleen E. Asst. Vice President Elder,Michael D. Vice President Emhof,Joseph R. Vice President English,James M. Senior Vice President Esposito,Vincent Managing Director Favaloro,Beth A. Vice President Feldman,Susan H. Senior Vice President Fisher,C. Nancy Managing Director Fishman,Mitchell B. Senior Vice President Fiumara,Joseph C. Vice President Flaherty,Patricia C. Senior Vice President Fleisher,Kate Vice President Fleming,Ellen E. Asst. Vice President Foley,Timothy P. Vice President Foran,Carey L. Vice President Frost,Karen T. Senior Vice President Gage,Matthew R. Asst. Vice President Gaudette,Marjorie B. Vice President Gibbs,Stephen C. Vice President Gindel,Caroline E. Asst. Vice President Goodfellow,Mark D. Vice President Goodman,Robert Managing Director Gould,Carol J. Asst. Vice President Grace,Linda K. Vice President Grant,Mitchell T. Managing Director Graviere,Patrice Senior Vice President Grey,Eric M. Vice President Grossberg,Jill Asst. Vice President Grove,Denise Vice President Guerin,Donnalee Vice President Hachey,Andrew J Asst. Vice President Hadley,Christopher Asst. Vice President Halloran,James E. Vice President Halloran,Thomas W. Senior Vice President Hansen,Christine M. Asst. Vice President Harring,Linda Senior Vice President Harrington,Shannon W. Vice President Hartig,Robert Vice President Hartigan,Craig W. Vice President Hartley,Deborah M. Asst. Vice President Hayes-Castro,Deanna R. Vice President Hedstrom,Gayle A. Asst. Vice President Heller,Kim G. Asst. Vice President Holmes,Maureen A. Vice President Hooley Jr.,Daniel F. Vice President Horwitz,Jonathan S. Senior Vice President Hotchkiss,Michael F. Senior Vice President Howes,Douglas E. Asst. Vice President Hoyt,Paula J. Asst. Vice President Hurley,William J. Managing Director & CFO Hutcherson,Eric A. Asst. Vice President Hutchins,Robert B. Vice President Iino,Yoshiro Vice President Jacobsen,Dwight D. Managing Director Kaminsky,Gregory C. Vice President Kanwal,Amrit Managing Director Kapinos,Peter J. Vice President Keleher,Kevin J. Asst. Vice President Kelley,Brian J. Vice President Kelly,David Vice President Kennedy,Alicia C. Asst. Vice President Kinsman,Anne Senior Vice President Kircher,Richard T. Asst. Vice President Kirk,Deborah H. Senior Vice President Koontz,Jill A. Senior Vice President Kringdon,Joseph D. Senior Vice President Landers,Bruce M. Vice President Lane,Linda L. Asst. Vice President LaPierre,Christopher W Asst. Vice President Lathrop,James D. Senior Vice President Lawlor,Stephanie T. Asst. Vice President Leary,Joan M. Vice President Ledbetter,Charles C. Vice President Leddy,Maura W. Vice President Leipsitz,Margaret Asst. Vice President Lemire,Kevin Vice President Levy,Eric S. Senior Vice President Levy,Norman S. Vice President Lewandowski Jr.,Edward V. Vice President Lewandowski,Edward V. Senior Vice President Lewis,Paul Asst. Vice President Li,Mei Asst. Vice President Lieberman,Samuel L. Senior Vice President Lifsitz,David M. Vice President Lilien,David R. Vice President Link,Christopher H. Asst. Vice President Linquata,Louis K. Asst. Vice President Litant,Lisa M. Vice President Lockwood,Maura A. Senior Vice President Loew,Christopher R. Asst. Vice President Lohmeier,Andrew Asst. Vice President Lohr,Mark G. Managing Director Lomba,Rufino R. Senior Vice President Lord,Caroline F. Asst. Vice President Lucey,Robert F. Director Lucey,Thomas J. Director Luskin,James M. Asst. Vice President Lyons,Robert F. Asst. Vice President MacDonald,Richard A. Senior Vice President Maloof,Renee L. Asst. Vice President Mancini,Dana Asst. Vice President Mancini,Jane M. Managing Director Manthorne,Heather M. Asst. Vice President Maravel,Alexi A. Asst. Vice President Martens,Erwin W. Managing Director Maxwell,Scott M. Managing Director McAvoy,Bridget Vice President McCafferty,Karen A. Vice President McCarthy,Anne B. Asst. Vice President McConville,Paul D. Senior Vice President McCracken,Brian Asst. Vice President McCutcheon,Bruce A Senior Vice President McDermott,Robert J. Vice President McKenna,Mark J. Senior Vice President McNamara,Laura Vice President McNamee,Mary G. Vice President Meagher,Dorothy B. Vice President Mehta,Ashok Vice President Metelmann,Claye A. Vice President Michejda,Marek A. Vice President Miller,Bart D. Senior Vice President Miller,Gregory T. Vice President Miller,Jeffrey M. Managing Director Mills,Ronald K. Vice President Mills,Stacy M. Vice President Minsk,Judith Asst. Vice President Monaghan,Richard A. Director Monahan,Kimberly A. Vice President Moody,Paul R. Vice President Moret,Mitchell L. Senior Vice President Morey,John P. Senior Vice President Mosher,Barry L. Vice President Mullen,Donald E. Senior Vice President Munson,Brian D. Vice President Murphy Jr.,Kenneth W. Asst. Vice President Murray,Brendan R. Senior Vice President Nadherny,Robert Senior Vice President Nagashima,Toshio Managing Director Natale,Lisa A. Asst. Vice President Nauen,Kimberly Page Vice President Neary,Ellen R. Vice President Neher,Stacey P. Asst. Vice President Nelson,Andrew E. Vice President Newell,Amy Jane Vice President Nickodemus,John P. Senior Vice President Nickse,Gail A. Asst. Vice President Nicolazzo,Jon C. Vice President Nisbet,M. Julia Asst. Vice President O'Brien,Lois C. Vice President O'Brien,Nancy M. Asst. Vice President O'Connell,Gayle M. Vice President O'Connor,Brian P. Vice President O'Connor,Matthew P. Asst. Vice President O'Day,Teresa S. Vice President Orr,Kevin Vice President Palmer,Patrick J. Vice President Pampliega,Carlos Vice President Panek,Raymond S. Asst. Vice President Parker,Michael T. Asst. Vice President Parr,Cynthia O. Senior Vice President Patton,Robert J. Vice President Perkins,Erin M. Asst. Vice President Peters,Jeffrey F. Managing Director Petitti,Joseph P. Vice President Petralia,Randolph S. Senior Vice President Phoenix,John G. Senior Vice President Phoenix,Joseph Senior Vice President Pilibosian,George J. Vice President Plapinger,Keith Senior Vice President Powers,Brian S. Asst. Vice President Present,Howard B. Senior Vice President Puddle,David G. Senior Vice President Pulkrabek,Scott M. Vice President Putnam,George Director Quinn,Lisa F. Asst. Vice President Reed,Nadine McQueen Asst. Vice President Rider,Wendy A. Vice President Riley,Megan G. Asst. Vice President Rodammer,Kris Senior Vice President Rodts,Jennifer M. Asst. Vice President Rogers,Deborah A. Vice President Rowe,Robert B. Vice President Ryan,Carolyn M. Asst. Vice President Ryan,Deborah A. Vice President Ryan,William M. Vice President Saccocia,Cynthia M Asst. Vice President Saunders,Catherine A. Senior Vice President Saur,Karl W. Vice President Scanlon,Michael M. Vice President Schlosberg,Alan R. Asst. Vice President Schofield,Shannon D. Senior Vice President Schultz,Mitchell D. Managing Director Scordato,Christine A. Senior Vice President Segers,Elizabeth R. Senior Vice President Selden,Denise D. Senior Vice President Shamburg,John B. Vice President Shanahan,Christopher W. Vice President Sharpless,Kathy G. Managing Director Shelby,Robert Vice President Short,Jonathan D. Senior Vice President Siebold,Mark J. Asst. Vice President Siemon Jr.,Frank E. Asst. Vice President Silva,J. Paul Vice President Silver,Gordon H. Sr Managing Director Skistimas Jr,John J. Vice President Smeglin,Maryann C. Asst. Vice President Solan,Meenakshi S. Asst. Vice President Soule,Scott W. Asst. Vice President Spiegel,Steven Sr Managing Director Sprague,David L. Vice President Starishevsky,Daniel Vice President Starr,Loren M. Managing Director Statuta,Jason M. Vice President Steinberg,Lauren B. Asst. Vice President Stern,Derek A. Asst. Vice President Stickney,Paul R. Senior Vice President Strumpf,Casey Senior Vice President Sugimoto,Toshifumi Senior Vice President Sullivan,Brian L. Senior Vice President Sullivan,Donna G Vice President Sullivan,Elaine M. Senior Vice President Sullivan,Maryann Asst. Vice President Suzuki,Toshimi Senior Vice President Sweeney,Janet C. Senior Vice President Talanian,John C. Managing Director Tanner,B Iris Vice President Tavares,April M. Asst. Vice President Telling,John R. Senior Vice President Tibbetts,Richard B. Managing Director Tirado,Patrice M. Vice President Troped Blacker,Bonnie Senior Vice President Upham,Scott E. Vice President Veale,David B. Asst. Vice President Wallack,William F. Asst. Vice President Walsh,Stephen M. Vice President Warde,Elizabeth A. Asst. Vice President Washburn,Andrew O. Vice President Waters,Mitchell J. Vice President Watt,Christopher C. Vice President Welch III,William A. Asst. Vice President Whalen,Brian Vice President Whalen,Edward F. Senior Vice President Whitaker,J. Greg Vice President White,Patrick J. Asst. Vice President Wolfson,Jane Senior Vice President Woodlock,Ronald J. Asst. Vice President Woolbert,Kelly A. Asst. Vice President Woolverton,William H. Managing Director Wright Jr.,Edmund F. Asst. Vice President Yan,Yanfang Vice President Young,Jason P. Vice President Zografos,Laura J. Senior Vice President Zukowski,Virginia A. Senior Vice President Item 28. Location of Accounts and Records Persons maintaining physical possession of accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are Registrant's Associate Clerk, Judith Cohen; Registrant's investment adviser, Putnam Investment Management, Inc.; Registrant's principal underwriter, Putnam Mutual Funds Corp.; Registrant's custodian, Putnam Fiduciary Trust Company ("PFTC"); and Registrant's transfer and dividend disbursing agent, Putnam Investor Services, a division of PFTC. The address of the Associate Clerk, investment adviser, principal underwriter, custodian and transfer and dividend disbursing agent is One Post Office Square, Boston, Massachusetts 02109. Item 29. Management Services None. Item 30. Undertakings None. CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Prospectuses and Statement of Additional Information constituting parts of Post-Effective Amendment No. 24 to the Registration Statement of Putnam Variable Trust on Form N-1A (File No. 33-17486) of our report dated February 15, 2000, on our audit of the financial statements and financial highlights of the Trust, which report is included in the Annual Report for Putnam Variable Trust for the year ended December 31, 1999 which is incorporated by reference into the Registration Statement. We also consent to the references to our firm under the caption "Independent Accountants and Financial Statements" in the Statement of Additional Information and under the heading "financial highlights" in such Prospectuses. PriceWaterhouseCoopers LLP Boston, Massachusetts April 27, 2000 NOTICE A copy of the Agreement and Declaration of Trust of Putnam Variable Trust is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Registrant. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the fund certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston, and The Commonwealth of Massachusetts, on the 28th day of April, 2000. Putnam Variable Trust By: Gordon H. Silver, Vice President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement of Putnam Variable Trust has been signed below by the following persons in the capacities and on the dates indicated: Signature Title George Putnam President and Chairman of the Board; Principal Executive Officer; Trustee John D. Hughes Senior Vice President; Treasurer and Principal Financial Officer Paul G. Bucuvalas Assistant Treasurer and Principal Accounting Officer Jameson A. Baxter Trustee Hans H. Estin Trustee John A. Hill Trustee Ronald J. Jackson Trustee Paul L. Joskow Trustee Elizabeth T. Kennan Trustee Lawrence J. Lasser Trustee John H. Mullin, III Trustee Robert E. Patterson Trustee William F. Pounds Trustee George Putnam, III Trustee A.J.C. Smith Trustee W. Thomas Stephens Trustee W. Nicholas Thorndike Trustee By: Gordon H. Silver, as Attorney-in-Fact April 28, 2000 Exhibit Index 13a. Class IB Distribution Plan and Agreement -- Exhibit 1. 15a. The Putnam Funds Code of Ethics - Exhibit 2. 15b. Putnam Investments Code of Ethics - Exhibit 3.
EX-99.M12B-1PLAN 2 PUTNAM VARIABLE TRUST CLASS IB AMENDED AND RESTATED DISTRIBUTION PLAN AND AGREEMENT This Plan and Agreement (the "Plan") constitutes the Distribution Plan for the Class IB shares of each portfolio series (each a "Fund" and collectively the "Funds") of Putnam Variable Trust, a Massachusetts business trust (the "Trust"), adopted pursuant to the provisions of Rule 12b-1 under the Investment Company Act of 1940 (the "Act") and the related agreement between the Trust and Putnam Mutual Funds Corp. ("PMF"). During the effective term of this Plan, the Trust may incur expenses on behalf of each Fund primarily intended to result in the sale of its Class IB shares upon the terms and conditions hereinafter set forth: Section 1. The Trust shall pay to PMF a monthly fee from the assets attributable to Class IB shares of each Fund at the annual rate of 0.35% of the average net assets attributable to the Class IB shares of such Fund, as determined at the close of each business day during the month, to compensate PMF for services provided and expenses incurred by it in connection with the offering of such Fund's Class IB shares, which may include, without limitation, the payment by PMF to investment dealers of commissions on the sale of such Fund's Class IB shares, as set forth in the then current Prospectus or Statement of Additional Information of such Fund and the payment of a service fee of up to 0.25% of such net asset value for the purposes of maintaining or improving services provided to shareholders by PMF and investment dealers. Such fees shall be payable for each month within 15 days after the close of such month. A majority of the Qualified Trustees, as defined below, may, from time to time, reduce the amount of such payments, or may suspend the operation of the Plan with respect to any Fund for such period or periods of time as they may determine. Section 2. This Plan shall not take effect with respect to a Fund until: (a) it has been approved by a vote of a majority of the outstanding Class IB shares of the Fund, but only if the Plan is adopted after the commencement of any public offering of the Fund's Class IB shares or the sale of the Fund's Class IB shares to persons who are not affiliated persons of the Fund, affiliated persons of such persons, promoters of the Fund or affiliated persons of such promoters; (b) it has been approved, together with any related agreements, by votes of the majority (or whatever greater percentage may, from time to time, be required by Section 12(b) of the Act or the rules and regulations thereunder) of both (i) the Trustees of the Trust, and (ii) the Qualified Trustees of the Trust, cast in person at a meeting called for the purpose of voting on this Plan or such agreement; and (c) the Fund has received the proceeds of the initial public offering of its Class IB shares. Section 3. This Plan shall not continue in effect with respect to any Fund for a period of more than one year after it takes effect unless such continuance is specifically approved at least annually in the manner provided for approval of this Plan in Section 2(b). Section 4. PMF shall provide to the Trustees of the Trust, and the Trustees shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. Section 5. This Plan may be terminated with respect to any Fund at any time by vote of a majority of the Qualified Trustees or by vote of the majority of the outstanding Class IB shares of the Fund. Section 6. All agreements with any person relating to implementation of this Plan shall be in writing, and any agreement related to this Plan shall provide: (a) that such agreement may be terminated with respect to any Fund at any time, without payment of any penalty, by vote of a majority of the Qualified Trustees or by vote of a majority of the outstanding Class IB shares of such Fund, on not more than 60 days' written notice to any other party to the agreement; and (b) that such agreement shall terminate automatically in the event of its assignment. Section 7. This Plan may not be amended to increase materially the amount of distribution expenses with respect to any Fund permitted pursuant to Section 1 hereof without the approval of a majority of the outstanding Class IB shares of such Fund and all material amendments to this Plan with respect to any Fund shall be approved in the manner provided for approval of this Plan in Section 2(b). Section 8. As used in this Plan, (a) the term "Qualified Trustees" shall mean those Trustees of the Trust who are not interested persons of the Trust, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it, and (b) the term "majority of the outstanding Class IB shares of the Fund" means the affirmative vote, at a duly called and held meeting of Class IB shareholders of the relevant Fund, (i) of the holders of 67% or more of the Class IB shares of such Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding Class IB shares of such Fund entitled to vote at such meeting are present in person or by proxy, or (ii) of the holders of more than 50% of the outstanding Class IB shares of such Fund entitled to vote at such meeting, whichever is less, and (c) the terms "assignment," "affiliated person," "interested person" and "promoter" shall have the respective meanings specified in the Act and the rules and regulations thereunder, subject to such exemptions as may be granted by the Securities and Exchange Commission. Section 9. A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees and not individually, and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the relevant Fund. Executed as of April 1, 2000. PUTNAM MUTUAL FUNDS CORP. PUTNAM VARIABLE TRUST /s/ Richard A. Monaghan /s/ Charles E. Porter By: ------------------- By: ----------------- Richard A. Monaghan Charles E. Porter Managing Director Executive Vice President Chief of Mutual Fund Business EX-99.PCODEETH 3 THE PUTNAM FUNDS Code of Ethics Each of The Putnam Funds (the "Funds") has determined to adopt this