As filed with the Securities and Exchange Commission on
April 29, 2004
Registration No. 33-17486
811-5346
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 33 / X /
and ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940 ----
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Amendment No. 34 / X /
(Check appropriate box or boxes) ----
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PUTNAM VARIABLE TRUST
(Exact name of registrant as specified in charter)
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One Post Office Square, Boston, Massachusetts 02109
(Address of principal executive offices)
/ X / on April 30, 2004 pursuant to paragraph (b)
---- effective date for a previously filed post-effective amendment.
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BETH S. MAZOR, Vice President
PUTNAM VARIABLE TRUST
One Post Office Square
Boston, Massachusetts 02109
(Name and address of agent for service)
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Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY LLP
One International Place
Boston, Massachusetts 02110
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Prospectus
April 30, 2004
Putnam Variable Trust
Class IA and IB Shares
Growth Funds Value Funds
Putnam VT Discovery Growth Fund Putnam VT Equity Income Fund
Putnam VT Growth Opportunities Fund Putnam VT The George Putnam Fund of
Putnam VT Health Sciences Fund Boston
Putnam VT International Putnam VT Growth and Income Fund
New Opportunities Fund Putnam VT International
Putnam VT New Opportunities Fund Growth and Income Fund
Putnam VT OTC & Emerging Growth Fund Putnam VT Mid Cap Value Fund
Putnam VT Vista Fund Putnam VT New Value Fund
Putnam VT Voyager Fund Putnam VT Small Cap Value Fund
Income Funds
Blend Funds Putnam VT American Government
Income Fund
Putnam VT Capital Appreciation Fund Putnam VT Diversified Income Fund
Putnam VT Capital Opportunities Fund Putnam VT High Yield Fund
Putnam VT Global Equity Fund Putnam VT Income Fund
Putnam VT International Equity Fund
Putnam VT Investors Fund Money Market Fund
Putnam VT Research Fund
Putnam VT Utilities Growth and Putnam VT Money Market Fund
Income Fund
Asset Allocation Fund
Putnam VT Global Asset Allocation
Fund
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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, LLC (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)
26 What are the funds' main investment strategies and related risks?
32 Who manages the funds?
36 How to buy and sell fund shares
37 Distribution Plan
37 How do the funds price their shares?
38 Fund distributions and taxes
38 Financial highlights
[SCALE LOGO OMITTED]
Fund summaries
GOAL, MAIN INVESTMENT STRATEGIES AND MAIN RISKS
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. More detailed descriptions of the funds' investment policies, 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.
PERFORMANCE INFORMATION
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 one of the fund's classes of shares, class IA shares. A table following each chart compares the fund's performance to that of broad measures of market performance. Performance of class IB shares for the period prior to April 6, 1998 for Putnam VT Diversified Income Fund, Putnam VT Growth and Income Fund and Putnam VT International Growth and Income Fund, and prior to April 30, 1998 for Putnam VT Global Asset Allocation Fund, Putnam VT Global Equity Fund, Putnam VT High Yield Fund, Putnam VT International Equity Fund, Putnam VT International New Opportunities Fund, Putnam VT Money Market Fund, Putnam VT New Opportunities Fund, Putnam VT New Value Fund, Putnam VT Utilities Growth and Income Fund, Putnam VT Vista Fund and Putnam VT Voyager Fund is based upon the performance of class IA shares of the fund, adjusted to reflect the fees paid by class IB shares, including a 12b-1 fee of 0.25%. 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 of the separate account issued by the participating insurance company or your insurance contract for information about insurance-related charges and expenses and performance data reflecting those charges and expenses.
FEES AND EXPENSES
Each summary also contains a table summarizing the fees and expenses you may pay if you invest in the fund. The tables do not reflect any insurance-related charges or expenses. Expenses are based on the fund's last fiscal year. The Peer Group Expense Ratio following the expense table is the average of the expenses of underlying funds for variable annuity products viewed by Lipper Inc. as having the same investment classification or objective of the fund, as of March 31, 2004. The peer group may include funds that are significantly larger or smaller than the fund, which may limit the comparability of the fund's expenses to the Lipper average. The example following each table translates the expenses shown in the table into dollar amounts. By doing this, you can more easily compare the cost of investing in the fund to the cost of investing in other mutual funds. The example makes certain assumptions. It assumes you invest $10,000 in the fund for the time periods shown and redeem all of your shares at the end of each time period. It also assumes a 5% return on your investment each year and that the fund's operating expenses remain the same. The example is hypothetical; your actual costs and returns may be higher or lower.
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 mainly in bonds that:
* are obligations of the U.S. government, its agencies and instrumentalities
* are backed by the full faith and credit of the United States, such as U.S. Treasury bonds and Ginnie Mae mortgage-backed bonds, or by only the credit of a federal agency or government sponsored entity, such as Fannie Mae and Freddie Mac mortgage-backed bonds, and
* have intermediate to long-term maturities (three years or longer).
Under normal circumstances, we invest at least 80% of the fund's net assets in U.S. government securities. We may invest up to 20% of net assets in mortgage-backed securities 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 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 not backed by the full faith and credit of the U.S. government.
* 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 higher for investments with longer maturities.
* 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
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
2001 6.82% 2002 8.98% 2003 1.89% |
Year-to-date performance through 3/31/2004 was 2.59%. During the periods shown in the bar chart, the highest return for a quarter was 5.05% (quarter ending 9/30/01) and the lowest return for a quarter was -0.90% (quarter ending 9/30/03).
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Average Annual Total Returns
(for periods ending 12/31/03)
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Since
Past inception
1 year (2/1/00)
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Class IA 1.89% 7.55%
Class IB 1.56% 7.33%
Lehman Intermediate Treasury Bond Index
(no deduction for fees or expenses) 2.10% 7.64%
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The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 2001. The fund's performance is compared to the Lehman Intermediate Treasury Bond Index, an unmanaged index of treasury bonds with maturities between 1 and up to 10 years.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
----------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
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Class IA 0.65% N/A 0.09% 0.74%
Class IB 0.65% 0.25% 0.09% 0.99%
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The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.74% and 0.99%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
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1 year 3 years 5 years 10 years
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Class IA $76 $237 $413 $923
Class IB $101 $315 $547 $1,213
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PUTNAM VT CAPITAL APPRECIATION FUND
GOAL
The fund seeks capital appreciation.
MAIN INVESTMENT STRATEGIES -- STOCKS
We invest mainly in common stocks of U.S. companies that we believe have favorable investment potential. For example, we may purchase stocks of companies with stock prices that reflect a value lower than that which we place on the company. We may also consider other factors we believe will cause the stock price to rise. We may 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.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
2001 -13.69% 2002 -22.13% 2003 25.04% |
Year-to-date performance through 3/31/2004 was 1.84%. During the periods shown in the bar chart, the highest return for a quarter was 15.11% (quarter ending 6/30/03) and the lowest return for a quarter was -18.30% (quarter ending 9/30/01).
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Average Annual Total Returns
(for periods ending 12/31/03)
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Since
Past inception
1 year (9/29/00)
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Class IA 25.04% -8.02%
Class IB 24.79% -8.23%
Russell 3000 Index (no deduction
for fees or expenses) 31.06% -5.94%
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The fund's performance is compared to the Russell 3000 Index, an unmanaged index of the 3,000 largest U.S. companies in the Russell universe.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
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Class IA 0.65% N/A 0.41% 1.06%
Class IB 0.65% 0.25% 0.41% 1.31%
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The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.82% and 1.07%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
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1 year 3 years 5 years 10 years
-------------------------------------------------------------------------
Class IA $108 $336 $583 $1,291
Class IB $133 $414 $717 $1,576
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PUTNAM VT CAPITAL OPPORTUNITIES FUND
GOAL
The fund seeks long-term growth of capital.
MAIN INVESTMENT STRATEGIES -- STOCKS
We invest mainly in common stocks of U.S. companies that we believe have favorable investment potential. For example, we may purchase stocks of companies with stock prices that reflect a value lower than that which we place on the company. We may also consider other factors we believe will cause the stock price to rise. 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.
PERFORMANCE INFORMATION
Performance information will be available after the fund completes a full
calendar year of operation.
FEES AND EXPENSES
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Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Expense Operating
Fees Fees Expenses Reimbursement Expenses
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Class IA 0.65% N/A 1.31% (0.91%) 1.05%
Class IB 0.65% 0.25% 1.31% (0.91%) 1.30%
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The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.96% and 1.21%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
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1 year 3 years 5 years 10 years
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Class IA $107 $527 $973 $2,212
Class IB $132 $604 $1,102 $2,473
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PUTNAM VT DISCOVERY GROWTH FUND
GOAL
The fund seeks long-term growth of capital.
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 earnings may lead to an increase in the price of the stock. We may 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 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
2001 -30.64% 2002 -29.32% 2003 32.39% |
Year-to-date performance through 3/31/2004 was 2.15%. During the periods shown in the bar chart, the highest return for a quarter was 22.36% (quarter ending 12/31/01) and the lowest return for a quarter was -31.71% (quarter ending 9/30/01).
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Average Annual Total Returns
(for periods ending 12/31/03)
-------------------------------------------------------------------------------
Since
Past inception
1 year (9/29/00)
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Class IA 32.39% -20.89%
Class IB 32.00% -21.10%
Russell Midcap Growth Index
(no deduction for fees or expenses) 42.71% -13.50%
Russell 2500 Growth Index
(no deduction for fees or expenses) 46.31% -8.95%
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The fund's performance is compared to the Russell Midcap Growth Index, an unmanaged index of all medium and medium/small companies in the Russell 1000 Index chosen for their growth orientation. The fund's performance is also compared to the Russell 2500 Growth Index, an unmanaged index of the smallest 2,500 companies in the Russell 3000 Index chosen for their growth orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-------------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
-------------------------------------------------------------------------------
Class IA 0.70% N/A 0.38% 1.08%
Class IB 0.70% 0.25% 0.38% 1.33%
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The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.00% and 1.25%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
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1 year 3 years 5 years 10 years
-------------------------------------------------------------------------------
Class IA $110 $343 $595 $1,317
Class IB $135 $421 $729 $1,601
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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 mainly in bonds that:
* are obligations of companies and governments worldwide,
* are either investment-grade or below investment-grade (junk bonds) and
* have intermediate to long-term maturities (three years or longer).
Under normal market conditions, we invest 15% - 65% of the fund's net assets in each of these 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.
We will not invest less than 15% of the fund's net assets in U.S. government securities.
MAIN RISKS
* The risk that the issuers of the fund's investments will not make timely payments of interest and principal. Because the fund invests significantly in junk bonds, it is subject to heightened credit risk. 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 higher for investments with longer maturities.
* The risk that, compared to other debt, mortgage-backed investments in which the fund may invest 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.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
1994 -4.23% 1995 19.13% 1996 8.81% 1997 7.38% 1998 -1.37% 1999 1.66% 2000 0.19% 2001 3.82% 2002 6.20% 2003 20.27% |
Year-to-date performance through 3/31/2004 was 3.08%. During the periods shown in the bar chart, the highest return for a quarter was 7.66% (quarter ending 6/30/03) and the lowest return for a quarter was -4.94% (quarter ending 9/30/98).
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Average Annual Total Returns
(for periods ending 12/31/03)
------------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
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Class IA 20.27% 6.20% 5.91%
Class IB 19.91% 5.98% 5.71%
Lehman Aggregate Bond Index
(no deduction for fees or expenses) 4.10% 6.62% 6.95%
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The fund's performance is compared to the Lehman Aggregate Bond Index, an unmanaged index used as a general measure of U.S fixed-income securities.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
------------------------------------------------------------------------
Class IA 0.69% N/A 0.13% 0.82%
Class IB 0.69% 0.25% 0.13% 1.07%
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The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.86% and 1.11%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
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1 year 3 years 5 years 10 years
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Class IA $84 $262 $455 $1,014
Class IB $109 $340 $590 $1,306
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PUTNAM VT EQUITY INCOME FUND
GOAL
The fund seeks current income. Capital growth is a secondary objective when consistent with seeking current income.
MAIN INVESTMENT STRATEGIES -- VALUE STOCKS
We invest mainly in common stocks of U.S. companies, with a focus on value stocks that offer the potential for current income and may also offer the potential for capital growth. Under normal circumstances, we invest at least 80% of the fund's net assets in common stocks and other equity investments that offer potential for current income. Value stocks are those that 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
Performance information will be available after the fund completes a full
calendar year of operation.
FEES AND EXPENSES
------------------------------------------------------------------------
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Expense Operating
Fees Fees Expenses Reimbursement Expenses
-------------------------------------------------------------------------
Class IA 0.65% N/A 0.67% (0.27%) 1.05%
Class IB 0.65% 0.25% 0.67% (0.27%) 1.30%
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The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.90% and 1.15%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
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1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Class IA $107 $392 $698 $1,567
Class IB $132 $469 $830 $1,845
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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 bonds and U.S. value stocks, with a greater focus on value stocks. Value stocks are those that 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.
Under normal market conditions, we invest at least 25% of the fund's total assets in fixed-income securities, including debt securities, preferred stocks, and that portion of the value of convertible securities attributable to the fixed-income characteristics of those securities.
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 the prices of the fixed-income investments we buy will fall if interest rates rise. Interest rate risk is generally higher for investments with longer maturities.
* The risk that the issuers of the fund's fixed-income investments 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 IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1999 -0.36% 2000 9.82% 2001 0.74% 2002 -8.57% 2003 17.35% |
Year-to-date performance through 3/31/2004 was 2.50%. During the periods shown in the bar chart, the highest return for a quarter was 11.73% (quarter ending 6/30/03) and the lowest return for a quarter was -10.60% (quarter ending 9/30/02).
--------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
--------------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (4/30/98)
--------------------------------------------------------------------------
Class IA 17.35% 3.41% 3.67%
Class IB 17.04% 3.21% 3.49%
S&P 500/Barra Value Index
(no deduction for fees or expenses) 31.79% 1.95% 2.00%
George Putnam Blended Index
(no deduction for fees or expenses) 20.47% 4.38% 4.57%
--------------------------------------------------------------------------
|
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 S&P 500/Barra Value Index, an unmanaged index of capitalization-weighted stocks chosen for their value orientation, and to the George Putnam Blended Index, an unmanaged index administered by Putnam Management, 60% of which is the S&P 500/Barra Value Index and 40% of which is the Lehman Aggregate Bond Index, an unmanaged index used as a general measure of U.S. fixed income securities.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
--------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
--------------------------------------------------------------------------
Class IA 0.63% N/A 0.10% 0.73%
Class IB 0.63% 0.25% 0.10% 0.98%
--------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.74% and 0.99%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
--------------------------------------------------------------------------
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------
Class IA $75 $233 $406 $906
Class IB $100 $312 $542 $1,201
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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, 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 may 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 the prices of the fixed-income investments we buy will fall if interest rates rise. Interest rate risk is generally highest for investments with longer maturities.
* The risk that our allocation of investments between stocks and bonds may adversely affect the fund's performance.
* The risk that the issuers of the fund's fixed-income investments 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.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1994 -2.50% 1995 24.71% 1996 15.62% 1997 19.67% 1998 13.47% 1999 11.85% 2000 -4.87% 2001 -8.42% 2002 -12.30% 2003 22.04% |
Year-to-date performance through 3/31/2004 was 2.80%. 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 -12.39% (quarter ending 9/30/02).
------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
------------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
------------------------------------------------------------------------
Class IA 22.04% 0.84% 7.13%
Class IB 21.90% 0.74% 7.01%
MSCI World Index (no deduction
for fees or expenses) 33.11% -0.77% 7.14%
------------------------------------------------------------------------
|
The fund's performance is compared to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index of securities of developed and emerging markets.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
------------------------------------------------------------------------
Class IA 0.70% N/A 0.25% 0.95%
Class IB 0.70% 0.25% 0.25% 1.20%
------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.99% and 1.24%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
------------------------------------------------------------------------
1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Class IA $97 $303 $525 $1,166
Class IB $122 $381 $660 $1,455
------------------------------------------------------------------------
|
PUTNAM VT GLOBAL EQUITY FUND
GOAL
The fund seeks capital appreciation.
MAIN INVESTMENT STRATEGIES -- GLOBAL STOCKS
We invest mainly in common stocks of companies worldwide that we believe have favorable investment potential. For example, we may purchase stocks of companies with stock prices that reflect a value lower than that which we place on the company. We also consider other factors we believe will cause the stock price to rise. Under normal circumstances, we invest at least 80% of the fund's net assets in equity investments. 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.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1994 -0.96% 1995 15.67% 1996 17.20% 1997 14.33% 1998 29.71% 1999 65.00% 2000 -29.64% 2001 -29.66% 2002 -22.16% 2003 29.54% |
Year-to-date performance through 3/31/2004 was 3.45%. 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 -25.07% (quarter ending 3/31/01).
------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
------------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
------------------------------------------------------------------------
Class IA 29.54% -3.81% 5.07%
Class IB 29.23% -4.03% 4.88%
MSCI World Index (no deduction
for fees or expenses) 33.11% -0.77% 7.14%
------------------------------------------------------------------------
|
The fund's performance is compared to the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index of securities of developed and emerging markets.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
------------------------------------------------------------------------
Class IA 0.77% N/A 0.15% 0.92%
Class IB 0.77% 0.25% 0.15% 1.17%
------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.03% and 1.28%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
------------------------------------------------------------------------
1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Class IA $94 $293 $509 $1,131
Class IB $119 $372 $644 $1,420
------------------------------------------------------------------------
|
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 that offer the potential for capital growth, current income, or both. 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.
* 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
1994 0.35% 1995 36.71% 1996 21.92% 1997 24.15% 1998 15.42% 1999 1.59% 2000 8.11% 2001 -6.16% 2002 -18.79% 2003 27.69% |
Year-to-date performance through 3/31/2004 was 2.49%. During the periods shown in the bar chart, the highest return for a quarter was 18.29% (quarter ending 6/30/03) and the lowest return for a quarter was -18.56% (quarter ending 9/30/02).
-----------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
-----------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
-----------------------------------------------------------------------
Class IA 27.69% 1.34% 9.86%
Class IB 27.38% 1.13% 9.67%
S&P 500/Barra Value Index
(no deduction for fees or expenses) 31.79% 1.95% 10.55%
-----------------------------------------------------------------------
|
The fund's performance is compared to the S&P 500/Barra Value Index, an unmanaged index of capitalization-weighted stocks chosen for their value orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-----------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
-----------------------------------------------------------------------
Class IA 0.48% N/A 0.05% 0.53%
Class IB 0.48% 0.25% 0.05% 0.78%
-----------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.94% and 1.19%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
-----------------------------------------------------------------------
1 year 3 years 5 years 10 years
-----------------------------------------------------------------------
Class IA $54 $170 $296 $665
Class IB $80 $249 $433 $966
-----------------------------------------------------------------------
|
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 earnings may lead to an increase in the price of the 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 risks of investing in fewer issuers than a fund that invests more broadly. The fund's ability to invest in fewer issuers increases the fund's vulnerability to factors affecting a single investment; therefore, the fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
2001 -31.92% 2002 -29.38% 2003 23.47% |
Year-to-date performance through 3/31/2004 was -0.52%. During the periods shown in the bar chart, the highest return for a quarter was 13.22% (quarter ending 12/31/01) and the lowest return for a quarter was -27.56% (quarter ending 3/31/01).
-------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
-------------------------------------------------------------------------
Since
Past inception
1 year (2/1/00)
-------------------------------------------------------------------------
Class IA 23.47% -17.85%
Class IB 23.06% -18.03%
Russell Top 200 Growth Index
(no deduction for fees or expenses) 26.63% -12.98%
-------------------------------------------------------------------------
|
The fund's performance is compared to the Russell Top 200 Growth Index, an unmanaged index of the largest companies in the Russell 1000 Index chosen for their growth orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
-------------------------------------------------------------------------
Class IA 0.70% N/A 0.26% 0.96%
Class IB 0.70% 0.25% 0.26% 1.21%
-------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.98% and 1.23%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
-------------------------------------------------------------------------
1 year 3 years 5 years 10 years
-------------------------------------------------------------------------
Class IA $98 $306 $531 $1,178
Class IB $123 $384 $665 $1,466
-------------------------------------------------------------------------
|
PUTNAM VT HEALTH SCIENCES FUND
GOAL
The fund seeks capital appreciation.
MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS
We invest mainly in common stocks of 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 earnings may lead to an increase in the price of the stock. Under normal circumstances, we invest at least 80% of the fund's net assets in securities of (a) companies that derive at least 50% of their assets, revenues or profits from the pharmaceutical, health care services, applied research and development and medical equipment and supplies industries, or (b) companies we think have the potential for growth as a result of their particular products, technology, patents or other market advantages in the health sciences industries. We invest mainly in midsized and large companies.
Industry focus. We invest mainly 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 of such events 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 private payment systems, such as increased use of managed care arrangements, may be more likely to adversely affect the fund than if the fund were more widely diversified.
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 increases the fund's vulnerability to factors affecting a single group of industries. This risk is significantly greater than for a fund that invests in a broader range of industries, and may result in greater losses and volatility.
* The risks of 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. The fund's ability to invest in fewer issuers increases the fund's vulnerability to factors affecting a single investment; therefore, the fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1999 -3.93% 2000 39.14% 2001 -19.53% 2002 -20.21% 2003 18.80% |
Year-to-date performance through 3/31/2004 was 0.12%. During the periods shown in the bar chart, the highest return for a quarter was 14.57% (quarter ending 3/31/00) and the lowest return for a quarter was -22.55% (quarter ending 3/31/01).
-----------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
-----------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (4/30/98)
-----------------------------------------------------------------------
Class IA 18.80% 0.39% 1.96%
Class IB 18.39% 0.20% 1.77%
S&P 500 Index (no deduction
for fees or expenses) 28.68% -0.57% 1.46%
-----------------------------------------------------------------------
|
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 S&P 500 Index, an unmanaged index of of common stocks frequently used as a general measure of U.S. stock performance.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-----------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
-----------------------------------------------------------------------
Class IA 0.70% N/A 0.14% 0.84%
Class IB 0.70% 0.25% 0.14% 1.09%
-----------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.30% and 1.55%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
-----------------------------------------------------------------------
1 year 3 years 5 years 10 years
-----------------------------------------------------------------------
Class IA $86 $268 $466 $1,037
Class IB $111 $347 $601 $1,329
-----------------------------------------------------------------------
|
PUTNAM VT HIGH YIELD FUND
GOAL
The fund seeks high current income. Capital growth is a secondary goal when consistent with achieving high current income.
MAIN INVESTMENT STRATEGIES -- LOWER-RATED BONDS
We invest mainly in bonds that:
* are obligations of U.S. companies
* are below investment-grade in quality (junk bonds) and
* have intermediate to long-term maturities (three years or longer).
Under normal circumstances, we invest at least 80% of the fund's net assets in securities rated below investment-grade.
MAIN RISKS
* The risk that the issuers of the fund's investments will not make timely payments of interest and principal. 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 higher for investments with longer maturities.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1994 -0.94% 1995 18.32% 1996 12.81% 1997 14.34% 1998 -5.86% 1999 5.92% 2000 -8.45% 2001 4.00% 2002 -0.52% 2003 26.68% |
Year-to-date performance through 3/31/2004 was 2.36%. During the periods shown in the bar chart, the highest return for a quarter was 9.47% (quarter ending 6/30/03) and the lowest return for a quarter was -9.95% (quarter ending 9/30/98).
-----------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
-----------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
-----------------------------------------------------------------------
Class IA 26.68% 4.91% 6.11%
Class IB 26.54% 4.74% 5.95%
JP Morgan Chase Global High
Yield Index (no deduction for fees
or expenses) 27.51% 5.99% 7.27%
-----------------------------------------------------------------------
|
The fund's performance is compared to the JP Morgan Chase Global High Yield Index, an unmanaged index that is designed to mirror the investable universe of the U.S. dollar global high yield corporate debt market, including domestic and international securities.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-----------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
-----------------------------------------------------------------------
Class IA 0.67% N/A 0.11% 0.78%
Class IB 0.67% 0.25% 0.11% 1.03%
-----------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.87% and 1.12%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
-----------------------------------------------------------------------
1 year 3 years 5 years 10 years
-----------------------------------------------------------------------
Class IA $80 $249 $433 $966
Class IB $105 $328 $569 $1,259
-----------------------------------------------------------------------
|
PUTNAM VT INCOME FUND
GOAL
The fund seeks high current income consistent with what Putnam Management believes to be prudent risk.
MAIN INVESTMENT STRATEGIES -- BONDS
We invest mainly in bonds that:
* are obligations of companies and governments worldwide denominated in U.S. dollars
* are either investment-grade or below investment-grade (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 fail to make timely payments of interest and principal. 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 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 higher for investments with longer maturities.
* 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 information for periods prior to that date 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 IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1994 -3.29% 1995 20.44% 1996 2.42% 1997 8.64% 1998 8.25% 1999 -2.07% 2000 8.01% 2001 7.53% 2002 8.09% 2003 4.70% |
Year-to-date performance through 3/31/2004 was 3.19%. 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 12/31/03)
----------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
----------------------------------------------------------------------
Class IA 4.70% 5.18% 6.09%
Class IB 4.43% 4.98% 5.92%
Lehman Aggregate Bond Index
(no deduction for fees or expenses) 4.10% 6.62% 6.95%
----------------------------------------------------------------------
|
The fund's performance is compared to the Lehman Aggregate Bond Index, an unmanaged index used as a general measure of U.S. fixed income securities.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
----------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
----------------------------------------------------------------------
Class IA 0.59% N/A 0.09% 0.68%
Class IB 0.59% 0.25% 0.09% 0.93%
----------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.70% and 0.95%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
----------------------------------------------------------------------
1 year 3 years 5 years 10 years
----------------------------------------------------------------------
Class IA $69 $218 $379 $847
Class IB $95 $296 $515 $1,143
----------------------------------------------------------------------
|
PUTNAM VT INTERNATIONAL EQUITY FUND
GOAL
The fund seeks capital appreciation.
MAIN INVESTMENT STRATEGIES -- INTERNATIONAL STOCKS
We invest mainly in common stocks of companies outside the United States that we believe have favorable investment potential. For example, we may purchase stocks of companies with stock prices that reflect a value lower than that which we place on the company. We also consider other factors we believe will cause the stock price to rise. Under normal circumstances, we invest at least 80% of the fund's net assets in equity investments. 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.
To determine whether a company is located outside of the United States, we look at the following factors: where the company's securities trade, where the company is located or organized, or where the company derives its revenues or profits.
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.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1998 18.69% 1999 60.21% 2000 -9.48% 2001 -20.41% 2002 -17.60% 2003 28.91% |
Year-to-date performance through 3/31/2004 was 3.26%. 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 -20.81% (quarter ending 9/30/02).
---------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
---------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (1/2/97)
---------------------------------------------------------------------
Class IA 28.91% 4.16% 7.79%
Class IB 28.65% 3.98% 7.61%
MSCI EAFE Index (no deduction
for fees or expenses) 38.59% -0.05% 2.86%
---------------------------------------------------------------------
|
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, Australasia, and the Far East, with all values expressed in U.S. dollars.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
---------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
---------------------------------------------------------------------
Class IA 0.76% N/A 0.18% 0.94%
Class IB 0.76% 0.25% 0.18% 1.19%
---------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.20% and 1.45%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
---------------------------------------------------------------------
1 year 3 years 5 years 10 years
---------------------------------------------------------------------
Class IA $96 $299 $519 $1,153
Class IB $121 $378 $654 $1,443
---------------------------------------------------------------------
|
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 invest mainly in common stocks of companies outside the United States. We invest mainly in value stocks that offer the potential for income. Value stocks are those that 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, 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.
To determine whether a company is located outside of the United States, we look at the following factors: where the company's securities trade, where the company is located or organized, or where the company derives its revenues or profits.
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 IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1998 11.27% 1999 24.59% 2000 1.36% 2001 -20.67% 2002 -13.67% 2003 38.37% |
Year-to-date performance through 3/31/2004 was 4.33%. During the periods shown in the bar chart, the highest return for a quarter was 18.84% (quarter ending 6/30/03) and the lowest return for a quarter was -19.76% (quarter ending 9/30/02).
------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
------------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (1/2/97)
------------------------------------------------------------------------
Class IA 38.37% 3.66% 6.86%
Class IB 37.85% 3.47% 6.69%
Citigroup World ex U.S. Primary
Markets Value Index (no deduction
for fees or expenses) 43.04% 3.34% 5.11%
------------------------------------------------------------------------
|
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 Citigroup World ex U.S. Primary Markets Value Index, an unmanaged index of mostly large- and some small-capitalization stocks from developed countries, excluding the U.S., chosen for their value orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
------------------------------------------------------------------------
Class IA 0.80% N/A 0.22% 1.02%
Class IB 0.80% 0.25% 0.22% 1.27%
------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.20% and 1.45%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
------------------------------------------------------------------------
1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Class IA $104 $325 $563 $1,248
Class IB $129 $403 $697 $1,534
------------------------------------------------------------------------
|
PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND
GOAL
The fund seeks long-term capital appreciation.
MAIN INVESTMENT STRATEGIES -- INTERNATIONAL GROWTH STOCKS
We 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.
To determine whether a company is located outside of the United States, we look at the following factors: where the company's securities trade, where the company is located or organized, or where the company derives its revenues or profits.
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 IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1998 15.58% 1999 102.95% 2000 -38.56% 2001 -28.52% 2002 -13.46% 2003 33.59% |
Year-to-date performance through 3/31/2004 was 3.38%. 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 -22.61% (quarter ending 3/31/01).
------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
------------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (1/2/97)
------------------------------------------------------------------------
Class IA 33.59% 0.60% 2.51%
Class IB 33.21% 0.41% 2.33%
Citigroup World ex U.S. Primary
Markets Growth Index (no deduction
for fees or expenses) 35.59% -1.07% 2.99%
------------------------------------------------------------------------
|
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 Citigroup World ex U.S. Primary Markets Growth Index, an unmanaged index of mostly large and some small capitalization stocks from developed countries, excluding the U.S., chosen for their growth orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
------------------------------------------------------------------------
Class IA 1.00% N/A 0.26% 1.26%
Class IB 1.00% 0.25% 0.26% 1.51%
------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.20% and 1.45%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
------------------------------------------------------------------------
1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Class IA $128 $400 $692 $1,523
Class IB $154 $477 $824 $1,802
------------------------------------------------------------------------
|
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 -- STOCKS
We invest mainly in common stocks of U.S. companies that we believe have favorable investment potential. For example, we may purchase stocks of companies with stock prices that reflect a value lower than that which we place on the company. We may also consider other factors we believe will cause the stock price to 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.
* 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 IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1999 30.13% 2000 -18.47% 2001 -24.61% 2002 -23.68% 2003 27.39% |
Year-to-date performance through 3/31/2004 was 2.03%. 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 -20.15% (quarter ending 3/31/01).
------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
------------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (4/30/98)
------------------------------------------------------------------------
Class IA 27.39% -4.90% -1.70%
Class IB 27.14% -5.09% -1.89%
S&P 500 Index (no deduction
for fees or expenses) 28.68% -0.57% 1.46%
------------------------------------------------------------------------
|
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 S&P 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock performance.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
------------------------------------------------------------------------
Class IA 0.65% N/A 0.10% 0.75%
Class IB 0.65% 0.25% 0.10% 1.00%
------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.93% and 1.18%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
------------------------------------------------------------------------
1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Class IA $77 $240 $417 $930
Class IB $102 $318 $552 $1,225
------------------------------------------------------------------------
|
PUTNAM VT MID CAP VALUE FUND
GOAL
The fund seeks capital appreciation and, as a secondary objective, 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 that 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. Under normal circumstances, we invest at least 80% of the fund's net assets in midsized companies of a size similar to those in the Russell Midcap Value Index.
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
Performance information will be available after the fund completes a full
calendar year of operation.
FEES AND EXPENSES
------------------------------------------------------------------------
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Expense Operating
Fees Fees Expenses Reimbursement Expenses
-------------------------------------------------------------------------
Class IA 0.70% N/A 1.20% (0.80%) 1.10%
Class IB 0.70% 0.25% 1.20% (0.80%) 1.35%
-------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.09% and 1.34%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
-------------------------------------------------------------------------
1 year 3 years 5 years 10 years
-------------------------------------------------------------------------
Class IA $112 $519 $952 $2,157
Class IB $137 $596 $1,081 $2,420
-------------------------------------------------------------------------
|
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 mainly in instruments that:
* are high quality and
* have a short-term maturity.
Concentration of investments. We may invest without limit in money market investments from the banking, personal credit and business credit industries. However, we may invest over 25% of the fund's total 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 fund's shares may be more vulnerable to decreases in value than those of money market funds that invest in issuers in a greater number of industries. To the extent that the 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.
At times, the mutual funds and other accounts that we and our affiliates manage may own all or most of the debt of a particular issuer. This concentration of ownership may make it more difficult to sell, or determine the fair value of, these investments.
MAIN RISKS
* The risk that the effects of inflation may erode the value of your investment over time.
* The risk that the fund will not maintain a net asset value of $1.00 per share, due to events such as a deterioration in the credit quality of issuers whose securities the fund holds, or an increase in interest rates.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1994 3.83% 1995 5.46% 1996 5.09% 1997 5.22% 1998 5.19% 1999 4.86% 2000 6.03% 2001 3.99% 2002 1.46% 2003 0.76% |
Year-to-date performance through 3/31/2004 was 0.17%. During the periods shown in the bar chart, the highest return for a quarter was 1.57% (quarter ending 12/31/00) and the lowest return for a quarter was 0.16% (quarter ending 9/30/03).
-------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
-------------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
-------------------------------------------------------------------------
Class IA 0.76% 3.40% 4.17%
Class IB 0.51% 3.17% 4.06%
Merrill Lynch 91-Day Treasury
Bill Index (no deduction for
fees or expenses) 1.15% 3.66% 4.43%
Lipper Money Market Average
(no deduction for fees or expenses) 0.44% 3.01% 3.94%
-------------------------------------------------------------------------
|
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 U.S. Treasury bills currently available in the marketplace, and to the Lipper Money Market Average, an arithmetic average of the total return of all money market mutual funds tracked by Lipper Analytical Services.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
-------------------------------------------------------------------------
Class IA 0.42% N/A 0.07% 0.49%
Class IB 0.42% 0.25% 0.07% 0.74%
-------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.58% and 0.83%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
-------------------------------------------------------------------------
1 year 3 years 5 years 10 years
-------------------------------------------------------------------------
Class IA $50 $157 $274 $616
Class IB $76 $237 $411 $918
-------------------------------------------------------------------------
|
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 earnings may lead to an increase in the price of the stock. The growth sectors we currently emphasize 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 may 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 market as a whole may not favor the types of investments we make.
* The risk of investing in a limited group of sectors. This increases the fund's vulnerability to factors affecting a limited group of sectors. This risk is significantly greater than for a fund that invests in a broader range of sectors, and may result in greater 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% 2000 -26.09% 2001 -29.99% 2002 -30.29% 2003 32.79% |
Year-to-date performance through 3/31/2004 was 2.85%. 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 -29.40% (quarter ending 9/30/01).
------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
------------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (5/2/94)
------------------------------------------------------------------------
Class IA 32.79% -4.10% 8.24%
Class IB 32.44% -4.31% 8.04%
Russell Midcap Growth Index
(no deduction for fees or expenses) 42.71% 2.01% 10.13%
------------------------------------------------------------------------
|
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 Russell Midcap Growth Index, an unmanaged index of all medium and medium/small companies in the Russell 1000 Index chosen for their growth orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
------------------------------------------------------------------------
Class IA 0.59% N/A 0.08% 0.67%
Class IB 0.59% 0.25% 0.08% 0.92%
------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.00% and 1.25%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
------------------------------------------------------------------------
1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Class IA $68 $214 $373 $835
Class IB $94 $293 $509 $1,131
------------------------------------------------------------------------
|
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.
* The risks of investing in fewer issuers than a fund that invests more broadly. The fund's ability to invest in fewer issuers increases the fund's vulnerability to factors affecting a single investment; therefore, the fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1998 6.26% 1999 0.27% 2000 22.59% 2001 3.53% 2002 -15.44% 2003 32.86% |
Year-to-date performance through 3/31/2004 was 3.72%. During the periods shown in the bar chart, the highest return for a quarter was 21.04% (quarter ending 6/30/03) and the lowest return for a quarter was -19.16% (quarter ending 9/30/02).
------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
------------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (1/2/97)
------------------------------------------------------------------------
Class IA 32.86% 7.41% 8.65%
Class IB 32.48% 7.22% 8.47%
Russell 3000 Value Index
(no deduction for fees or expenses) 31.14% 4.16% 9.49%
------------------------------------------------------------------------
|
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 Russell 3000 Value Index, an unmanaged index of those companies in the Russell 3000 Index chosen for their value orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
------------------------------------------------------------------------
Class IA 0.70% N/A 0.09% 0.79%
Class IB 0.70% 0.25% 0.09% 1.04%
------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.00% and 1.25%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
------------------------------------------------------------------------
1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Class IA $81 $252 $439 $978
Class IB $106 $331 $574 $1,271
------------------------------------------------------------------------
|
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, 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 earnings may lead to an increase in the price of the stock. Under normal circumstances, we invest at least 80% of the fund's net assets in common stocks traded in the over-the-counter ("OTC") market and common stocks of "emerging growth" companies listed on securities exchanges. 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 IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1999 126.52% 2000 -51.03% 2001 -45.57% 2002 -32.06% 2003 35.94% |
Year-to-date performance through 3/31/2004 was 2.88%. 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 -43.76% (quarter ending 3/31/01).
------------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
------------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (4/30/98)
------------------------------------------------------------------------
Class IA 35.94% -11.02% -9.64%
Class IB 35.71% -11.17% -9.79%
Russell 2500 Growth Index
(no deduction for fees or expenses) 46.31% 3.83% 1.85%
Russell Midcap Growth Index
(no deduction for fees or expenses) 42.71% 2.01% 3.18%
------------------------------------------------------------------------
|
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 2500 Growth Index, an unmanaged index of the smallest 2,500 companies in the Russell 3000 Index chosen for their growth orientation. The fund's performance is also compared to the Russell Midcap Growth Index, an unmanaged index of all medium and medium/small companies in the Russell 1000 Index chosen for their growth orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
------------------------------------------------------------------------
Class IA 0.70% N/A 0.19% 0.89%
Class IB 0.70% 0.25% 0.19% 1.14%
------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.03% and 1.28%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
------------------------------------------------------------------------
1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Class IA $91 $285 $495 $1,101
Class IB $116 $362 $628 $1,386
------------------------------------------------------------------------
|
PUTNAM VT RESEARCH FUND
GOAL
The fund seeks capital appreciation.
MAIN INVESTMENT STRATEGIES -- STOCKS
We invest mainly in common stocks of U.S. companies that we think have the greatest potential for capital appreciation with stock prices that reflect a value lower than that which we place on the company, or whose earnings we believe are likely to grow over time. We also look for the presence of other factors we believe will cause the stock price to 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.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1999 27.58% 2000 -1.84% 2001 -18.62% 2002 -22.06% 2003 25.69% |
Year-to-date performance through 3/31/2004 was 1.10%. 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 -20.15% (quarter ending 9/30/01).
-----------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03)
-----------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (9/30/98)
-----------------------------------------------------------------------
Class IA 25.69% -0.03% 3.42%
Class IB 25.32% -0.19% 3.21%
S&P 500 Index (no deduction
for fees or expenses) 28.68% -0.57% 1.46%
-----------------------------------------------------------------------
|
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 S&P 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock performance.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-----------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
-----------------------------------------------------------------------
Class IA 0.65% N/A 0.14% 0.79%
Class IB 0.65% 0.25% 0.14% 1.04%
-----------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.93% and 1.18%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
-----------------------------------------------------------------------
1 year 3 years 5 years 10 years
-----------------------------------------------------------------------
Class IA $81 $252 $439 $978
Class IB $106 $331 $574 $1,271
-----------------------------------------------------------------------
|
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. Under normal circumstances, we invest at least 80% of the fund's net assets in small companies of a size similar to those in the Russell 2000 Value Index.
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
2000 24.62% 2001 18.42% 2002 -18.06% 2003 50.06% |
Year-to-date performance through 3/31/2004 was 9.01%. During the periods shown in the bar chart, the highest return for a quarter was 23.92% (quarter ending 6/30/03) and the lowest return for a quarter was -21.64% (quarter ending 9/30/02).
Average Annual Total Returns
(for periods ending 12/31/03)
-------------------------------------------------------------------------
Since
Past inception
1 year (4/30/99)
-------------------------------------------------------------------------
Class IA 50.06% 14.45%
Class IB 49.65% 14.20%
Russell 2000 Value Index (no deduction for
fees or expenses) 46.03% 13.57%
-------------------------------------------------------------------------
|
The fund's performance benefited from Putnam Management's agreement to limit the fund's expenses through the period ended December 31, 2000. The fund's performance is compared to the Russell 2000 Value Index, an unmanaged index of those companies in the Russell 2000 Index chosen for their value orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
-------------------------------------------------------------------------
Class IA 0.79% N/A 0.12% 0.91%
Class IB 0.79% 0.25% 0.12% 1.16%
-------------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.14% and 1.39%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
-------------------------------------------------------------------------
1 year 3 years 5 years 10 years
-------------------------------------------------------------------------
Class IA $93 $290 $504 $1,120
Class IB $118 $368 $638 $1,409
-------------------------------------------------------------------------
|
PUTNAM VT UTILITIES GROWTH AND INCOME FUND
GOAL
The fund seeks capital growth and current income.
MAIN INVESTMENT STRATEGIES -- STOCKS
We invest mainly in a combination of stocks and bonds of companies in the utilities industries that we believe have favorable investment potential. For example, we may purchase stocks of companies with stock prices that reflect a value lower than that which we place on a company. We may also consider other factors we believe will cause the stock price to rise. Under normal circumstances, we invest at least 80% of the fund's net assets in equity and debt investments of companies in the utilities industries. These are companies that, in our 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). 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 mainly in companies that produce or distribute a product or service to both residential and industrial customers, such as electricity, gas or other types of energy, supply water or provide telecommunications services (except public broadcasting). 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 of such events 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 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 increases the fund's vulnerability to factors affecting a single group of industries. This risk 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 the prices of the fixed-income investments we buy will fall if interest rates rise. Interest rate risk is generally higher for investments with longer maturities.
* The risk that the issuers of the fund's fixed-income investments 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 risks of 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. The fund's ability to invest in fewer issuers increases the fund's vulnerability to factors affecting a single investment; therefore, the fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1994 -7.02% 1995 31.08% 1996 15.80% 1997 27.10% 1998 14.92% 1999 -0.66% 2000 17.61% 2001 -22.11% 2002 -23.83% 2003 25.00% |
Year-to-date performance through 3/31/2004 was 4.02%. During the periods shown in the bar chart, the highest return for a quarter was 18.66% (quarter ending 6/30/03) and the lowest return for a quarter was -18.36% (quarter ending 9/30/02).
----------------------------------------------------------------------
Average Annual Total Returns
(for periods ending 12/31/03
----------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
----------------------------------------------------------------------
Class IA 25.00% -2.83% 5.97%
Class IB 24.82% -3.01% 5.80%
S&P Utilities Index (no deduction
for fees or expenses) 26.26% -2.57% 4.51%
Lipper Utility Funds Average
(no deduction for fees or expenses) 22.68% -1.05% 6.60%
----------------------------------------------------------------------
|
The fund's performance is compared to the S&P Utilities Index, an unmanaged list of common stocks issued by utilities companies, and to the Lipper Utility Funds Average, an arithmetic return of all utilities funds tracked by Lipper Inc.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
----------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
----------------------------------------------------------------------
Class IA 0.70% N/A 0.13% 0.83%
Class IB 0.70% 0.25% 0.13% 1.08%
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|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.07% and 1.32%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
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1 year 3 years 5 years 10 years
----------------------------------------------------------------------
Class IA $85 $265 $460 $1,025
Class IB $110 $343 $595 $1,317
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|
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 earnings may lead to an increase in the price of the 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 IA SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
1998 19.48% 1999 52.90% 2000 -3.98% 2001 -33.34% 2002 -30.44% 2003 33.42% |
Year-to-date performance through 3/31/2004 was 5.01%. 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 -32.08% (quarter ending 9/30/01).
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Average Annual Total Returns
(for periods ending 12/31/03)
------------------------------------------------------------------------
Since
Past Past inception
1 year 5 years (1/2/97)
------------------------------------------------------------------------
Class IA 33.42% -1.91% 4.24%
Class IB 33.16% -2.10% 4.07%
Russell Midcap Growth Index
(no deduction for fees or expenses) 42.71% 2.01% 7.11%
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|
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 Russell Midcap Growth Index, an unmanaged index of all medium and medium/small companies in the Russell 1000 Index chosen for their growth orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
------------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
------------------------------------------------------------------------
Class IA 0.65% N/A 0.11% 0.76%
Class IB 0.65% 0.25% 0.11% 1.01%
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|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 1.03% and 1.28%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
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1 year 3 years 5 years 10 years
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Class IA $78 $243 $422 $942
Class IB $103 $322 $558 $1,236
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|
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 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.
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
1994 1.04% 1995 40.67% 1996 12.97% 1997 26.52% 1998 24.36% 1999 58.22% 2000 -16.42% 2001 -22.24% 2002 -26.34% 2003 25.16% |
Year-to-date performance through 3/31/2004 was 1.06%. 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 -18.88% (quarter ending 3/31/01).
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Average Annual Total Returns
(for periods ending 12/31/03)
-----------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
-----------------------------------------------------------------------
Class IA 25.16% -1.06% 9.13%
Class IB 24.91% -1.25% 8.94%
Russell 1000 Growth Index
(no deduction for fees or expenses) 29.75% -5.11% 9.21%
S&P 500 Index (no deduction
for fees or expenses) 28.68% -0.57% 11.07%
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|
The fund's performance is compared to the Russell 1000 Growth Index, an unmanaged index of those Russell 1000 companies chosen for their growth orientation, and to S&P 500 Index, an unmanaged index of common stocks frequently used as a general measure of U.S. stock performance.
FEES AND EXPENSES
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
-----------------------------------------------------------------------
Total
Annual
Distribution Fund
Management (12b-1) Other Operating
Fees Fees Expenses Expenses
-----------------------------------------------------------------------
Class IA 0.55% N/A 0.07% 0.62%
Class IB 0.55% 0.25% 0.07% 0.87%
-----------------------------------------------------------------------
|
The Peer Group Expense Ratio for the fund's class IA shares and class IB shares as of March 31, 2004 was 0.98% and 1.23%, respectively.
EXAMPLE
The example translates the expenses shown in the preceding table into dollar amounts using standard assumptions described in the introduction under "Fund summaries" above.
-----------------------------------------------------------------------
1 year 3 years 5 years 10 years
-----------------------------------------------------------------------
Class IA $63 $199 $346 $774
Class IB $89 $278 $482 $1,073
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|
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.
We will consider, among other factors, a company's valuation, financial strength, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments.
* 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 directly relating 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.
Stocks of companies we believe are fast-growing may trade 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. Seeking earnings growth may result in significant investments in the technology sector, which may be subject to greater volatility than other sectors of the economy. Emerging growth companies may have limited product lines, markets or financial resources. Their stocks may trade less frequently and in limited volumes, and are subject to greater volatility.
Companies we believe are undergoing positive change and 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 similarly recognize the value of the company, then the price of the company's stock may fall or may not approach the value that we have placed on it.
* Small and midsized companies. These companies, some of which may have a market capitalization 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 small and midsized companies may therefore be more vulnerable to adverse developments than those of larger companies. Small companies in foreign countries could be relatively smaller than those in the United States.
For Putnam VT Mid Cap Value Fund, we invest mostly in companies of a size similar to those in the Russell Midcap Value Index. As of the date of this prospectus, the index was composed of companies having a market capitalization of between approximately $0.6 billion and $17.3 billion.
For Putnam VT Small Cap Value Fund, we invest mostly in companies of a size similar to those in the Russell 2000 Value Index. As of the date of this prospectus, the index was composed of companies having a market capitalization of between approximately $20 million and $2.7 billion.
* 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.
* 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.
Putnam VT Diversified Income Fund, we consider a foreign company to be one that is domiciled outside the U.S. or has its principal operations located outside the U.S.
For Putnam VT Income Fund, we may invest in U.S. dollar-denominated fixed-income securities of foreign issuers.
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 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 instruments 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 an investment before its maturity date. If an issuer calls or redeems an investment 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.
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.
* 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 mostly 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 in securities rated below investment grade. However, we will not invest in securities that are rated lower than B or its equivalent by each agency rating the investment, or are unrated securities that 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 and Putnam VT Utilities Growth and Income Fund, we invest mostly in investment-grade debt investments. 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. For Putnam VT The George Putnam Fund of Boston, we may invest in non-investment-grade investments and for Putnam VT Utilities Growth and Income Fund, we may invest up to 20% of the fund's total assets in below investment-grade investments. However, for Putnam VT The George Putnam Fund of Boston and Putnam VT Utilities Growth and Income Fund, 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 buy it.
For Putnam VT High Yield Fund, we invest mostly in higher-yield, higher-risk debt investments that are rated below BBB or its equivalent at the time of purchase by any nationally recognized securities rating agency rating such investments, or are 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.
For Putnam VT Diversified Income Fund and Putnam VT Global Asset Allocation Fund, we may invest up to 70% and 35%, respectively, of the fund's total assets in higher-yield, 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, including investments in the lowest rating category of the rating agency, 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.
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 zero coupon bonds and other investments that are issued at less than their face value and that are required to make interest payments 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. Our success in achieving the fund's investment objectives may depend more on our own credit analysis when we buy lower quality bonds than when we buy higher quality bonds. We may have to participate in legal proceedings involving the issuer. 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 investments, such as U.S. Treasury obligations and Ginnie Mae certificates, are backed by the full faith and credit of the U.S. government, others, such as federal agency bonds, are backed only by the credit of the issuer. Mortgage-backed securities may be subject to the risk that underlying borrowers will be unable 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.
The credit quality of an investment may be supported or enhanced by another company or financial institution through the use of a letter of credit or similar arrangements. The main credit risk in investments backed by a letter of credit is that the provider of the letter of credit will not be able to fulfill its obligations.
* 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 investments. 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 will be notified.
* Illiquid investments. We may invest up to 15% (up to 10% for Putnam VT Money Market Fund) of a fund's assets 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. However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment.
Derivatives involve special risks and may result in losses. The successful use of derivatives depends on our ability to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways due to the use of leverage or other factors, especially in unusual market conditions, and may result in increased volatility.
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. Under normal market conditions, we keep each fund's portfolio fully invested, with minimal cash holdings. However, 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, including investing solely in the United States. 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.
* Portfolio transactions and portfolio turnover rate. Transactions on U.S. stock exchanges, commodities and futures markets involve the payment by the fund of brokerage commissions. During the last fiscal year, each fund paid brokerage commissions on its portfolio transactions representing the following percentages of its average net assets during the year:
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Brokerage
commissions
as percentage
Fund name of average net assets
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Putnam VT American Government Income Fund less than .01%
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Putnam VT Capital Appreciation Fund 0.41
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Putnam VT Capital Opportunities Fund 0.69
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Putnam VT Discovery Growth Fund 0.31
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Putnam VT Diversified Income Fund 0.01
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Putnam VT Equity Income Fund 0.34
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Putnam VT The George Putnam Fund of Boston 0.11
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Putnam VT Global Asset Allocation Fund 0.22
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Putnam VT Global Equity Fund 0.29
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Putnam VT Growth and Income Fund 0.12
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Putnam VT Growth Opportunities Fund 0.16
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Putnam VT Health Sciences Fund 0.16
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Putnam VT High Yield Fund --
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Putnam VT Income Fund --
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Putnam VT International Equity Fund 0.22
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Putnam VT International Growth and Income Fund 0.23
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Putnam VT International New Opportunities Fund 0.40
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Putnam VT Investors Fund 0.21
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Putnam VT Mid Cap Value Fund 0.36
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Putnam VT Money Market Fund --
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Putnam VT New Opportunities Fund 0.20
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Putnam VT New Value Fund 0.21
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Putnam VT OTC & Emerging Growth Fund 0.32
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Putnam VT Research Fund 0.30
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Putnam VT Small Cap Value Fund 0.23
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Putnam VT Utilities Growth and Income Fund 0.15
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Putnam VT Vista Fund 0.30
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Putnam VT Voyager Fund 0.17
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Although brokerage commissions and other portfolio transaction costs are not reflected in the fund's expense ratio, they are reflected in the fund's return.
Investors should exercise caution in comparing brokerage commissions for different types of funds. For example, while brokerage commissions represent one component of a fund's transactions costs, they do not reflect the undisclosed amount of profit or "mark-up" typically included in the price paid by the fund for principal transactions (transactions directly with a dealer or other counterparty), including most fixed income securities and certain derivatives. Also, transactions in foreign securities often involve the payment of fixed brokerage commissions, which may be higher than those in the United States. As a result, funds that invest exclusively in fixed income securities and in the United States will typically have lower brokerage commissions, though not necessarily lower transaction costs, than funds that invest in equity securities or foreign securities. In addition, brokerage commissions do not reflect the extent to which the fund's purchase and sale transactions change the market price for an investment (the "market impact"), another element of transaction costs.
Another factor in transaction costs is a fund's portfolio turnover rate, which measures how frequently the fund buys and sells investments. During the last fiscal year, each fund's portfolio turnover rate was as follows:
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Portfolio
Fund name turnover rate
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Putnam VT American Government Income Fund 553.08%
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Putnam VT Capital Appreciation Fund 143.90
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Putnam VT Capital Opportunities Fund 163.05*
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Putnam VT Discovery Growth Fund 81.55
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Putnam VT Diversified Income Fund 104.06
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Putnam VT Equity Income Fund 113.49*
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Putnam VT The George Putnam Fund of Boston 144.47
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Putnam VT Global Asset Allocation Fund 155.21
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Putnam VT Global Equity Fund 88.32
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Putnam VT Growth and Income Fund 32.55
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Putnam VT Growth Opportunities Fund 59.00
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Putnam VT Health Sciences Fund 63.66
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Putnam VT High Yield Fund 75.01
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Putnam VT Income Fund 287.19
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Putnam VT International Equity Fund 71.14
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Putnam VT International Growth and Income Fund 71.71
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Putnam VT International New Opportunities Fund 135.90
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Putnam VT Investors Fund 73.32
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Putnam VT Mid Cap Value Fund 117.37*
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Putnam VT Money Market Fund --
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Putnam VT New Opportunities Fund 44.22
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Putnam VT New Value Fund 59.50
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Putnam VT OTC & Emerging Growth Fund 71.72
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Putnam VT Research Fund 116.88
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Putnam VT Small Cap Value Fund 36.14
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Putnam VT Utilities Growth and Income Fund 38.45
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Putnam VT Vista Fund 90.84
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Putnam VT Voyager Fund 47.37
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|
* Not annualized.
Both a fund's portfolio turnover rate and the amount of brokerage commissions it pays will vary over time based on market conditions. High turnover may lead to increased costs and decreased performance.
As a matter of policy, Putnam Management is not permitted to consider sales of shares of any of the funds (or of other Putnam funds) as a factor in the selection of broker-dealers to execute portfolio transactions for the fund.
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 (monthly for Putnam VT Capital Appreciation Fund, Putnam VT Capital Opportunities Fund, Putnam VT Discovery Growth Fund, Putnam VT Equity Income Fund and Putnam VT Mid Cap Value Fund) for these services based on the fund's average net assets.
Putnam Management's address is One Post Office Square, Boston, MA 02109. Each fund (with the exception of Putnam VT Capital Opportunities Fund, Putnam VT Equity Income Fund and Putnam VT Mid Cap Value Fund, each of which had not completed its first full fiscal year as of December 31, 2003) paid Putnam Management management fees in the following amounts (reflected as a percentage of average net assets for each fund's last fiscal year):
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Management
Putnam VT Fund Fees
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Putnam VT American Government Income Fund .65%
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Putnam VT Capital Appreciation Fund .65
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Putnam VT Discovery Growth Fund .70
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Putnam VT Diversified Income Fund .69
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Putnam VT The George Putnam Fund of Boston .63
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Putnam VT Global Asset Allocation .70
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Putnam VT Global Equity Fund .77
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Putnam VT Growth and Income Fund .48
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Putnam VT Growth Opportunities Fund .70
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Putnam VT Health Sciences Fund .70
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Putnam VT High Yield Fund .67
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Putnam VT Income Fund .59
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Putnam VT International Equity Fund .76
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Putnam VT International Growth and Income Fund .80
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Putnam VT International New Opportunities Fund 1.00
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Putnam VT Investors Fund .65
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Putnam VT Money Market Fund .42
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Putnam VT New Opportunities Fund .59
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Putnam VT New Value Fund .70
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Portfolio
Fund name turnover rate
--------------------------------------------------------------------------------
Putnam VT OTC & Emerging Growth Fund .70
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Putnam VT Research Fund .65
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Putnam VT Small Cap Value Fund .79
--------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income Fund .70
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Putnam VT Vista Fund .65
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Putnam VT Voyager Fund .55
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|
The following funds pay Putnam Management a monthly management fee for these services at the following annual rates:
Putnam VT Capital Opportunities 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 Equity 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; and 0.38% of any excess thereafter.
Putnam VT Mid Cap Value 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.
In order to limit the expenses of Putnam VT Capital Opportunities Fund, Putnam VT Equity Income Fund and Putnam VT Mid Cap Value Fund, Putnam Management has agreed to limit each fund's compensation (and, to the extent necessary, bear other expenses of each fund) through December 31, 2004 to the extent that expenses of each fund (exclusive of brokerage, interest, taxes, and deferred organizational and extraordinary expenses, and payments under the fund's distribution plan) would exceed an annual rate of 1.05%, 1.05% and 1.10%, respectively, of the funds' average net assets. For the purpose of determining any such limitation on Putnam Management's compensation, expenses of a fund do not reflect the application of commissions or cash management credits that may reduce designated fund expenses.