Code of Ethics with respect to certain types of personal securities transactions by officers and Trustees of the Funds which might be deemed to create possible conflicts of interest and to establish reporting requirements and enforcement procedures with respect to such transactions. I. Rules Applicable to Officers and Trustees Affiliated with Putnam Investments, Inc. A. Incorporation of Adviser's Code of Ethics. The provisions of the Code of Ethics for employees of Putnam Investments, Inc. and its Subsidiaries (the "Putnam Investments Code of Ethics"), which is attached as Appendix A hereto, are hereby incorporated herein as the Funds' Code of Ethics applicable to officers and Trustees of the Funds who are employees of the Funds or officers, directors or employees of Putnam Investments, Inc. or its subsidiaries. A violation of the Putnam Investments Code of Ethics shall constitute a violation of the Funds' Code. B. Reports. Officers and Trustees of each of the Funds who are made subject to the Putnam Investments Code of Ethics pursuant to the preceding paragraph shall file the reports required by the Putnam Investments Code of Ethics with the Compliance Director designated therein. A report filed with the Compliance Director shall be deemed to be filed with each of the Funds of which the reporting individual is an officer or Trustee. C. Review. (1) The Compliance Director shall compare the reported personal securities transactions with completed and contemplated portfolio transactions of each of the Funds to determine whether a violation of this Code may have occurred. Before making any determination that a violation has been committed by any person, the Compliance Director shall give such person an opportunity to supply additional explanatory material. (2) If the Compliance Director determines that a violation of this Code has or may have occurred, he shall submit his written determination, together with the confidential quarterly report and any additional explanatory material provided by the individual, to the Chairman of the Funds, who shall make an independent determination of whether a violation has occurred. D. Sanctions. If the Chairman of the Funds finds that a violation has occurred, he shall report the violation and any sanction imposed under the Putnam Code of Ethics to the Trustees of the Funds who may impose such additional sanctions as they deem appropriate. If a securities transaction of the Chairman is under consideration, the Vice Chairman of the Funds shall act in all respects in the manner prescribed herein for the Chairman. II. Rules Applicable to Unaffiliated Trustees A. Definitions. (1) "Beneficial ownership" shall be interpreted in the same manner as it would be in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder. Application of this definition is explained in more detail in Exhibit A hereto. (2) "Control" means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. (3) "Interested Trustee" means a Trustee of a Fund who is an "interested person" of the Fund within the meaning of the Investment Company Act. (4) "Purchase or sale of a security" includes, among other things, the writing of an option to purchase or sell a security. (5) "Security" shall have the same meaning as that set forth in Section 2(a)(36) of the Investment Company Act (in effect, all securities) except that it shall not include securities issued by the Government of the United States or an agency thereof, bankers' acceptances, bank certificates of deposit, commercial paper and shares of registered open-end investment companies. (6) "Unaffiliated Trustee" means a Trustee who is not made subject to the Putnam Investments Code of Ethics pursuant to Part I hereof. B. Prohibited Purchases and Sales. No Unaffiliated Trustee of any of the Funds shall purchase or sell, directly or indirectly, any security in which he has or by reason of such transaction acquires, any direct or indirect beneficial ownership and which to his actual knowledge at the time of such purchase or sale: (1) is being considered for purchase or sale by the Fund; (2) is being purchased or sold by the Fund; or (3) was purchased or sold by the Fund within the most recent five days if such person participated in the recommendation to, or the decision by, Putnam Management to purchase or sell such security for the Fund. C. Exempted Transactions. The prohibitions of Section II-B of this Code shall not apply to: (1) purchases or sales effected in any account over which the Unaffiliated Trustee has no direct or indirect influence or control; (2) purchases or sales which are non-volitional on the part of either the Unaffiliated Trustee or the Fund; (3) purchases which are part of an automatic dividend reinvestment plan; (4) purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; (5) purchases or sales other than those exempted in (1) through (4) above which do not cause the Unaffiliated Trustee to gain improperly a personal benefit through his relationship with the Fund and are only remotely potentially harmful to a Fund because they would be very unlikely to affect a highly institutional market, and are previously approved by the Compliance Director under the Putnam Code of Ethics or the Chairman of the Funds, which approval shall be confirmed in writing. D. Reporting. (1) Whether or not one of the exemptions listed in Section II-C applies, every Unaffiliated Trustee of a Fund shall file with the Chairman of the Funds a report containing the information described in Section II-D(2) of this Code with respect to transactions in any security in which such Unaffiliated Trustee has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, if such Trustee, at the time of that transaction, knew or, in the ordinary course of fulfilling his official duties as a Trustee of the Fund, should have known that, during the 15-day period immediately preceding or after the date of the transaction by the Trustee: (a) such security was or is to be purchased or sold by the Fund or (b) such security was or is being considered for purchase or sale by the Fund; provided, however, that an Unaffiliated Trustee shall not be required to make a report with respect to transactions effected for any account over which such person does not have any direct or indirect influence or control. (2) Every report shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information: (a) The date of the transaction, the title and the number of shares, and the principal amount of each security involved; (b) The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); (c) The price at which the transaction was effected; and (d) The name of the broker, dealer or bank with or through whom the transaction was effected. (3) Every report concerning a purchase or sale prohibited under Section II-B hereof with respect to which the reporting person relies upon one of the exemptions provided in Section IIC shall contain a brief statement of the exemption relied upon and the circumstances of the transaction. (4) Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he has any direct or indirect beneficial ownership in the security to which the report relates. (5) Notwithstanding anything to the contrary contained herein, an Unaffiliated Trustee who is an Interested Trustee shall also file the reports required by Rule 17j-1(c)(1) under the Investment Company Act of 1940. E. Review. (1) The Chairman of the Funds shall compare the reported personal securities transactions with completed and contemplated portfolio transactions of the Funds to determine whether any transaction ("Reviewable Transactions") listed in Section II-B (disregarding exemptions provided by Section II-C(1) through (5)) may have occurred. (2) If the Chairman determines that a Reviewable Transaction may have occurred, he shall then determine whether a violation of this Code may have occurred, taking into account all the exemptions provided under Section II-C. Before making any determination that a violation has occurred, the Chairman shall give the person involved an opportunity to supply additional information regarding the transaction in question. F. Sanctions. If the Chairman determines that a violation of this Code has occurred, he shall so advise a committee consisting of the Unaffiliated Trustees, other than the person whose transaction is under consideration, and shall provide the committee with a report of the matter, including any additional information supplied by such person. The committee may impose such sanction as it deems appropriate. III. Miscellaneous. A. Amendments to The Putnam Companies Code of Ethics. Any amendment to the Putnam Companies Code of Ethics shall be deemed an amendment to Section I-A of this Code effective 30 days after written notice of such amendment shall have been received by the Chairman of the Funds, unless the Trustees of the Funds expressly determine that such amendment shall become effective at an earlier or later date or shall not be adopted. B. Records. The Funds shall maintain records in the manner and to the extent set forth below, which records may be maintained on microfilm under the conditions described in Rule 31a-2(f)(1) under the Investment Company Act and shall be available for examination by representatives of the Securities and Exchange Commission. (1) A copy of this Code and any other code which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place; (2) A record of any violation of this Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs; (3) A copy of each report made by an officer or Trustee pursuant to this Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; and (4) A list of all person who are, or within the past five years have been, required to make reports pursuant to this Code shall be maintained in an easily accessible place. C. Confidentiality. All reports of securities transactions and any other information filed with any Fund pursuant to this Code shall be treated as confidential, but are subject to review as provided herein and by personnel of the Securities and Exchange Commission. D. Interpretation of Provisions. The Directors and Trustees may from time to time adopt such interpretations of this Code as they deem appropriate. E. Delegation by Chairman. The Chairman of the Funds may from time to time delegate any or all of his responsibilities under this Code, either generally or as to specific instances, to such officer or Trustee of the Funds as he may designate. As revised July 8, 1994 EX-99.PCODEETH 4 Code of Ethics PUTNAM INVESTMENTS [SCALE LOGO OMITTED] It is the personal responsibility of every Putnam employee to avoid any conduct that could create a conflict, or even the appearance of a conflict, with our clients, or to do anything that could damage or erode the trust our clients place in Putnam and its employees. 44156 4/2000
* Table of Contents Overview iii Preamble vii Definitions: Code of Ethics ix Section I. Personal Securities Rules for All Employees 1 A. Restricted List 1 B. Prohibited Purchases and Sales 6 C. Discouraged Transactions 9 D. Exempted Transactions 10 Section II. Additional Special Rules for Personal Securities Transactions of Access Persons and Certain Investment Professionals 13 Section III. Prohibited Conduct for All Employees 19 Section IV. Special Rules for Officers and Employees of Putnam Europe Ltd. 29 Section V. Reporting Requirements for All Employees 31 Section VI. Education Requirements 35 Section VII. Compliance and Appeal Procedures 37 Appendix A 39 Preamble 41 Definitions: Insider Trading 43 Section 1. Rules Concerning Inside Information 45 Section 2. Overview of Insider Trading 49 Appendix B. Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds 55 Appendix C. Clearance Form for Portfolio Manager Sales Out of Personal Account of Securities Also Held by Fund (For compliance with "Contra-Trading" Rule) 57 Appendix D. Procedures for Approval of New Financial Instruments 59 Index 61
* Overview Every Putnam employee is required, as a condition of continued employment, to read, understand, and comply with the entire Code of Ethics. This Overview is provided only as a convenience and is not intended to substitute for a careful reading of the complete document. It is the personal responsibility of every Putnam employee to avoid any conduct that could create a conflict, or even the appearance of a conflict, with our clients, or do anything that could damage or erode the trust our clients place in Putnam and its employees. This is the spirit of the Code of Ethics. In accepting employment at Putnam, every employee accepts the absolute obligation to comply with the letter and the spirit of the Code of Ethics. Failure to comply with the spirit of the Code of Ethics is just as much a violation of the Code as failure to comply with the written rules of the Code. The rules of the Code cover activities, including personal securities transactions, of Putnam employees, certain family members of employees, and entities (such as corporations, trusts, or partnerships) that employees may be deemed to control or influence. Sanctions will be imposed for violations of the Code of Ethics. Sanctions may include bans on personal trading, reductions in salary increases or bonuses, disgorgement of trading profits, suspension of employment, and termination of employment. - -- Insider trading: Putnam employees are forbidden to buy or sell any security while either Putnam or the employee is in possession of non-public information ("inside information") concerning the security or the issuer. A violation of Putnam's insider trading policies may result in criminal and civil penalties, including imprisonment and substantial fines. - -- Conflicts of interest: The Code of Ethics imposes limits on activities of Putnam employees where the activity may conflict with the interests of Putnam or its clients. These include limits on the receipt and solicitation of gifts and on service as a fiduciary for a person or entity outside of Putnam. For example, Putnam employees generally may not accept gifts over $50 in total value in a calendar year from any entity or any supplier of goods or services to Putnam. In addition, a Putnam employee may not serve as a director of any corporation without prior approval of the Code of Ethics Officer, and Putnam employees may not be members of investment clubs. - -- Confidentiality: Information about Putnam clients and Putnam investment activity and research is proprietary and confidential and may not be disclosed or used by any Putnam employee outside Putnam without a valid business purpose. - -- Personal securities trading: Putnam employees may not buy or sell any security for their own account without clearing the proposed transaction in advance with the Code of Ethics Administrator. Certain securities are excepted from this requirement (e.g., Marsh & McLennan stock and shares of open-end (not closed-end) Putnam Funds). The Code of Ethics Officer will permit employees to purchase or sell up to 1,000 shares of stock of an issuer whose capitalization exceeds $5 billion, but such purchases or sales must still be cleared. Clearance must be obtained in advance, between 11:30 a.m. and 4:00 p.m. EST on the day of the trade. Clearance may be obtained between 9:00 a.m. and 4:00 p.m. on the day of the trade for up to 1,000 shares of stock of an issuer whose capitalization exceeds $5 billion. A clearance is valid only for the day it is obtained. The Code also strongly discourages excessive trading by employees for their own account (i.e., more than 10 trades in any calendar quarter). Trading in excess of this level will be reviewed with the Code of Ethics Oversight Committee. - -- Short Selling: Putnam employees are prohibited from short selling any security, whether or not it is held in a Putnam client portfolio, except that short selling against the S&P 100 and 500 indexes and "against the box" are permitted. - -- Confirmations of trading and periodic account statements: All Putnam employees must have their brokers send confirmations of personal securities transactions, including transactions of immediate family members and accounts over which the employee has investment discretion, to the Code of Ethics Officer. Employees must contact the Code of Ethics Administrator to obtain an authorization letter from Putnam for setting up a personal brokerage account. - -- Quarterly and annual reporting: Certain Putnam employees (so-called "Access Persons" as defined by the SEC and in the Code of Ethics) must report all their securities transactions in each calendar quarter to the Code of Ethics Officer within 10 days after the end of the quarter. All Access Persons must disclose all personal securities holdings upon commencement of employment and thereafter on an annual basis. You will be notified if these requirements apply to you. If these requirements apply to you and you fail to report as required, salary increases and bonuses will be reduced. - -- IPOs and private placements: Putnam employees may not buy any securities in an initial public offering or in a private placement, except in limited circumstances when prior written authorization is obtained. - -- Procedures for Approval of New Financial Instruments: No new types of securities or instruments may be purchased for any Putnam fund or other client account without the prior approval of the Risk Management Committee. - -- Personal securities transactions by Access Persons and certain investment professionals: The Code imposes several special restrictions on personal securities transactions by Access Persons and certain investment professionals, which are summarized as follows: - -- "60-Day Holding Period". No Access Person shall profit from the purchase and sale, or sale and purchase, of any security or related derivative security within 60 calendar days. - -- "7-Day" Rule. Before a portfolio manager places an order to buy a security for any portfolio he manages, he must sell from his personal account any such security or related derivative security purchased within the preceding 7 calendar days and disgorge any profit from the sale. - -- "Blackout" Rules. No portfolio manager may sell any security or related derivative security for her personal account until 7 calendar days have passed since the most recent purchase of that security or related derivative security by any portfolio she manages. No portfolio manager may buy any security or related derivative security for his personal account until 7 calendar days have passed since the most recent sale of that security or related derivative security by any portfolio he manages. - -- "Contra-Trading" Rule. No portfolio manager may sell out of her personal account any security or related derivative security that is held in any portfolio she manages unless she has received the written approval of a CIO and the Code of Ethics Officer. - -- No manager may cause a Putnam client to take action for the manager's own personal benefit. - -- SIMILAR RULES LIMIT PERSONAL SECURITIES TRANSACTIONS BY ANALYSTS, CO-MANAGERS, AND CHIEF INVESTMENT OFFICERS. PLEASE READ THESE RULES CAREFULLY. YOU ARE RESPONSIBLE FOR UNDERSTANDING THE RESTRICTIONS. This Overview is qualified in its entirety by the provisions of the Code of Ethics. The Code requires that all Putnam employees read, understand, and comply with the entire Code of Ethics. * Preamble It is the personal responsibility of every Putnam employee to avoid any conduct that would create a conflict, or even the appearance of a conflict, with our clients, or embarrass Putnam in any way. This is the spirit of the Code of Ethics. In accepting employment at Putnam, every employee also accepts the absolute obligation to comply with the letter and the spirit of the Code of Ethics. Failure to comply with the spirit of the Code of Ethics is just as much a violation of the Code as failure to comply with the written rules of the Code. Sanctions will be imposed for violations of the Code of Ethics, including the Code's reporting requirements. Sanctions may include bans on personal trading, reductions in salary increases or bonuses, disgorgement of trading profits, suspension of employment and termination of employment. Putnam Investments is required by law to adopt a Code of Ethics. The purpose of the law is to prevent abuses in the investment advisory business that can arise when conflicts of interest exist between the employees of an investment adviser and its clients. Having an effective Code of Ethics is good business practice, as well. By adopting and enforcing a Code of Ethics, we strengthen the trust and confidence reposed in us by demonstrating that, at Putnam, client interests come before personal interests. Putnam has had a Code of Ethics for many years. The first Putnam Code was written more than 30 years ago by George Putnam. It has been revised periodically, and was re-drafted in its entirety in 1989 to take account of legal and regulatory developments in the investment advisory business. Since 1989, the Code has been revised regularly to reflect developments in our business. The Code that follows represents a balancing of important interests. On the one hand, as a registered investment adviser, Putnam owes a duty of undivided loyalty to its clients, and must avoid even the appearance of a conflict that might be perceived as abusing the trust they have placed in Putnam. On the other hand, Putnam does not want to prevent conscientious professionals from investing for their own account where conflicts do not exist or are so attenuated as to be immaterial to investment decisions affecting Putnam clients. When conflicting interests cannot be reconciled, the Code makes clear that, first and foremost, Putnam employees owe a fiduciary duty to Putnam clients. In most cases, this means that the affected employee will be required to forego conflicting personal securities transactions. In some cases, personal investments will be permitted, but only in a manner which, because of the circumstances and applicable controls, cannot reasonably be perceived as adversely affecting Putnam client portfolios or taking unfair advantage of the relationship Putnam employees have to Putnam clients. The Code contains specific rules prohibiting defined types of conflicts. Because every potential conflict cannot be anticipated in advance, the Code also contains certain general provisions prohibiting conflict situations. In view of these general provisions, it is critical that any individual who is in doubt about the applicability of the Code in a given situation seek a determination from the Code of Ethics Officer about the propriety of the conduct in advance. The procedures for obtaining such a determination are described in Section VII of the Code. It is critical that the Code be strictly observed. Not only will adherence to the Code ensure that Putnam renders the best possible service to its clients, it will ensure that no individual is liable for violations of law. It should be emphasized that adherence to this policy is a fundamental condition of employment at Putnam. Every employee is expected to adhere to the requirements of this Code of Ethics despite any inconvenience that may be involved. Any employee failing to do so may be subject to such disciplinary action, including financial penalties and termination of employment, as determined by the Code of Ethics Oversight Committee or the Chief Executive Officer of Putnam Investments. * Definitions: Code of Ethics The words given below are defined specifically for the purposes of Putnam's Code of Ethics. Gender references in the Code of Ethics alternate. Rule of construction regarding time periods. Unless the context indicates otherwise, time periods used in the Code of Ethics shall be measured inclusively, i.e., including the dates from and to which the measurement is made. Access Persons. Access Persons are (i) all officers of Putnam Investment Management, Inc. (the investment manager of Putnam's mutual funds), (ii) all employees within Putnam's Investment Division, and (iii) all other employees of Putnam who, in connection with their regular duties, have access to information regarding purchases or sales of portfolio securities by a Putnam mutual fund, or who have access to information regarding recommendations with respect to such purchases or sales. Code of Ethics Administrator. The individual designated by the Code of Ethics Officer to assume responsibility for day-to-day, non-discretionary administration of this Code. The current Code of Ethics Administrator is Laura Rose, who can be reached at extension 11104. Code of Ethics Officer. The Putnam officer who has been assigned the responsibility of enforcing and interpreting this Code. The Code of Ethics Officer shall be the General Counsel or such other person as is designated by the President of Putnam Investments. If the Code of Ethics Officer is unavailable, the Deputy Code of Ethics Officer (to be appointed by the Code of Ethics Officer) shall act in his stead. Code of Ethics Oversight Committee. Has oversight responsibility for administering the Code of Ethics. Members include the Code of Ethics Officer, the Head of Investments, and other members of Putnam's senior management approved by the Chief Executive Officer of Putnam. Immediate family. Spouse, minor children, or other relatives living in the same household as the Putnam employee. Policy Statements. The Policy Statement Concerning Insider Trading Prohibitions attached to the Code as Appendix A and the Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds attached to the Code as Appendix B. Private placement. Any offering of a security not to the public, but to sophisticated investors who have access to the kind of information which would be contained in a prospectus, and which does not require registration with the relevant securities authorities. Purchase or sale of a security. Any acquisition or transfer of any interest in the security for direct or indirect consideration, and includes the writing of an option. Putnam. Any or all of Putnam Investments, Inc., and its subsidiaries, any one of which shall be a "Putnam company." Putnam client. Any of the Putnam Funds, or any advisory, trust, or other client of Putnam. Putnam employee (or "employee"). Any employee of Putnam. Restricted List. The list established in accordance with Rule 1 of Section I.A. Security. Any type or class of equity or debt security and any rights relating to a security, such as put and call options, warrants, and convertible securities. Unless otherwise noted, the term "security" does not include: currencies, direct and indirect obligations of the U.S. government and its agencies, commercial paper, certificates of deposit, repurchase agreements, bankers' acceptances, any other money market instruments, shares of open-end mutual funds (including Putnam open-end mutual funds), securities of The Marsh & McLennan Companies, Inc., commodities, and any option on a broad-based market index or an exchange-traded futures contract or option thereon. Transaction for a personal account (or "personal securities transaction"). Securities transactions: (a) for the personal account of any employee; (b) for the account of a member of the immediate family of any employee; (c) for the account of a partnership in which a Putnam employee or immediate family member is a general partner or a partner with investment discretion; (d) for the account of a trust in which a Putnam employee or immediate family member is a trustee with investment discretion; (e) for the account of a closely-held corporation in which a Putnam employee or immediate family member holds shares and for which he has investment discretion; and (f) for any account other than a Putnam client account which receives investment advice of any sort from the employee or immediate family member, or as to which the employee or immediate family member has investment discretion. * Section I. Personal Securities Rules for All Employees A. Restricted List RULE 1 No Putnam employee shall purchase or sell for his personal account any security without prior clearance obtained through Putnam's Intranet pre-clearance system or from the Code of Ethics Administrator. No clearance will be granted for securities appearing on the Restricted List. Securities shall be placed on the Restricted List in the following circumstances: (a) when orders to purchase or sell such security have been entered for any Putnam client, or the security is being actively considered for purchase or sale for any Putnam client; (b) with respect to voting securities of corporations in the banking, savings and loan, communications, or gaming (i.e., casinos) industries, when holdings of Putnam clients exceed 7% (for public utilities, the threshold is 4%); (c) when, in the judgment of the Code of Ethics Officer, other circumstances warrant restricting personal transactions of Putnam employees in a particular security; (d) the circumstances described in the Policy Statement Concerning Insider Trading Prohibitions, attached as Appendix A. Reminder: Securities for an employee's "personal account" include securities owned by certain family members of a Putnam employee. Thus, this Rule prohibits certain trades by family members of Putnam employees. See Definitions. Compliance with this rule does not exempt an employee from complying with any other applicable rules of the Code, such as those described in Section III. In particular, Access Persons and certain investment professionals must comply with the special rules set forth in Section II. EXCEPTIONS A. "Large Cap" Exception. If a security appearing on the Restricted List is an equity security for which the issuer has a market capitalization (defined as outstanding shares multiplied by current price per share) of over $5 billion, then a Putnam employee may purchase or sell up to 1,000 shares of the security per day for his personal account. This exception does not apply if the security appears on the Restricted List in the circumstances described in subpart (b), (c), or (d) of Rule 1. B. Investment Grade Or Higher Fixed-Income Exception. If a security being traded or considered for trade for a Putnam client is a non-convertible fixed-income security which bears a rating of BBB (Standard & Poor's) or Baa (Moody's) or any comparable rating or higher, then a Putnam employee may purchase or sell that security for his personal account without regard to the activity of Putnam clients. This exception does not apply if the security has been placed on the Restricted List in the circumstances described in subpart (b), (c), or (d) of Rule 1. C. Pre-Clearing Transactions Effected by Share Subscription. The purchase and sale of securities made by subscription rather than on an exchange are limited to issuers having a market capitalization of $5 billion or more and are subject to a 1,000 share limit. The following are procedures to comply with Rule 1 when effecting a purchase or sale of shares by subscription: (a) The Putnam employee must pre-clear the trade on the day he or she submits a subscription to the issuer, rather than on the actual day of the trade since the actual day of the trade typically will not be known to the employee who submits the subscription. At the time of pre-clearance, the employee will be told whether the purchase is permitted (in the case of a corporation having a market capitalization of $5 billion or more), or not permitted (in the case of a smaller capitalization issuer). (b) The subscription for any purchase or sale of shares must be reported on the employee's quarterly personal securities transaction report, noting the trade was accomplished by subscription. (c) As no brokers are involved in the transaction, the confirmation requirement will be waived for these transactions, although the Putnam employee must provide the Legal and Compliance Department with any transaction summaries or statements sent by the issuer. SANCTION GUIDELINES A. Failure to Pre-Clear a Personal Trade 1. First violation: One month trading ban with written warning that a future violation will result in a longer trading ban. 2. Second violation: Three month trading ban and written notice to Managing Director of the employee's division. 3. Third violation: Six month trading ban with possible longer or permanent trading ban based upon review by Code of Ethics Oversight Committee. B. Failure to Pre-Clear Securities on the Restricted List 1. First violation: Disgorgement of any profit from the transaction, one month trading ban, and written warning that a future violation will result in a longer trading ban. 2. Second violation: Disgorgement of any profit from the transaction, three month trading ban, and written notice to Managing Director of the employee's division. 3. Third violation: Disgorgement of any profit from the transaction, and six month trading ban with possible longer or permanent trading ban based upon review by Code of Ethics Oversight Committee. NOTE: These are the sanction guidelines for successive failures to pre-clear personal trades within a 2-year period. The Code of Ethics Oversight Committee retains the right to increase or decrease the sanction for a particular violation in light of the circumstances. The Committee's belief that an employee intentionally has violated the Code of Ethics will result in more severe sanctions than outlined in the guidelines above. The sanctions described in Paragraph B apply to Restricted List securities that are: (i) small cap stocks (i.e., stocks not entitled to the "Large Cap" exception) and (ii) large cap stocks that exceed the daily 1,000 share maximum permitted under the "Large Cap" exception. Failure to pre-clear an otherwise permitted trade of up to 1,000 shares of a large cap security is subject to the sanctions described above in Paragraph A. IMPLEMENTATION A. Maintenance of Restricted List. The Restricted List shall be maintained by the Code of Ethics Administrator. B. Consulting Restricted List. An employee wishing to trade any security for his personal account shall first obtain clearance through Putnam's Intranet pre-clearance system. The system may be accessed from your desktop computer through Internet access software and following the directions provided in the system. The current address of the Intranet pre-clearance system can be obtained from the Code of Ethics Administrator. Employees may pre-clear all securities between 11:30 a.m. and 4:00 p.m. EST, and may pre-clear purchases or sales of up to 1,000 shares of issuers having a market capitalization of more than $5 billion between 9:00 a.m. and 4:00 p.m. EST. Requests to make personal securities transactions may not be made using the system or presented to the Code of Ethics Administrator after 4:00 p.m. The pre-clearance system will inform the employee whether the security may be traded and whether trading in the security is subject to the "Large Cap" limitation. The response of the pre-clearance system as to whether a security appears on the Restricted List and, if so, whether it is eligible for the exceptions set forth after this Rule shall be final, unless the employee appeals to the Code of Ethics Officer, using the procedure described in Section VII, regarding the request to trade a particular security. A clearance is only valid for trading on the day it is obtained. Trades in securities listed on Asian or European stock exchanges, however, may be executed within one business day after pre-clearance is obtained. If a security is not on the Restricted List, other classes of securities of the same issuer (e.g., preferred or convertible preferred stock) may be on the Restricted List. It is the employee's responsibility to identify with particularity the class of securities for which permission is being sought for a personal investment. If the Intranet pre-clearance system does not recognize a security, or if an employee is unable to use the system or has any questions with respect to the system or pre-clearance, the employee may consult the Code of Ethics Administrator. The Code of Ethics Administrator shall not have authority to answer any questions about a security other than whether trading is permitted. The response of the Code of Ethics Administrator as to whether a security appears on the Restricted List and, if so, whether it is eligible for the exceptions set forth after this Rule shall be final, unless the employee appeals to the Code of Ethics Officer, using the procedure described in Section VII, regarding the request to trade a particular security. C. Removal of Securities from Restricted List. Securities shall be removed from the Restricted List when: (a) in the case of securities on the Restricted List pursuant to Rule 1(a), they are no longer being purchased or sold for a Putnam client or actively considered for purchase or sale for a Putnam client; (b) in the case of securities on the Restricted List pursuant to Rule 1(b), the holdings of Putnam clients fall below the applicable threshold designated in that Rule, or at such earlier time as the Code of Ethics Officer deems appropriate; or (c) in the case of securities on the Restricted List pursuant to Rule 1(c) or 1(d), when circumstances no longer warrant restrictions on personal trading. COMMENTS 1. Pre-Clearance. Subpart (a) of this Rule is designed to avoid the conflict of interest that might occur when an employee trades for his personal account a security that currently is being traded or is likely to be traded for a Putnam client. Such conflicts arise, for example, when the trades of an employee might have an impact on the price or availability of a particular security, or when the trades of the client might have an impact on price to the benefit of the employee. Thus, exceptions involve situations where the trade of a Putnam employee is unlikely to have an impact on the market. 