* Investment management teams. Putnam Management's investment professionals are organized into investment management teams, with a particular team dedicated to each specific asset class. The members of the team identified after the name of each fund are responsible for the day-to-day management of the fund. In the case of the Global Equity Research Team, Joshua H. Brooks and Kelly A. Morgan are Co-Chief Investment Officers heading the team. The names of all team members can be found at www.putnaminvestments.com.
The following team members coordinate the teams' management of the funds' portfolios. Their experience as investment professionals over at least the last five years is shown.
Portfolio leader Since Experience
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Kevin M. Cronin 1998 1997 - Present Putnam Management
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Portfolio member Since Experience
------------------------------------------------------------------------------
Robert A. Bloemker 2002 1999 - Present Putnam Management
Prior to Sept. 1999 Lehman Brothers
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|
Portfolio leader Since Experience
------------------------------------------------------------------------------
Michael E. Nance 2002 2001 - Present Putnam Management
Prior to May 2001 Kobrick Funds LLC
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Portfolio members Since Experience
------------------------------------------------------------------------------
Joseph P. Joseph 1999 1994 - Present Putnam Management
------------------------------------------------------------------------------
James S. Yu 2003 2002 - Present Putnam Management
Prior to Oct. 2002 John Hancock Funds
Prior to 2000 Merrill Lynch
Investment Management
------------------------------------------------------------------------------
|
Portfolio leader Since Experience
------------------------------------------------------------------------------
Joseph P. Joseph 1999 1994 - Present Putnam Management
------------------------------------------------------------------------------
Portfolio members Since Experience
------------------------------------------------------------------------------
Tinh Bui 2002 2001 - Present Putnam Management
Prior to Aug. 2001 PPMAmerica, Inc.
------------------------------------------------------------------------------
John A. Ferry 2004 1998 - Present Putnam Management
------------------------------------------------------------------------------
Gerald I. Moore 2000 1987 - Present Putnam Management
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|
Portfolio leader Since Experience ------------------------------------------------------------------------------ Roland W. Gillis 1995 1995 - Present Putnam Management ------------------------------------------------------------------------------ Portfolio members Since Experience ------------------------------------------------------------------------------ Daniel L. Miller 2001 1983 - Present Putnam Management ------------------------------------------------------------------------------- David J. Santos 2002 1986 - Present Putnam Management ------------------------------------------------------------------------------- |
Portfolio leader Since Experience ------------------------------------------------------------------------------- D. William Kohli 2002 1994 - Present Putnam Management ------------------------------------------------------------------------------- Portfolio members Since Experience ------------------------------------------------------------------------------- Stephen C. Peacher 2003 1990 - Present Putnam Management ------------------------------------------------------------------------------ David L. Waldman 1998 1997 - Present Putnam Management ------------------------------------------------------------------------------ |
Portfolio leader Since Experience
------------------------------------------------------------------------------
Bartlett R. Geer 2000 2000 - Present Putnam Management
Prior to Dec. 2000 State Street Research
and Management
------------------------------------------------------------------------------
Portfolio members Since Experience
------------------------------------------------------------------------------
Kevin M. Cronin 2003 1997 - Present Putnam Management
------------------------------------------------------------------------------
Jeanne L. Mockard 2000 1985 - Present Putnam Management
------------------------------------------------------------------------------
|
Portfolio leader Since Experience ------------------------------------------------------------------------------ Jeanne L. Mockard 2000 1985 - Present Putnam Management ------------------------------------------------------------------------------ Portfolio members Since Experience ------------------------------------------------------------------------------ Kevin M. Cronin 2003 1997 - Present Putnam Management ------------------------------------------------------------------------------ Jeffrey L. Knight 2001 1993 - Present Putnam Management ------------------------------------------------------------------------------ |
Global Core Team
------------------------------------------------------------------------------
Portfolio leader Since Experience
------------------------------------------------------------------------------
Shigeki Makino 2002 2000 - Present Putnam Management
Prior to Aug. 2000 Fidelity Investments
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Portfolio members Since Experience
------------------------------------------------------------------------------
Mark A. Bogar 2002 1998 - Present Putnam Management
------------------------------------------------------------------------------
Josh H. Brooks 2004 2003 - Present Putnam Management
Prior to Apr. 2003 Delaware Investments
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David E. Gerber 2003 1996 - Present Putnam Management
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Stephen S. Oler 2002 1997 - Present Putnam Management
------------------------------------------------------------------------------
PUTNAM VT GROWTH AND INCOME FUND
------------------------------------------------------------------------------
Large-Cap Value Team
------------------------------------------------------------------------------
Portfolio leader Since Experience
------------------------------------------------------------------------------
Hugh H. Mullin 1996 1986 - Present Putnam Management
------------------------------------------------------------------------------
Portfolio members Since Experience
------------------------------------------------------------------------------
David L. King 1993 1983 - Present Putnam Management
------------------------------------------------------------------------------
Christopher G. Miller 2000 1998 - Present Putnam Management
------------------------------------------------------------------------------
PUTNAM VT GROWTH OPPORTUNITIES FUND
------------------------------------------------------------------------------
Large-Cap Growth Team
------------------------------------------------------------------------------
Portfolio leader Since Experience
------------------------------------------------------------------------------
Brian O'Toole 2002 2002 - Present Putnam Management
Prior to Jun. 2002 Citigroup Asset
Management
------------------------------------------------------------------------------
Portfolio members Since Experience
------------------------------------------------------------------------------
Tony H. Elavia 2003 1999 - Present Putnam Management
Prior to Sept. 1999 TES Partners
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David J. Santos 1999 1986 - Present Putnam Management
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Walton D. Pearson 2003 2003 - Present Putnam Management
Prior to 2003 Alliance Capital
Management
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|
Portfolio leader Since Experience
------------------------------------------------------------------------------
Stephen C. Peacher 2002 1990 - Present Putnam Management
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Portfolio members Since Experience
------------------------------------------------------------------------------
Norman P. Boucher 2002 1998 - Present Putnam Management
------------------------------------------------------------------------------
Paul D. Scanlon 2002 1999 - Present Putnam Management
Prior to Sept. 1999 Olympus Health Care
Group, Inc.
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Rosemary H. Thomsen 2000 1986 - Present Putnam Management
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PUTNAM VT INCOME FUND
------------------------------------------------------------------------------
Core Fixed-Income Team
------------------------------------------------------------------------------
Portfolio leader Since Experience
------------------------------------------------------------------------------
Kevin M. Cronin 2000 1997 - Present Putnam Management
------------------------------------------------------------------------------
Portfolio member Since Experience
------------------------------------------------------------------------------
Robert A. Bloemker 2002 1999 - Present Putnam Management
Prior to Sept. 1999 Lehman Brothers
------------------------------------------------------------------------------
|
Portfolio leaders Since Experience
------------------------------------------------------------------------------
Joshua L. Byrne 2004 1992 - Present Putnam Management
------------------------------------------------------------------------------
Simon Davis 2004 2000 - Present Putnam Management
Prior to Sept. 2000 Deutsche Asset
Management
------------------------------------------------------------------------------
Portfolio members Since Experience
------------------------------------------------------------------------------
Stephen S. Oler 2000 1997 - Present Putnam Management
------------------------------------------------------------------------------
George W. Stairs 2002 1994 - Present Putnam Management
------------------------------------------------------------------------------
|
Portfolio leader Since Experience ------------------------------------------------------------------------------ George W. Stairs 1997 1994 - Present Putnam Management ------------------------------------------------------------------------------ Portfolio member Since Experience ------------------------------------------------------------------------------ Pamela R. Holding 2001 1995 - Present Putnam Management ------------------------------------------------------------------------------ |
Portfolio leader Since Experience
------------------------------------------------------------------------------
Stephen P. Dexter 1999 1999 - Present Putnam Management
Prior to Jun. 1999 Scudder Kemper Inc.
------------------------------------------------------------------------------
Portfolio members Since Experience
------------------------------------------------------------------------------
Peter J. Hadden 2003 1992 - Present Putnam Management
------------------------------------------------------------------------------
Denise D. Selden 2003 1998 - Present Putnam Management
------------------------------------------------------------------------------
PUTNAM VT INVESTORS FUND
------------------------------------------------------------------------------
U.S. Core Team
------------------------------------------------------------------------------
Portfolio leader Since Experience
------------------------------------------------------------------------------
James C. Wiess 2002 2000 - Present Putnam Management
Prior to Apr. 2000 JP Morgan Company
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Portfolio members Since Experience
------------------------------------------------------------------------------
Josh H. Brooks 2004 2003 - Present Putnam Management
Prior to Apr. 2003 Delaware Investments
------------------------------------------------------------------------------
Richard P. Cervone 2002 1998 - Present Putnam Management
Prior to Jul. 1998 Loomis, Sayles and Co.
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James S. Yu 2003 2002 - Present Putnam Management
Prior to Oct. 2002 John Hancock Funds
Prior to 2000 Merrill Lynch
Investment Management
------------------------------------------------------------------------------
|
Portfolio leader Since Experience
------------------------------------------------------------------------------
Thomas J. Hoey 2004 1999 - Present Putnam Management
------------------------------------------------------------------------------
Portfolio members Since Experience
------------------------------------------------------------------------------
J. Frederick Copper 2003 2001 - Present Putnam Management
Prior to Feb. 2001 Wellington Management
Company LLP
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Edward T. Shadek, Jr. 2004 1997 - Present Putnam Management
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|
Portfolio leader Since Experience
------------------------------------------------------------------------------
Daniel L. Miller 1990 1983 - Present Putnam Management
------------------------------------------------------------------------------
Portfolio members Since Experience
------------------------------------------------------------------------------
Brian P. O'Toole 2002 2002 - Present Putnam Management
Prior to Jun. 2002 Citigroup Asset
Management
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Richard B. Weed 2003 2000 - Present Putnam Management
Prior to Dec. 2000 State Street Global
Advisors
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PUTNAM VT NEW VALUE FUND
------------------------------------------------------------------------------
Large-Cap Value Team
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Portfolio leader Since Experience
------------------------------------------------------------------------------
David L. King 1995 1983 - Present Putnam Management
------------------------------------------------------------------------------
Portfolio member Since Experience
------------------------------------------------------------------------------
Michael J. Abata 2002 1997 - Present Putnam Management
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PUTNAM VT OTC & EMERGING GROWTH FUND
------------------------------------------------------------------------------
Specialty Growth Team
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Portfolio leader Since Experience
------------------------------------------------------------------------------
Roland W. Gillis 2001 1995 - Present Putnam Management
------------------------------------------------------------------------------
Portfolio member Since Experience
------------------------------------------------------------------------------
Daniel L. Miller 2003 1983 - Present Putnam Management
------------------------------------------------------------------------------
|
Portfolio leader Since Experience
------------------------------------------------------------------------------
Edward T. Shadek, Jr. 1999 1997 - Present Putnam Management
------------------------------------------------------------------------------
Portfolio member Since Experience
------------------------------------------------------------------------------
Eric N. Harthun 2002 2000 - Present Putnam Management
Prior to Mar. 2000 Boston Partners Asset
Management
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|
Mid-Cap Growth Team
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Portfolio members Since Experience
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Kevin M. Divney 2003 1997 - Present Putnam Management
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Paul E. Marrkand 2003 1987 - Present Putnam Management
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PUTNAM VT VOYAGER FUND
------------------------------------------------------------------------------
Large-Cap Growth Team
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Portfolio leader Since Experience
------------------------------------------------------------------------------
Brian P. O'Toole 2002 2002 - Present Putnam Management
Prior to Jun. 2002 Citigroup Asset
Management
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Portfolio members Since Experience
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Tony H. Elavia 2002 1999 - Present Putnam Management
Prior to Sept. 1999 TES Partners
Prior to Sept. 1998 Voyageur Asset
Management
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Walton D. Pearson 2003 2003 - Present Putnam Management
Prior to Feb. 2003 Alliance Capital
Management
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David J. Santos 2003 1986 - Present Putnam Management
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|
* Compensation of investment professionals. Putnam Management believes that its investment management teams should be compensated primarily based on their success in helping investors achieve their goals. The portion of Putnam Investments' total incentive compensation pool that is available to Putnam Management's Investment Division is based primarily on its delivery, across all of the portfolios it manages, of consistent, dependable and superior performance over time relative to peer groups. The peer group for each fund is its broad investment category as determined by Lipper Inc., as follows:
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Lipper Variable Products
(Underlying
Funds) Peer group Funds
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Balanced Funds Putnam VT The George Putnam Fund of Boston
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Corporate Debt Funds A Rated Putnam VT Income Fund
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Equity Income Funds Putnam VT Equity Income Fund
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General Bond Funds Putnam VT Diversified Income Fund
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General U.S. Putnam VT American Government
Government Funds Income Fund
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Global Flexible Portfolio Funds Putnam VT Global Asset Allocation Fund
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Global Funds Putnam VT Global Equity Fund
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High Current Yield Funds Putnam VT High Yield Fund
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International Funds Putnam VT International Equity Fund
Putnam VT International Growth and
Income Fund
Putnam VT International New Opportunities
Fund
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Large-Cap Core Funds Putnam VT Investors Fund
Putnam VT Research Fund
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Large-Cap Growth Funds Putnam VT Growth Opportunities Fund
Putnam VT Voyager Fund
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Large-Cap Value Funds Putnam VT Growth and Income Fund
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Mid-Cap Core Funds Putnam VT Capital Opportunities Fund
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Mid-Cap Growth Funds Putnam VT OTC & Emerging Growth Fund
Putnam VT Vista Fund
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Mid-Cap Value Funds Putnam VT Mid Cap Value Fund
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Money Market Funds Putnam VT Money Market Fund
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Multi-Cap Core Funds Putnam VT Capital Appreciation Fund
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Multi-Cap Growth Funds Putnam VT Discovery Growth Fund
Putnam VT New Opportunities Fund
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Multi-Cap Value Funds Putnam VT New Value Fund
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Small-Cap Value Funds Putnam VT Small Cap Value Fund
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Specialty/Miscellaneous Funds Putnam VT Health Sciences Fund
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Utility Funds Putnam VT Utilities Growth and Income Fund
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|
The portion of the incentive compensation pool available to each of your investment management teams is also based primarily on its delivery, across all of the portfolios it manages, of consistent, dependable and superior performance over time.
* Consistent performance means being above median over one year.
* Dependable performance means not being in the 4th quartile of the peer group over one, three or five years.
* Superior performance (which is the largest component of Putnam Management's incentive compensation program) means being in the top third of the peer group over three and five years.
In determining an investment management team's portion of the incentive compensation pool and allocating that portion to individual team members, Putnam Management retains discretion to reward or penalize teams or individuals as it deems appropriate, based on other factors. The size of the overall incentive compensation pool each year is determined by Putnam Management's parent company, Marsh & McLennan Companies, Inc., and depends in large part on Putnam's profitability for the year. Incentive compensation generally represents at least 70% of the total compensation paid to investment team members.
* Regulatory matters and litigation. On November 13, 2003, Putnam Management agreed to entry of an order by the Securities and Exchange Commission in partial resolution of administrative and cease-and-desist proceedings initiated by the SEC on October 28, 2003 in connection with alleged excessive short-term trading by at least six Putnam Management investment professionals. The SEC's findings reflect that four of those employees engaged in such trading in funds over which they had investment decision-making responsibility and had access to non-public information regarding, among other things, current portfolio holdings and valuations. The six indi viduals are no longer employed by Putnam Management. Under the order, Putnam Management will make restitution for losses attributable to excessive short-term trading by Putnam employees, institute new employee trading restrictions and enhanced employee trading compliance, retain an independent compliance consultant, and take other remedial actions. Putnam Management neither admitted nor denied the order's findings, which included findings that Putnam Management willfully violated provisions of the federal securities laws. A civil monetary penalty and other monetary relief, if any, will be determined at a later date. If a hearing is necessary to determine the amounts of such penalty or other relief, Putnam Management will be precluded from arguing that it did not violate the federal securities laws in the manner described in the SEC order, the findings set forth in the SEC order will be accepted as true by the hearing officer and additional evidence may be presented. Putnam Management, and not the investors in any Putnam fund, will bear all costs, including restitution, civil penalties and associated legal fees. Administrative proceedings instituted by the Commonwealth of Massachusetts on October 28, 2003 against Putnam Management in connection with alleged market timing activities by Putnam employees and by participants in some Putnam-administered 401(k) plans are pending. Putnam Management has committed to make complete restitution for any losses suffered by Putnam shareholders as a result of any improper market-timing activities by Putnam employees or within Putnam-administered 401(k) plans.
The SEC's and Commonwealth's allegations and related matters also serve as the general basis for numerous lawsuits, including purported class action lawsuits filed against Putnam Management and certain related parties, including certain Putnam funds. Putnam Management has agreed to bear any costs incurred by Putnam funds in connection with these lawsuits. Based on currently available information, Putnam Management believes that the likelihood that the pending private lawsuits and purported class action lawsuits will have a material adverse financial impact on the fund is remote, and the pending actions are not likely to materially affect its ability to provide investment management services to its clients, including the Putnam funds.
Review of these matters by counsel for Putnam Management and by separate independent counsel for the Putnam funds and their independent Trustees is continuing. In addition, Marsh & McLennan Companies, Inc., Putnam Management's parent company, has engaged counsel to conduct a separate review of Putnam Management's policies and controls related to short-term trading. The fund may experience increased redemptions as a result of these matters, which could result in increased transaction costs and operating expenses.
How to buy and sell fund shares
The Trust has an underwriting agreement relating to the funds with Putnam Retail Management, One Post Office Square, Boston, Massachusetts 02109. Putnam Retail Management presently offers shares of each fund of the Trust continuously to separate accounts of various insurers. The underwriting agreement presently provides that Putnam Retail Management accepts orders for shares at net asset value and no sales commission or load is charged. Putnam Retail Management 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 Retail Management 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.
The various separate accounts that invest in the funds may exchange shares of the funds without limit. Some of the separate accounts have adopted measures to attempt to address the potential for market timing and excessive short term trading, which may or may not be effective, while other separate accounts have not. Putnam has adopted certain monitoring controls which seek to identify market timing and excessive short term trading but, as Putnam may have little or no access to individual contract holder records, there is no assurance that this monitoring will be effective. Even if it is effective, Putnam will be dependent on the cooperation and policies of the insurance company whose separate account is the source of the trading to address the issue. In addition, the terms of the particular insurance contract may also limit the ability of the insurance company to address the issue. As a result, the funds can give no assurances that market timing and excessive short term trading will not occur in the funds.
Distribution Plan
The Trust has adopted a Distribution Plan with respect to class IB shares to compensate Putnam Retail Management 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 plan provides for payments by each fund to Putnam Retail Management 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 0.25% of average net assets. Because these fees are paid out of a fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
Putnam Retail Management 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 Retail Management makes quarterly payments to dealers at the annual rate of up to 0.25% of the average net asset value of class IB shares.
Putnam Retail Management 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 Retail Management, 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.
From time to time, the fund may buy securities in private transactions exempt from registration under the securities laws. These investments are illiquid and may be difficult to sell and/or price and are subject to heightened risk because their issuers typically have limited product lines, operating histories and financial resources. There typically will not be a trading market for those securities from which the fund may readily ascertain a market value. Where market quotations are not readily available, the fund applies its fair value procedures to determine a price for the securities; in many cases, Putnam Management may be required to determine a fair value based solely on its own analysis of the investment.
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. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. As a result, each fund has adopted fair value pricing procedures, which, among other things, require each fund to fair value such securities if there has been a movement in the U.S. market that exceeds a specified threshold. Although the threshold may be revised from time to time and the number of days on which fair value prices will be used will depend on market activity, it is possible that fair value prices will be used by each fund to a significant extent.
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. 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, a fund could be required at times to liquidate other investments in order to satisfy its distribution requirements.
Financial highlights
The financial highlights tables are 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 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.
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PUTNAM VARIABLE TRUST
Financial Highlights
CLASS IA
---------------------------------------------------------------------------------------------------------
Investment Operations:
Net
Net Realized and
Asset Unrealized
Value, Net Gain (Loss) Total from
Beginning Investment on Investment
Period ended of Period Income (Loss) Investments Operations
---------------------------------------------------------------------------------------------------------
Putnam VT American
Government Income Fund
December 31, 2003 $12.34 $.29(a) $(.07) $.22
December 31, 2002 11.62 .39(a) .63 1.02
December 31, 2001 10.88 .48(a) .26 .74
December 31, 2000*** 10.00 .59(a)(b) .62 1.21
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Putnam VT Capital
Appreciation Fund
December 31, 2003 $6.07 $--(a)(e) $1.52 $1.52
December 31, 2002 7.82 .02(a) (1.75) (1.73)
December 31, 2001 9.06 .01(a) (1.25) (1.24)
December 31, 2000**** 10.00 (.07)(a) (.87) (.94)
---------------------------------------------------------------------------------------------------------
Putnam VT Capital
Opportunities Fund
December 31, 2003***** $10.00 $--(a)(b)(e) $3.02 $3.02
---------------------------------------------------------------------------------------------------------
Putnam VT Discovery
Growth Fund
December 31, 2003 $3.52 $(.02)(a) $1.16 $1.14
December 31, 2002 4.98 (.04)(a) (1.42) (1.46)
December 31, 2001 7.18 (.06)(a) (2.14) (2.20)
December 31, 2000**** 10.00 (.05)(a) (2.77) (2.82)
---------------------------------------------------------------------------------------------------------
Putnam VT Diversified
Income Fund
December 31, 2003 $8.55 $.63(a) $.97 $1.60
December 31, 2002 8.81 .71(a) (.20) .51
December 31, 2001 9.15 .78(a) (.44) .34
December 31, 2000 9.92 .80(a) (.78) .02
December 31, 1999 10.49 .80(a) (.63) .17
---------------------------------------------------------------------------------------------------------
Putnam VT Equity
Income Fund
December 31, 2003***** $10.00 $.10(a)(b) $2.06 $2.16
---------------------------------------------------------------------------------------------------------
Putnam VT The George
Putnam Fund of Boston
December 31, 2003 $9.58 $.23(a) $1.38 $1.61
December 31, 2002 10.73 .28(a) (1.17) (.89)
December 31, 2001 10.96 .31(a) (.24) .07
December 31, 2000 9.98 .19(a) .79 .98
December 31, 1999 10.28 .32(a) (.36) (.04)
---------------------------------------------------------------------------------------------------------
Putnam VT Global
Asset Allocation Fund
December 31, 2003 $11.51 $.23(a) $2.19 $2.42
December 31, 2002 13.37 .26(a) (1.87) (1.61)
December 31, 2001 16.66 .36(a) (1.78) (1.42)
December 31, 2000 19.60 .48(a) (1.32) (.84)
December 31, 1999 18.94 .41(a) 1.69 2.10
---------------------------------------------------------------------------------------------------------
Putnam VT Global
Equity Fund
December 31, 2003 $7.25 $.09(a) $2.02 $2.11
December 31, 2002 9.34 .07(a) (2.13) (2.06)
December 31, 2001 18.10 .02(a) (5.17) (5.15)
December 31, 2000 30.49 (.08)(a) (7.36) (7.44)
December 31, 1999 20.28 (.02)(a) 12.09 12.07
---------------------------------------------------------------------------------------------------------
Putnam VT Growth
and Income Fund
December 31, 2003 $18.75 $.37(a) $4.69 $5.06
December 31, 2002 23.56 .36(a) (4.69) (4.33)
December 31, 2001 25.85 .35(a) (1.94) (1.59)
December 31, 2000 26.80 .40(a) 1.49 1.89
December 31, 1999 28.77 .47(a) 0.01 .48
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (Continued)
CLASS IA (Continued)
---------------------------------------------------------------------------------------------
Less Distributions:
From
From Net
Net Realized From
Investment Gain on Return
Period ended Income Investments of Capital
---------------------------------------------------------------------------------------------
Putnam VT American
Government Income Fund
December 31, 2003 $(.25) $(.23) $--
December 31, 2002 (.30) -- --
December 31, 2001 -- --(e) --
December 31, 2000*** (.22) (.11) --
---------------------------------------------------------------------------------------------
Putnam VT Capital
Appreciation Fund
December 31, 2003 $-- $-- $--
December 31, 2002 (.01) -- (.01)
December 31, 2001 -- -- --
December 31, 2000**** -- -- --
---------------------------------------------------------------------------------------------
Putnam VT Capital
Opportunities Fund
December 31, 2003***** $-- $(.28) $--
---------------------------------------------------------------------------------------------
Putnam VT
Discovery Growth Fund
December 31, 2003 $-- $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- -- --
December 31, 2000**** -- -- --
---------------------------------------------------------------------------------------------
Putnam VT
Diversified Income Fund
December 31, 2003 $(.83) $-- $--
December 31, 2002 (.77) -- --
December 31, 2001 (.68) -- --
December 31, 2000 (.79) -- --
December 31, 1999 (.74) -- --
---------------------------------------------------------------------------------------------
Putnam VT Equity
Income Fund
December 31, 2003***** $(.05) $(.02) $--
---------------------------------------------------------------------------------------------
Putnam VT The George
Putnam Fund of Boston
December 31, 2003 $(.26) $-- $--
December 31, 2002 (.26) -- --
December 31, 2001 (.30) -- --
December 31, 2000 -- -- --
December 31, 1999 (.23) (.02) (.01)
---------------------------------------------------------------------------------------------
Putnam VT Global
Asset Allocation Fund
December 31, 2003 $(.50) $-- $--
December 31, 2002 (.25) -- --
December 31, 2001 (.18) (1.69) --
December 31, 2000 (.34) (1.76) --
December 31, 1999 (.38) (1.06) --
---------------------------------------------------------------------------------------------
Putnam VT Global
Equity Fund
December 31, 2003 $(.10) $-- $--
December 31, 2002 (.03) -- --
December 31, 2001 -- (3.61) --
December 31, 2000 (.18) (4.77) --
December 31, 1999 (.09) (1.77) --
---------------------------------------------------------------------------------------------
Putnam VT Growth
and Income Fund
December 31, 2003 $(.42) $-- $--
December 31, 2002 (.36) (.12) --
December 31, 2001 (.41) (.29) --
December 31, 2000 (.50) (2.34) --
December 31, 1999 (.41) (2.04) --
---------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (continued)
CLASS IA (continued)
---------------------------------------------------------------------------------------------------------
Total
Investment
Return at Net Assets,
Total Net Asset Value, Net Asset End of Period
Period ended Distributions End of Period Value(%)(c)(i) (in thousands)
---------------------------------------------------------------------------------------------------------
Putnam VT American
Government Income Fund
December 31, 2003 $(.48) $12.08 1.89 $225,290
December 31, 2002 (.30) 12.34 8.98 386,364
December 31, 2001 --(e) 11.62 6.82 136,461
December 31, 2000*** (.33) 10.88 12.11* 17,992
---------------------------------------------------------------------------------------------------------
Putnam VT Capital
Appreciation Fund
December 31, 2003 $-- $7.59 25.04 $23,316
December 31, 2002 (.02) 6.07 (22.13) 13,542
December 31, 2001 -- 7.82 (13.69) 11,003
December 31, 2000**** -- 9.06 (9.40)* 2,258
---------------------------------------------------------------------------------------------------------
Putnam VT Capital
Opportunities Fund
December 31, 2003***** $(.28) $12.74 30.25* $5,972
---------------------------------------------------------------------------------------------------------
Putnam VT Discovery
Growth Fund
December 31, 2003 $-- $4.66 32.39 $19,835
December 31, 2002 -- 3.52 (29.32) 12,353
December 31, 2001 -- 4.98 (30.64) 7,558
December 31, 2000**** -- 7.18 (28.20)* 3,174
---------------------------------------------------------------------------------------------------------
Putnam VT Diversified
Income Fund
December 31, 2003 $(.83) $9.32 20.27 $449,121
December 31, 2002 (.77) 8.55 6.20 440,845
December 31, 2001 (.68) 8.81 3.82 491,673
December 31, 2000 (.79) 9.15 0.19 537,743
December 31, 1999 (.74) 9.92 1.66 623,737
---------------------------------------------------------------------------------------------------------
Putnam VT Equity
Income Fund
December 31, 2003***** $(.07) $12.09 21.57* $39,133
---------------------------------------------------------------------------------------------------------
Putnam VT The George
Putnam Fund of Boston
December 31, 2003 $(.26) $10.93 17.35 $463,270
December 31, 2002 (.26) 9.58 (8.57) 416,550
December 31, 2001 (.30) 10.73 0.74 387,517
December 31, 2000 -- 10.96 9.82 305,564
December 31, 1999 (.26) 9.98 (0.36) 276,553
---------------------------------------------------------------------------------------------------------
Putnam VT Global
Asset Allocation Fund
December 31, 2003 $(.50) $13.43 22.04 $417,713
December 31, 2002 (.25) 11.51 (12.30) 423,653
December 31, 2001 (1.87) 13.37 (8.42) 611,233
December 31, 2000 (2.10) 16.66 (4.87) 815,135
December 31, 1999 (1.44) 19.60 11.85 1,001,087
---------------------------------------------------------------------------------------------------------
Putnam VT Global
Equity Fund
December 31, 2003 $(.10) $9.26 29.54 $670,764
December 31, 2002 (.03) 7.25 (22.16) 659,264
December 31, 2001 (3.61) 9.34 (29.66) 1,139,131
December 31, 2000 (4.95) 18.10 (29.64) 2,018,743
December 31, 1999 (1.86) 30.49 65.00 3,090,073
---------------------------------------------------------------------------------------------------------
Putnam VT Growth
and Income Fund
December 31, 2003 $(.42) $23.39 27.69 $4,947,556
December 31, 2002 (.48) 18.75 (18.79) 4,729,161
December 31, 2001 (.70) 23.56 (6.16) 7,216,388
December 31, 2000 (2.84) 25.85 8.11 8,675,872
December 31, 1999 (2.45) 26.80 1.59 9,567,077
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (continued)
CLASS IA (continued)
---------------------------------------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Expenses Income (Loss)
Average Net to Average Portfolio
Period ended Asets(%)(d)(i) Net Assets(%) Turnover(%)
---------------------------------------------------------------------------------------------------
Putnam VT American
Government Income Fund
December 31, 2003 .74 2.35 553.08
December 31, 2002 .74 3.26 517.44(f)
December 31, 2001 .77 4.23 262.05(f)
December 31, 2000*** .82(b)* 5.20(b)* 336.72*
---------------------------------------------------------------------------------------------------
Putnam VT Capital
Appreciation Fund
December 31, 2003 1.06 .04 143.90
December 31, 2002 1.13 .30 166.36
December 31, 2001 1.35 .13 101.98
December 31, 2000**** 1.18* (.72)* 89.87*
---------------------------------------------------------------------------------------------------
Putnam VT Capital
Opportunities Fund
December 31, 2003***** .71(b)* (.01)(b)* 163.05*
---------------------------------------------------------------------------------------------------
Putnam VT Discovery
Growth Fund
December 31, 2003 1.08 (.58) 81.55
December 31, 2002 1.56 (1.11) 92.27(g)
December 31, 2001 1.62 (1.10) 109.55
December 31, 2000**** .85* (.67)* 28.20*
---------------------------------------------------------------------------------------------------
Putnam VT Diversified
Income Fund
December 31, 2003 .82 7.16 104.06
December 31, 2002 .82 8.45 176.17(f)
December 31, 2001 .79 8.83 139.13(f)
December 31, 2000 .78 8.62 169.27
December 31, 1999 .78 7.86 117.02
---------------------------------------------------------------------------------------------------
Putnam VT Equity
Income Fund
December 31, 2003***** .71(b)* .93(b)* 113.49*
---------------------------------------------------------------------------------------------------
Putnam VT The George
Putnam Fund of Boston
December 31, 2003 .73 2.27 144.47
December 31, 2002 .75 2.83 128.14(f)
December 31, 2001 .76 2.92 334.64(f)
December 31, 2000 .76 3.44 154.53
December 31, 1999 .83 3.04 173.41
---------------------------------------------------------------------------------------------------
Putnam VT Global
Asset Allocation Fund
December 31, 2003 .95 1.92 155.21
December 31, 2002 .91 2.10 105.04
December 31, 2001 .84 2.54 187.96(f)
December 31, 2000 .79 2.73 159.03
December 31, 1999 .77 2.22 149.82
---------------------------------------------------------------------------------------------------
Putnam VT Global
Equity Fund
December 31, 2003 .92 1.21 88.32
December 31, 2002 .89 .92 173.27
December 31, 2001 .82 .20 186.11
December 31, 2000 .76 (.32) 170.41
December 31, 1999 .73 (.09) 154.88
---------------------------------------------------------------------------------------------------
Putnam VT Growth
and Income Fund
December 31, 2003 .53 1.85 32.55
December 31, 2002 .52 1.71 36.01
December 31, 2001 .51 1.42 32.75
December 31, 2000 .50 1.63 55.04
December 31, 1999 .50 1.66 53.68
---------------------------------------------------------------------------------------------------
|
PUTNAM VARIABLE TRUST
Financial Highlights
CLASS IA
--------------------------------------------------------------------------------------------------------
Investment Operations:
Net
Net Realized and
Asset Unrealized
Value, Net Gain (Loss) Total from
Beginning Investment on Investment
Period ended of Period Income (Loss) Investments Operations
--------------------------------------------------------------------------------------------------------
Putnam VT Growth
Opportunities Fund
December 31, 2003 $3.75 $.01(a) $.87 $.88
December 31, 2002 5.31 --(a)(e) (1.56) (1.56)
December 31, 2001 7.80 (.01)(a) (2.48) (2.49)
December 31, 2000*** 10.00 (.02)(a) (2.18) (2.20)
--------------------------------------------------------------------------------------------------------
Putnam VT Health
Sciences Fund
December 31, 2003 $9.37 $.07(a) $1.68 $1.75
December 31, 2002 11.75 .04(a) (2.41) (2.37)
December 31, 2001 14.61 .01(a) (2.86) (2.85)
December 31, 2000 10.50 .01(a) 4.10 4.11
December 31, 1999 10.94 .01(a) (.44) (.43)
--------------------------------------------------------------------------------------------------------
Putnam VT High
Yield Fund
December 31, 2003 $7.08 $.65(a) $1.07 $1.72
December 31, 2002 8.08 .76(a) (.78) (.02)
December 31, 2001 8.98 .91(a) (.55) .36
December 31, 2000 11.09 1.14(a) (1.97) (.83)
December 31, 1999 11.70 1.13(a) (.48) .65
--------------------------------------------------------------------------------------------------------
Putnam VT Income
Fund
December 31, 2003 $12.95 $.46(a) $.13 $.59
December 31, 2002 12.65 .64(a) .33 .97
December 31, 2001 12.61 .70(a) .21 .91
December 31, 2000 12.52 .84(a) .11 .95
December 31, 1999 13.73 .78(a) (1.05) (.27)
--------------------------------------------------------------------------------------------------------
Putnam VT
International
Equity Fund
December 31, 2003 $10.14 $.16(a) $2.73 $2.89
December 31, 2002 12.42 .13(a) (2.29) (2.16)
December 31, 2001 17.72 .13(a) (3.62) (3.49)
December 31, 2000 21.66 .31(a) (2.05) (1.74)
December 31, 1999 13.52 .08(a) 8.06 8.14
--------------------------------------------------------------------------------------------------------
Putnam VT
International
Growth and Income
Fund
December 31, 2003 $8.37 $.15(a) $2.99 $3.14
December 31, 2002 9.76 .12(a) (1.44) (1.32)
December 31, 2001 13.28 .13(a) (2.80) (2.67)
December 31, 2000 15.25 .16(a) .05 .21
December 31, 1999 12.24 .21(a) 2.80 3.01
--------------------------------------------------------------------------------------------------------
Putnam VT
International New
Opportunities Fund
December 31, 2003 $8..41 $.09(a) $2.71 $2.80
December 31, 2002 9.80 .07(a) (1.38) (1.31)
December 31, 2001 13.71 .04(a) (3.95) (3.91)
December 31, 2000 23.31 (.11)(a) (8.45) (8.56)
December 31, 1999 11.49 (.05)(a) 11.88 11.83
--------------------------------------------------------------------------------------------------------
Putnam VT Investors
Fund
December 31, 2003 $7.08 $.05(a) $1.87 $1.92
December 31, 2002 9.31 .04(a) (2.24) (2.20)
December 31, 2001 12.36 .03(a) (3.07) (3.04)
December 31, 2000 15.16 .01(a) (2.81) (2.80)
December 31, 1999 11.65 .01(a) 3.50 3.51
--------------------------------------------------------------------------------------------------------
Putnam VT Mid
Cap Value Fund
December 31, 2003***** $10.00 $.07(a)(b) $2.83 $2.90
--------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (continued)
CLASS IA (continued)
------------------------------------------------------------------------------------------------
Less Distributions:
From
From Net
Net Realized From
Investment Gain on Return
Period ended Income Investments of Capital
------------------------------------------------------------------------------------------------
Putnam VT Growth
Opportunities Fund
December 31, 2003 $-- $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- -- --
December 31, 2000*** -- -- --
------------------------------------------------------------------------------------------------
Putnam VT Health
Sciences Fund
December 31, 2003 $(.08) $-- $--
December 31, 2002 (.01) -- --
December 31, 2001 (.01) -- --
December 31, 2000 -- -- --
December 31, 1999 (.01) -- --
------------------------------------------------------------------------------------------------
Putnam VT High
Yield Fund
December 31, 2003 $(.83) $-- $--
December 31, 2002 (.98) -- --
December 31, 2001 (1.26) -- --
December 31, 2000 (1.28) -- --
December 31, 1999 (1.26) -- --
------------------------------------------------------------------------------------------------
Putnam VT Income Fund
December 31, 2003 $(.63) $-- $--
December 31, 2002 (.67) -- --
December 31, 2001 (.87) -- --
December 31, 2000 (.86) -- --
December 31, 1999 (.73) (.21) --
------------------------------------------------------------------------------------------------
Putnam VT
International Equity
Fund
December 31, 2003 $(.12) $-- $--
December 31, 2002 (.12) -- --
December 31, 2001 (.06) (1.75) --
December 31, 2000 (.41) (1.79) --
December 31, 1999 -- -- --
------------------------------------------------------------------------------------------------
Putnam VT
International
Growth and Income
Fund
December 31, 2003 $(.16) $-- $--
December 31, 2002 (.07) -- --
December 31, 2001 (.13) (.72) --
December 31, 2000 (.68) (1.50) --
December 31, 1999 -- -- --
------------------------------------------------------------------------------------------------
Putnam VT
International New
Opportunities Fund
December 31, 2003 $(.05) $-- $--
December 31, 2002 (.08) -- --
December 31, 2001 -- -- --
December 31, 2000 (.01) (1.03) --(e)
December 31, 1999 (.01) -- --
------------------------------------------------------------------------------------------------
Putnam VT Investors
Fund
December 31, 2003 $(.05) $-- $--
December 31, 2002 (.03) -- --
December 31, 2001 (.01) -- --
December 31, 2000 -- -- --
December 31, 1999 -- -- --
------------------------------------------------------------------------------------------------
Putnam VT Mid Cap
Value Fund
December 31, 2003***** $(.04) $(.07) $--
------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (continued)
CLASS IA (continued)
---------------------------------------------------------------------------------------------------------
Total
Investment
Return at Net Assets,
Total Net Asset Value, Net Asset End of Period
Period ended Distributions End of Period Value(%)(c)(i) (in thousands)
---------------------------------------------------------------------------------------------------------
Putnam VT Growth
Opportunities Fund
December 31, 2003 $-- $4.63 23.47 $38,470
December 31, 2002 -- 3.75 (29.38) 32,235
December 31, 2001 -- 5.31 (31.92) 55,646
December 31, 2000*** -- 7.80 (22.00)* 77,022
---------------------------------------------------------------------------------------------------------
Putnam VT Health
Sciences Fund
December 31, 2003 $(.08) $11.04 18.80 $200,054
December 31, 2002 (.01) 9.37 (20.21) 212,783
December 31, 2001 (.01) 11.75 (19.53) 342,488
December 31, 2000 -- 14.61 39.14 497,695
December 31, 1999 (.01) 10.50 (3.93) 218,848
---------------------------------------------------------------------------------------------------------
Putnam VT High
Yield Fund
December 31, 2003 $(.83) $7.97 26.68 $594,299
December 31, 2002 (.98) 7.08 (0.52) 526,885
December 31, 2001 (1.26) 8.08 4.00 647,505
December 31, 2000 (1.28) 8.98 (8.45) 709,534
December 31, 1999 (1.26) 11.09 5.92 964,590
---------------------------------------------------------------------------------------------------------
Putnam VT Income Fund
December 31, 2003 $(.63) $12.91 4.70 $765,119
December 31, 2002 (.67) 12.95 8.09 919,294
December 31, 2001 (.87) 12.65 7.53 879,911
December 31, 2000 (.86) 12.61 8.01 806,452
December 31, 1999 (.94) 12.52 (2.07) 935,800
---------------------------------------------------------------------------------------------------------
Putnam VT
International
Equity Fund
December 31, 2003 $(.12) $12.91 28.91 $444,329
December 31, 2002 (.12) 10.14 (17.60) 430,607
December 31, 2001 (1.81) 12.42 (20.41) 521,192
December 31, 2000 (2.20) 17.72 (9.48) 696,527
December 31, 1999 -- 21.66 60.21 627,368
---------------------------------------------------------------------------------------------------------
Putnam VT
International
Growth and Income
Fund
December 31, 2003 $(.16) $11.35 38.37 $227,237
December 31, 2002 (.07) 8.37 (13.67) 201,168
December 31, 2001 (.85) 9.76 (20.67) 273,298
December 31, 2000 (2.18) 13.28 1.36 393,973
December 31, 1999 -- 15.25 24.59 387,504
---------------------------------------------------------------------------------------------------------
Putnam VT
International
New Opportunities
Fund
December 31, 2003 $(.05) $11.16 33.59 $98,339
December 31, 2002 (.08) 8.41 (13.46) 91,939
December 31, 2001 -- 9.80 (28.52) 140,731
December 31, 2000 (1.04) 13.71 (38.56) 255,447
December 31, 1999 (.01) 23.31 102.96 330,982
---------------------------------------------------------------------------------------------------------
Putnam VT
Investors Fund
December 31, 2003 $(.05) $8.95 27.39 $353,033
December 31, 2002 (.03) 7.08 (23.68) 341,675
December 31, 2001 (.01) 9.31 (24.61) 597,312
December 31, 2000 -- 12.36 (18.47) 905,213
December 31, 1999 -- 15.16 30.13 867,151
---------------------------------------------------------------------------------------------------------
Putnam VT Mid
Cap Value Fund
December 31, 2003***** $(.11) $12.79 29.01* $16,499
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (continued)
CLASS IA (continued)
------------------------------------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Expenses Income (Loss)
to Average Net to Average Portfolio
Period ended Assets(%)(d)(i) Net Assets(%) Turnover(%)
------------------------------------------------------------------------------------------------
Putnam VT Growth
Opportunities Fund
December 31, 2003 .96 .17 59.00
December 31, 2002 .96 .03 63.30
December 31, 2001 .85 (.19) 83.13
December 31, 2000*** .80* (.23)* 57.60*
------------------------------------------------------------------------------------------------
Putnam VT Health
Sciences Fund
December 31, 2003 .84 .39 63.66
December 31, 2002 .83 .39 74.33
December 31, 2001 .79 .09 53.20
December 31, 2000 .79 .06 49.10
December 31, 1999 .83 .14 82.45
------------------------------------------------------------------------------------------------
Putnam VT High
Yield Fund
December 31, 2003 .78 8.86 75.01
December 31, 2002 .78 10.55 68.41
December 31, 2001 .76 10.99 81.97
December 31, 2000 .74 11.46 69.05
December 31, 1999 .72 10.18 52.96
------------------------------------------------------------------------------------------------
Putnam VT Income Fund
December 31, 2003 .68 3.61 287.19
December 31, 2002 .68 5.10 399.61(f)
December 31, 2001 .68 5.60 250.79(f)
December 31, 2000 .67 6.94 238.00
December 31, 1999 .67 6.07 220.90
------------------------------------------------------------------------------------------------
Putnam VT
International
Equity Fund
December 31, 2003 .94 1.50 71.14
December 31, 2002 .99 1.17 53.20(g)
December 31, 2001 .94 .93 69.81
December 31, 2000 .94 1.62 78.84
December 31, 1999 1.02 .51 107.38
------------------------------------------------------------------------------------------------
Putnam VT
International
Growth and Income
Fund
December 31, 2003 1.02 1.70 71.71
December 31, 2002 1.00 1.34 99.21
December 31, 2001 .98 1.26 154.29
December 31, 2000 .97 1.15 82.02
December 31, 1999 .98 1.50 92.27
------------------------------------------------------------------------------------------------
Putnam VT
International New
Opportunities Fund
December 31, 2003 1.26 1.00 135.90
December 31, 2002 1.27 .82 136.66
December 31, 2001 1.24 .35 198.97
December 31, 2000 1.21 (.57) 189.71
December 31, 1999 1.41 (.36) 196.53
------------------------------------------------------------------------------------------------
Putnam VT
Investors Fund
December 31, 2003 .75 .71 73.32
December 31, 2002 .72 .56 122.88
December 31, 2001 .66 .23 98.05
December 31, 2000 .65 .08 76.32
December 31, 1999 .71 .05 65.59
------------------------------------------------------------------------------------------------
Putnam VT Mid
Cap Value Fund
December 31, 2003***** .74(b)* .60(b)* 117.37*
------------------------------------------------------------------------------------------------
|
PUTNAM VARIABLE TRUST
Financial Highlights
CLASS IA
---------------------------------------------------------------------------------------------------------
Investment Operations:
Net
Net Realized and
Asset Unrealized
Value, Net Gain (Loss) Total from
Beginning Investment on Investment
Period ended of Period Income (Loss) Investments Operations
---------------------------------------------------------------------------------------------------------
Putnam VT Money
Market Fund
December 31, 2003 $1.00 $.0076 $--(h) $.0076
December 31, 2002 1.00 .0145 --(h) .0145
December 31, 2001 1.00 .0392 -- .0392
December 31, 2000 1.00 .0588 -- .0588
December 31, 1999 1.00 .0476 -- .0476
---------------------------------------------------------------------------------------------------------
Putnam VT New
Opportunities Fund
December 31, 2003 $11.62 $(.02)(a) $3.83 $3.81
December 31, 2002 16.67 (.03)(a) (5.02) (5.05)
December 31, 2001 29.89 (.04)(a) (8.76) (8.80)
December 31, 2000 43.54 (.13)(a) (10.03) (10.16)
December 31, 1999 26.06 (.08)(a) 17.93 17.85
---------------------------------------------------------------------------------------------------------
Putnam VT New
Value Fund
December 31, 2003 $10.98 $.15(a) $3.39 $3.54
December 31, 2002 13.47 .16(a) (2.14) (1.98)
December 31, 2001 13.52 .18(a) .28 .46
December 31, 2000 11.86 .21(a) 2.27 2.48
December 31, 1999 12.03 .18(a) (.14) .04
---------------------------------------------------------------------------------------------------------
Putnam VT OTC &
Emerging Growth Fund
December 31, 2003 $4.09 $(.03)(a) $1.50 $1.47
December 31, 2002 6.02 (.03)(a) (1.90) (1.93)
December 31, 2001 11.06 (.05)(a) (4.99) (5.04)
December 31, 2000 22.79 (.08)(a) (11.42) (11.50)
December 31, 1999 10.09 (.08)(a)(b) 12.84 12.76
---------------------------------------------------------------------------------------------------------
Putnam VT Research Fund
December 31, 2003 $8.51 $.07(a) $2.10 $2.17
December 31, 2002 10.99 .06(a) (2.47) (2.41)
December 31, 2001 14.32 .08(a) (2.73) (2.65)
December 31, 2000 14.69 .07(a) (.34) (.27)
December 31, 1999 11.93 .05(a)(b) 3.20 3.25
---------------------------------------------------------------------------------------------------------
Putnam VT Small
Cap Value Fund
December 31, 2003 $12.23 $.11(a) $5.97 $6.08
December 31, 2002 15.09 .08(a) (2.76) (2.68)
December 31, 2001 12.81 .08(a) 2.27 2.35
December 31, 2000 10.31 .07(a) 2.47 2.54
December 31, 1999** 10.00 (.02)(a) .37 .35
---------------------------------------------------------------------------------------------------------
Putnam VT Utilities
Growth and Income Fund
December 31, 2003 $9.57 $.28(a) $1.99 $2.27
December 31, 2002 12.97 .35(a) (3.35) (3.00)
December 31, 2001 18.13 .36(a) (4.17) (3.81)
December 31, 2000 16.97 .49(a) 2.25 2.74
December 31, 1999 18.19 .52(a) (.72) (.20)
---------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund
December 31, 2003 $7.93 $(.02)(a) $2.67 $2.65
December 31, 2002 11.40 (.03)(a) (3.44) (3.47)
December 31, 2001 19.65 (.02)(a) (6.47) (6.49)
December 31, 2000 20.68 (.05)(a) (.73) (.78)
December 31, 1999 14.72 (.05)(a) 7.64 7.59
---------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund
December 31, 2003 $21.00 $.10(a) $5.15 $5.25
December 31, 2002 28.72 .12(a) (7.63) (7.51)
December 31, 2001 48.82 .20(a) (10.65) (10.45)
December 31, 2000 66.25 .04(a) (8.96) (8.92)
December 31, 1999 45.85 .03(a) 24.59 24.62
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (continued)
CLASS IA (continued)
------------------------------------------------------------------------------------------------------
Less Distributions:
From
From Net
Net Realized From
Investment Gain on Return
Period ended Income Investments of Capital
------------------------------------------------------------------------------------------------------
Putnam VT Money
Market Fund
December 31, 2003 $(.0076) $-- $--
December 31, 2002 (.0145) -- --
December 31, 2001 (.0392) -- --
December 31, 2000 (.0588) -- --
December 31, 1999 (.0476) -- --
------------------------------------------------------------------------------------------------------
Putnam VT New
Opportunities Fund
December 31, 2003 $-- $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- (4.42) --(e)
December 31, 2000 -- (3.49) --
December 31, 1999 -- (.37) --
------------------------------------------------------------------------------------------------------
Putnam VT New Value Fund
December 31, 2003 $(.18) $-- $--
December 31, 2002 (.13) (.38) --
December 31, 2001 (.14) (.37) --
December 31, 2000 (.18) (.64) --
December 31, 1999 --(e) (.21) --
------------------------------------------------------------------------------------------------------
Putnam VT OTC &
Emerging Growth Fund
December 31, 2003 $-- $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- -- --
December 31, 2000 -- (.23) --(e)
December 31, 1999 -- (.06) --
------------------------------------------------------------------------------------------------------
Putnam VT
Research Fund
December 31, 2003 $(.05) $-- $--
December 31, 2002 (.07) -- --
December 31, 2001 (.05) (.63) --
December 31, 2000 -- (.10) --
December 31, 1999 (.03) (.46) --
------------------------------------------------------------------------------------------------------
Putnam VT Small
Cap Value Fund
December 31, 2003 $(.08) $-- $--
December 31, 2002 (.04) (.14) --
December 31, 2001 --(e) (.07) --
December 31, 2000 (.04) -- --
December 31, 1999** -- (.03) (.01)
------------------------------------------------------------------------------------------------------
Putnam VT Utilities
Growth and Income Fund
December 31, 2003 $(.41) $-- $--
December 31, 2002 (.40) -- --
December 31, 2001 (.50) (.85) --
December 31, 2000 (.57) (1.01) --
December 31, 1999 (.50) (.52) --
------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund
December 31, 2003 $-- $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- (1.76) --(e)
December 31, 2000 -- (.25) --
December 31, 1999 -- (1.63) --
------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund
December 31, 2003 $(.15) $-- $--
December 31, 2002 (.21) -- --
December 31, 2001 (.05) (9.60) --
December 31, 2000 (.02) (8.49) --
December 31, 1999 (.05) (4.17) --
------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (continued)
CLASS IA (continued)
---------------------------------------------------------------------------------------------------------
Total
Investment
Return at Net Assets,
Total Net Asset Value, Net Asset End of Period
Period ended Distributions End of Period Value(%)(c)(i) (in thousands)
---------------------------------------------------------------------------------------------------------
Putnam VT Money
Market Fund
December 31, 2003 $(.0076) $1.00 .76 $457,943
December 31, 2002 (.0145) 1.00 1.46 794,448