2. Regulatory Limits. Owing to a variety of federal statutes and regulations in the banking, savings and loan, communications, and gaming industries, it is critical that accounts of Putnam clients not hold more than 10% of the voting securities of any issuer (5% for public utilities). Because of the risk that the personal holdings of Putnam employees may be aggregated with Putnam holdings for these purposes, subpart (b) of this Rule limits personal trades in these areas. The 7% limit (4% for public utilities) will allow the regulatory limits to be observed. 3. Options. For the purposes of this Code, options are treated like the underlying security. See Definitions. Thus, an employee may not purchase, sell, or "write" option contracts for a security that is on the Restricted List. A securities index will not be put on the Restricted List simply because one or more of its underlying securities have been put on the Restricted List. The exercise of an options contract (the purchase or writing of which was previously pre-cleared) does not have to be pre-cleared. Note, however, that the sale of securities obtained through the exercise of options must be pre-cleared. 4. Involuntary Transactions. "Involuntary" personal securities transactions are exempted from the Code. Special attention should be paid to this exemption. (See Section I.D.) 5. Tender Offers. This Rule does not prohibit an employee from tendering securities from his personal account in response to an any-and-all tender offer, even if Putnam clients are also tendering securities. A Putnam employee is, however, prohibited from tendering securities from his personal account in response to a partial tender offer, if Putnam clients are also tendering securities. B. Prohibited Purchases and Sales RULE 1 Putnam employees are prohibited from short selling any security, whether or not the security is held in a Putnam client portfolio. EXCEPTIONS Short selling against the S&P 100 and 500 indexes and "against the box" are permitted. RULE 2 No Putnam employee shall purchase any security for her personal account in an initial public offering. EXCEPTION Pre-existing Status Exception. A Putnam employee shall not be barred by this Rule or by Rule 1(a) of Section I.A. from purchasing securities for her personal account in connection with an initial public offering of securities by a bank or insurance company when the employee's status as a policyholder or depositor entitles her to purchase securities on terms more favorable than those available to the general public, in connection with the bank's conversion from mutual or cooperative form to stock form, or the insurance company's conversion from mutual to stock form, provided that the employee has had the status entitling her to purchase on favorable terms for at least two years. This exception is only available with respect to the value of bank deposits or insurance policies that an employee owns before the announcement of the initial public offering. This exception does not apply, however, if the security appears on the Restricted List in the circumstances set forth in subparts (b), (c), or (d) of Section I.A., Rule 1. IMPLEMENTATION A. General Implementation. An employee shall inquire, before any purchase of a security for her personal account, whether the security to be purchased is being offered pursuant to an initial public offering. If the security is offered through an initial public offering, the employee shall refrain from purchasing that security for her personal account unless the exception applies. B. Administration of Exception. If the employee believes the exception applies, she shall consult the Code of Ethics Administrator concerning whether the security appears on the Restricted List and if so, whether it is eligible for this exception. COMMENTS 1. The purpose of this rule is twofold. First, it is designed to prevent a conflict of interest between Putnam employees and Putnam clients who might be in competition for the same securities in a limited public offering. Second, the rule is designed to prevent Putnam employees from being subject to undue influence as a result of receiving "favors" in the form of special allocations of securities in a public offering from broker-dealers who seek to do business with Putnam. 2. Purchases of securities in the immediate after-market of an initial public offering are not prohibited, provided they do not constitute violations of other portions of the Code of Ethics. For example, participation in the immediate after-market as a result of a special allocation from an underwriting group would be prohibited by Section III, Rule 3 concerning gifts and other "favors." 3. Public offerings subsequent to initial public offerings are not deemed to create the same potential for competition between Putnam employees and Putnam clients because of the pre-existence of a market for the securities. RULE 3 No Putnam employee shall purchase any security for his personal account in a limited private offering or private placement. COMMENTS 1. The purpose of this Rule is to prevent a Putnam employee from investing in securities for his own account pursuant to a limited private offering that could compete with or disadvantage Putnam clients, and to prevent Putnam employees from being subject to efforts to curry favor by those who seek to do business with Putnam. 2. Exemptions to the prohibition will generally not be granted where the proposed investment relates directly or indirectly to investments by a Putnam client, or where individuals involved in the offering (including the issuers, broker, underwriter, placement agent, promoter, fellow investors and affiliates of the foregoing) have any prior or existing business relationship with Putnam or a Putnam employee, or where the Putnam employee believes that such individuals may expect to have a future business relationship with Putnam or a Putnam employee. 3. An exemption may be granted, subject to reviewing all the facts and circumstances, for investments in: (a) Pooled investment funds, including hedge funds, subject to the condition that an employee investing in a pooled investment fund would have no involvement in the activities or decision-making process of the fund except for financial reports made in the ordinary course of the fund's business. (b) Private placements where the investment cannot relate, or be expected to relate, directly or indirectly to Putnam or investments by a Putnam client. 4. Employees who apply for an exemption will be expected to disclose to the Code of Ethics Officer in writing all facts and relationships relating to the proposed investment. 5. Limited partnership interests are frequently sold in private placements. An employee should assume that investment in a limited partnership is barred by these rules, unless the employee has obtained, in advance of purchase, a written exemption under the ad hoc exemption set forth in Section I.D., Rule 2. The procedure for obtaining an ad hoc exemption is described in Section VII, Part 4. 6. Applications to invest in private placements will be reviewed by the Code of Ethics Oversight Committee. This review will take into account, among other factors, the considerations described in the preceding comments. RULE 4 No Putnam employee shall purchase or sell any security for her personal account or for any Putnam client account while in possession of material, nonpublic information concerning the security or the issuer. EXCEPTIONS NONE. Please read Appendix A, Policy Statement Concerning Insider Trading Prohibitions. RULE 5 No Putnam employee shall purchase from or sell to a Putnam client any securities or other property for his personal account, nor engage in any personal transaction to which a Putnam client is known to be a party, or which transaction may have a significant relationship to any action taken by a Putnam client. EXCEPTIONS None. IMPLEMENTATION It shall be the responsibility of every Putnam employee to make inquiry prior to any personal transaction sufficient to satisfy himself that the requirements of this Rule have been met. COMMENT This rule is required by federal law. It does not prohibit a Putnam employee from purchasing any shares of an open-end Putnam fund. The policy with respect to employee trading in closed-end Putnam funds is attached as Appendix B. C. Discouraged Transactions RULE 1 Putnam employees are strongly discouraged from engaging in naked option transactions for their personal accounts. EXCEPTIONS None. COMMENT Naked option transactions are particularly dangerous, because a Putnam employee may be prevented by the restrictions in this Code of Ethics from "covering" the naked option at the appropriate time. All employees should keep in mind the limitations on their personal securities trading imposed by this Code when contemplating such an investment strategy. Engaging in naked options transactions on the basis of material, nonpublic information is prohibited. See Appendix A, Policy Statement Concerning Insider Trading Prohibitions. RULE 2 Putnam employees are strongly discouraged from engaging in excessive trading for their personal accounts. EXCEPTIONS None. COMMENTS 1. Although a Putnam employee's excessive trading may not itself constitute a conflict of interest with Putnam clients, Putnam believes that its clients' confidence in Putnam will be enhanced and the likelihood of Putnam achieving better investment results for its clients over the long term will be increased if Putnam employees rely on their investment -- as opposed to trading -- skills in transactions for their own account. Moreover, excessive trading by a Putnam employee for his or her own account diverts an employee's attention from the responsibility of servicing Putnam clients, and increases the possibilities for transactions that are in actual or apparent conflict with Putnam client transactions. 2. Although this Rule does not define excessive trading, employees should be aware that if their trades exceed 10 trades per quarter the trading activity will be reviewed by the Code of Ethics Oversight Committee. D. Exempted Transactions RULE 1 Transactions which are involuntary on the part of a Putnam employee are exempt from the prohibitions set forth in Sections I.A., I.B., and I.C. EXCEPTIONS None. COMMENTS 1. This exemption is based on categories of conduct that the Securities and Exchange Commission does not consider "abusive." 2. Examples of examples;involuntary personal securities transactions include: (a) sales out of the brokerage account of a Putnam employee as a result of bona fide margin call, provided that withdrawal of collateral by the Putnam employee within the ten days previous to the margin call was not a contributing factor to the margin call; (b) purchases arising out of an automatic dividend reinvestment program of an issuer of a publicly traded security. 3. Transactions by a trust in which the Putnam employee (or a member of his immediate family) holds a beneficial interest, but for which the employee has no direct or indirect influence or control with respect to the selection of investments, are involuntary transactions. In addition, these transactions do not fall within the definition of "personal securities transactions." See Definitions. 4. A good-faith belief on the part of the employee that a transaction was involuntary will not be a defense to a violation of the Code of Ethics. In the event of confusion as to whether a particular transaction is involuntary, the burden is on the employee to seek a prior written determination of the applicability of this exemption. The procedures for obtaining such a determination appear in Section VII, Part 3. RULE 2 Transactions which have been determined in writing by the Code of Ethics Officer before the transaction occurs to be no more than remotely potentially harmful to Putnam clients because the transaction would be very unlikely to affect a highly institutional market, or because the transaction is clearly not related economically to the securities to be purchased, sold, or held by a Putnam client, are exempt from the prohibitions set forth in Sections I.A., I.B., and I.C. EXCEPTIONS N.A. IMPLEMENTATION An employee may seek an ad hoc exemption under this Rule by following the procedures in Section VII, Part 4. COMMENTS 1. This exemption is also based upon categories of conduct that the Securities and Exchange Commission does not consider "abusive." 2. The burden is on the employee to seek a prior written determination that the proposed transaction meets the standards for an ad hoc exemption set forth in this Rule. * Section II. Additional Special Rules for Personal Securities Transactions of Access Persons and Certain Investment Professionals Access Persons (including all Investment Professionals and other employees as defined on page ix) RULE 1 ("60-DAY" RULE) No Access Person shall profit from the purchase and sale, or sale and purchase, of any security or related derivative security within 60 calendar days. EXCEPTIONS None, unless prior written approval from the Code of Ethics Officer is obtained. Exceptions may be granted on a case-by-case basis when no abuse is involved and the equities of the situation support an exemption. For example, although an Access Person may buy a stock as a long-term investment, that stock may have to be sold involuntarily due to unforeseen activity such as a merger. IMPLEMENTATION 1. The 60-Day Rule applies to all Access Persons, as defined in the Definitions section of the Code. 2. Calculation of whether there has been a profit is based upon the market prices of the securities. The calculation is not net of commissions or other sales charges. 3. As an example, an Access Person would not be permitted to sell a security at $12 that he purchased within the prior 60 days for $10. Similarly, an Access Person would not be permitted to purchase a security at $10 that she had sold within the prior 60 days for $12. If the proposed transaction would be made at a loss, it would be permitted if the pre-clearance requirements are met. See, Section I, Rule 1. COMMENTS 1. The prohibition against short-term trading profits by Access Persons is designed to minimize the possibility that they will capitalize inappropriately on the market impact of trades involving a client portfolio about which they might possibly have information. 2. Although Chief Investment Officers, Portfolio Managers, and Analysts may sell securities at a profit within 60 days of purchase in order to comply with the requirements of the 7-Day Rule applicable to them (described below), the profit will have to be disgorged to charity under the terms of the 7-Day Rule. 3. Access Persons occasionally make a series of transactions in securities over extended periods of time. For example, an Access Person bought 100 shares of Stock X on Day 1 at $100 per share and then bought 50 additional shares on Day 45 at $95 per share. On Day 75, the Access Person sold 20 shares at $105 per share. The question arises whether the Access Person violated the 60-Day Rule. The characterization of the employee's tax basis in the shares sold determines the analysis. If, for personal income tax purposes, the Access Person characterizes the shares sold as having a basis of $100 per share (i.e., shares purchased on Day 1), the transaction would be consistent with the 60-Day Rule. However, if the tax basis in the shares is $95 per share (i.e., shares purchased on Day 45), the transaction would violate the 60-Day Rule. Certain Investment Professionals RULE 2 ("7-DAY" RULE) (a) Portfolio Managers: Before a portfolio manager places an order to buy a security for any Putnam client portfolio that he manages, he shall sell any such security or related derivative security purchased in a transaction for his personal account within the preceding seven calendar days. (b) Co-Managers: Before a portfolio manager places an order to buy a security for any Putnam client he manages, his co-manager shall sell any such security or related derivative security purchased in transaction for his personal account within the preceding seven calendar days. (c) Analysts: Before an analyst makes a buy recommendation for a security, he shall sell any such security or related derivative security purchased in a transaction for his personal account within the preceding seven calendar days. (d) Chief Investment Officers: The Chief Investment Officer of an investment group must sell any security or related derivative security purchased in a transaction for his personal account within the preceding seven calendar days before any portfolio manager in the CIO's investment group places an order to buy such security for any Putnam client account he manages. EXCEPTIONS None. COMMENTS 1. This Rule applies to portfolio managers and Chief Investment Officers with respect to any purchase (no matter how small) in any client account managed or overseen by that portfolio manager or CIO (even so-called "clone accounts"). In particular, it should be noted that the requirements of this rule also apply with respect to purchases in client accounts, including "clone accounts," resulting from "cash flows." To comply with the requirements of this rule, it is the responsibility of each portfolio manager and CIO to be aware of the placement of all orders for purchases of a security by client accounts that he or she manages or oversees for 7 days following the purchase of that security for his or her personal account. 2. An investment professional who must sell securities to be in compliance with the 7-Day Rule must absorb any loss and disgorge to charity any profit resulting from the sale. 3. This Rule is designed to avoid even the appearance of a conflict of interest between an investment professional and a Putnam client. A more stringent rule is warranted because, with their greater knowledge and control, these investment professionals are in a better position than other employees to create an appearance of manipulation of Putnam client accounts for personal benefit. 4. "Portfolio manager" is used in this Section as a functional label, and is intended to cover any employee with authority to authorize a trade on behalf of a Putnam client, whether or not such employee bears the title "portfolio manager." "Analyst" is also used in this Section as a functional label, and is intended to cover any employee who is not a portfolio manager but who may make recommendations regarding investments for Putnam clients. RULE 3 ("BLACKOUT RULE") (a) Portfolio Managers: No portfolio manager shall: (i) sell any security or related derivative security for her personal account until seven calendar days have elapsed since the most recent purchase of that security or related derivative security by any Putnam client portfolio she manages or co-manages; or (ii) purchase any security or related derivative security for her personal account until seven calendar days have elapsed since the most recent sale of that security or related derivative security from any Putnam client portfolio that she manages or co-manages. (b) Analysts: No analyst shall: (i) sell any security or related derivative security for his personal account until seven calendar days have elapsed since his most recent buy recommendation for that security or related derivative security; or (ii) purchase any security or related derivative security for his personal account until seven calendar days have elapsed since his most recent sell recommendation for that security or related derivative security. (c) Chief Investment Officers: No Chief Investment Officer shall: (i) sell any security or related derivative security for his personal account until seven calendar days have elapsed since the most recent purchase of that security or related derivative security by a portfolio manager in his investment group; or (ii) purchase any security or related derivative security for his personal account until seven calendar days have elapsed since the most recent sale of that security or related derivative security from any Putnam client portfolio managed in his investment group. EXCEPTIONS None. COMMENTS 1. This Rule applies to portfolio managers and Chief Investment Officers with respect to any transaction (no matter how small) in any client account managed or overseen by that portfolio manager or CIO (even so-called "clone accounts"). In particular, it should be noted that the requirements of this rule also apply with respect to transactions in client accounts, including "clone accounts," resulting from "cash flows." In order to comply with the requirements of this rule, it is the responsibility of each portfolio manager and CIO to be aware of all transactions in a security by client accounts that he or she manages or oversees that took place within the 7 days preceding a transaction in that security for his or her personal account. 2. This Rule is designed to prevent a Putnam portfolio manager or analyst from engaging in personal investment conduct that appears to be counter to the investment strategy she is pursuing or recommending on behalf of a Putnam client. 3. Trades by a Putnam portfolio manager for her personal account in the "same direction" as the Putnam client portfolio she manages, and trades by an analyst for his personal account in the "same direction" as his recommendation, do not present the same danger, so long as any "same direction" trades do not violate other provisions of the Code or the Policy Statements. RULE 4 ("CONTRA TRADING" RULE) (a) Portfolio Managers: No portfolio manager shall, without prior clearance, sell out of his personal account securities or related derivative securities held in any Putnam client portfolio that he manages or co-manages. (b) Chief Investment Officers: No Chief Investment Officer shall, without prior clearance, sell out of his personal account securities or related derivative securities held in any Putnam client portfolio managed in his investment group. EXCEPTIONS None, unless prior clearance is given. IMPLEMENTATION A. Individuals Authorized to Give Approval. Prior to engaging in any such sale, a portfolio manager shall seek approval, in writing, of the proposed sale. In the case of a portfolio manager or director, prior written approval of the proposed sale shall be obtained from a chief investment officer to whom he reports or, in his absence, another chief investment officer. In the case of a chief investment officer, prior written approval of the proposed sale shall be obtained from another chief investment officer. In addition to the foregoing, prior written approval must also be obtained from the Code of Ethics Officer. B. Contents of Written Approval. In every instance, the written approval form attached as Appendix C (or such other form as the Code of Ethics Officer shall designate) shall be used. The written approval should be signed by the chief investment officer giving approval and dated the date such approval was given, and shall state, briefly, the reasons why the trade was allowed and why the investment conduct pursued by the portfolio manager, director, or chief investment officer was deemed inappropriate for the Putnam client account controlled by the individual seeking to engage in the transaction for his personal account. Such written approval shall be sent by the chief investment officer approving the transaction to the Code of Ethics Officer within twenty-four hours or as promptly as circumstances permit. Approvals obtained after a transaction has been completed or while it is in process will not satisfy the requirements of this Rule. COMMENT This Rule, like Rule 3 of this Section, is designed to prevent a Putnam portfolio manager from engaging in personal investment conduct that appears to be counter to the investment strategy that he is pursuing on behalf of a Putnam client. RULE 5 No portfolio manager shall cause, and no analyst shall recommend, a Putnam client to take action for the portfolio manager's or analyst's own personal benefit. EXCEPTIONS None. COMMENTS 1. A portfolio manager who trades in, or an analyst who recommends, particular securities for a Putnam client account in order to support the price of securities in his personal account, or who "front runs" a Putnam client order is in violation of this Rule. Portfolio managers and analysts should be aware that this Rule is not limited to personal transactions in securities (as that word is defined in "Definitions"). Thus, a portfolio manager or analyst who "front runs" a Putnam client purchase or sale of obligations of the U.S. government is in violation of this Rule, although U.S. government obligations are excluded from the definition of "security." 2. This Rule is not limited to instances when a portfolio manager or analyst has malicious intent. It also prohibits conduct that creates an appearance of impropriety. Portfolio managers and analysts who have questions about whether proposed conduct creates an appearance of impropriety should seek a prior written determination from the Code of Ethics Officer, using the procedures described in Section VII, Part 3. Section III. Prohibited Conduct for All Employees RULE 1 All employees must comply with applicable laws and regulations as well as company policies. This includes tax, antitrust, political contribution, and international boycott laws. In addition, no employee at Putnam may engage in fraudulent conduct of any kind. EXCEPTIONS None. COMMENTS 1. Putnam may report to the appropriate legal authorities conduct by Putnam employees that violates this rule. 2. It should also be noted that the U.S. Foreign Corrupt Practices Act makes it a criminal offense to make a payment or offer of payment to any non-U.S. governmental official, political party, or candidate to induce that person to affect any governmental act or decision, or to assist Putnam's obtaining or retaining business. RULE 2 No Putnam employee shall conduct herself in a manner which is contrary to the interests of, or in competition with, Putnam or a Putnam client, or which creates an actual or apparent conflict of interest with a Putnam client. EXCEPTIONS None. COMMENTS 1. This Rule is designed to recognize the fundamental principle that Putnam employees owe their chief duty and loyalty to Putnam and Putnam clients. 2. It is expected that a Putnam employee who becomes aware of an investment opportunity that she believes is suitable for a Putnam client who she services will present it to the appropriate portfolio manager, prior to taking advantage of the opportunity herself. RULE 3 No Putnam employee shall seek or accept gifts, favors, preferential treatment, or special arrangements of material value from any broker-dealer, investment adviser, financial institution, corporation, or other entity, or from any existing or prospective supplier of goods or services to Putnam or Putnam Funds. Specifically, any gift over $50 in value, or any accumulation of gifts which in aggregate exceeds $50 in value from one source in one calendar year, is prohibited. Any Putnam employee who is offered or receives an item prohibited by this Rule must report the details in writing to the Code of Ethics Officer. EXCEPTIONS None. COMMENTS 1. This rule is intended to permit only proper types of customary business amenities. Listed below are examples of items that would be permitted under proper circumstances and of items that are prohibited under this rule. These examples are illustrative and not all-inclusive. Notwithstanding these examples, a Putnam employee may not, under any circumstances, accept anything that could create the appearance of any kind of conflict of interest. For example, acceptance of any consideration is prohibited if it would create the appearance of a "reward" or inducement for conducting Putnam business either with the person providing the gift or his employer. 2. This rule also applies to gifts or "favors" of material value that an investment professional may receive from a company or other entity being researched or considered as a possible investment for a Putnam client account. 3. Among items not considered of "material value" which, under proper circumstances, would be considered permissible are: (a) Occasional lunches or dinners conducted for business purposes; (b) Occasional cocktail parties or similar social gatherings conducted for business purposes; (c) Occasional attendance at theater, sporting or other entertainment events conducted for business purposes; and (d) Small gifts, usually in the nature of reminder advertising, such as pens, calendars, etc., with a value of no more than $50. 4. Among items which are considered of "material value" and which are prohibited are: (a) Entertainment of a recurring nature such as sporting events, theater, golf games, etc.; (b) The cost of transportation to a locality outside the Boston metropolitan area, and lodging while in another locality, unless such attendance and reimbursement arrangements have received advance written approval of the Code of Ethics Officer; (c) Personal loans to a Putnam employee on terms more favorable than those generally available for comparable credit standing and collateral; and (d) Preferential brokerage or underwriting commissions or spreads or allocations of shares or interests in an investment for the personal account of a Putnam employee. 5. As with any of the provisions of the Code of Ethics, a sincere belief by the employee that he was acting in accordance with the requirements of this Rule will not satisfy his obligations under the Rule. Therefore, an employee who is in doubt concerning the propriety of any gift or "favor" should seek a prior written determination from the Code of Ethics Officer, as provided in Part 3 of Section VII. RULE 4 No Putnam employee may pay, offer, or commit to pay any amount of consideration which might be or appear to be a bribe or kickback in connection with Putnam's business. EXCEPTIONS None. COMMENT Although the rule does not specifically address political contributions, Putnam employees should be aware that it is against corporate policy to use company assets to fund political contributions of any sort, even where such contributions may be legal. No Putnam employee should offer or agree to make any political contributions (including political dinners and similar fund-raisers) on behalf of Putnam, and no employee will be reimbursed by Putnam for such contributions made by the employee personally. RULE 5 No contributions may be made with corporate funds to any political party or campaign, whether directly or by reimbursement to an employee for the expense of such a contribution. No Putnam employee shall solicit any charitable, political or other contributions using Putnam letterhead or making reference to Putnam in the solicitation. No Putnam employee shall personally solicit any such contribution while on Putnam business. EXCEPTIONS None. COMMENT 1. Putnam has established a political action committee (PAC) that contributes to worthy candidates for political office. Any request received by a Putnam employee for a political contribution must be directed to Putnam's Legal and Compliance Department. 2. This rule does not prohibit solicitation on personal letterhead by Putnam employees. Nonetheless, Putnam employees should use discretion in soliciting contributions from individuals or entities who provide services to Putnam. There should never be a suggestion that any service provider must contribute to keep Putnam's business. RULE 6 No unauthorized disclosure may be made by any employee or former employee of any trade secrets or proprietary information of Putnam or of any confidential information. No information regarding any Putnam client portfolio, actual or proposed securities trading activities of any Putnam client, or Putnam research shall be disclosed outside the Putnam organization without a valid business purpose. EXCEPTIONS None. COMMENT All information about Putnam and Putnam clients is strictly confidential. Putnam research information should not be disclosed unnecessarily and never for personal gain. RULE 7 No Putnam employee shall serve as officer, employee, director, trustee or general partner of a corporation or entity other than Putnam, without prior approval of the Code of Ethics Officer. EXCEPTION Charitable or Non-profit Exception. This Rule shall not prevent any Putnam employee from serving as officer, director, or trustee of a charitable or not-for-profit institution, provided that the employee abides by the spirit of the Code of Ethics and the Policy Statements with respect to any investment activity for which she has any discretion or input as officer, director, or trustee. The pre-clearance and reporting requirements of the Code of Ethics do not apply to the trading activities of such charitable or not-for-profit institutions for which an employee serves as an officer, director, or trustee. COMMENTS 1. This Rule is designed to ensure that Putnam cannot be deemed an affiliate of any issuer of securities by virtue of service by one of its officers or employees as director or trustee. 