December 31, 2001 (.0392) 1.00 3.99 893,647
December 31, 2000 (.0588) 1.00 6.03 637,405
December 31, 1999 (.0476) 1.00 4.86 823,013
---------------------------------------------------------------------------------------------------------
Putnam VT New
Opportunities Fund
December 31, 2003 $-- $15.43 32.79 $1,826,123
December 31, 2002 -- 11.62 (30.29) 1,664,685
December 31, 2001 (4.42) 16.67 (29.99) 3,058,087
December 31, 2000 (3.49) 29.89 (26.09) 4,992,696
December 31, 1999 (.37) 43.54 69.35 6,432,227
---------------------------------------------------------------------------------------------------------
Putnam VT New
Value Fund
December 31, 2003 $(.18) $14.34 32.86 $416,273
December 31, 2002 (.51) 10.98 (15.44) 366,623
December 31, 2001 (.51) 13.47 3.53 455,975
December 31, 2000 (.82) 13.52 22.59 302,930
December 31, 1999 (.21) 11.86 .27 249,092
---------------------------------------------------------------------------------------------------------
Putnam VT OTC &
Emerging Growth Fund
December 31, 2003 $-- $5.56 35.94 $73,227
December 31, 2002 -- 4.09 (32.06) 61,535
December 31, 2001 -- 6.02 (45.57) 107,050
December 31, 2000 (.23) 11.06 (51.03) 217,797
December 31, 1999 (.06) 22.79 126.52 207,003
---------------------------------------------------------------------------------------------------------
Putnam VT Research Fund
December 31, 2003 $(.05) $10.63 25.69 $128,360
December 31, 2002 (.07) 8.51 (22.06) 127,084
December 31, 2001 (.68) 10.99 (18.62) 197,443
December 31, 2000 (.10) 14.32 (1.84) 222,579
December 31, 1999 (.49) 14.69 27.58 134,115
---------------------------------------------------------------------------------------------------------
Putnam VT Small
Cap Value Fund
December 31, 2003 $(.08) $18.23 50.06 $290,933
December 31, 2002 (.18) 12.23 (18.06) 215,964
December 31, 2001 (.07) 15.09 18.42 231,329
December 31, 2000 (.04) 12.81 24.62 59,483
December 31, 1999** (.04) 10.31 3.47* 12,298
---------------------------------------------------------------------------------------------------------
Putnam VT Utilities
Growth and Income Fund
December 31, 2003 $(.41) $11.43 25.00 $352,531
December 31, 2002 (.40) 9.57 (23.83) 355,128
December 31, 2001 (1.35) 12.97 (22.11) 631,897
December 31, 2000 (1.58) 18.13 17.61 958,078
December 31, 1999 (1.02) 16.97 (.66) 945,581
---------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund
December 31, 2003 $-- $10.58 33.42 $263,268
December 31, 2002 -- 7.93 (30.44) 234,249
December 31, 2001 (1.76) 11.40 (33.34) 443,879
December 31, 2000 (.25) 19.65 (3.98) 767,550
December 31, 1999 (1.63) 20.68 52.90 542,491
---------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund
December 31, 2003 $(.15) $26.10 25.16 $2,799,625
December 31, 2002 (.21) 21.00 (26.34) 2,740,121
December 31, 2001 (9.65) 28.72 (22.24) 4,784,868
December 31, 2000 (8.51) 48.82 (16.41) 7,326,157
December 31, 1999 (4.22) 66.25 58.22 9,130,197
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (continued)
CLASS IA (continued)
---------------------------------------------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Expenses Income (Loss)
to Average Net to Average Portfolio
Period ended Assets(%)(d)(i) Net Assets(%) Turnover(%)
---------------------------------------------------------------------------------------------------------
Putnam VT Money
Market Fund
December 31, 2003 .49 .77 --
December 31, 2002 .48 1.45 --
December 31, 2001 .45 3.75 --
December 31, 2000 .50 5.87 --
December 31, 1999 .49 4.77 --
---------------------------------------------------------------------------------------------------------
Putnam VT New
Opportunities Fund
December 31, 2003 .67 (.11) 44.22
December 31, 2002 .63 (.19) 68.82
December 31, 2001 .59 (.21) 72.16
December 31, 2000 .57 (.31) 53.64
December 31, 1999 .59 (.28) 71.14
---------------------------------------------------------------------------------------------------------
Putnam VT New
Value Fund
December 31, 2003 .79 1.24 59.50
December 31, 2002 .78 1.37 60.33
December 31, 2001 .79 1.32 74.80
December 31, 2000 .79 1.75 83.62
December 31, 1999 .80 1.40 98.21
---------------------------------------------------------------------------------------------------------
Putnam VT OTC &
Emerging Growth Fund
December 31, 2003 .89 (.62) 71.72
December 31, 2002 .90 (.72) 68.02
December 31, 2001 .85 (.63) 116.66
December 31, 2000 .81 (.42) 88.63
December 31, 1999 .90(b) (.55)(b) 127.98
---------------------------------------------------------------------------------------------------------
Putnam VT
Research Fund
December 31, 2003 .79 .82 116.88
December 31, 2002 .78 .64 154.60
December 31, 2001 .74 .67 146.42
December 31, 2000 .78 .47 161.52
December 31, 1999 .85(b) .34(b) 169.16
---------------------------------------------------------------------------------------------------------
Putnam VT Small
Cap Value Fund
December 31, 2003 .91 .77 36.14
December 31, 2002 .92 .57 51.54
December 31, 2001 .94 .56 36.65
December 31, 2000 1.10 .59 34.05
December 31, 1999** 1.29* (.24)* 48.24*
---------------------------------------------------------------------------------------------------------
Putnam VT Utilities
Growth and Income Fund
December 31, 2003 .83 2.84 38.45
December 31, 2002 .79 3.23 42.68
December 31, 2001 .73 2.45 93.13
December 31, 2000 .72 2.94 28.88
December 31, 1999 .71 3.02 26.16
---------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund
December 31, 2003 .76 (.21) 90.84
December 31, 2002 .74 (.28) 78.14
December 31, 2001 .67 (.18) 112.81
December 31, 2000 .67 (.22) 104.60
December 31, 1999 .75 (.29) 133.32
---------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund
December 31, 2003 .62 .45 47.37
December 31, 2002 .60 .51 90.52
December 31, 2001 .57 .61 105.03
December 31, 2000 .56 .07 92.54
December 31, 1999 .57 .05 85.13
---------------------------------------------------------------------------------------------------------
|
PUTNAM VARIABLE TRUST
Financial Highlights
CLASS IB
---------------------------------------------------------------------------------------------------------
Investment Operations:
Net
Net Realized and
Asset Unrealized
Value, Net Gain (Loss) Total from
Beginning Investment on Investment
Period ended of Period Income (Loss) Investments Operations
---------------------------------------------------------------------------------------------------------
Putnam VT American
Government Income Fund
December 31, 2003 $12.30 $.25(a) $(.07) $.18
December 31, 2002 11.59 .37(a) .62 .99
December 31, 2001 10.87 .47(a) .25 .72
December 31, 2000*** 10.00 .54(a)(b) .66 1.20
---------------------------------------------------------------------------------------------------------
Putnam VT Capital
Appreciation Fund
December 31, 2003 $6.05 $(.01)(a) $1.51 $1.50
December 31, 2002 7.80 --(a)(e) (1.74) (1.74)
December 31, 2001 9.06 (.01)(a) (1.25) (1.26)
December 31, 2000**** 10.00 (.05)(a) (.89) (.94)
---------------------------------------------------------------------------------------------------------
Putnam VT Capital
Opportunities Fund
December 31, 2003***** $10.00 $(.03)(a)(b) $3.03 $3.00
---------------------------------------------------------------------------------------------------------
Putnam VT Discovery
Growth Fund
December 31, 2003 $3.50 $(.03)(a) $1.15 $1.12
December 31, 2002 4.97 (.05)(a) (1.42) (1.47)
December 31, 2001 7.18 (.07)(a) (2.14) (2.21)
December 31, 2000**** 10.00 (.07)(a) (2.75) (2.82)
---------------------------------------------------------------------------------------------------------
Putnam VT
Diversified
Income Fund
December 31, 2003 $8.49 $.60(a) $.96 $1.56
December 31, 2002 8.75 .68(a) (.18) .50
December 31, 2001 9.11 .76(a) (.45) .31
December 31, 2000 9.90 .78(a) (.78) --
December 31, 1999 10.47 .78(a) (.62) .16
---------------------------------------------------------------------------------------------------------
Putnam VT Equity
Income Fund
December 31, 2003***** $10.00 $.09(a)(b) $2.05 $2.14
---------------------------------------------------------------------------------------------------------
Putnam VT The George
Putnam Fund of Boston
December 31, 2003 $9.54 $.20(a) $1.38 $1.58
December 31, 2002 10.69 .26(a) (1.17) (.91)
December 31, 2001 10.94 .29(a) (.25) .04
December 31, 2000 9.98 .18(a) .78 .96
December 31, 1999 10.28 .30(a) (.34) (.04)
---------------------------------------------------------------------------------------------------------
Putnam VT Global
Asset Allocation Fund
December 31, 2003 $11.51 $.20(a) $2.21 $2.41
December 31, 2002 13.37 .23(a) (1.86) (1.63)
December 31, 2001 16.67 .32(a) (1.77) (1.45)
December 31, 2000 19.60 .45(a) (1.29) (.84)
December 31, 1999 18.95 .39(a) 1.69 2.08
---------------------------------------------------------------------------------------------------------
Putnam VT Global
Equity Fund
December 31, 2003 $7.19 $.07(a) $2.01 $2.08
December 31, 2002 9.27 .05(a) (2.12) (2.07)
December 31, 2001 18.02 --(a)(e) (5.14) (5.14)
December 31, 2000 30.41 (.10)(a) (7.34) (7.44)
December 31, 1999 20.28 (.10)(a) 12.08 11.98
---------------------------------------------------------------------------------------------------------
Putnam VT Growth
and Income Fund
December 31, 2003 $18.64 $.32(a) $4.67 $4.99
December 31, 2002 23.44 .31(a) (4.67) (4.36)
December 31, 2001 25.76 .29(a) (1.93) (1.64)
December 31, 2000 26.75 .36(a) 1.48 1.84
December 31, 1999 28.75 .41(a) .04 .45
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (continued)
CLASS IB (continued)
------------------------------------------------------------------------------------------------------
Less Distributions:
From
From Net From
Net Realized Return
Investment Gain on of
Period ended Income Investments Capital
------------------------------------------------------------------------------------------------------
Putnam VT American
Government Income Fund
December 31, 2003 $(.23) $(.23) $--
December 31, 2002 (.28) -- --
December 31, 2001 -- --(e) --
December 31, 2000*** (.22) (.11) --
------------------------------------------------------------------------------------------------------
Putnam VT Capital
Appreciation Fund
December 31, 2003 $-- $-- $--
December 31, 2002 (.01) -- --(e)
December 31, 2001 -- -- --
December 31, 2000**** -- -- --
------------------------------------------------------------------------------------------------------
Putnam VT Capital
Opportunities Fund
December 31, 2003***** $-- $(.28) $--
------------------------------------------------------------------------------------------------------
Putnam VT Discovery
Growth Fund
December 31, 2003 $-- $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- -- --
December 31, 2000**** -- -- --
------------------------------------------------------------------------------------------------------
Putnam VT Diversified
Income Fund
December 31, 2003 $(.81) $-- $--
December 31, 2002 (.76) -- --
December 31, 2001 (.67) -- --
December 31, 2000 (.79) -- --
December 31, 1999 (.73) -- --
------------------------------------------------------------------------------------------------------
Putnam VT Equity
Income Fund
December 31, 2003***** $(.04) $(.02) $--
------------------------------------------------------------------------------------------------------
Putnam VT The George
Putnam Fund of Boston
December 31, 2003 $(.24) $-- $--
December 31, 2002 (.24) -- --
December 31, 2001 (.29) -- --
December 31, 2000 -- -- --
December 31, 1999 (.23) (.02) (.01)
------------------------------------------------------------------------------------------------------
Putnam VT Global
Asset Allocation Fund
December 31, 2003 $(.47) $-- $--
December 31, 2002 (.23) -- --
December 31, 2001 (.16) (1.69) --
December 31, 2000 (.33) (1.76) --
December 31, 1999 (.37) (1.06) --
------------------------------------------------------------------------------------------------------
Putnam VT Global
Equity Fund
December 31, 2003 $(.08) $-- $--
December 31, 2002 (.01) -- --
December 31, 2001 -- (3.61) --
December 31, 2000 (.18) (4.77) --
December 31, 1999 (.08) (1.77) --
------------------------------------------------------------------------------------------------------
Putnam VT Growth
and Income Fund
December 31, 2003 $(.37) $-- $--
December 31, 2002 (.32) (.12) --
December 31, 2001 (.39) (.29) --
December 31, 2000 (.49) (2.34) --
December 31, 1999 (.41) (2.04) --
------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (Continued)
CLASS IB (Continued)
---------------------------------------------------------------------------------------------------------
Total
Investment
Return at Net Assets,
Total Net Asset Value, Net Asset End of Period
Period ended Distributions End of Period Value(%)(c)(i) (in thousands)
---------------------------------------------------------------------------------------------------------
Putnam VT American
Government Income Fund
December 31, 2003 $(.46) $12.02 1.56 $107,751
December 31, 2002 (.28) 12.30 8.77 164,573
December 31, 2001 --(e) 11.59 6.64 73,366
December 31, 2000*** (.33) 10.87 11.98* 7,690
---------------------------------------------------------------------------------------------------------
Putnam VT Capital
Appreciation Fund
December 31, 2003 $-- $7.55 24.79 $20,315
December 31, 2002 (.01) 6.05 (22.35) 14,021
December 31, 2001 -- 7.80 (13.91) 9,784
December 31, 2000**** -- 9.06 (9.40)* 989
---------------------------------------------------------------------------------------------------------
Putnam VT Capital
Opportunities Fund
December 31, 2003***** $(.28) $12.72 30.05* $4,737
---------------------------------------------------------------------------------------------------------
Putnam VT Discovery
Growth Fund
December 31, 2003 $-- $4.62 32.00 $35,091
December 31, 2002 -- 3.50 (29.58) 24,082
December 31, 2001 -- 4.97 (30.78) 13,245
December 31, 2000**** -- 7.18 (28.20)* 1,921
---------------------------------------------------------------------------------------------------------
Putnam VT
Diversified
Income Fund
December 31, 2003 $(.81) $9.24 19.91 $141,644
December 31, 2002 (.76) 8.49 6.03 102,982
December 31, 2001 (.67) 8.75 3.51 92,828
December 31, 2000 (.79) 9.11 (0.07) 68,832
December 31, 1999 (.73) 9.90 1.65 23,182
---------------------------------------------------------------------------------------------------------
Putnam VT Equity
Income Fund
December 31, 2003***** $(.06) $12.08 21.39* $22,804
---------------------------------------------------------------------------------------------------------
Putnam VT The George
Putnam Fund of Boston
December 31, 2003 $(.24) $10.88 17.04 $254,106
December 31, 2002 (.24) 9.54 (8.75) 178,710
December 31, 2001 (.29) 10.69 0.46 156,821
December 31, 2000 -- 10.94 9.62 94,236
December 31, 1999 (.26) 9.98 (.41) 38,566
---------------------------------------------------------------------------------------------------------
Putnam VT Global
Asset Allocation Fund
December 31, 2003 $(.47) $13.45 21.90 $32,588
December 31, 2002 (.23) 11.51 (12.46) 21,758
December 31, 2001 (1.85) 13.37 (8.58) 24,735
December 31, 2000 (2.09) 16.67 (4.87) 18,984
December 31, 1999 (1.43) 19.60 11.76 6,617
---------------------------------------------------------------------------------------------------------
Putnam VT Global
Equity Fund
December 31, 2003 $(.08) $9.19 29.23 $74,972
December 31, 2002 (.01) 7.19 (22.39) 65,834
December 31, 2001 (3.61) 9.27 (29.76) 92,817
December 31, 2000 (4.95) 18.02 (29.75) 103,129
December 31, 1999 (1.85) 30.41 64.56 28,909
---------------------------------------------------------------------------------------------------------
Putnam VT Growth
and Income Fund
December 31, 2003 $(.37) $23.26 27.38 $828,558
December 31, 2002 (.44) 18.64 (18.99) 612,170
December 31, 2001 (.68) 23.44 (6.39) 709,842
December 31, 2000 (2.83) 25.76 7.92 513,216
December 31, 1999 (2.45) 26.75 1.47 162,112
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (Continued)
CLASS IB (Continued)
--------------------------------------------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Expenses Income (Loss)
to Average Net to Average Portfolio
Period ended Assets(%)(d)(i) Net Assets(%) Turnover(%)
--------------------------------------------------------------------------------------------------------
Putnam VT American
Government Income Fund
December 31, 2003 .99 2.09 553.08
December 31, 2002 .99 3.13 517.44(f)
December 31, 2001 .99 4.12 262.05(f)
December 31, 2000*** .95(b)* 5.21(b)* 336.72*
--------------------------------------------------------------------------------------------------------
Putnam VT Capital
Appreciation Fund
December 31, 2003 1.31 (.20) 143.90
December 31, 2002 1.38 .05 166.36
December 31, 2001 1.57 (.13) 101.98
December 31, 2000**** 1.22* (.66)* 89.87*
--------------------------------------------------------------------------------------------------------
Putnam VT Capital
Opportunities Fund
December 31, 2003***** .88(b)* (.18)(b)* 163.05*
--------------------------------------------------------------------------------------------------------
Putnam VT Discovery
Growth Fund
December 31, 2003 1.33 (.83) 81.55
December 31, 2002 1.81 (1.36) 92.27(g)
December 31, 2001 1.84 (1.34) 109.55
December 31, 2000**** .89* (.67)* 28.20*
--------------------------------------------------------------------------------------------------------
Putnam VT Diversified
Income Fund
December 31, 2003 1.07 6.86 104.06
December 31, 2002 1.07 8.20 176.17(f)
December 31, 2001 1.01 8.58 139.13(f)
December 31, 2000 .93 8.45 169.27
December 31, 1999 .93 7.67 117.02
--------------------------------------------------------------------------------------------------------
Putnam VT Equity
Income Fund
December 31, 2003***** .88(b)* .76(b)* 113.49*
--------------------------------------------------------------------------------------------------------
Putnam VT The George
Putnam Fund of Boston
December 31, 2003 .98 2.00 144.47
December 31, 2002 1.00 2.58 128.14(f)
December 31, 2001 .98 2.69 334.64(f)
December 31, 2000 .91 3.27 154.53
December 31, 1999 .98 3.00 173.41
--------------------------------------------------------------------------------------------------------
Putnam VT Global
Asset Allocation Fund
December 31, 2003 1.20 1.63 155.21
December 31, 2002 1.16 1.87 105.04
December 31, 2001 1.06 2.29 187.96(f)
December 31, 2000 .94 2.60 159.03
December 31, 1999 .92 2.15 149.82
--------------------------------------------------------------------------------------------------------
Putnam VT Global
Equity Fund
December 31, 2003 1.17 .95 88.32
December 31, 2002 1.14 .69 173.27
December 31, 2001 1.04 (.02) 186.11
December 31, 2000 .91 (.43) 170.41
December 31, 1999 .88 (.43) 154.88
--------------------------------------------------------------------------------------------------------
Putnam VT Growth
and Income Fund
December 31, 2003 .78 1.60 32.55
December 31, 2002 .77 1.47 36.01
December 31, 2001 .73 1.22 32.75
December 31, 2000 .65 1.47 55.04
December 31, 1999 .65 1.55 53.68
--------------------------------------------------------------------------------------------------------
|
PUTNAM VARIABLE TRUST
Financial Highlights
CLASS IB
---------------------------------------------------------------------------------------------------------
Investment Operations:
Net
Net Realized and
Asset Unrealized
Value, Net Gain (Loss) Total from
Beginning Investment on Investment
Period ended of Period Income (Loss) Investments Operations
---------------------------------------------------------------------------------------------------------
Putnam VT Growth
Opportunities Fund
December 31, 2003 $3.73 $--(a)(e) $.86 $.86
December 31, 2002 5.29 (.01)(a) (1.55) (1.56)
December 31, 2001 7.79 (.02)(a) (2.48) (2.50)
December 31, 2000*** 10.00 (.04)(a) (2.17) (2.21)
---------------------------------------------------------------------------------------------------------
Putnam VT Health
Sciences Fund
December 31, 2003 $9.32 $.02(a) $1.69 $1.71
December 31, 2002 11.70 .01(a) (2.39) (2.38)
December 31, 2001 14.58 (.02)(a) (2.86) (2.88)
December 31, 2000 10.50 (.01)(a) 4.09 4.08
December 31, 1999 10.93 --(a)(e) (.43) (.43)
---------------------------------------------------------------------------------------------------------
Putnam VT High
Yield Fund
December 31, 2003 $7.05 $.62(a) $1.09 $1.71
December 31, 2002 8.06 .74(a) (.78) (.04)
December 31, 2001 8.97 .88(a) (.54) .34
December 31, 2000 11.08 1.13(a) (1.97) (.84)
December 31, 1999 11.70 1.11(a) (.47) .64
---------------------------------------------------------------------------------------------------------
Putnam VT
Income Fund
December 31, 2003 $12.89 $.42(a) $.13 $.55
December 31, 2002 12.60 .60(a) .35 .95
December 31, 2001 12.58 .65(a) .23 .88
December 31, 2000 12.51 .81(a) .11 .92
December 31, 1999 13.73 .76(a) (1.04) (.28)
---------------------------------------------------------------------------------------------------------
Putnam VT
International Equity Fund
December 31, 2003 $10.09 $.13(a) $2.73 $2.86
December 31, 2002 12.36 .10(a) (2.28) (2.18)
December 31, 2001 17.67 .09(a) (3.61) (3.52)
December 31, 2000 21.63 .21(a) (1.97) (1.76)
December 31, 1999 13.51 .05(a) 8.07 8.12
---------------------------------------------------------------------------------------------------------
Putnam VT
International
Growth and Income Fund
December 31, 2003 $8.35 $.13(a) $2.97 $3.10
December 31, 2002 9.73 .09(a) (1.42) (1.33)
December 31, 2001 13.25 .11(a) (2.79) (2.68)
December 31, 2000 15.22 .13(a) .08 .21
December 31, 1999 12.24 .15(a) 2.83 2.98
---------------------------------------------------------------------------------------------------------
Putnam VT
International
New Opportunities Fund
December 31, 2003 $8.37 $.07(a) $2.70 $2.77
December 31, 2002 9.75 .05(a) (1.37) (1.32)
December 31, 2001 13.67 .02(a) (3.94) (3.92)
December 31, 2000 23.28 (.13)(a) (8.44) (8.57)
December 31, 1999 11.48 (.16)(a) 11.96 11.80
---------------------------------------------------------------------------------------------------------
Putnam VT Investors
Fund
December 31, 2003 $7.04 $.03(a) $1.87 $1.90
December 31, 2002 9.26 .03(a) (2.24) (2.21)
December 31, 2001 12.31 .01(a) (3.06) (3.05)
December 31, 2000 15.13 (.01)(a) (2.81) (2.82)
December 31, 1999 11.64 (.01)(a) 3.50 3.49
---------------------------------------------------------------------------------------------------------
Putnam VT Mid
Cap Value Fund
December 31, 2003***** $10.00 $.05(a)(b) $2.83 $2.88
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (Continued)
CLASS IB (Continued)
------------------------------------------------------------------------------------------------------
Less Distributions:
From
From Net From
Net Realized Return
Investment Gain on of
Period ended Income Investments Capital
------------------------------------------------------------------------------------------------------
Putnam VT Growth
Opportunities Fund
December 31, 2003 $-- $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- -- --
December 31, 2000*** -- -- --
------------------------------------------------------------------------------------------------------
Putnam VT Health
Sciences Fund
December 31, 2003 $(.06) $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- -- --
December 31, 2000 -- -- --
December 31, 1999 --(e) -- --
------------------------------------------------------------------------------------------------------
Putnam VT High
Yield Fund
December 31, 2003 $(.82) $-- $--
December 31, 2002 (.97) -- --
December 31, 2001 (1.25) -- --
December 31, 2000 (1.27) -- --
December 31, 1999 (1.26) -- --
------------------------------------------------------------------------------------------------------
Putnam VT Income Fund
December 31, 2003 $(.60) $-- $--
December 31, 2002 (.66) -- --
December 31, 2001 (.86) -- --
December 31, 2000 (.85) -- --
December 31, 1999 (.73) (.21) --
------------------------------------------------------------------------------------------------------
Putnam VT
International
Equity Fund
December 31, 2003 $(.10) $-- $--
December 31, 2002 (.09) -- --
December 31, 2001 (.04) (1.75) --
December 31, 2000 (.41) (1.79) --
December 31, 1999 -- -- --
------------------------------------------------------------------------------------------------------
Putnam VT
International
Growth and Income
Fund
December 31, 2003 $(.14) $-- $--
December 31, 2002 (.05) -- --
December 31, 2001 (.12) (.72) --
December 31, 2000 (.68) (1.50) --
December 31, 1999 -- -- --
------------------------------------------------------------------------------------------------------
Putnam VT
International
New Opportunities
Fund
December 31, 2003 $(.03) $-- $--
December 31, 2002 (.06) -- --
December 31, 2001 -- -- --
December 31, 2000 (.01) (1.03) --(e)
December 31, 1999 --(e) -- --
------------------------------------------------------------------------------------------------------
Putnam VT Investors
Fund
December 31, 2003 $(.03) $-- $--
December 31, 2002 (.01) -- --
December 31, 2001 -- -- --
December 31, 2000 -- -- --
December 31, 1999 -- -- --
------------------------------------------------------------------------------------------------------
Putnam VT Mid
Cap Value Fund
December 31, 2003***** $(.03) $(.07) $--
------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (Continued)
CLASS IB (Continued)
---------------------------------------------------------------------------------------------------------
Total
Investment
Return at Net Assets,
Total Net Asset Value, Net Asset End of Period
Period ended Distributions End of Period Value(%)(c)(i) (in thousands)
---------------------------------------------------------------------------------------------------------
Putnam VT Growth
Opportunities Fund
December 31, 2003 $-- $4.59 23.06 $37,906
December 31, 2002 -- 3.73 (29.49) 31,065
December 31, 2001 -- 5.29 (32.09) 44,521
December 31, 2000*** -- 7.79 (22.10)* 41,072
---------------------------------------------------------------------------------------------------------
Putnam VT Health
Sciences Fund
December 31, 2003 $(.06) $10.97 18.39 $161,036
December 31, 2002 -- 9.32 (20.34) 119,828
December 31, 2001 -- 11.70 (19.75) 128,067
December 31, 2000 -- 14.58 38.86 107,991
December 31, 1999 --(e) 10.50 (3.90) 20,162
---------------------------------------------------------------------------------------------------------
Putnam VT High
Yield Fund
December 31, 2003 $(.82) $7.94 26.54 $159,069
December 31, 2002 (.97) 7.05 (0.85) 79,036
December 31, 2001 (1.25) 8.06 3.78 64,972
December 31, 2000 (1.27) 8.97 (8.51) 38,039
December 31, 1999 (1.26) 11.08 5.81 17,646
---------------------------------------------------------------------------------------------------------
Putnam VT Income
Fund
December 31, 2003 $(.60) $12.84 4.43 $262,067
December 31, 2002 (.66) 12.89 7.89 215,874
December 31, 2001 (.86) 12.60 7.30 144,380
December 31, 2000 (.85) 12.58 7.79 55,669
December 31, 1999 (.94) 12.51 (2.16) 18,116
---------------------------------------------------------------------------------------------------------
Putnam VT
International
Equity Fund
December 31, 2003 $(.10) $12.85 28.65 $510,055
December 31, 2002 (.09) 10.09 (17.75) 308,970
December 31, 2001 (1.79) 12.36 (20.61) 252,647
December 31, 2000 (2.20) 17.67 (9.61) 197,754
December 31, 1999 -- 21.63 60.10 40,448
---------------------------------------------------------------------------------------------------------
Putnam VT
International
Growth and Income
Fund
December 31, 2003 $(.14) $11.31 37.85 $63,651
December 31, 2002 (.05) 8.35 (13.77) 45,744
December 31, 2001 (.84) 9.73 (20.81) 41,771
December 31, 2000 (2.18) 13.25 1.33 36,934
December 31, 1999 -- 15.22 24.35 10,652
---------------------------------------------------------------------------------------------------------
Putnam VT
International
New Opportunities
Fund
December 31, 2003 $(.03) $11.11 33.21 $144,493
December 31, 2002 (.06) 8.37 (13.63) 122,332
December 31, 2001 -- 9.75 (28.68) 159,227
December 31, 2000 (1.04) 13.67 (38.67) 184,660
December 31, 1999 --(e) 23.28 102.80 33,554
---------------------------------------------------------------------------------------------------------
Putnam VT Investors
Fund
December 31, 2003 $(.03) $8.91 27.14 $220,061
December 31, 2002 (.01) 7.04 (23.87) 180,341
December 31, 2001 -- 9.26 (24.78) 261,025
December 31, 2000 -- 12.31 (18.64) 279,598
December 31, 1999 -- 15.13 29.98 101,795
---------------------------------------------------------------------------------------------------------
Putnam VT Mid Cap Value Fund
December 31, 2003***** $(.10) $12.78 28.83* $6,703
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (Continued)
CLASS IB (Continued)
---------------------------------------------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Expenses Income (Loss)
to Average Net to Average Portfolio
Period ended Assets(%)(d)(i) Net Assets(%) Turnover(%)
---------------------------------------------------------------------------------------------------------
Putnam VT Growth
Opportunities Fund
December 31, 2003 1.21 (.08) 59.00
December 31, 2002 1.21 (.21) 63.30
December 31, 2001 1.07 (.39) 83.13
December 31, 2000*** .94* (.39)* 57.60*
---------------------------------------------------------------------------------------------------------
Putnam VT Health
Sciences Fund
December 31, 2003 1.09 .11 63.66
December 31, 2002 1.08 .13 74.33
December 31, 2001 1.01 (.13) 53.20
December 31, 2000 .94 (.10) 49.10
December 31, 1999 .98 (.01) 82.45
---------------------------------------------------------------------------------------------------------
Putnam VT High
Yield Fund
December 31, 2003 1.03 8.44 75.01
December 31, 2002 1.03 10.38 68.41
December 31, 2001 .98 10.71 81.97
December 31, 2000 .89 11.61 69.05
December 31, 1999 .87 10.01 52.96
---------------------------------------------------------------------------------------------------------
Putnam VT Income Fund
December 31, 2003 .93 3.29 287.19
December 31, 2002 .93 4.79 399.61(f)
December 31, 2001 .90 5.26 250.79(f)
December 31, 2000 .82 6.74 238.00
December 31, 1999 .82 6.14 220.90
---------------------------------------------------------------------------------------------------------
Putnam VT
International
Equity Fund
December 31, 2003 1.19 1.15 71.14
December 31, 2002 1.24 .91 53.20(g)
December 31, 2001 1.16 .66 69.81
December 31, 2000 1.09 1.13 78.84
December 31, 1999 1.17 .31 107.38
---------------------------------------------------------------------------------------------------------
Putnam VT
International
Growth and Income
Fund
December 31, 2003 1.27 1.39 71.71
December 31, 2002 1.25 1.03 99.21
December 31, 2001 1.20 1.02 154.29
December 31, 2000 1.12 .97 82.02
December 31, 1999 1.13 1.08 92.27
---------------------------------------------------------------------------------------------------------
Putnam VT
International New
Opportunities Fund
December 31, 2003 1.51 0.74 135.90
December 31, 2002 1.52 .56 136.66
December 31, 2001 1.46 .14 198.97
December 31, 2000 1.36 (.74) 189.71
December 31, 1999 1.56 (.97) 196.53
---------------------------------------------------------------------------------------------------------
Putnam VT Investors
Fund
December 31, 2003 1.00 .46 73.32
December 31, 2002 .97 .32 122.88
December 31, 2001 .88 .02 98.05
December 31, 2000 .80 (.06) 76.32
December 31, 1999 .86 (.11) 65.59
---------------------------------------------------------------------------------------------------------
Putnam VT Mid
Cap Value Fund
December 31, 2003***** .91(b)* .45(b)* 117.37*
---------------------------------------------------------------------------------------------------------
|
PUTNAM VARIABLE TRUST
Financial Highlights
CLASS IB
---------------------------------------------------------------------------------------------------------
Investment Operations:
Net
Net Realized and
Asset Unrealized
Value, Net Gain (Loss) Total from
Beginning Investment on Investment
Period ended of Period Income (Loss) Investments Operations
---------------------------------------------------------------------------------------------------------
Putnam VT Money
Market Fund
December 31, 2003 $1.00 $.0051 $--(h) $.0051
December 31, 2002 1.00 .0120 --(h) .0120
December 31, 2001 1.00 .0370 -- .0370
December 31, 2000 1.00 .0566 -- .0566
December 31, 1999 1.00 .0460 -- .0460
---------------------------------------------------------------------------------------------------------
Putnam VT New
Opportunities Fund
December 31, 2003 $11.50 $(.05)(a) $3.78 $3.73
December 31, 2002 16.55 (.06)(a) (4.99) (5.05)
December 31, 2001 29.77 (.08)(a) (8.72) (8.80)
December 31, 2000 43.44 (.18)(a) (10.00) (10.18)
December 31, 1999 26.04 (.15)(a) 17.92 17.77
---------------------------------------------------------------------------------------------------------
Putnam VT New
Value Fund
December 31, 2003 $10.93 $.12(a) $3.37 $3.49
December 31, 2002 13.42 .14(a) (2.14) (2.00)
December 31, 2001 13.49 .14(a) .29 .43
December 31, 2000 11.85 .20(a) 2.26 2.46
December 31, 1999 12.02 .17(a) (.13) .04
---------------------------------------------------------------------------------------------------------
Putnam VT OTC &
Emerging Growth Fund
December 31, 2003 $4.06 $(.04)(a) $1.49 $1.45
December 31, 2002 5.99 (.05)(a) (1.88) (1.93)
December 31, 2001 11.03 (.06)(a) (4.98) (5.04)
December 31, 2000 22.76 (.10)(a) (11.40) (11.50)
December 31, 1999 10.08 (.10)(a)(b) 12.84 12.74
---------------------------------------------------------------------------------------------------------
Putnam VT
Research Fund
December 31, 2003 $8.47 $.05(a) $2.09 $2.14
December 31, 2002 10.94 .04(a) (2.46) (2.42)
December 31, 2001 14.28 .05(a) (2.72) (2.67)
December 31, 2000 14.67 .05(a) (.34) (.29)
December 31, 1999 11.90 .02(a)(b) 3.23 3.25
---------------------------------------------------------------------------------------------------------
Putnam VT Small
Cap Value Fund
December 31, 2003 $12.16 $.08(a) $5.93 $6.01
December 31, 2002 15.03 .05(a) (2.75) (2.70)
December 31, 2001 12.79 .04(a) 2.27 2.31
December 31, 2000 10.30 .05(a) 2.47 2.52
December 31, 1999** 10.00 (.03)(a) .37 .34
---------------------------------------------------------------------------------------------------------
Putnam VT Utilities
Growth and Income Fund
December 31, 2003 $9.52 $.26(a) $1.99 $2.25
December 31, 2002 12.92 .32(a) (3.35) (3.03)
December 31, 2001 18.09 .33(a) (4.16) (3.83)
December 31, 2000 16.95 .45(a) 2.26 2.71
December 31, 1999 18.19 .47(a) (.69) (.22)
---------------------------------------------------------------------------------------------------------
Putnam VT Vista
Fund
December 31, 2003 $7.87 $(.04)(a) $2.65 $2.61
December 31, 2002 11.34 (.05)(a) (3.42) (3.47)
December 31, 2001 19.60 (.05)(a) (6.45) (6.50)
December 31, 2000 20.65 (.08)(a) (.72) (.80)
December 31, 1999 14.73 (.07)(a) 7.62 7.55
---------------------------------------------------------------------------------------------------------
Putnam VT Voyager
Fund
December 31, 2003 $20.87 $.04(a) $5.14 $5.18
December 31, 2002 28.56 .06(a) (7.60) (7.54)
December 31, 2001 48.64 .13(a) (10.61) (10.48)
December 31, 2000 66.11 .01(a) (8.99) (8.98)
December 31, 1999 45.81 (.10)(a) 24.62 24.52
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (Continued)
CLASS IB (Continued)
----------------------------------------------------------------------------------------------------
Less Distributions:
From
From Net From
Net Realized Return
Investment Gain on of
Period ended Income Investments Capital
----------------------------------------------------------------------------------------------------
Putnam VT Money
Market Fund
December 31, 2003 $(.0051) $-- $--
December 31, 2002 (.0120) -- --
December 31, 2001 (.0370) -- --
December 31, 2000 (.0566) -- --
December 31, 1999 (.0460) -- --
----------------------------------------------------------------------------------------------------
Putnam VT New
Opportunities Fund
December 31, 2003 $-- $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- (4.42) --(e)
December 31, 2000 -- (3.49) --
December 31, 1999 -- (.37) --
----------------------------------------------------------------------------------------------------
Putnam VT New
Value Fund
December 31, 2003 $(.15) $-- $--
December 31, 2002 (.11) (.38) --
December 31, 2001 (.13) (.37) --
December 31, 2000 (.18) (.64) --
December 31, 1999 -- (.21) --
----------------------------------------------------------------------------------------------------
Putnam VT OTC &
Emerging Growth Fund
December 31, 2003 $-- $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- -- --
December 31, 2000 -- (.23) --(e)
December 31, 1999 -- (.06) --
----------------------------------------------------------------------------------------------------
Putnam VT
Research Fund
December 31, 2003 $(.03) $-- $--
December 31, 2002 (.05) -- --
December 31, 2001 (.04) (.63) --
December 31, 2000 -- (.10) --
December 31, 1999 (.02) (.46) --
----------------------------------------------------------------------------------------------------
Putnam VT Small
Cap Value Fund
December 31, 2003 $(.05) $-- $--
December 31, 2002 (.03) (.14) --
December 31, 2001 --(e) (.07) --
December 31, 2000 (.03) -- --
December 31, 1999** -- (.03) (.01)
----------------------------------------------------------------------------------------------------
Putnam VT Utilities
Growth and Income
Fund
December 31, 2003 $(.38) $-- $--
December 31, 2002 (.37) -- --
December 31, 2001 (.49) (.85) --
December 31, 2000 (.56) (1.01) --
December 31, 1999 (.50) (.52) --
----------------------------------------------------------------------------------------------------
Putnam VT Vista
Fund
December 31, 2003 $-- $-- $--
December 31, 2002 -- -- --
December 31, 2001 -- (1.76) --(e)
December 31, 2000 -- (.25) --
December 31, 1999 -- (1.63) --
----------------------------------------------------------------------------------------------------
Putnam VT Voyager
Fund
December 31, 2003 $(.09) $-- $--
December 31, 2002 (.15) -- --
December 31, 2001 -- (9.60) --
December 31, 2000 --(e) (8.49) --
December 31, 1999 (.05) (4.17) --
----------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (Continued)
CLASS IB (Continued)
---------------------------------------------------------------------------------------------------------
Total
Investment
Return at Net Assets,
Total Net Asset Value, Net Asset End of Period
Period ended Distributions End of Period Value(%)(c)(i) (in thousands)
---------------------------------------------------------------------------------------------------------
Putnam VT Money
Market Fund
December 31, 2003 $(.0051) $1.00 .51 $121,504
December 31, 2002 (.0120) 1.00 1.20 154,358
December 31, 2001 (.0370) 1.00 3.76 154,176
December 31, 2000 (.0566) 1.00 5.82 101,820
December 31, 1999 (.0460) 1.00 4.66 41,516
---------------------------------------------------------------------------------------------------------
Putnam VT New
Opportunities Fund
December 31, 2003 $-- $15.23 32.44 $176,316
December 31, 2002 -- 11.50 (30.51) 125,829
December 31, 2001 (4.42) 16.55 (30.14) 200,041
December 31, 2000 (3.49) 29.77 (26.20) 231,779
December 31, 1999 (.37) 43.44 69.10 62,977
---------------------------------------------------------------------------------------------------------
Putnam VT New
Value Fund
December 31, 2003 $(.15) $14.27 32.48 $149,367
December 31, 2002 (.49) 10.93 (15.60) 99,692
December 31, 2001 (.50) 13.42 3.32 88,543
December 31, 2000 (.82) 13.49 22.37 30,806
December 31, 1999 (.21) 11.85 .26 9,541
---------------------------------------------------------------------------------------------------------
Putnam VT OTC &
Emerging Growth Fund
December 31, 2003 $-- $5.51 35.71 $43,220
December 31, 2002 -- 4.06 (32.22) 32,536
December 31, 2001 -- 5.99 (45.69) 55,209
December 31, 2000 (.23) 11.03 (51.09) 74,367
December 31, 1999 (.06) 22.76 126.45 24,432
---------------------------------------------------------------------------------------------------------
Putnam VT Research
Fund
December 31, 2003 $(.03) $10.58 25.32 $125,821
December 31, 2002 (.05) 8.47 (22.20) 101,445
December 31, 2001 (.67) 10.94 (18.83) 119,888
December 31, 2000 (.10) 14.28 (1.98) 88,834
December 31, 1999 (.48) 14.67 27.69 26,210
---------------------------------------------------------------------------------------------------------
Putnam VT Small
Cap Value Fund
December 31, 2003 $(.05) $18.12 49.65 $332,094
December 31, 2002 (.17) 12.16 (18.27) 191,497
December 31, 2001 (.07) 15.03 18.13 130,991
December 31, 2000 (.03) 12.79 24.44 30,586
December 31, 1999** (.04) 10.30 3.37* 6,384
---------------------------------------------------------------------------------------------------------
Putnam VT Utilities
Growth and Income
Fund
December 31, 2003 $(.38) $11.39 24.82 $48,653
December 31, 2002 (.37) 9.52 (24.09) 39,574
December 31, 2001 (1.34) 12.92 (22.28) 59,284
December 31, 2000 (1.57) 18.09 17.45 48,543
December 31, 1999 (1.02) 16.95 (0.79) 11,337
---------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund
December 31, 2003 $-- $10.48 33.16 $240,752
December 31, 2002 -- 7.87 (30.60) 189,445
December 31, 2001 (1.76) 11.34 (33.50) 293,140
December 31, 2000 (.25) 19.60 (4.09) 297,024
December 31, 1999 (1.63) 20.65 52.59 37,506
---------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund
December 31, 2003 $(.09) $25.96 24.91 $509,892
December 31, 2002 (.15) 20.87 (26.53) 362,402
December 31, 2001 (9.60) 28.56 (22.41) 481,526
December 31, 2000 (8.49) 48.64 (16.54) 485,116
December 31, 1999 (4.22) 66.11 58.01 155,889
---------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST
Financial Highlights (Continued)
CLASS IB (Continued)
------------------------------------------------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Expenses Income (Loss)
to Average Net to Average Portfolio
Period ended Assets(%)(d)(i) Net Assets(%) Turnover(%)
------------------------------------------------------------------------------------------------------------
Putnam VT Money
Market Fund
December 31, 2003 .74 .51 --
December 31, 2002 .73 1.19 --
December 31, 2001 .67 3.51 --
December 31, 2000 .65 5.81 --
December 31, 1999 .64 4.61 --
------------------------------------------------------------------------------------------------------------
Putnam VT New
Opportunities Fund
December 31, 2003 .92 (.36) 44.22
December 31, 2002 .88 (.44) 68.82
December 31, 2001 .81 (.43) 72.16
December 31, 2000 .72 (.45) 53.64
December 31, 1999 .74 (.47) 71.14
------------------------------------------------------------------------------------------------------------
Putnam VT New
Value Fund
December 31, 2003 1.04 .99 59.50
December 31, 2002 1.03 1.16 60.33
December 31, 2001 1.01 1.10 74.80
December 31, 2000 .94 1.65 83.62
December 31, 1999 .95 1.43 98.21
------------------------------------------------------------------------------------------------------------
Putnam VT OTC &
Emerging Growth Fund
December 31, 2003 1.14 (.87) 71.72
December 31, 2002 1.15 (.97) 68.02
December 31, 2001 1.07 (.86) 116.66
December 31, 2000 .96 (.59) 88.63
December 31, 1999 1.05(b) (.68)(b) 127.98
------------------------------------------------------------------------------------------------------------
Putnam VT
Research Fund
December 31, 2003 1.04 .56 116.88
December 31, 2002 1.03 .41 154.60
December 31, 2001 .96 .46 146.42
December 31, 2000 .93 .35 161.52
December 31, 1999 1.00(b) .13(b) 169.16
------------------------------------------------------------------------------------------------------------
Putnam VT Small
Cap Value Fund
December 31, 2003 1.16 .53 36.14
December 31, 2002 1.17 .36 51.54
December 31, 2001 1.16 .33 36.65
December 31, 2000 1.25 .44 34.05
December 31, 1999** 1.39* (.31)* 48.24*
------------------------------------------------------------------------------------------------------------
Putnam VT Utilities
Growth and Income Fund
December 31, 2003 1.08 2.57 38.45
December 31, 2002 1.04 2.99 42.68
December 31, 2001 .95 2.23 93.13
December 31, 2000 .87 2.68 28.88
December 31, 1999 .86 2.77 26.16
------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund
December 31, 2003 1.01 (.46) 90.84
December 31, 2002 .99 (.53) 78.14
December 31, 2001 .89 (.39) 112.81
December 31, 2000 .82 (.36) 104.60
December 31, 1999 .90 (.42) 133.32
------------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund
December 31, 2003 .87 .19 47.37
December 31, 2002 .85 .26 90.52
December 31, 2001 .79 .39 105.03
December 31, 2000 .71 .02 92.54
December 31, 1999 .72 (.21) 85.13
------------------------------------------------------------------------------------------------------------
|
PUTNAM VARIABLE TRUST
Notes to Financial Highlights
* Not annualized.
** For the period April 30, 1999 (commencement of operations) to December 31, 1999.
*** For the period February 1, 2000 (commencement of operations) to December 31, 2000.
**** For the period September 29, 2000 (commencement of operations) to December 31, 2000.
***** For the period May 1, 2003 (commencement of operations) to December 31, 2003.
(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, the expenses of the following funds reflect a reduction of the following amounts based on average net assets.
12/31/03 12/31/00 12/31/99
-------- -------- --------
Putnam VT American Government Income Fund Class IA 0.19%
Putnam VT American Government Income Fund Class IB 0.19%
Putnam VT Capital Opportunities Fund Class IA 0.61%
Putnam VT Capital Opportunities Fund Class IB 0.61%
Putnam VT Equity Income Fund Class IA 0.18%
Putnam VT Equity Income Fund Class IB 0.18%
Putnam VT Mid Cap Value Class IA 0.54%
Putnam VT Mid Cap Value Class IB 0.54%
Putnam VT OTC & Emerging Growth Fund Class IA 0.53%
Putnam VT OTC & Emerging Growth Fund Class IB 0.53%
Putnam VT Research Fund Class IA 0.54%
Putnam VT Research Fund Class IB 0.54%
|
(c) Total return assumes dividend reinvestment.
(d) Includes amounts paid through expense offset arrangements and for certain funds, brokerage service arrangements (Note 2).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes certain treasury note transactions executed in connection with a short-term trading strategy.
(g) Portfolio turnover excludes the impact of assets received from the acquired fund (Note 5).
(h) Amount represents less than $0.0001 per share.
(i) The charges and expenses at the insurance company separate account level are not reflected.
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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.putnaminvestments.com
File No. 811--5346 213125 4/04
Putnam Variable Trust
Class IA and IB Shares
Putnam VT American Government Income Fund
Putnam VT Capital Appreciation Fund
Putnam VT Capital Opportunities Fund
Putnam VT Discovery Growth Fund
Putnam VT Diversified Income Fund
Putnam VT Equity Income Fund
Putnam VT The George Putnam Fund of Boston
Putnam VT Global Asset Allocation Fund
Putnam VT Global Equity 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 Equity Fund
Putnam VT International Growth and Income Fund
Putnam VT International New Opportunities Fund
Putnam VT Investors Fund
Putnam VT Mid Cap Value 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, 2004
This SAI is not a 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 dated April 30, 2004, as revised from time to time, 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.
502156
Table of Contents Part I TRUST ORGANIZATION AND CLASSIFICATION............................. I-3 INVESTMENT RESTRICTIONS........................................... I-4 CHARGES AND EXPENSES.............................................. I-6 AMORTIZED COST VALUATION AND DAILY DIVIDEND...................... I-36 INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS.................... I-36 Part II MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS........ II-1 TAXES........................................................... II-24 MANAGEMENT...................................................... II-28 DETERMINATION OF NET ASSET VALUE................................ II-39 DISTRIBUTION PLAN............................................... II-41 SUSPENSION OF REDEMPTIONS....................................... II-41 SHAREHOLDER LIABILITY........................................... II-42 PROXY VOTING GUIDELINES AND PROCEDURES.......................... II-42 SECURITIES RATINGS.............................................. II-42 DEFINITIONS..................................................... II-47 APPENDIX A...................................................... II-48 SAI |
PART I
TRUST ORGANIZATION AND CLASSIFICATION
Putnam Variable Trust (the "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 October 1, 2002, Putnam VT Global Equity Fund was known as Putnam VT Global Growth Fund. Prior to April 30, 2003, Putnam VT Discovery Growth Fund was known as Putnam VT Voyager Fund II and Putnam VT International Equity Fund was known as Putnam VT International Growth 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-eight 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 Investment Company Act of 1940, 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 VT American Government Income Fund, Putnam VT Capital Appreciation Fund, Putnam VT Capital Opportunities Fund, Putnam VT Discovery Growth Fund, Putnam VT Equity Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Global Equity Fund, Putnam VT Growth Opportunities Fund, Putnam VT Health Sciences Fund, Putnam VT Investors Fund, Putnam VT Mid Cap Value Fund, Putnam VT OTC & Emerging Growth Fund, Putnam VT Research 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 VT American Government Income Fund, Putnam VT Capital Appreciation Fund, Putnam VT Capital Opportunities Fund, Putnam VT Discovery Growth Fund, Putnam VT Equity Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Global Equity Fund, Putnam VT Growth Opportunities Fund, Putnam VT Health Sciences Fund, Putnam VT Investors Fund, Putnam VT Mid Cap Value 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 Capital Opportunities Fund, Putnam VT Equity Income Fund, Putnam VT Mid Cap Value Fund and 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 Capital Opportunities Fund, Putnam VT Equity Income Fund, Putnam VT Mid Cap Value Fund and 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 VT American Government Income Fund, Putnam VT Capital Appreciation Fund, Putnam VT Capital Opportunities Fund, Putnam VT Discovery Growth Fund, Putnam VT Equity Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Global Equity Fund, Putnam VT Growth Opportunities Fund, Putnam VT Health Sciences Fund, Putnam VT Investors Fund, Putnam VT Mid Cap Value 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 VT American Government Income Fund, Putnam VT Capital Appreciation Fund, Putnam VT Capital Opportunities Fund, Putnam VT Discovery Growth Fund, Putnam VT Equity Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Global Equity Fund, Putnam VT Growth Opportunities Fund, Putnam VT Health Sciences Fund, Putnam VT Investors Fund, Putnam VT Mid Cap Value 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 (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.
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 March 17, 2003, each fund pays a quarterly fee (in the case of Putnam VT Capital Appreciation Fund, Putnam VT Capital Opportunities Fund, Putnam VT Discovery Growth Fund, Putnam VT Equity Income Fund and Putnam VT Mid Cap Value Fund, each fund pays a monthly fee) to Putnam Management based on the average net assets of the fund, as determined at the close of each business day during the period, at the annual rate of:
Putnam VT International New Opportunities Fund:
(a) 1.00% of the first $500 million of average net assets;
(b) 0.90% of the next $500 million;
(c) 0.85% of the next $500 million;
(d) 0.80% of the next $5 billion;
(e) 0.775% of the next $5 billion;
(f) 0.755% of the next $5 billion;
(g) 0.74% of the next $5 billion; and
(h) 0.73% of any excess thereafter.
Putnam VT Global Equity Fund, Putnam VT International Equity Fund, Putnam VT International Growth and Income Fund, and Putnam VT Small Cap Value Fund:
(a) 0.80% of the first $500 million of average net assets;
(b) 0.70% of the next $500 million;
(c) 0.65% of the next $500 million;
(d) 0.60% of the next $5 billion;
(e) 0.575% of the next $5 billion;
(f) 0.555% of the next $5 billion;
(g) 0.54% of the next $5 billion; and
(h) 0.53% of any excess thereafter.
Putnam VT Discovery Growth Fund:
(a) 0.70% of the first $500 million of average net assets;
(b) 0.60% of the next $500 million;
(c) 0.55% of the next $500 million;
(d) 0.50% of the next $5 billion;
(e) 0.475% of the next $5 billion;
(f) 0.455% of the next $5 billion;
(g) 0.44% of the next $5 billion;
(h) 0.43% of the next $5 billion;
(i) 0.42% of the next $5 billion;
(j) 0.41% of the next $5 billion;
(k) 0.40% of the next $5 billion;
(l) 0.39% of the next $5 billion;
(m) 0.38% of the next $8.5 billion; and
(n) 0.37% of any excess thereafter.
Putnam VT Growth Opportunities Fund:
(a) 0.70% of the first $500 million of average net assets;
(b) 0.60% of the next $500 million;
(c) 0.55% of the next $500 million;
(d) 0.50% of the next $5 billion;
(e) 0.475% of the next $5 billion;
(f) 0.455% of the next $5 billion;
(g) 0.44% of the next $5 billion;
(h) 0.43% of the next $5 billion; and
(i) 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 Mid Cap Value Fund, Putnam VT New Opportunities Fund, Putnam VT New Value Fund, Putnam VT OTC & Emerging Growth Fund, Putnam VT Utilities Growth and Income Fund and Putnam VT Voyager Fund:
(a) 0.70% of the first $500 million of average net assets;
(b) 0.60% of the next $500 million;
(c) 0.55% of the next $500 million;
(d) 0.50% of the next $5 billion;
(e) 0.475% of the next $5 billion;
(f) 0.455% of the next $5 billion;
(g) 0.44% of the next $5 billion; and
(h) 0.43% of any excess thereafter.
Putnam VT Capital Appreciation Fund:
(a) 0.65% of the first $500 million of average net assets;
(b) 0.55% of the next $500 million;
(c) 0.50% of the next $500 million;
(d) 0.45% of the next $5 billion;
(e) 0.425% of the next $5 billion;
(f) 0.405% of the next $5 billion;
(g) 0.39% of the next $5 billion;
(h) 0.38% of the next $5 billion;
(i) 0.37% of the next $5 billion;
(j) 0.36% of the next $5 billion;
(k) 0.35% of the next $5 billion;
(l) 0.34% of the next $5 billion;
(m) 0.33% of the next $8.5 billion; and
(n) 0.32% of any excess thereafter.
Putnam VT American Government Income Fund:
(a) 0.65% of the first $500 million of average net assets;
(b) 0.55% of the next $500 million;
(c) 0.50% of the next $500 million;
(d) 0.45% of the next $5 billion;
(e) 0.425% of the next $5 billion;
(f) 0.405% of the next $5 billion;
(g) 0.39% of the next $5 billion;
(h) 0.38% of the next $5 billion;
(i) 0.37% of the next $5 billion;
(j) 0.36% of the next $5 billion;
(k) 0.35% of the next $5 billion; and
(l) 0.34% of any excess thereafter.
Putnam VT Capital Opportunities Fund, Putnam VT Equity Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Growth and Income Fund, Putnam VT Income Fund, Putnam VT Investors Fund, Putnam VT Research Fund and Putnam VT Vista Fund:
(a) 0.65% of the first $500 million of average net assets;
(b) 0.55% of the next $500 million;
(c) 0.50% of the next $500 million;
(d) 0.45% of the next $5 billion;
(e) 0.425% of the next $5 billion;
(f) 0.405% of the next $5 billion;
(g) 0.39% of the next $5 billion; and
(h) 0.38% of any excess thereafter.
Putnam VT Money Market Fund:
(a) 0.45% of the first $500 million of average net assets;
(b) 0.35% of the next $500 million;
(c) 0.30% of the next $500 million;
(d) 0.25% of the next $5 billion;
(e) 0.225% of the next $5 billion;
(f) 0.205% of the next $5 billion;
(g) 0.19% of the next $5 billion; and
(h) 0.18% of any excess thereafter.
For the past three fiscal years, pursuant to the Management Contract, each fund (with the exception of Putnam VT Capital Opportunities Fund, Putnam VT Equity Income Fund and Putnam VT Mid Cap Value Fund, each of which commenced operations on May 1, 2003 and ended its first fiscal year on December 31, 2003) incurred the following fees:
Reflecting a
reduction in the
following amounts
Fiscal Management pursuant to an
Fund name Year fee paid expense limitation
Putnam VT American Government Income Fund
2003 $3,140,023 $0
2002 $2,319,307 $0
2001 $802,595 $0
Putnam VT Capital Appreciation Fund
2003 $215,178 $0
2002 $164,861 $0
2001 $73,394 0
Putnam VT Capital Opportunities Fund
2003 (i) $0 $22,638
Putnam VT Discovery Growth Fund
2003 $308,009 $0
2002 $171,643 $0
2001 $83,615 $0
Putnam VT Diversified Income Fund
2003 $3,988,636 $0
2002 $3,906,665 $0
2001 $4,146,009 $0
Putnam VT Equity Income Fund
2003 (i) $70,005 $48,065
Putnam VT The George Putnam Fund of Boston
2003 $4,082,080 $0
2002 $3,660,573 $0
2001 $3,030,468 $0
Putnam VT Global Asset Allocation Fund
2003 $3,117,621 $0
2002 $3,732,096 $0
2001 $4,755,368 $0
Putnam VT Global Equity Fund
2003 $5,487,317 $0
2002 $7,061,185 $0
2001 $10,730,488 $0
Putnam VT Growth and Income Fund
2003 $25,972,807 $0
2002 $31,382,284 $0
2001 $39,524,781 $0
Putnam VT Growth Opportunities Fund
2003 $487,805 $0
2002 $554,393 $0
2001 $736,339 $0
Putnam VT Health Sciences Fund
2003 $2,436,291 $0
2002 $2,777,833 $0
2001 $3,326,045 $0
Putnam VT High Yield Fund
2003 $4,676,407 $0
2002 $4,393,831 $0
2001 $4,963,809 $0
Putnam VT Income Fund
2003 $6,599,963 $0
2002 $6,402,394 $0
2001 $5,707,283 $0
Putnam VT International Equity Fund
2003 $6,181,201 $0
2002 $5,725,145 $0
2001 $6,118,396 $0
Putnam VT International Growth and Income Fund
2003 $2,025,812 $0
2002 $2,313,131 $0
2001 $2,844,877 $0
Putnam VT International New Opportunities Fund
2003 $2,184,720 $0
2002 $2,572,480 $0
2001 $3,455,856 $0
Putnam VT Investors Fund
2003 $3,415,254 $0
2002 $4,171,833 $0
2001 $5,765,246 $0
Putnam VT Mid Cap Value Fund
2003 (i) $0 $49,511
Putnam VT Money Market Fund
2003 $3,134,965 $0
2002 $3,982,184 $0
2001 $3,840,752 $0
Putnam VT New Opportunities Fund
2003 $11,177,975 $0
2002 $13,774,768 $0
2001 $21,142,217 $0
Putnam VT New Value Fund
2003 $3,392,243 $0
2002 $3,632,692 $0
2001 $3,127,684 $0
Putnam VT OTC & Emerging Growth Fund
2003 $742,748 $0
2002 $859,693 $0
2001 $1,355,499 $0
Putnam VT Research Fund
2003 $1,508,059 $0
2002 $1,756,731 $0
2001 $1,995,993 $0
Putnam VT Small Cap Value Fund
2003 $3,797,669 $0
2002 $3,619,606 $0
2001 $1,704,436 $0
Putnam VT Utilities Growth and Income Fund
2003 $2,706,376 $0
2002 $3,556,606 $0
2001 $5,507,340 $0
Putnam VT Vista Fund
2003 $2,999,047 $0
2002 $3,557,362 $0
2001 $4,929,542 $0
Putnam VT Voyager Fund
2003 $17,657,467 $0
2002 $22,263,902 $0
2001 $32,259,746 $0
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(i) Commenced operations on May 1, 2003.
Expense limitation. In order to limit expenses for Putnam VT Capital Opportunities Fund, Putnam VT Equity Income Fund and Putnam VT Mid Cap Value Fund, Putnam Management has agreed to limit each fund's compensation (and, to the extent necessary, bear other expenses) through December 31, 2004 to the extent that expenses of each fund (exclusive of brokerage, interest, taxes, and extraordinary expenses, and payments under the fund's distribution plans) would exceed 1.05%, 1.05%, and 1.10%, respectively, of each fund's average net assets. For the purpose of determining any such limitation on Putnam Management's compensation, expenses of each 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 American Government Income Fund
2003 $7,274
2002 $0
2001 $0
Putnam VT Capital Appreciation Fund
2003 $136,649
2002 $140,306
2001 $33,615
Putnam VT Capital Opportunities Fund
2003 (i) $35,829
Putnam VT Discovery Growth Fund
2003 $138,167
2002 $142,299
2001 $22,416
Putnam VT Diversified Income Fund
2003 $32,103
2002 $32,593
2001 $18,042
Putnam VT Equity Income Fund
2003 (i) $91,378
Putnam VT The George Putnam Fund of Boston
2003 $695,127
2002 $703,616
2001 $492,637
Putnam VT Global Asset Allocation Fund
2003 $985,092
2002 $973,674
2001 $1,165,552
Putnam VT Global Equity Fund
2003 $2,102,459
2002 $5,351,801
2001 $7,894,965
Putnam VT Growth and Income Fund
2003 $6,386,638
2002 $8,477,448
2001 $7,395,837
Putnam VT Growth Opportunities Fund
2003 $113,940
2002 $139,411
2001 $172,503
Putnam VT Health Sciences Fund
2003 $546,906
2002 $802,017
2001 $381,142
Putnam VT High Yield Fund
2003 $0
2002 $2,630
2001 $1,132
Putnam VT Income Fund
2003 $51,453
2002 $20,094
2001 $9,189
Putnam VT International Equity Fund
2003 $1,794,394
2002 $1,425,679
2001 $2,013,050
Putnam VT International Growth and Income Fund
2003 $590,495
2002 $860,031
2001 $1,758,972
Putnam VT International New Opportunities Fund
2003 $877,358
2002 $1,447,559
2001 $2,790,501
Putnam VT Investors Fund
2003 $1,102,575
2002 $2,137,025
2001 $1,747,505
Putnam VT Mid Cap Value Fund
2003 (i) $37,884
Putnam VT Money Market Fund
2003 $0
2002 $0
2001 $0
Putnam VT New Opportunities Fund
2003 $3,707,981
2002 $5,471,344
2001 $4,608,379
Putnam VT New Value Fund
2003 $1,036,414
2002 $1,257,889
2001 $1,112,394
Putnam VT OTC & Emerging Growth Fund
2003 $347,511
2002 $372,436
2001 $196,859
Putnam VT Research Fund
2003 $695,245
2002 $1,228,023
2001 $1,061,277
Putnam VT Small Cap Value Fund
2003 $1,104,206
2002 $1,758,317
2001 $605,161
Putnam VT Utilities Growth and Income Fund
2003 $593,287
2002 $1,130,439
2001 $2,329,326
Putnam VT Vista Fund
2003 $1,365,250
2002 $1,503,894
2001 $853,543
Putnam VT Voyager Fund
2003 $5,501,181
2002 $9,927,959
2001 $11,667,791
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(i) Commenced operations on May 1, 2003.