2. Certain charitable or not-for-profit institutions have assets (such as endowment funds or employee benefit plans) which require prudent investment. To the extent that a Putnam employee (because of her position as officer, director, or trustee of an outside entity) is charged with responsibility to invest such assets prudently, she may not be able to discharge that duty while simultaneously abiding by the spirit of the Code of Ethics and the Policy Statements. Employees are cautioned that they should not accept service as an officer, director, or trustee of an outside charitable or not-for-profit entity where such investment responsibility is involved, without seriously considering their ability to discharge their fiduciary duties with respect to such investments. RULE 8 No Putnam employee shall serve as a trustee, executor, custodian, any other fiduciary, or as an investment adviser or counselor for any account outside Putnam. EXCEPTIONS Charitable or Religious Exception. This Rule shall not prevent any Putnam employee from serving as fiduciary with respect to a religious or charitable trust or foundation, so long as the employee abides by the spirit of the Code of Ethics and the Policy Statements with respect to any investment activity over which he has any discretion or input. The pre-clearance and reporting requirements of the Code of Ethics do not apply to the trading activities of such a religious or charitable trust or foundation. Family Trust or Estate Exception. This Rule shall not prevent any Putnam employee from serving as fiduciary with respect to a family trust or estate, so long as the employee abides by all of the Rules of the Code of Ethics with respect to any investment activity over which he has any discretion. COMMENT The roles permissible under this Rule may carry with them the obligation to invest assets prudently. Once again, Putnam employees are cautioned that they may not be able to fulfill their duties in that respect while abiding by the Code of Ethics and the Policy Statements. RULE 9 No Putnam employee may be a member of any investment club. EXCEPTIONS None. COMMENT This Rule guards against the danger that a Putnam employee may be in violation of the Code of Ethics and the Policy Statements by virtue of his personal securities transactions in or through an entity that is not bound by the restrictions imposed by this Code of Ethics and the Policy Statements. Please note that this restriction also applies to the spouse of a Putnam employee and any relatives of a Putnam employee living in the same household as the employee, as their transactions are covered by the Code of Ethics (see page x). RULE 10 No Putnam employee may become involved in a personal capacity in consultations or negotiations for corporate financing, acquisitions or other transactions for outside companies (whether or not held by any Putnam client), nor negotiate nor accept a fee in connection with these activities without obtaining the prior written permission of the president of Putnam Investments. EXCEPTIONS None. RULE 11 No new types of securities or instruments may be purchased for a Putnam fund or other client account without following the procedures set forth in Appendix D. EXCEPTIONS None. COMMENT See Appendix D. RULE 12 No employee may create or participate in the creation of any record that is intended to mislead anyone or to conceal anything that is improper. EXCEPTIONS None. COMMENT In many cases, this is not only a matter of company policy and ethical behavior but also required by law. Our books and records must accurately reflect the transactions represented and their true nature. For example, records must be accurate as to the recipient of all payments; expense items, including personal expense reports, must accurately reflect the true nature of the expense. No unrecorded fund or asset shall be established or maintained for any reason. RULE 13 No employee should have any direct or indirect (including by a family member or close relative) personal financial interest (other than normal investments not material to the employee in the entity's publicly traded securities) in any business, with which Putnam has dealings unless such interest is disclosed and approved by the Code of Ethics Officer. RULE 14 No employee shall, with respect to any affiliate of Putnam that provides investment advisory services and is listed below in Comment 4 to this Rule, as revised from time to time (each an "NPA"), (a) directly or indirectly seek to influence the purchase, retention, or disposition of, or exercise of voting, consent, approval or similar rights with respect to, any portfolio security in any account or fund advised by the NPA and not by Putnam, (b) transmit any information regarding the purchase, retention or disposition of, or exercise of voting, consent, approval or similar rights with respect to, any portfolio security held in a Putnam or NPA client account to any personnel of the NPA, (c) transmit any trade secrets, proprietary information, or confidential information of Putnam to the NPA without a valid business purpose, (d) use confidential information or trade secrets of the NPA for the benefit of the employee, Putnam, or any other NPA, or (e) breach any duty of loyalty to the NPA by virtue of service as a director or officer of the NPA. COMMENT 1. Sections (a) and (b) of the Rule are designed to help ensure that the portfolio holdings of Putnam clients and clients of the NPA need not be aggregated for purposes of determining beneficial ownership under Section 13(d) of the Securities Exchange Act or applicable regulatory or contractual investment restrictions that incorporate such definition of beneficial ownership. Persons who serve as directors or officers of both Putnam and an NPA would take care to avoid even inadvertent violations of Section (b). Section (a) does not prohibit a Putnam employee who serves as a director or officer of the NPA from seeking to influence the modification or termination of a particular investment product or strategy in a manner that is not directed at any specific securities. Sections (a) and (b) do not apply when a Putnam affiliate serves as an adviser or subadviser to the NPA or one of its products, in which case normal Putnam aggregation rules apply. 2. As a separate entity, any NPA may have trade secrets or confidential information that it would not choose to share with Putnam. This choice must be respected. 3. When Putnam employees serve as directors or officers of an NPA, they are subject to common law duties of loyalty to the NPA, despite their Putnam employment. In general, this means that when performing their duties as NPA directors or officers, they must act in the best interest of the NPA and its shareholders. Putnam's Legal and Compliance Department will assist any Putnam employee who is a director or officer of an NPA and has questions about the scope of his or her responsibilities to the NPA. 4. Entities that are currently non-Putnam affiliates within the scope of this Rule are: Cisalpina Gestioni, S.p.A., PanAgora Asset Management Inc., PanAgora Asset Management Ltd., Nissay Asset Management Co., Ltd., and Thomas H. Lee Partners, L.P. RULE 15 No employee shall use computer hardware, software, data, Internet, electronic mail, voice mail, electronic messaging ("e-mail" or "cc: Mail"), or telephone communications systems in a manner that is inconsistent with their use as set forth in policy statements governing their use that are adopted from time to time by Putnam. No employee shall introduce a computer "virus" or computer code that may result in damage to Putnam's information or computer systems. EXCEPTIONS None. COMMENT 1. Internet and Electronic Messaging Policies. As more and more employees of Putnam Investments use the Internet to connect with Putnam's customers, vendors, suppliers and other key organizations, it is important that all Putnam employees understand the appropriate use guidelines and how to protect assets of Putnam and its clients whenever using the Internet. Internet access is provided to designated employees to connect with worldwide information resources for the benefit of the company and its clients. Such access is not intended for personal use. Employees using the Internet or any electronic messaging system must do so in a responsible, ethical and lawful manner. * Putnam has adopted a Policy and Guidelines on Internet Use. A copy of this policy statement is included in the Putnam Employee Handbook and is available online (you may contact Putnam's Human Resources Department for the on-line address). Failure to comply with this policy statement is a violation of Putnam's Code of Ethics. 2. System Security Policy Statement. It is the policy of Putnam Investments to secure its computer hardware, software, data, electronic mail, voice mail and Internet access by placing strict controls and restrictions on their access and use. * Putnam has adopted a System Security Policy Statement. This policy statement governs the use of computer hardware and software, data, electronic mail, voice mail, Internet and commercial online services, computer passwords and logon Ids, and workstation security. A copy of this policy statement is included in the Putnam Employee Handbook and is available online (you may contact Putnam's Human Resources Department for the on-line address). Failure to comply with this policy statement is a violation of Putnam's Code of Ethics. 3. Computer Virus Policy and Procedure. Putnam has adopted a Computer Virus Policy and Procedure. This policy sets forth guidelines to prevent computer viruses, procedures to be followed in the event a computer may be infected with a virus, and a description of virus symptoms. A copy of this policy statement is included in the Putnam Employee Handbook and is available online (you may contact Putnam's Human Resources Department for the on-line address). Failure to comply with this policy statement is a violation of Putnam's Code of Ethics. * Section IV. Special Rules for Officers and Employees of Putnam Europe Ltd. RULE 1 In situations subject to Section I.A., Rule 1 (Restricted List Personal Securities Transactions), the Putnam Europe Ltd. ("PEL") employee must obtain clearance not only as provided in that rule, but also from PEL's Compliance Officer or her designee, who must approve the transaction before any trade is placed and record the approval. EXCEPTIONS None. IMPLEMENTATION Putnam's Code of Ethics Administrator in Boston (the "Boston Administrator") has also been designated the Assistant Compliance Officer of PEL and has been delegated the right to approve or disapprove personal securities transactions in accordance with the foregoing requirement. Therefore, approval from the Code of Ethics Administrator for PEL employees to make personal securities investments constitutes approval under the Code of Ethics and also for purposes of compliance with IMRO, the U.K. self-regulatory organization that regulates PEL. The position of London Code of Ethics Administrator (the "London Administrator") has also been created (Jane Barlow is the current London Administrator). All requests for clearances must be made by e-mail to the Boston Administrator copying the London Administrator. The e-mail must include the number of shares to be bought or sold and the name of the broker(s) involved. Where time is of the essence clearances can be made by telephone to the Boston Administrator but they must be followed up by e-mail. Both the Boston and London Administrators will maintain copies of all clearances for inspection by senior management and regulators. RULE 2 No PEL employee may trade with any broker or dealer unless that broker or dealer has sent a letter to the London Administrator agreeing to deliver copies of trade confirmations to PEL. No PEL employee may enter into any margin or any other special dealing arrangement with any broker-dealer without the prior written consent of the PEL Compliance Officer. EXCEPTIONS None. IMPLEMENTATION PEL employees will be notified separately of this requirement once a year by the PEL Compliance Officer, and are required to provide an annual certification of compliance with the Rule. All PEL employees must inform the London Administrator of the names of all brokers and dealers with whom they trade prior to trading. The London Administrator will send a letter to the broker(s) in question requesting them to agree to deliver copies of confirms to PEL. The London Administrator will forward copies of the confirms to the Boston Administrator. PEL employees may trade with a broker only when the London Administrator has received the signed agreement from that broker. RULE 3 For purposes of the Code of Ethics, including Putnam's Policy Statement on Insider Trading Prohibitions, PEL employees must also comply with Part V of the Criminal Justice Act 1993 on insider dealing. EXCEPTIONS None. IMPLEMENTATION To ensure compliance with U.K. insider dealing legislation, PEL employees must observe the relevant procedures set forth in PEL's Compliance Manual, a copy of which is sent to each PEL employee, and sign an annual certification as to compliance. * Section V. Reporting Requirements for All Employees Reporting of Personal Securities Transactions RULE 1 Each Putnam employee shall ensure that broker-dealers send all confirmations of securities transactions for his personal accounts to the Code of Ethics Officer. (For the purpose of this Rule, "securities" shall include securities of The Marsh & McLennan Companies, Inc., and any option on a security or securities index, including broad-based market indexes.) EXCEPTIONS None. IMPLEMENTATION 1. Putnam employees must instruct their broker-dealers to send confirmations to Putnam and must follow up with the broker-dealer on a reasonable basis to ensure that the instructions are being followed. Putnam employees should contact the Code of Ethics Administrator to obtain a letter from Putnam authorizing the setting up of a personal brokerage account. Confirmations should be submitted to the Code of Ethics Administrator. (Specific procedures apply to employees of Putnam Europe Ltd. ("PEL"). Employees of PEL should contact the London Code of Ethics Administrator.) Failure of a broker-dealer to comply with the instructions of a Putnam employee to send confirmations shall be a violation by the Putnam employee of this Rule. COMMENTS 1. "Transactions for personal accounts" is defined broadly to include more than transaction in accounts under an employee's own name. See Definitions. 2. A confirmation is required for all personal securities transactions, whether or not exempted or excepted by this Code. 3. To the extent that a Putnam employee has investment authority over securities transactions of a family trust or estate, confirmations of those transactions must also be made, unless the employee has received a prior written exception from the Code of Ethics Officer. RULE 2 Every Access Person shall file a quarterly report, within ten calendar days of the end of each quarter, recording all purchases and sales of any securities for personal accounts as defined in the Definitions. (For the purpose of this Rule, "securities" shall include securities of The Marsh & McLennan Companies, Inc., and any option on a security or securities index, including broad-based market indexes.) EXCEPTIONS None. IMPLEMENTATION All employees required to file such a report will receive a blank form at the end of the quarter from the Code of Ethics Administrator. The form will specify the information to be reported. The form shall also contain a representation that employees have complied fully with all provisions of the Code of Ethics. COMMENT 1. The date for each transaction required to be disclosed in the quarterly report is the trade date for the transaction, not the settlement date. 2. If the requirement to file a quarterly report applies to you and you fail to report within the required 10-day period, salary increases and bonuses will be reduced in accordance with guidelines stated in the form. Reporting of Personal Securities Holdings RULE 3 Access Persons must disclose all personal securities holdings to the Code of Ethics Officer upon commencement of employment and thereafter on an annual basis. EXCEPTIONS None. COMMENT These requirements are mandated by SEC regulations and are designed to facilitate the monitoring of personal securities transactions. Putnam's Code of Ethics Administrator will provide Access Persons with the form for making these reports and the specific information that must be disclosed at the time that the disclosure is required. Other Reporting Policies The following rules are designed to ensure that Putnam's internal Control and Reporting professionals are aware of all items that might need to be addressed by Putnam or reported to appropriate entities. RULE 4 If a Putnam employee suspects that fraudulent or other irregular activity might be occurring at Putnam, the activity must be reported immediately to the Managing Director in charge of that employee's business unit. Managing Directors who are notified of any such activity must immediately report it in writing to Putnam's Chief Financial Officer or Putnam's General Counsel. RULE 5 Putnam employees must report all communications from regulatory or government agencies (federal, state, or local) to the Managing Director in charge of their business unit. Managing Directors who are notified of any such communication must immediately report it in writing to Putnam's Chief Financial Officer or Putnam's General Counsel. RULE 6 All claims, circumstances or situations that come to the attention of a Putnam employee must be reported through the employee's management structure up to the Managing Director in charge of the employee's business unit. Managing Directors who are notified of any such claim, circumstance or situation that might give rise to a claim against Putnam for more than $100,000 must immediately report in writing it to Putnam's Chief Financial Officer or Putnam's General Counsel. RULE 7 All possible violations of law or regulations at Putnam that come to the attention of a Putnam employee must be reported immediately to the Managing Director in charge of the employee's business unit. Managing Directors who are notified of any such activity must immediately report it in writing to Putnam's Chief Financial Officer or Putnam's General Counsel. RULE 8 Putnam employees must report all requests by anyone for Putnam to participate in or cooperate with an international boycott to the Managing Director in charge of their business unit. Managing Directors who are notified of any such request must immediately report it in writing to Putnam's Chief Financial Officer or Putnam's General Counsel. * Section VI. Education Requirements Every Putnam employee has an obligation to fully understand the requirements of the Code of Ethics. The Rules set forth below are designed to enhance this understanding. RULE 1 A copy of the Code of Ethics will be distributed to every Putnam employee periodically. All Access Persons will be required to certify periodically that they have read, understood, and will comply with the provisions of the Code of Ethics, including the Code's Policy Statement Concerning Insider Trading Prohibitions. RULE 2 Every investment professional will attend a meeting periodically at which the Code of Ethics will be reviewed. * Section VII. Compliance and Appeal Procedures 1. Assembly of Restricted List. The Code of Ethics Administrator will coordinate the assembly and maintenance of the Restricted List. The list will be assembled each day by 11:30 a.m. EST. No employee may engage in a personal securities transaction without prior clearance on any day, even if the employee believes that the trade will be subject to an exception. Note that pre-clearance may be obtained after 9:00 a.m. for purchases or sales of up to 1,000 shares of issuers having a market capitalization in excess of $5 billion. 