The increase in brokerage commissions for certain funds is due to an increase in transactions by these funds. For Putnam VT Capital Appreciation Fund, the brokerage commission paid in fiscal 2002 is higher than the brokerage commission paid in fiscal 2001 due to significant increase in the fund's net assets and increased transaction activity. For Putnam VT Health Sciences Fund, the brokerage commission paid in fiscal 2002 is higher than the brokerage commission paid in fiscal 2001 due to increased redemption activity and portfolio repositioning resulting from change in portfolio management. For Putnam VT Small Cap Value Fund, the brokerage commission paid in fiscal 2002 is higher than the brokerage commission paid in fiscal 2001 due to significant increase in the fund's net assets and increased transaction activity resulting from change in portfolio management.
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:
Dollar value Percentage
of these of total Amount of
transactions transactions commissions
--------------------------------------------------------------------------------------------
C>
Putnam VT American Government Income Fund $0 0% $0
Putnam VT Capital Appreciation Fund 13,284,773 13.19 23,831
Putnam VT Capital Opportunities Fund 4,408,325 15.96 6,873
Putnam VT Discovery Growth Fund 13,331,573 17.67 24,878
Putnam VT Diversified Income Fund 0 0 0
Putnam VT Equity Income Fund 8,109,926 7.48 8,557
Putnam VT The George Putnam Fund of Boston 75,509,303 5.82 116,452
Putnam VT Global Asset Allocation Fund 211,717,147 5.88 288,960
Putnam VT Global Equity Fund 497,446,680 26.75 791,333
Putnam VT Growth and Income Fund 1,240,734,305 27.27 1,807,272
Putnam VT Growth Opportunities Fund 10,013,207 12.54 14,380
Putnam VT Health Sciences Fund 84,650,903 15.08 114,019
Putnam VT High Yield Fund 0 0 0
Putnam VT Income Fund 0 0 0
Putnam VT International Equity Fund 498,687,814 44.34 892,504
Putnam VT International Growth and Income Fund 202,878,157 52.72 314,219
Putnam VT International New Opportunities Fund 308,770,737 50.85 440,043
Putnam VT Investors Fund 118,224,777 12.48 180,575
Putnam VT Mid Cap Value Fund 4,752,399 10.34 5,043
Putnam VT Money Market Fund 0 0 0
Putnam VT New Opportunities Fund 315,646,565 13.50 574,622
Putnam VT New Value Fund 76,776,698 13.05 151,505
Putnam VT OTC & Emerging Growth Fund 26,594,086 16.10 62,784
Putnam VT Research Fund 74,783,629 11.91 115,351
Putnam VT Small Cap Value Fund 142,071,071 39.03 449,430
Putnam VT Utilities Growth and Income Fund 109,628,647 34.22 234,174
Putnam VT Vista Fund 109,536,210 10.34 202,839
Putnam VT Voyager Fund 758,298,807 17.53 1,083,549
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Administrative expense reimbursement
Each fund reimbursed Putnam Management for administrative services during fiscal 2003, including compensation of certain fund officers and contributions to the Putnam Investments, LLC Profit Sharing Retirement Plan for their benefit, as follows:
Portion of total
reimbursement for
Total compensation and
reimbursement contributions
---------------------------------------------------------------------------
Putnam VT American Government Income Fund $9,855 $7,697
Putnam VT Capital Appreciation Fund 4,683 3,658
Putnam VT Capital Opportunities Fund 27 21
Putnam VT Discovery Growth Fund 5,020 3,921
Putnam VT Diversified Income Fund 12,286 9,596
Putnam VT Equity Income Fund 1,395 1,090
Putnam VT The George Putnam Fund of Boston 12,418 9,699
Putnam VT Global Asset Allocation Fund 8,128 6,348
Putnam VT Global Equity Fund 12,807 10,003
Putnam VT Growth and Income Fund 42,285 33,027
Putnam VT Growth Opportunities Fund 5,527 4,317
Putnam VT Health Sciences Fund 7,966 6,222
Putnam VT High Yield Fund 12,640 9,873
Putnam VT Income Fund 21,079 16,464
Putnam VT International Equity Fund 13,241 10,342
Putnam VT International Growth and Income Fund 8,418 6,575
Putnam VT International New Opportunities Fund 8,296 6,480
Putnam VT Investors Fund 11,051 8,631
Putnam VT Mid Cap Value Fund 42 33
Putnam VT Money Market Fund 11,381 8,889
Putnam VT New Opportunities Fund 24,053 18,787
Putnam VT New Value Fund 9,539 7,451
Putnam VT OTC & Emerging Growth Fund 6,221 4,859
Putnam VT Research Fund 8,041 6,281
Putnam VT Small Cap Value Fund 9,678 7,559
Putnam VT Utilities Growth and Income Fund 8,435 6,588
Putnam VT Vista Fund 9,057 7,074
Putnam VT Voyager Fund 42,058 32,850
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Trustee responsibilities and fees
The Trustees are responsible for generally overseeing the conduct of the Trust's business. Subject to such policies as the Trustees may determine, Putnam Management furnishes a continuing investment program for the Trust and makes investment decisions on its behalf. Subject to the control of the Trustees, Putnam Management also manages the Trust's other affairs and business.
The table below shows the value of each Trustee's holdings in all of the Putnam Funds as of December 31, 2003. Certain Trustees own interests in one or more funds through variable annuity contracts or variable life insurance policies.
Aggregate dollar range
of shares held in all of the
Name of Trustee Putnam funds overseen by Trustee
Jameson A. Baxter over $100,000
Charles B. Curtis over $100,000
John A. Hill over $100,000
Ronald J. Jackson over $100,000
Paul L. Joskow over $100,000
Elizabeth T. Kennan over $100,000
John H. Mullin, III over $100,000
Robert E. Patterson over $100,000
W. Thomas Stephens over $100,000
W. Nicholas Thorndike over $100,000
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*George Putnam, III over $100,000 *A.J.C. Smith over $100,000
* Trustees who are or may be deemed to be "interested persons" (as defined in the Investment Company Act of 1940) of the Trust, Putnam Management or Putnam Retail Management. Messrs. Putnam, III and Smith are deemed "interested persons" by virtue of their positions as officers or shareholders of the Trust or Putnam Management, Putnam Retail Management, or Marsh & McLennan Companies, Inc., the parent company of Putnam Management and Putnam Retail Management. George Putnam, III is the President of the Trust and each of the other Putnam funds. A.J.C. Smith is the Chairman of Putnam Investments and serves as a Director of and Consultant to Marsh & McLennan Companies, Inc.
Each Trustee receives 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 Executive 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 Committees of the Board of Trustees, and the number of times each Committee met during your fund's fiscal year, are shown in the table below:
Audit and Pricing Committee 15 Board Policy and Nominating Committee 7 Brokerage and Custody Committee 4 Communication, Service and Marketing Committee 9 Contract Committee 14 Distributions Committee 6 Executive Committee 1 Investment Oversight Committees 30 |
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 2003 (other than Putnam VT Capital Opportunities Fund, Putnam VT Equity Income Fund and Putnam VT Mid Cap Value Fund, each of which lists the estimated fees to be paid to each Trustee by each fund during its first full fiscal year) and the fees paid to each Trustee by all of the Putnam funds during calendar year 2003:
COMPENSATION TABLE
Aggregate compensation (1) from:
Putnam VT Putnam VT Putnam VT Putnam VT
American Capital Capital Putnam VT Putnam VT Putnam VT The George
Government Appreciation Opportunities Discovery Diversified Equity Putnam Fund
Trustee/Year Income Fund Fund Fund Growth Fund Income Fund Income Fund of Boston
-----------------------------------------------------------------------------------------------------------
Jameson A. Baxter/
1994 (5) $1,182 $539 $145 $613 $1,371 $210 $1,392
Charles B. Curtis/
2001 1,168 535 144 609 1,356 209 1,377
John A. Hill/
1985 (5)(7) 1,992 914 237 1,040 2,309 347 2,345
Ronald J. Jackson/
1996 (5) 1,185 542 145 617 1,377 212 1,398
Paul L. Joskow/
1997 (5) 1,181 537 142 608 1,370 203 1,390
Elizabeth T. Kennan/
1992 1,159 529 137 602 1,347 204 1,367
Lawrence J. Lasser/
1992 (8) -- -- -- -- -- -- --
John H. Mullin, III/
1997 (5) 1,173 536 144 610 1,361 209 1,382
Robert E. Patterson/
1984 1,174 537 144 611 1,363 210 1,384
George Putnam, III/
1984 (7) 1,456 667 175 759 1,689 257 1,715
A.J.C. Smith/
1986 (6) -- -- -- -- -- -- --
W. Thomas Stephens/
1997 (5) 1,157 529 141 601 1,343 205 1,364
W. Nicholas Thorndike/
1992 1,179 538 142 612 1,370 209 1,391
|
Aggregate compensation (1) from:
Putnam VT Putnam VT Putnam VT
Global Asset Putnam VT Putnam VT Growth Health Putnam VT
Allocation Global Growth and Opportunities Sciences High Yield Putnam VT
Trustee/Year Fund Equity Fund Income Fund Fund Fund Fund Income Fund
-----------------------------------------------------------------------------------------------------------
Jameson A. Baxter/
1994 (5) $941 $1,587 $4,951 $715 $912 $1,417 $2,172
Charles B. Curtis/
2001 931 1,570 5,982 707 902 1,097 2,148
John A. Hill/
1985 (5)(7) 1,585 2,674 8,340 1,205 1,536 2,386 3,657
Ronald J. Jackson/
1996 (5) 945 1,593 4,968 718 915 1,422 2,180
Paul L. Joskow/
1997 (5) 940 1,586 4,946 714 911 1,415 2,169
Elizabeth T. Kennan/
1992 924 1,559 4,861 702 895 1,391 2,132
Lawrence J. Lasser/
1992 (8) -- -- -- -- -- -- --
John H. Mullin, III/
1997 (5) 934 1,576 4,914 710 905 1,407 2,156
Robert E. Patterson/
1984 935 1,577 3,835 711 906 1,713 2,158
George Putnam, III/
1984 (7) 1,159 1,955 6,098 881 1,123 1,746 2,675
A.J.C. Smith/
1986 (6) -- -- -- -- -- -- --
W. Thomas Stephens/
1997 (5) 922 1,554 4,848 700 893 1,388 2,127
W. Nicholas Thorndike/
1992 940 1,586 4,945 714 911 1,415 2,169
|
Aggregate compensation (1) from:
Putnam VT
Putnam VT International Putnam VT Putnam VT
Putnam VT International New Putnam VT Putnam VT Money New
International Growth and Opportunities Investors Mid Cap Market Opportunities
Trustee/Year Equity Fund Income Fund Fund Fund Value Fund Fund Fund
-----------------------------------------------------------------------------------------------------------
Jameson A. Baxter/
1994 (5) $1,552 $1,013 $991 $1,262 $110 $1,204 $2,713
Charles B. Curtis/
2001 1,535 1,002 980 1,247 109 1,191 2,684
John A. Hill/
1985 (5)(7) 2,613 1,706 1,670 2,126 179 2,030 4,570
Ronald J. Jackson/
1996 (5) 1,557 1,017 995 1,265 110 1,209 2,723
Paul L. Joskow/
1997 (5) 1,556 1,012 990 1,259 107 1,211 2,710
Elizabeth T. Kennan/
1992 1,524 995 973 1,237 104 1,183 2,664
Lawrence J. Lasser/
1992 (8) -- -- -- -- -- -- --
John H. Mullin, III/
1997 (5) 1,540 1,005 984 1,252 109 1,196 2,694
Robert E. Patterson/
1984 1,542 1,007 985 1,253 109 1,197 2,697
George Putnam, III/
1984 (7) 1,911 1,248 1,221 1,551 132 1,484 3,342
A.J.C. Smith/
1986 (6) -- -- -- -- -- -- --
W. Thomas Stephens/
1997 (5) 1,520 992 971 1,235 106 1,180 2,657
W. Nicholas Thorndike/
1992 1,550 1,012 990 1,260 107 1,203 2,710
|
Aggregate compensation (1) from:
Putnam VT Putnam VT
Putnam VT OTC & Putnam VT Putnam VT Utilities
New Value Emerging Research Small Cap Growth and Putnam VT Putnam VT
Trustee/Year Fund Growth Fund Fund Value Fund Income Fund Vista Fund Voyager Fund
-----------------------------------------------------------------------------------------------------------
Jameson A. Baxter/
1994 (5) $1,037 $771 $935 $1,008 $1,010 $965 $4,339
Charles B. Curtis/
2001 1,027 762 925 998 999 954 4,291
John A. Hill/
1985 (5)(7) 1,747 1,299 1,576 1,697 1,701 1,625 7,309
Ronald J. Jackson/
1996 (5) 1,043 773 939 1,014 1,014 969 4,355
Paul L. Joskow/
1997 (5) 1,033 767 934 1,004 1,009 964 4,335
Elizabeth T. Kennan/
1992 1,020 756 919 992 992 948 4,261
Lawrence J. Lasser/
1992 (8) -- -- -- -- -- -- --
John H. Mullin, III/
1997 (5) 1,030 765 929 1,002 1,003 958 4,307
Robert E. Patterson/
1984 1,032 766 930 1,003 1,004 959 4,312
George Putnam, III/
1984 (7) 1,279 948 1,152 1,243 1,244 1,189 5,345
A.J.C. Smith/
1986 (6) -- -- -- -- -- -- --
W. Thomas Stephens/
1997 (5) 1,016 755 916 988 989 945 4,249
W. Nicholas Thorndike/
1992 1,038 770 935 1,009 1,009 964 4,334
|
COMPENSATION TABLE
Pension or retirement benefits accrued as part of fund expenses from:
Putnam VT Putnam VT Putnam VT Putnam VT
American Capital Capital Putnam VT Putnam VT Putnam VT The George
Government Appreciation Opportunities Discovery Diversified Equity Putnam Fund
Trustee/Year Income Fund Fund Fund Growth Fund Income Fund Income Fund of Boston
-----------------------------------------------------------------------------------------------------------
Jameson A. Baxter/
1994 (5) $385 $170 $35 $192 $417 $35 $424
Charles B. Curtis/
2001 341 151 31 171 371 31 376
John A. Hill/
1985 (5)(7) 444 196 41 222 482 41 489
Ronald J. Jackson/
1996 (5) 353 156 32 176 383 32 389
Paul L. Joskow/
1997 (5) 252 111 23 126 273 23 277
Elizabeth T. Kennan/
1992 459 202 42 229 498 42 505
Lawrence J. Lasser/
1992 (8) -- -- -- -- 228 -- 232
John H. Mullin, III/
1997 (5) 389 172 36 195 423 36 429
Robert E. Patterson/
1984 251 111 23 126 272 23 277
George Putnam, III/
1984 (7) 205 90 19 102 222 19 226
A.J.C. Smith/
1986 (6) -- -- -- -- 516 -- 524
W. Thomas Stephens/
1997 (5) 352 155 32 176 382 32 388
W. Nicholas Thorndike/
1992 592 261 54 296 642 54 652
|
Pension or retirement benefits accrued as part of fund expenses from:
Putnam VT
Global Putnam VT Putnam VT Putnam VT Putnam VT
Asset Global Growth and Growth Health Putnam VT Putnam VT
Allocation Equity Income Opportunities Sciences High Yield Putnam VT International
Trustee/Year Fund Fund Fund Fund Fund Fund Income Fund Equity Fund
-----------------------------------------------------------------------------------------------------------
Jameson A. Baxter/
1994 (5) $290 $492 $1,535 $222 $280 $431 $662 $476
Charles B. Curtis/
2001 258 437 1,363 197 249 382 588 422
John A. Hill/
1985 (5)(7) 335 568 1,773 256 324 497 764 549
Ronald J. Jackson/
1996 (5) 266 451 1,408 204 257 395 607 436
Paul L. Joskow/
1997 (5) 190 322 1,005 145 183 282 433 311
Elizabeth T. Kennan/
1992 346 587 1,830 265 334 513 789 567
Lawrence J. Lasser/
1992 (8) 159 268 839 -- 153 235 361 260
John H. Mullin, III/
1997 (5) 294 498 1,554 225 284 436 670 482
Robert E. Patterson/
1984 190 321 1,002 145 183 281 432 310
George Putnam, III/
1984 (7) 155 262 817 118 149 229 352 253
A.J.C. Smith/
1986 (6) 359 608 1,898 -- 347 532 818 587
W. Thomas Stephens/
1997 (5) 266 451 1,407 203 257 395 606 436
W. Nicholas Thorndike/
1992 447 757 2,362 341 431 663 1,018 732
|
Pension or retirement benefits accrued as part of fund expenses from:
Putnam VT
Putnam VT International Putnam VT Putnam VT
International New Putnam VT Putnam VT Money New Putnam VT
Growth and Opportunities Investors Mid Cap Market Opportunities New Value
Trustee/Year Income Fund Fund Fund Value Fund Fund Fund Fund
-----------------------------------------------------------------------------------------------------------
Jameson A. Baxter/
1994 (5) $313 $306 $414 $35 $381 $837 $297
Charles B. Curtis/
2001 278 272 368 31 339 744 263
John A. Hill/
1985 (5)(7) 361 353 478 41 440 967 343
Ronald J. Jackson/
1996 (5) 287 281 380 32 350 768 272
Paul L. Joskow/
1997 (5) 205 200 271 23 250 548 194
Elizabeth T. Kennan/
1992 373 365 494 42 455 999 354
Lawrence J. Lasser/
1992 (8) 171 168 226 -- 208 458 162
John H. Mullin, III/
1997 (5) 317 310 419 36 386 848 300
Robert E. Patterson/
1984 204 200 270 23 249 547 194
George Putnam, III/
1984 (7) 167 163 221 19 203 446 158
A.J.C. Smith/
1986 (6) 387 380 511 -- 471 1,035 367
W. Thomas Stephens/
1997 (5) 287 280 380 32 349 767 272
W. Nicholas Thorndike/
1992 482 471 637 54 587 1,289 456
|
Pension or retirement benefits accrued as part of fund expenses from:
Putnam VT Putnam VT
OTC & Putnam VT Putnam VT Utilities
Emerging Research Small Cap Growth and Putnam VT Putnam VT
Trustee/Year Growth Fund Fund Value Fund Income Fund Vista Fund Voyager Fund
-----------------------------------------------------------------------------------------------
Jameson A. Baxter/
1994 (5) $254 $290 $283 $313 $297 $1,343
Charles B. Curtis/
2001 226 258 252 278 263 1,192
John A. Hill/
1985 (5)(7) 294 335 327 361 343 1,551
Ronald J. Jackson/
1996 (5) 233 266 260 287 272 1,232
Paul L. Joskow/
1997 (5) 167 190 186 205 194 879
Elizabeth T. Kennan/
1992 303 346 338 373 354 1,601
Lawrence J. Lasser/
1992 (8) 139 159 154 171 162 734
John H. Mullin, III/
1997 (5) 258 294 287 317 300 1,360
Robert E. Patterson/
1984 166 190 185 204 194 876
George Putnam, III/
1984 (7) 135 155 151 167 158 715
A.J.C. Smith/
1986 (6) 314 359 349 387 367 1,661
W. Thomas Stephens/
1997 (5) 233 266 260 287 272 1,230
W. Nicholas Thorndike/
1992 391 447 436 482 456 2,066
|
Estimated
annual
benefits Total
from all compensation
Putnam from
funds upon all Putnam
Trustee/Year retirement (2) funds (3)(4)
---------------------------------------------
Jameson A. Baxter/
1994 (5) $100,000 $215,500
Charles B. Curtis/
2001 100,000 210,250
John A. Hill/
1985 (5)(7) 200,000 413,625
Ronald J. Jackson/
1996 (5) 100,000 214,500
Paul L. Joskow/
1997 (5) 100,000 215,250
Elizabeth T. Kennan/
1992 100,000 207,000
Lawrence J. Lasser/
1992 (8) 93,333 --
John H. Mullin, III/
1997 (5) 100,000 208,750
Robert E. Patterson/
1984 100,000 206,500
George Putnam, III/
1984 (7) 125,000 260,500
A.J.C. Smith/
1986 (6) 93,333 --
W. Thomas Stephens/
1997 (5) 100,000 206,500
W. Nicholas Thorndike/
1992 100,000 212,250
|
(1) Includes an annual retainer and an attendance fee for each meeting attended.
(2) Assumes that each Trustee retires at the normal retirement date. For Trustees who are not within three years of retirement, estimated benefits for each Trustee are based on Trustee fee rates in effect during calendar 2003.
(3) As of December 31, 2003, there were 101 funds in the Putnam family. For Mr. Hill, amounts shown also include compensation for service as a trustee of TH Lee, Putnam Emerging Opportunities Portfolio, a closed-end fund advised by an affiliate of Putnam Management.
(4) Includes amounts (ranging from $2,000 to $11,000 per Trustee) for which the Putnam funds were reimbursed by Putnam Management for special Board and committee meetings in connection with certain regulatory and other matters relating to alleged improper trading by certain Putnam Management employees and participants in certain 401(k) plans administered by Putnam Fiduciary Trust Company.
(5) Includes compensation deferred pursuant to a Trustee Compensation Deferral Plan. As of December 31, 2003, the total amounts of deferred compensation payable by the fund, including income earned on such amounts, to certain Trustees were:
Baxter Hill Jackson Joskow Mullin III Stephens
-------------------------------------------------------------------------------------------------------
VT American Government Income Fund $785 $2,260 $1,159 $855 $897 $353
VT Capital Appreciation Fund $276 $794 $407 $301 $315 $124
VT Capital Opportunities Fund $51 $147 $75 $56 $58 $23
VT Discovery Growth Fund $567 $1,633 $837 $618 $648 $255
VT Diversified Income Fund $1,083 $3,118 $1,599 $1,180 $1,238 $487
VT Equity Income Fund $74 $214 $110 $81 $85 $33
VT The George Putnam Fund of Boston $1,077 $3,102 $1,591 $1,174 $1,231 $484
VT Global Asset Allocation Fund $3,907 $11,252 $5,770 $4,257 $4,466 $1,757
VT Global Equity Fund $8,447 $24,327 $12,476 $9,205 $9,655 $3,799
VT Growth & Income Fund $22,134 $63,742 $32,690 $24,118 $25,299 $9,955
VT Growth Opportunities Fund $567 $1,634 $838 $618 $648 $255
VT Health Sciences Fund $728 $2,096 $1,075 $793 $832 $327
VT High Yield Fund $5,404 $15,564 $7,982 $5,889 $6,177 $2,431
VT Income Fund $5,355 $15,420 $7,908 $5,835 $6,120 $2,408
VT International Equity Fund $1,558 $4,487 $2,301 $1,698 $1,781 $701
VT International Growth & Income Fund $807 $2,323 $1,192 $879 $922 $363
VT International New Opportunities Fund $791 $2,279 $1,169 $862 $905 $356
VT Investors Fund $1,052 $3,029 $1,553 $1,146 $1,202 $473
VT Mid-Cap Value Fund $38 $111 $57 $42 $44 $17
VT Money Market Fund $1,202 $3,462 $1,776 $1,310 $1,374 $541
VT New Opportunities Fund $12,074 $34,771 $17,832 $13,156 $13,800 $5,431
VT New Value Fund $894 $2,574 $1,320 $974 $1,021 $402
VT OTC & Emerging Growth Fund $614 $1,769 $907 $669 $702 $276
VT Research Fund $741 $2,135 $1,095 $808 $847 $333
VT Small Cap Value Fund $788 $2,269 $1,163 $858 $900 $354
VT Utilities Growth & Income Fund $4,603 $13,254 $6,798 $5,015 $5,261 $2,070
VT Vista Fund $883 $2,544 $1,305 $963 $1,010 $397
VT Voyager Fund $18,130 $52,210 $26,776 $19,755 $20,722 $8,154
|
(6) Since July 1, 2000, Marsh & McLennan Companies, Inc. has compensated Mr. Smith for his services as Trustee. The estimated annual retirement benefits shown in this table for Mr. Smith reflect benefits earned under the funds' retirement plan prior to July 1, 2000.
(7) Includes additional compensation to Messrs. Hill and Putnam for service as Chairman of the Trustees and President of the Funds, respectively.
(8) Mr. Lasser resigned from the Board of Trustees of the Putnam funds on November 3, 2003. The estimated annual retirement benefits shown in this table for Mr. Lasser reflect benefits earned under the funds' retirement plan prior to July 1, 2000.
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, 2004 the officers and Trustees as a group owned directly no shares of the Trust or any fund thereof. 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 of the Trust.