2. Consultation of Restricted List. It is the responsibility of each employee to pre-clear through the Intranet pre-clearance system or consult with the Code of Ethics Administrator prior to engaging in a personal securities transaction, to determine if the security he proposes to trade is on the Restricted List and, if so, whether it is subject to the "Large Cap" limitation. The Intranet pre-clearance system and the Code of Ethics Administrator will be able to tell an employee whether a security is on the Restricted List. No other information about the Restricted List is available through the Intranet pre-clearance system. The Code of Ethics Administrator shall not be authorized to answer any questions about the Restricted List, or to render an opinion about the propriety of a particular personal securities transaction. Any such questions shall be directed to the Code of Ethics Officer. 3. Request for Determination. An employee who has a question concerning the applicability of the Code of Ethics to a particular situation shall request a determination from the Code of Ethics Officer before engaging in the conduct or personal securities transaction about which he has a question. If the question pertains to a personal securities transaction, the request shall state for whose account the transaction is proposed, the relationship of that account to the employee, the security proposed to be traded, the proposed price and quantity, the entity with whom the transaction will take place (if known), and any other information or circumstances of the trade that could have a bearing on the Code of Ethics Officer's determination. If the question pertains to other conduct, the request for determination shall give sufficient information about the proposed conduct to assist the Code of Ethics Officer in ascertaining the applicability of the Code. In every instance, the Code of Ethics Officer may request additional information, and may decline to render a determination if the information provided is insufficient. The Code of Ethics Officer shall make every effort to render a determination promptly. No perceived ambiguity in the Code of Ethics shall excuse any violation. Any person who believes the Code to be ambiguous in a particular situation shall request a determination from the Code of Ethics Officer. 4. Request for Ad Hoc Exemption. Any employee who wishes to obtain an ad hoc exemption under Section I.D., Rule 2, shall request from the Code of Ethics Officer an exemption in writing in advance of the conduct or transaction sought to be exempted. In the case of a personal securities transaction, the request for an ad hoc exemption shall give the same information about the transaction required in a request for determination under Part 3 of this Section, and shall state why the proposed personal securities transaction would be unlikely to affect a highly institutional market, or is unrelated economically to securities to be purchased, sold, or held by any Putnam client. In the case of other conduct, the request shall give information sufficient for the Code of Ethics Officer to ascertain whether the conduct raises questions of propriety or conflict of interest (real or apparent). The Code of Ethics Officer shall make every effort to promptly render a written determination concerning the request for an ad hoc exemption. 5. Appeal to Code of Ethics Officer with Respect to Restricted List. If an employee ascertains that a security that he wishes to trade for his personal account appears on the Restricted List, and thus the transaction is prohibited, he may appeal the prohibition to the Code of Ethics Officer by submitting a written memorandum containing the same information as would be required in a request for a determination. The Code of Ethics Officer shall make every effort to respond to the appeal promptly. 6. Information Concerning Identity of Compliance Personnel. The names of Code of Ethics personnel are available by contacting the Legal and Compliance Department. Appendix A Policy Statement Concerning Insider Trading Prohibitions PUTNAM INVESTMENTS [SCALE LOGO OMITTED] * Preamble Putnam has always forbidden trading on material nonpublic information ("inside information") by its employees. Tougher federal laws make it important for Putnam to restate that prohibition in the strongest possible terms, and to establish, maintain, and enforce written policies and procedures to prevent the misuse of material nonpublic information. Unlawful trading while in possession of inside information can be a crime. Today, federal law provides that an individual convicted of trading on inside information go to jail for some period of time. There is also significant monetary liability for an inside trader; the Securities and Exchange Commission can seek a court order requiring a violator to pay back profits and penalties of up to three times those profits. In addition, private plaintiffs can seek recovery for harm suffered by them. The inside trader is not the only one subject to liability. In certain cases, "controlling persons" of inside traders (including supervisors of inside traders or Putnam itself) can be liable for large penalties. Section 1 of this Policy Statement contains rules concerning inside information. Section 2 contains a discussion of what constitutes unlawful insider trading. Neither material nonpublic information nor unlawful insider trading is easy to define. Section 2 of this Policy Statement gives a general overview of the law in this area. However, the legal issues are complex and must be resolved by the Code of Ethics Officer. If an employee has any doubt as to whether she has received material nonpublic information, she must consult with the Code of Ethics Officer prior to using that information in connection with the purchase or sale of a security for his own account or the account of any Putnam client, or communicating the information to others. A simple rule of thumb is if you think the information is not available to the public at large, don't disclose it to others and don't trade securities to which the inside information relates. If an employee has failed to consult the Code of Ethics Officer, Putnam will not excuse employee misuse of inside information on the ground that the employee claims to have been confused about this Policy Statement or the nature of the information in his possession. If Putnam determines, in its sole discretion, that an employee has failed to abide by this Policy Statement, or has engaged in conduct that raises a significant question concerning insider trading, he will be subject to disciplinary action, including termination of employment. THERE ARE NO EXCEPTIONS TO THIS POLICY STATEMENT AND NO ONE IS EXEMPT. * Definitions: Insider Trading Gender references in Appendix A alternate. Code of Ethics Administrator. The individual designated by the Code of Ethics Officer to assume responsibility for day-to-day, non-discretionary administration of this Policy Statement. Code of Ethics Officer. The Putnam officer who has been assigned the responsibility of enforcing and interpreting this Policy Statement. The Code of Ethics Officer shall be the General Counsel or such other person as is designated by the President of Putnam Investments. If he is unavailable, the Deputy Code of Ethics Officer (to be appointed by the Code of Ethics Officer) shall act in his stead. Immediate family. Spouse, minor children or other relatives living in the same household as the Putnam employee. Purchase or sale of a security. Any acquisition or transfer of any interest in the security for direct or indirect consideration, including the writing of an option. Putnam. Any or all of Putnam Investments, Inc., and its subsidiaries, any one of which shall be a "Putnam company." Putnam client. Any of the Putnam Funds, or any advisory or trust client of Putnam. Putnam employee (or "employee"). Any employee of Putnam. Security. Anything defined as a security under federal law. The term includes any type of equity or debt security, any interest in a business trust or partnership, and any rights relating to a security, such as put and call options, warrants, convertible securities, and securities indices. (Note: The definition of "security" in this Policy Statement varies significantly from that in the Code of Ethics. For example, the definition in this Policy Statement specifically includes securities of The Marsh & McLennan Companies, Inc.) Transaction for a personal account (or "personal securities transaction"). Securities transactions: (a) for the personal account of any employee; (b) for the account of a member of the immediate family of any employee; (c) for the account of a partnership in which a Putnam employee or immediate family member is a partner with investment discretion; (d) for the account of a trust in which a Putnam employee or immediate family member is a trustee with investment discretion; (e) for the account of a closely-held corporation in which a Putnam employee or immediate family member holds shares and for which he has investment discretion; and (f) for any account other than a Putnam client account which receives investment advice of any sort from the employee or immediate family member, or as to which the employee or immediate family member has investment discretion. Officers and employees of Putnam Europe Ltd. ("PEL") must also consult the relevant procedures on compliance with U.K. insider dealing legislation set forth in PEL's Compliance Manual (see Rule 3 of Section IV of the Code of Ethics). * Section 1. Rules Concerning Inside Information RULE 1 No Putnam employee shall purchase or sell any security listed on the Inside Information List (the "Red List") either for his personal account or for a Putnam client. IMPLEMENTATION When an employee contacts the Code of Ethics Administrator seeking clearance for a personal securities transaction, the Code of Ethics Administrator's response as to whether a security appears on the Restricted List will include securities on the Red List. COMMENT This Rule is designed to prohibit any employee from trading a security while Putnam may have inside information concerning that security or the issuer. Every trade, whether for a personal account or for a Putnam client, is subject to this Rule. RULE 2 No Putnam employee shall purchase or sell any security, either for a personal account or for the account of a Putnam client, while in possession of material, nonpublic information concerning that security or the issuer, without the prior written approval of the Code of Ethics Officer. IMPLEMENTATION In order to obtain prior written approval of the Code of Ethics Officer, a Putnam employee should follow the reporting steps prescribed in Rule 3. COMMENTS 1. Rule 1 concerns the conduct of an employee when Putnam possesses material nonpublic information. Rule 2 concerns the conduct of an employee who herself possesses material, nonpublic information about a security that is not yet on the Red List. 2. If an employee has any question as to whether information she possesses is material and/or nonpublic information, she must contact the Code of Ethics Officer in accordance with Rule 3 prior to purchasing or selling any security related to the information or communicating the information to others. The Code of Ethics Officer shall have the sole authority to determine what constitutes material, nonpublic information for the purposes of this Policy Statement. An employee's mistaken belief that the information was not material nonpublic information will not excuse a violation of this Policy Statement. RULE 3 Any Putnam employee who believes he may have received material, nonpublic information concerning a security or the issuer shall immediately report the information to the Code of Ethics Officer and to no one else. After reporting the information, the Putnam employee shall comply strictly with Rule 2 by not trading in the security without the prior written approval of the Code of Ethics Officer and shall: (a) take precautions to ensure the continued confidentiality of the information; and (b) refrain from communicating the information in question to any person. EXCEPTION This rule shall not apply to material, nonpublic information obtained by Putnam employees who are directors or trustees of publicly traded companies, to the extent that such information is received in their capacities as directors or trustees, and then only to the extent such information is not communicated to anyone else within the Putnam organization. IMPLEMENTATION 1. In order to make any use of potential material, nonpublic information, including purchasing or selling a security or communicating the information to others, an employee must communicate that information to the Code of Ethics Officer in a way designed to prevent the spread of such information. Once the employee has reported potential material, nonpublic information to the Code of Ethics Officer, the Code of Ethics Officer will evaluate whether information constitutes material, nonpublic information, and whether a duty exists that makes use of such information improper. If the Code of Ethics Officer determines either (a) that the information is not material or is public, or (b) that use of the information is proper, he will issue a written approval to the employee specifically authorizing trading while in possession of the information, if the employee so requests. If the Code of Ethics Officer determines (a) that the information may be nonpublic and material, and (b) that use of such information may be improper, he will place the security that is the subject of such information on the Red List. 2. An employee who reports potential inside information to the Code of Ethics Officer should expect that the Code of Ethics Officer will need significant information to make the evaluation described in the foregoing paragraph, including information about (a) the manner in which the employee acquired the information, and (b) the identity of individuals to whom the employee has revealed the information, or who have otherwise learned the information. The Code of Ethics Officer may place the affected security or securities on the Red List pending the completion of his evaluation. 3. If an employee possesses documents, disks, or other materials containing the potential inside information, an employee must take precautions to ensure the confidentiality of the information in question. Those precautions include (a) putting documents containing such information out of the view of a casual observer, and (b) securing files containing such documents or ensuring that computer files reflecting such information are secure from viewing by others. * Section 2. Overview of Insider Trading A. Introduction This section of the Policy Statement provides guidelines for employees as to what may constitute inside information. It is possible that in the course of her employment, an employee may receive inside information. No employee should misuse that information, either by trading for her own account or by communicating the information to others. B. What constitutes unlawful insider trading? The basic definition of unlawful insider trading is trading on material, nonpublic information (also called "inside information") by an individual who has a duty not to "take advantage" of the information. What does this definition mean? The following sections help explain the definition. 1. What is material information? Trading on inside information is not a basis for liability unless the information is material. Information is "material" if a reasonable person would attach importance to the information in determining his course of action with respect to a security. Information which is reasonably likely to affect the price of a company's securities is "material," but effect on price is not the sole criterion for determining materiality. Information that employees should consider material includes but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, reorganization, recapitalization, asset sales, plans to commence a tender offer, merger or acquisition proposals or agreements, major litigation, liquidity problems, significant contracts, and extraordinary management developments. Material information does not have to relate to a company's business. For example, a court considered as material certain information about the contents of a forthcoming newspaper column that was expected to affect the market price of a security. In that case, a reporter for The Wall Street Journal was found criminally liable for disclosing to others the dates that reports on various companies would appear in the Journal's "Heard on the Street" column and whether those reports would be favorable or not. 2. What is nonpublic information? Information is nonpublic until it has been effectively communicated to, and sufficient opportunity has existed for it to be absorbed by, the marketplace. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the Securities and Exchange Commission, or appearing in Dow Jones, Reuters Economic Services, The Wall Street Journal, or other publications of general circulation would be considered public. 3. Who has a duty not to "take advantage" of inside information? Unlawful insider trading occurs only if there is a duty not to "take advantage" of material nonpublic information. When there is no such duty, it is permissible to trade while in possession of such information. Questions as to whether a duty exists are complex, fact-specific, and must be answered by a lawyer. a. Insiders and Temporary Insiders. Corporate "insiders" have a duty not to take advantage of inside information. The concept of "insider" is broad. It includes officers, directors, and employees of a corporation. In addition, a person can be a "temporary insider" if she enters into a special confidential relationship with a corporation and as a result is given access to information concerning the corporation's affairs. A temporary insider can include, among others, accounting firms, consulting firms, law firms, banks and the employees of such organizations. Putnam would generally be a temporary insider of a corporation it advises or for which it performs other services, because typically Putnam clients expect Putnam to keep any information disclosed to it confidential. Example An investment adviser to the pension fund of a large publicly-traded corporation, Acme, Inc., learns from an Acme employee that Acme will not be making the minimum required annual contribution to the pension fund because of a serious downturn in Acme's financial situation. The information conveyed is material and nonpublic. Comment Neither the investment adviser, its employees, nor clients can trade on the basis of that information, because the investment adviser and its employees could be considered "temporary insiders" of Acme. b. Misappropriators. Certain people who are not insiders (or temporary insiders) also have a duty not to deceptively take advantage of inside information. Included in this category is an individual who "misappropriates" (or takes for his own use) material, nonpublic information in violation of a duty owed either to the corporation that is the subject of inside information or some other entity. Such a misappropriator can be held liable if he trades while in possession of that material, nonpublic information. Example The chief financial officer of Acme, Inc., is aware of Acme's plans to engage in a hostile takeover of Profit, Inc. The proposed hostile takeover is material and nonpublic. COMMENT The chief financial officer of Acme cannot trade in Profit, Inc.'s stock for his own account. Even though he owes no duty to Profit, Inc., or its shareholders, he owes a duty to Acme not to "take advantage" of the information about the proposed hostile takeover by using it for his personal benefit. c. Tippers and Tippees. A person (the "tippee") who receives material, nonpublic information from an insider or misappropriator (the "tipper") has a duty not to trade while in possession of that information if he knew or should have known that the information was provided by the tipper for an improper purpose and in breach of a duty owed by the tipper. In this context, it is an improper purpose for a person to provide such information for personal benefit, such as money, affection, or friendship. Example The chief executive officer of Acme, Inc., tells his daughter that negotiations concerning a previously-announced acquisition of Acme have been terminated. This news is material and, at the time the father tells his daughter, nonpublic. The daughter sells her shares of Acme. Comment The father is a tipper because he has a duty to Acme and its shareholders not to "take advantage" of the information concerning the breakdown of negotiations, and he has conveyed the information for an "improper" purpose (here, out of love and affection for his daughter). The daughter is a "tippee" and is liable for trading on inside information because she knew or should have known that her father was conveying the information to her for his personal benefit, and that her father had a duty not to "take advantage" of Acme information. A person can be a tippee even if he did not learn the information directly from the tipper, but learned it from a previous tippee. Example An employee of a law firm which works on mergers and acquisitions learns at work about impending acquisitions. She tells her friend and her friend's stockbroker about the upcoming acquisitions on a regular basis. The stockbroker tells the brother of a client on a regular basis, who in turn tells two friends, A and B. A and B buy shares of the companies being acquired before public announcement of the acquisition, and regularly profit from such purchases. A and B do not know the employee of the law firm. They do not, however, ask about the source of the information. Comment A and B, although they have never heard of the tipper, are tippees because they did not ask about the source of the information, even though they were experienced investors, and were aware that the "tips" they received from this particular source were always right. C. Who can be liable for insider trading? The categories of individuals discussed above (insiders, temporary insiders, misappropriators or tippees) can be liable if they trade while in possession of material nonpublic information. In addition, individuals other than those who actually trade on inside information can be liable for trades of others. A tipper can be liable if (a) he provided the information in exchange for a personal benefit in breach of a duty and (b) the recipient of the information (the "tippee") traded while in possession of the information. Most importantly, a controlling person can be liable if the controlling person "knew or recklessly disregarded" the fact that the controlled person was likely to engage in misuse of inside information and failed to take appropriate steps to prevent it. Putnam is a "controlling person" of its employees. In addition, certain supervisors may be "controlling persons" of those employees they supervise. EXAMPLE A supervisor of an analyst learns that the analyst has, over a long period of time, secretly received material inside information from Acme, Inc.'s chief financial officer. The supervisor learns that the analyst has engaged in a number of trades for his personal account on the basis of the inside information. The supervisor takes no action. COMMENT Even if he is not liable to a private plaintiff, the supervisor can be liable to the Securities and Exchange Commission for a civil penalty of up to three times the amount of the analyst's profit. (Penalties are discussed in the following section.) D. Penalties for Insider Trading Penalties for misuse of inside information are severe, both for individuals involved in such unlawful conduct and their employers. A person who violates the insider trading laws can be subject to some or all of the penalties below, even if he does not personally benefit from the violation. Penalties include: - -- jail sentences (of which at least one to three years must be served) - -- criminal penalties for individuals of up to $1,000,000, and for corporations of up to $2,500,000 - -- injunctions permanently preventing an individual from working in the securities industry - -- injunctions ordering an individual to pay over profits obtained from unlawful insider trading - -- civil penalties of up to three times the profit gained or loss avoided by the trader, even if the individual paying the penalty did not trade or did not benefit personally - -- civil penalties for the employer or other controlling person of up to the greater of $1,000,000 or three times the amount of profit gained or loss avoided - -- damages in the amount of actual losses suffered by other participants in the market for the security at issue. Regardless of whether penalties or money damages are sought by others, Putnam will take whatever action it deems appropriate (including dismissal) if Putnam determines, in its sole discretion, that an employee appears to have committed any violation of this Policy Statement, or to have engaged in any conduct which raises significant questions about whether an insider trading violation has occurred. * Appendix B. Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds 1. Pre-clearance for all employees Any purchase or sale of Putnam closed-end fund shares by a Putnam employee must be pre-cleared by the Code of Ethics Officer or, in his absence, the Deputy Code of Ethics Officer. A list of the closed-end funds can be obtained from the Code of Ethics Administrator. Trading in shares of closed-end funds is subject to all the rules of the Code of Ethics. 2. Special Rules Applicable to Managing Directors of Putnam Investment Management, Inc. and officers of the Putnam Funds Please be aware that any employee who is a Managing Director of Putnam Investment Management, Inc. (the investment manager of the Putnam mutual funds) and officers of the Putnam Funds will not receive clearance to engage in any combination of purchase and sale or sale and purchase of the shares of a given closed-end fund within six months of each other. Therefore, purchases should be made only if you intend to hold the shares more than six months; no sales of fund shares should be made if you intend to purchase additional shares of that same fund within six months. You are also required to file certain forms with the Securities and Exchange Commission in connection with purchases and sales of Putnam closed-end funds. Please contact the Code of Ethics Officer or Deputy Code of Ethics Officer for further information. 3. Reporting by all employees As with any purchase or sale of a security, duplicate confirmations of all such purchases and sales must be forwarded to the Code of Ethics Officer by the broker-dealer utilized by an employee. If you are required to file a quarterly report of all personal securities transactions, this report should include all purchases and sales of closed-end fund shares. Please contact the Code of Ethics Officer or Deputy Code of Ethics Officer if there are any questions regarding these matters. *Appendix C. Clearance Form for Portfolio Manager Sales Out of Personal Account of Securities Also Held by Fund (For compliance with "Contra-Trading" Rule) TO: Code of Ethics Officer FROM: --------------------------------- DATE: --------------------------------- RE: Personal Securities Transaction of --------------------------------- This serves as prior written approval of the personal securities transaction described below: NAME OF PORTFOLIO MANAGER CONTEMPLATING PERSONAL TRADE: - ------------------------------------------------------------------------ SECURITY TO BE TRADED: - ------------------------------------------------------------------------ AMOUNT TO BE TRADED: --------------------------------- FUND HOLDING SECURITIES: --------------------------------- AMOUNT HELD BY FUND: --------------------------------- REASON FOR PERSONAL TRADE: --------------------------------- SPECIFIC REASON SALE OF SECURITIES IS INAPPROPRIATE FOR FUND: - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ (Please attach additional sheets if necessary.) CIO APPROVAL: DATE: -------------------------------------- ---------------- LEGAL/COMPLIANCE APPROVAL: DATE: ------------------------- ---------------- * Appendix D. Procedures for Approval of New Financial Instruments 1. Summary a. Putnam has adopted procedures for the introduction of new instruments and securities, focusing on, but not limited to, derivatives. b. No new types of securities or instruments may be purchased for any Putnam fund or other client account without the approval of Putnam's New Securities Review Committee ("NSRC"). c. Putnam publishes from time to time a list of approved derivatives. The purchase of any derivative not listed is prohibited without specific authorization from the NSRC. 2. Procedures a. Introduction. The purchase and sale of financial instruments that have not been used previously at Putnam raise significant investment, business, operational, and compliance issues. In order to address these issues in a comprehensive manner, Putnam has adopted the following procedures for obtaining approval of the use of new instruments or investments. In addition, to provide guidance regarding the purchase of derivatives, Putnam publishes from time to time a list of approved derivatives. Only derivatives listed may be used for Putnam funds or accounts unless specifically authorized by the NSRC. b. Process of approval. An investment professional wishing to purchase a new type of investment should discuss it with the Investment Division's Administrative office (the current contact is Julie Malloy). Investment Division Administration will coordinate a review of a new instrument by appropriate NSRC members from an investment, operational and compliance perspective, including the review of instruments by the Administrative Services Division of PFTC. Based on this review, the NSRC will then approve or disapprove the proposed new investment. Investment professionals must build in adequate time for this review before planned use of a new instrument. Further, the approval of the NSRC is only a general one. Individual fund and account guidelines must be reviewed in accordance with standard compliance procedures to determine whether purchase is permitted. In addition, if the instrument involves legal documentation, that documentation must be reviewed and be completed before trading. The NSRC may prepare a compliance and operational manual for the new derivative. 3. Violations a. Putnam's Operating Committee has determined that adherence to rigorous internal controls and procedures for novel securities and instruments is necessary to protect Putnam's business standing and reputation. Violation of these procedures will be treated as violation of both compliance guidelines and Putnam's Code of Ethics. Putnam encourages questions and expects that these guidelines will be interpreted conservatively. * Index "7-Day Rule" for transactions by managers, analysts and CIOs, 14 "60-Day Rule", 13 Access Persons definition, ix special rules on trading, 13, 32 Analysts special rules on trading by, 13 Appeals Procedures, 37 Bankers' acceptances excluded from securities, x Blackout rule on trading by portfolio managers, analysts and CIOs, 15 Boycotts reporting of requests to participate, 33 Bribes, 21 CDs excluded from securities, x Claims against Putnam reporting of, 33 Clearance how long pre-clearance is valid, 4 required for personal securities transactions, 1 Closed-end funds rules on trading, 55 Commercial paper excluded from securities, x Commodities (other than securities indices) excluded from securities, x Computer use compliance with corporate policies required, 27 Confidentiality required of all employees, 22 Confirmations of personal transactions required, 31 Conflicts of interest with Putnam and Putnam clients prohibited, 19 Contra-trading rule transactions by managers and CIOs, 17 Convertible securities defined as securities, x Currencies excluded as securities, x Director serving as for another entity prohibited, 23 Employee serving as for another entity prohibited, 23 Excessive trading (over 10 trades) by employees strongly discouraged, 10 Exemptions basis for, 10 Family members covered in personal securities transactions, x, 43 Fiduciary serving as for another entity prohibited, 23 Fraudulent or irregular activities reporting of, 33 Gifts restrictions on receipt of by employees, 19 Government or regulatory agencies reporting of communications from, 33 Holdings disclosure of by Access Persons, 32 Initial public offerings/IPOs purchases in prohibited, 6 Insider trading policy statement and explanations, 39 prohibited, 9 Investment clubs prohibited, 24 Investment Grade Exception for clearance of fixed income securities on Restricted List, 2 Involuntary personal securities transactions exempted, 10 exemption defined, 6 Large Cap Exception for clearance of securities on Restricted List, 1 Marsh & McLennan Companies stock excluded from securities, x Money market instruments excluded from securities, x Mutual fund shares (open end) excluded from securities, x Naked options by employees discouraged, 9 New financial instruments procedures for approval, 59 Non-Putnam affiliates (NPAs) transactions and relationships with, 25 Officer serving as for another entity prohibited, 23 Options defined as securities, x relationship to securities on Restricted or Red Lists, 5 Partner serving as general partner of another entity prohibited, 23 Partnerships covered in personal securities transactions, x, 43 Personal securities transaction defined, x, 43 Pink sheet reports quarterly reporting requirements, 32 Political contributions, 22 Portfolio managers special rules on trading by, 13 Private offerings or placements purchases of prohibited, 7 Putnam Europe Ltd. special rules for, 29 Repurchase agreements excluded from securities, x Sale defined, x, 43 Sanctions, vii for failure to pre-clear properly, 3 Shares by subscription procedures to preclear the purchase and sales of Shares by Subscription, 2 Short sales by employees prohibited conduct, 6 Solicitations by Putnam employees restricted, 21 Tender offers partial exemption from clearance rules, 6 Trustee serving as for another entity prohibited, 23 Trusts covered in personal securities transactions, x, 43 U.S. government obligations excluded from securities, x Violations of Law reporting of, 33 Warrants defined as securities, x
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