Fund and class Shareholder name and address Percentage owned PUTNAM VT AMER GOVT INCOME IA HARTFORD LIFE (4) 100.00% PUTNAM VT AMER GOVT INCOME IB ALLSTATE LIFE INSURANCE CO (1) 75.80% PUTNAM VT AMER GOVT INCOME IB HARTFORD LIFE (4) 14.50% PUTNAM VT AMER GOVT INCOME IB ALLSTATE LIFE OF NY (1) 9.30% PUTNAM VT CAP OPPS FUND IA HARTFORD LIFE & ANNUITY (4) 48.40% PUTNAM VT CAP OPPS FUND IA HARTFORD LIFE INS CO (4) 33.00% PUTNAM VT CAP OPPS FUND IA THE PUTNAM COMPANIES, INC (9) 17.60% PUTNAM VT CAP OPPS FUND IB HARTFORD LIFE & ANNUITY (4) 47.10% PUTNAM VT CAP OPPS FUND IB ALLSTATE LIFE INSURANCE CO (1) 38.40% PUTNAM VT CAP OPPS FUND IB HARTFORD LIFE INS CO (4) 12.70% PUTNAM VT CAP APPRECIATION IA HARTFORD LIFE (4) 100.00% PUTNAM VT CAP APPRECIATION IB ALLSTATE LIFE INSURANCE CO (1) 76.60% PUTNAM VT CAP APPRECIATION IB HARTFORD LIFE (4) 18.20% PUTNAM VT CAP APPRECIATION IB ALLSTATE LIFE OF NY (1) 5.00% PUTNAM VT DISCOVERY GROWTH IA HARTFORD LIFE (4) 100.00% PUTNAM VT DISCOVERY GROWTH IB ALLSTATE LIFE INSURANCE CO (1) 56.30% PUTNAM VT DISCOVERY GROWTH IB HARTFORD LIFE (4) 11.80% PUTNAM VT DISCOVERY GROWTH IB ING USA ANNUITY AND LIFE (5) 9.10% PUTNAM VT DIVERSIFIED INCOME IA HARTFORD LIFE (4) 97.70% PUTNAM VT DIVERSIFIED INCOME IB ALLSTATE LIFE INSURANCE CO (1) 63.40% PUTNAM VT DIVERSIFIED INCOME IB HARTFORD LIFE (4) 20.80% PUTNAM VT DIVERSIFIED INCOME IB ALLSTATE LIFE OF NY (1) 7.00% PUTNAM VT EQUITY INCOME IA HARTFORD LIFE & ANNUITY (4) 65.10% PUTNAM VT EQUITY INCOME IA HARTFORD LIFE INS CO (4) 34.20% PUTNAM VT EQUITY INCOME IB ALLSTATE LIFE INSURANCE CO (1) 42.00% PUTNAM VT EQUITY INCOME IB HARTFORD LIFE & ANNUITY (4) 30.90% PUTNAM VT EQUITY INCOME IB METLIFE INVESTORS VA/VL ACCT 1 (8) 11.90% PUTNAM VT EQUITY INCOME IB HARTFORD LIFE INS CO (4) 11.40% PUTNAM VT GEORGE PUTNAM IA HARTFORD LIFE (4) 99.80% PUTNAM VT GEORGE PUTNAM IB ALLSTATE LIFE INSURANCE CO (1) 81.20% PUTNAM VT GEORGE PUTNAM IB HARTFORD LIFE (4) 11.90% PUTNAM VT GEORGE PUTNAM IB ALLSTATE LIFE OF NY (1) 5.60% PUTNAM VT GLOBAL ASSET ALLOC IA HARTFORD LIFE (4) 98.70% PUTNAM VT GLOBAL ASSET ALLOC IB ALLSTATE LIFE INSURANCE CO (1) 72.00% PUTNAM VT GLOBAL ASSET ALLOC IB HARTFORD LIFE (4) 20.10% PUTNAM VT GLOBAL ASSET ALLOC IB ALLSTATE LIFE OF NY (1) 7.70% PUTNAM VT GLOBAL EQUITY IA HARTFORD LIFE (4) 99.60% PUTNAM VT GLOBAL EQUITY IB ALLSTATE LIFE INSURANCE CO (1) 75.90% PUTNAM VT GLOBAL EQUITY IB HARTFORD LIFE (4) 8.80% PUTNAM VT GLOBAL EQUITY IB ALLSTATE LIFE OF NY (1) 7.70% PUTNAM VT GLOBAL EQUITY IB AEGON PFL FIRST UNION (11) 6.80% PUTNAM VT GROWTH & INCOME IA HARTFORD LIFE (4) 97.30% PUTNAM VT GROWTH & INCOME IB ALLSTATE LIFE INSURANCE CO (1) 69.20% PUTNAM VT GROWTH & INCOME IB HARTFORD LIFE (4) 9.70% PUTNAM VT GROWTH & INCOME IB ALLSTATE LIFE OF NY (1) 5.50% PUTNAM VT GROWTH & INCOME IB ALLSTATE NORTHBROOK LIFE (1) 5.00% PUTNAM VT GROWTH OPPS IA HARTFORD LIFE (4) 100.00% PUTNAM VT GROWTH OPPS IB ALLSTATE LIFE INSURANCE CO (1) 73.70% PUTNAM VT GROWTH OPPS IB HARTFORD LIFE (4) 15.00% PUTNAM VT GROWTH OPPS IB ALLSTATE LIFE OF NY (1) 6.50% PUTNAM VT HEALTH SCIENCES IA HARTFORD LIFE (4) 100.00% PUTNAM VT HEALTH SCIENCES IB ALLSTATE LIFE INSURANCE CO (1) 48.00% PUTNAM VT HEALTH SCIENCES IB LINCOLN NATIONAL VARIABLE (7) 19.80% PUTNAM VT HEALTH SCIENCES IB AXP IDS LIFE (3) 18.50% PUTNAM VT HEALTH SCIENCES IB HARTFORD LIFE (4) 5.60% PUTNAM VT HIGH YIELD IA HARTFORD LIFE (4) 99.00% PUTNAM VT HIGH YIELD IB ALLSTATE LIFE INSURANCE CO (1) 61.10% PUTNAM VT HIGH YIELD IB HARTFORD LIFE (4) 18.10% PUTNAM VT HIGH YIELD IB AXP IDS LIFE (3) 9.70% PUTNAM VT HIGH YIELD IB LINCOLN BENEFIT LIFE CO (7) 5.00% PUTNAM VT INCOME IA HARTFORD LIFE (4) 98.30% PUTNAM VT INCOME IB ALLSTATE LIFE INSURANCE CO (1) 74.60% PUTNAM VT INCOME IB HARTFORD LIFE (4) 17.40% PUTNAM VT INCOME IB ALLSTATE LIFE OF NY (1) 7.30% PUTNAM VT INTERNATIONAL G&I IA HARTFORD LIFE (4) 99.60% PUTNAM VT INTERNATIONAL G&I IB ALLSTATE LIFE INSURANCE CO (1) 60.10% PUTNAM VT INTERNATIONAL G&I IB HARTFORD LIFE (4) 10.80% PUTNAM VT INTERNATIONAL G&I IB LINCOLN BENEFIT LIFE CO (7) 8.00% PUTNAM VT INTERNATIONAL G&I IB ING USA ANNUITY AND LIFE (5) 5.70% PUTNAM VT INTL EQUITY IA HARTFORD LIFE (4) 94.00% PUTNAM VT INTL EQUITY IA METLIFE INVESTORS VA/VL ACCT 1 (8) 5.10% PUTNAM VT INTL EQUITY IB ALLSTATE LIFE INSURANCE CO (1) 31.30% PUTNAM VT INTL EQUITY IB AXP IDS LIFE (3) 14.10% PUTNAM VT INTL EQUITY IB ALLSTATE NORTHBROOK LIFE (1) 11.80% PUTNAM VT INTL EQUITY IB METLIFE INVESTORS VA/VL ACCT 1 (8) 9.20% PUTNAM VT INTL EQUITY IB TRAVELERS INSURANCE COMPANY (10) 6.00% PUTNAM VT INTL EQUITY IB HARTFORD LIFE (4) 5.40% PUTNAM VT INTNL NEW OPPS IA HARTFORD LIFE (4) 97.60% PUTNAM VT INTNL NEW OPPS IB AXP IDS LIFE (3) 72.20% PUTNAM VT INTNL NEW OPPS IB ALLSTATE LIFE INSURANCE CO (1) 19.90% PUTNAM VT INVESTORS IA HARTFORD LIFE (4) 99.90% PUTNAM VT INVESTORS IB ALLSTATE LIFE INSURANCE CO (1) 79.40% PUTNAM VT INVESTORS IB HARTFORD LIFE (4) 12.90% PUTNAM VT INVESTORS IB ALLSTATE LIFE OF NY (1) 7.30% PUTNAM VT MID CAP VALUE IA HARTFORD LIFE & ANNUITY (4) 50.80% PUTNAM VT MID CAP VALUE IA HARTFORD LIFE INS CO (4) 49.10% PUTNAM VT MID CAP VALUE IB ALLSTATE LIFE INSURANCE CO (1) 53.00% PUTNAM VT MID CAP VALUE IB HARTFORD LIFE INS CO (4) 20.70% PUTNAM VT MID CAP VALUE IB HARTFORD LIFE & ANNUITY (4) 19.10% PUTNAM VT MID CAP VALUE IB ALLSTATE LIFE OF NY (1) 7.10% PUTNAM VT MONEY MARKET IA HARTFORD LIFE (4) 98.30% PUTNAM VT MONEY MARKET IB ALLSTATE LIFE INSURANCE CO (1) 70.00% PUTNAM VT MONEY MARKET IB HARTFORD LIFE (4) 14.10% PUTNAM VT MONEY MARKET IB AEGON PFL FIRST UNION (11) 8.20% PUTNAM VT MONEY MARKET IB ALLSTATE LIFE OF NY (1) 7.60% PUTNAM VT NEW OPPORTUNITIES IA HARTFORD LIFE (4) 60.40% PUTNAM VT NEW OPPORTUNITIES IA AXP IDS LIFE (3) 33.60% PUTNAM VT NEW OPPORTUNITIES IB ALLSTATE LIFE INSURANCE CO (1) 73.80% PUTNAM VT NEW OPPORTUNITIES IB HARTFORD LIFE (4) 13.80% PUTNAM VT NEW OPPORTUNITIES IB ALLSTATE LIFE OF NY (1) 6.60% PUTNAM VT NEW VALUE IA HARTFORD LIFE (4) 99.40% PUTNAM VT NEW VALUE IB ALLSTATE LIFE INSURANCE CO (1) 75.90% PUTNAM VT NEW VALUE IB HARTFORD LIFE (4) 11.50% PUTNAM VT OTC & EMERGING G&I IA HARTFORD LIFE (4) 93.50% PUTNAM VT OTC & EMERGING G&I IA HARTFORD LIFE INS CO (4) 6.40% PUTNAM VT OTC & EMERGING G&I IB ALLSTATE LIFE INSURANCE CO (1) 83.80% PUTNAM VT OTC & EMERGING G&I IB HARTFORD LIFE (4) 10.10% PUTNAM VT OTC & EMERGING G&I IB ALLSTATE LIFE OF NY (1) 6.00% PUTNAM VT RESEARCH IA HARTFORD LIFE (4) 100.00% PUTNAM VT RESEARCH IB ALLSTATE LIFE INSURANCE CO (1) 85.20% PUTNAM VT RESEARCH IB HARTFORD LIFE (4) 8.70% PUTNAM VT RESEARCH IB ALLSTATE LIFE OF NY (1) 5.50% PUTNAM VT SMALL CAP VALUE IA HARTFORD LIFE (4) 97.70% PUTNAM VT SMALL CAP VALUE IB ALLSTATE LIFE INSURANCE CO (1) 32.00% PUTNAM VT SMALL CAP VALUE IB TRAVELERS INSURANCE COMPANY (10) 26.40% PUTNAM VT SMALL CAP VALUE IB NORTHBROOK LIFE INSURANCE CO (1) 11.20% PUTNAM VT SMALL CAP VALUE IB TRAVELERS LIFE & ANNUITY CO (10) 9.90% PUTNAM VT SMALL CAP VALUE IB INTEGRITY LIFE INSURANCE (6) 5.70% PUTNAM VT UTILITIES G&I IA HARTFORD LIFE (4) 98.80% PUTNAM VT UTILITIES G&I IB ALLSTATE LIFE INSURANCE CO (1) 82.20% PUTNAM VT UTILITIES G&I IB HARTFORD LIFE (4) 10.30% PUTNAM VT UTILITIES G&I IB ALLSTATE LIFE OF NY (1) 7.40% PUTNAM VT VISTA IA HARTFORD LIFE (4) 97.40% PUTNAM VT VISTA IB AXP IDS LIFE (3) 46.30% PUTNAM VT VISTA IB ALLSTATE LIFE INSURANCE CO (1) 36.40% PUTNAM VT VISTA IB AXP AMERICAN ENTERPRISE LIFE (2) 5.40% PUTNAM VT VOYAGER IA HARTFORD LIFE (4) 95.10% PUTNAM VT VOYAGER IB ALLSTATE LIFE INSURANCE CO (1) 68.70% PUTNAM VT VOYAGER IB HARTFORD LIFE (4) 10.50% PUTNAM VT VOYAGER IB ALLSTATE NORTHBROOK LIFE (1) 7.70% |
The addresses for the shareholders listed above are:
(1) Allstate Life Insurance Co., 3100 Sanders Rd., Northbrook, IL 60062
(2) American Express Financial Advisors, 733 Marquette Avenue, Minneapolis, MN 55041
(3) AXP IDS Life, 1497 AXP Financial Center, Minneapolis, MN 55474-0014
(4) The Hartford, 200 Hopmeadow St., Simsbury, CT 06089
(5) ING Life Companies, 1290 Broadway, Denver, CO 80203
(6) Integrity Life Insurance Co., 515 West Market St., Louisville, KY 40202
(7) Lincoln National Life Insurance Co., 1300 South Clinton St., Fort Wayne, IN 46801
(8) MetLife Investors Insurance Company, One Madison Ave., Area 5H, New York, NY 10010
(9) Putnam Investments, One Post Office Square, Boston, MA 02109
(10) The Travelers Life Insurance Company, One Tower Square, Hartford, CT 06183
(11) TransAmerica Life Insurance Co., 4333 Edgewood Rd. NE, Cedar Rapids,
IA 52499
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 Express Financial Advisors, The Hartford, ING Life Companies, Integrity Life Insurance Co., Lincoln National Life Insurance Co., MetLife Investors Insurance Company, The Travelers Life Insurance Company and TransAmerica Life Insurance Company, or any of them together, may be deemed to be a controlling person of each of the funds.
Distribution fees
During fiscal 2003, class IB shares of the funds paid the following 12b-1 fees to Putnam Retail Management:
Putnam VT American Government Income Fund $368,501 Putnam VT Capital Appreciation Fund 41,562 Putnam VT Capital Opportunities Fund 3,252 Putnam VT Discovery Growth Fund 72,648 Putnam VT Diversified Income Fund 308,388 Putnam VT Equity Income Fund 16,397 Putnam VT The George Putnam Fund of Boston 524,365 Putnam VT Global Asset Allocation Fund 67,802 Putnam VT Global Equity Fund 169,324 Putnam VT Growth and Income Fund 1,726,625 Putnam VT Growth Opportunities Fund 84,941 Putnam VT Health Sciences Fund 351,956 Putnam VT High Yield Fund 294,480 Putnam VT Income Fund 604,434 Putnam VT International Equity Fund 981,095 Putnam VT International Growth and Income 127,879 Putnam VT International New Opportunities Fund 318,686 Putnam VT Investors Fund 478,910 Putnam VT Mid Cap Value Fund 4,654 Putnam VT Money Market Fund 357,958 Putnam VT New Opportunities Fund 361,935 Putnam VT New Value Fund 288,498 Putnam VT OTC & Emerging Growth Fund 94,349 Putnam VT Research Fund 272,964 Putnam VT Small Cap Value Fund 613,148 Putnam VT Utilities Growth and Income Fund 105,373 Putnam VT Vista Fund 541,181 Putnam VT Voyager Fund 1,066,617 |
Investor servicing and custody fees and expenses
During fiscal 2003, the Trust incurred $13,136,985 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 American Government Income Fund $312,859 Putnam VT Capital Appreciation Fund 77,104 Putnam VT Capital Opportunities Fund 10,047 Putnam VT Discovery Growth Fund 83,930 Putnam VT Diversified Income Fund 526,586 Putnam VT Equity Income Fund 77,458 Putnam VT The George Putnam Fund of Boston 493,920 Putnam VT Global Asset Allocation Fund 908,633 Putnam VT Global Equity Fund 831,812 Putnam VT Growth and Income Fund 1,905,498 Putnam VT Growth Opportunities Fund 96,314 Putnam VT Health Sciences Fund 312,805 Putnam VT High Yield Fund 462,386 Putnam VT Income Fund 633,314 Putnam VT International Equity Fund 1,188,692 Putnam VT International Growth and Income Fund 425,264 Putnam VT International New Opportunities Fund 401,657 Putnam VT Investors Fund 335,753 Putnam VT Mid Cap Value Fund 48,977 Putnam VT Money Market Fund 402,150 Putnam VT New Opportunities Fund 766,280 Putnam VT New Value Fund 281,984 Putnam VT OTC & Emerging Growth Fund 109,330 Putnam VT Research Fund 199,417 Putnam VT Small Cap Value Fund 361,979 Putnam VT Utilities Growth and Income Fund 345,293 Putnam VT Vista Fund 314,548 Putnam VT Voyager Fund 1,222,995 |
AMORTIZED COST VALUATION AND DAILY DIVIDEND (for Putnam VT Money Market
Fund only)
The valuation of the fund's portfolio instruments at amortized cost is permitted in accordance with Rule 2a-7 under the Investment Company Act of 1940, and in accordance with certain procedures adopted by the Trustees. The amortized cost of an instrument is determined by valuing it at cost originally and thereafter amortizing any discount or premium from its face value at a constant rate until maturity, regardless of the effect of fluctuating interest rates on the market value of the instrument. Although the amortized cost method provides certainty in valuation, it may result at times in determinations of value that are higher or lower than the price a fund would receive if the instruments were sold. Consequently, in the absence of circumstances described below, changes in the market value of portfolio instruments during periods of rising or falling interest rates will not normally be reflected either in the computation of net asset value of a fund's portfolio or in the daily computation of net income. Under the procedures adopted by the Trustees, the funds must maintain a dollar-weighted average portfolio maturity of 90 days or less, purchase only instruments having remaining maturities of 397 days or less and invest in securities determined by the Trustees to be of high quality with minimal credit risks. The Trustees have also established procedures designed to stabilize, to the extent reasonably possible, the fund's price per share as computed for the purpose of distribution, redemption and repurchase at $1.00. These procedures include review of a fund's portfolio holdings by the Trustees, at such intervals as they may deem appropriate, to determine whether the fund's net asset value calculated by using readily available market quotations deviates from $1.00 per share, and, if so, whether such deviation may result in material dilution or is otherwise unfair to existing shareholders. In the event the Trustees determine that such a deviation exists, they will take such corrective action as they regard as necessary and appropriate, including selling portfolio instruments prior to maturity to realize capital gains or losses or to shorten the average portfolio maturity; withholding dividends; redeeming of shares in kind; or establishing a net asset value per share by using readily available market quotations.
Since the net income of a fund is declared as a dividend each time it is determined, the net asset value per share of that fund remains at $1.00 per share immediately after such determination and dividend declaration. Any increase in the value of a shareholder's investment in a fund representing the reinvestment of dividend income is reflected by an increase in the number of shares of that fund in the shareholder's account on the last business day of each month. It is expected that a fund's net income will be positive each time it is determined. However, if because of realized losses on sales of portfolio investments, a sudden rise in interest rates, or for any other reason the net income of a fund determined at any time is a negative amount, a fund will offset such amount allocable to each then shareholder's account from dividends accrued during the month with respect to such account. If, at the time of payment of a dividend, such negative amount exceeds a shareholder's accrued dividends, the fund will reduce the number of outstanding shares by treating the shareholder as having contributed to the capital of the fund that number of full and fractional shares which represent the amount of the excess. Each shareholder is deemed to have agreed to such contribution in these circumstances by his or her investment in the fund.
INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
PricewaterhouseCoopers LLP, 125 High Street, Boston, Massachusetts 02110, are the Trust's independent auditors, 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 Independent Auditors' Report, financial highlights and financial statements included in the Trust's Annual Report for the fiscal year ended December 31, 2003, filed electronically on March 8, 2004 (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 auditors, given on their authority as experts in auditing and accounting.
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, the Trust 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 the fund's prospectus or Part I of this SAI, or by applicable law, the Trust may engage in each of the practices described below.
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS
Foreign Investments
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 may not be 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, 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, typically are 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 devaluations relative to the U.S. dollar, and future devaluations may adversely affect the value of assets denominated in such currencies. Many emerging market countries have experienced substantial, and in some periods extremely high, rates of inflation or deflation for many years, and future inflation may adversely affect the economies and securities markets of such countries.
In addition, unanticipated political or social developments may affect the value of investments in emerging markets and the availability of additional investments in these markets. The small size, limited trading volume and relative inexperience of the securities markets in these countries may make 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
To manage its exposure to foreign currencies, the fund may engage in foreign currency exchange transactions, including purchasing and selling foreign currency, foreign currency options, foreign currency forward contracts and foreign currency futures contracts and related options. 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.
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 that 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 or that it has an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by Putnam in accordance with procedures established by the Trustees, in such amount are segregated by its custodian), 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) or have an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by Putnam in accordance with procedures established by the Trustees, in such amount are segregated by its custodian). In the case of put options, the fund will segregate assets determined to be liquid by Putnam in accordance with procedures established by the Trustees 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, if the fund holds the security, 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. If the fund does not hold the underlying security, the fund bears the risk that, if the market price exceeds the option strike price, the fund will suffer a loss equal to the difference at the time of exercise. 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 an issue 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, 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 also may be 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 and Other Floating Rate Loans.
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. These loans 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. Putnam Management will be unable to access non-public information to which other investors in syndicated loans may have access. 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. Investments in loan participations may be of any quality, including "distressed" loans, and will be subject to the fund's credit quality policy.
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, and 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.
With respect to its management of investments in floating rate loans, Putnam will normally seek to avoid receiving material, non-public information ("Confidential Information") about the issuers of floating rate loans being considered for acquisition by the fund or held in the fund's portfolio. In many instances, issuers may offer to furnish Confidential Information to prospective purchasers, and to holders, of the issuer's floating rate loans. Putnam's decision not to receive Confidential Information may place Putnam at a disadvantage relative to other investors in floating rate loans (which could have an adverse effect on the price the fund pays or receives when buying or selling loans). Also, in instances where holders of floating rate loans are asked to grant amendments, waivers or consent, Putnam's ability to assess their significance or desirability may be adversely affected. For these and other reasons, it is possible that Putnam's decision not to receive Confidential Information under normal circumstances could adversely affect the fund's investment performance.
Notwithstanding its intention generally not to receive material, non-public information with respect to its management of investments in floating rate loans, Putnam may from time to time come into possession of material, non-public information about the issuers of loans that may be held in the fund's portfolio. Possession of such information may in some instances occur despite Putnam's efforts to avoid such possession, but in other instances Putnam may choose to receive such information (for example, in connection with participation in a creditors' committee with respect to a financially distressed issuer). As, and to the extent, required by applicable law, Putnam's ability to trade in these loans for the account of the fund could potentially be limited by its possession of such information. Such limitations on Putnam's ability to trade could have an adverse effect on the fund by, for example, preventing the fund from selling a loan that is experiencing a material decline in value. In some instances, these trading restrictions could continue in effect for a substantial period of time.
In some instances, other accounts managed by Putnam may hold other securities issued by borrowers whose floating rate loans may be held in the fund's portfolio. These other securities may include, for example, debt securities that are subordinate to the floating rate loans held in the fund's portfolio, convertible debt or common or preferred equity securities. In certain circumstances, such as if the credit quality of the issuer deteriorates, the interests of holders of these other securities may conflict with the interests of the holders of the issuer's floating rate loans. In such cases, Putnam may owe conflicting fiduciary duties to the fund and other client accounts. Putnam will endeavor to carry out its obligations to all of its clients to the fullest extent possible, recognizing that in some cases certain clients may achieve a lower economic return, as a result of these conflicting client interests, than if Putnam's client accounts collectively held only a single category of the issuer's securities.
Floating Rate and Variable Rate Demand Notes
Floating rate and variable rate demand notes and bonds may have a stated maturity in excess of one year, but may have features that 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
Mortgage-backed securities, including collateralized mortgage obligations ("CMOs") and certain stripped mortgage-backed securities represent a participation in, or are secured by, mortgage loans. 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 mortgage-backed and asset-backed securities will have higher than market interest rates and therefore will be purchased at a premium above their par value.
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 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 their volatility.
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 yield to maturity on an interest only or "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, principal only or "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.
Hybrid Instruments
These instruments are generally considered derivatives and include indexed or structured securities, and combine the elements of futures contracts or options with those of debt, preferred equity or a depository instrument. A hybrid instrument may be a debt security, preferred stock, warrant, convertible security, certificate of deposit or other evidence of indebtedness on which a portion of or all interest payments, and/or the principal or stated amount payable at maturity, redemption or retirement, is determined by reference to prices, changes in prices, or differences between prices, of securities, currencies, intangibles, goods, articles or commodities (collectively, "underlying assets"), or by another objective index, economic factor or other measure, including interest rates, currency exchange rates, or commodities or securities indices (collectively, "benchmarks"). Hybrid instruments may take a number of forms, including, but not limited to, debt instruments with interest or principal payments or redemption terms determined by reference to the value of an index at a future time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the conversion terms related to a particular commodity.
The risks of investing in hybrid instruments reflect a combination of the risks of investing in securities, options, futures and currencies. An investment in a hybrid instrument may entail significant risks that are not associated with a similar investment in a traditional debt instrument that has a fixed principal amount, is denominated in U.S. dollars or bears interest either at a fixed rate or a floating rate determined by reference to a common, nationally published benchmark. The risks of a particular hybrid instrument will depend upon the terms of the instrument, but may include the possibility of significant changes in the benchmark(s) or the prices of the underlying assets to which the instrument is linked. Such risks generally depend upon factors unrelated to the operations or credit quality of the issuer of the hybrid instrument, which may not be foreseen by the purchaser, such as economic and political events, the supply and demand of the underlying assets and interest rate movements. Hybrid instruments may be highly volatile and their use by a fund may not be successful.
Hybrid instruments may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Alternatively, hybrid instruments may bear interest at above market rates but bear an increased risk of principal loss (or gain). The latter scenario may result if "leverage" is used to structure the hybrid instrument. Leverage risk occurs when the hybrid instrument is structured so that a given change in a benchmark or underlying asset is multiplied to produce a greater value change in the hybrid instrument, thereby magnifying the risk of loss as well as the potential for gain.
Hybrid instruments can be an efficient means of creating exposure to a particular market, or segment of a market, with the objective of enhancing total return. For example, a fund may wish to take advantage of expected declines in interest rates in several European countries, but avoid the transaction costs associated with buying and currency-hedging the foreign bond positions. One solution would be to purchase a U.S. dollar-denominated hybrid instrument whose redemption price is linked to the average three year interest rate in a designated group of countries. The redemption price formula would provide for payoffs of less than par if rates were above the specified level. Furthermore, a fund could limit the downside risk of the security by establishing a minimum redemption price so that the principal paid at maturity could not be below a predetermined minimum level if interest rates were to rise significantly. The purpose of this arrangement, known as a structured security with an embedded put option, would be to give the fund the desired European bond exposure while avoiding currency risk, limiting downside market risk, and lowering transaction costs. Of course, there is no guarantee that the strategy will be successful and a fund could lose money if, for example, interest rates do not move as anticipated or credit problems develop with the issuer of the hybrid instrument.
Hybrid instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending on the structure of the particular hybrid instrument, changes in a benchmark may be magnified by the terms of the hybrid instrument and have an even more dramatic and substantial effect upon the value of the hybrid instrument. Also, the prices of the hybrid instrument and the benchmark or underlying asset may not move in the same direction or at the same time.
Hybrid instruments may also carry liquidity risk since the instruments are often "customized" to meet the portfolio needs of a particular investor, and therefore, the number of investors that are willing and able to buy such instruments in the secondary market may be smaller than that for more traditional debt securities. Under certain conditions, the redemption value of such an investment could be zero. In addition, because the purchase and sale of hybrid investments could take place in an over-the-counter market without the guarantee of a central clearing organization, or in a transaction between the fund and the issuer of the hybrid instrument, the creditworthiness of the counterparty of the issuer of the hybrid instrument would be an additional risk factor the fund would have to consider and monitor. Hybrid instruments also may not be subject to regulation by the CFTC, which generally regulates the trading of commodity futures by U.S. persons, the SEC, which regulates the offer and sale of securities by and to U.S. persons, or any other governmental regulatory authority.
Structured investments. A structured investment is a security having a return tied to an underlying index or other security or asset class. Structured investments generally are individually negotiated agreements and may be traded over-the-counter. Structured investments are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, or specified instruments (such as commercial bank loans) and the issuance by that entity or one or more classes of securities ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class of structured securities that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there currently is no active trading market for structured securities. Investments in government and government-related and restructured debt instruments are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt and requests to extend additional loan amounts.
Securities of Other Investment Companies. Securities of other investment companies, including shares of closed-end investment companies, unit investment trusts and open-end investment companies, represent interests in professionally managed portfolios that may invest in any type of instrument. These types of instruments are often structured to perform in a similar fashion to a broad based securities index. Investing in these types of securities involves substantially the same risks as investing directly in the underlying instruments, but may involve additional expenses at the investment company-level, such as portfolio management fees and operating expenses. In addition, these types of investments involve the risk that they will not perform in exactly the same fashion, or in response to the same factors, as the index or underlying instruments. Certain types of investment companies, such as closed-end investment companies, issue a fixed number of shares that trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. Others are continuously offered at net asset value, but may also be traded in the secondary market. The extent to which a fund can invest in securities of other investment companies is limited by federal securities 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.
Alternative Investment Strategies
Under normal market conditions, each fund seeks to remain fully invested and to minimize its cash holdings. However, at times Putnam Management may judge that market conditions make pursuing a fund's investment strategies inconsistent with the best interests of its shareholders. Putnam Management then may temporarily use alternative strategies that are mainly designed to limit the fund's losses. In implementing these strategies, the funds may invest primarily in debt securities, preferred stocks, U.S. Government and agency obligations, cash or money market instruments, or any other securities Putnam Management considers consistent with such defensive strategies.
Money market instruments, or short-term debt instruments, consist of obligations such as commercial paper, bank obligations (i.e., certificates of deposit and bankers' acceptances), repurchase agreements and various government obligations, such as Treasury bills. These instruments have a remaining maturity of one year or less and are generally of high credit quality. Money market instruments may be structured to be, or may employ a trust or other form so that they are, eligible investments for money market funds. For example, put features can be used to modify the maturity of a security or interest rate adjustment features can be used to enhance price stability. If a structure fails to function as intended, adverse tax or investment consequences may result. Neither the Internal Revenue Service (IRS) nor any other regulatory authority has ruled definitively on certain legal issues presented by certain structured securities. Future tax or other regulatory determinations could adversely affect the value, liquidity, or tax treatment of the income received from these securities or the nature and timing of distributions made by the funds.
Private Placements and Restricted Securities
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 publicly traded 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 fund 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. 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 and the Trustees have delegated such authority to Putnam Management.
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. 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. If sales of portfolio securities cause the fund to realize net short-term capital gains, such gains will be taxable as ordinary income. 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.
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 the 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 the 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. The 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. The fund's use of derivatives may cause the fund to recognize higher amounts of short-term capital gains, generally taxed to shareholders at ordinary income tax rates. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment.
Industry and sector groups
Putnam uses a customized set of industry and sector groups for classifying securities ("Putnam Investment Codes"). The Putnam Investment Codes are based on an expanded Standard & Poor's industry classification model, modified to be more representative of global investing and more applicable to both large and small capitalization securities.
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. The 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, the 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 the 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 distributed in a timely manner, to its shareholders in the form of dividends (including capital gain dividends).
If the 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 the 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. The fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax.
Hedging transactions. If the fund engages in hedging transactions, including hedging transactions in options, futures contracts, and straddles, or other similar transactions, it will be subject to special tax rules (including constructive sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund's securities, convert long-term capital gains into short-term capital gains or convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund will endeavor to make any available elections pertaining to such transactions in a manner believed to be in the best interests of the fund.
Certain of the fund's hedging activities (including its transactions, if
any, in foreign currencies or foreign currency-denominated instruments)
are likely to produce a difference between its book income and its
taxable income. If the fund's book income exceeds its taxable income,
the distribution (if any) of such excess will be treated as (i) a
dividend to the extent of the fund's remaining earnings and profits
(including earnings and profits arising from tax-exempt income), (ii)
thereafter as a return of capital to the extent of the recipient's basis
in the shares, and (iii) thereafter as gain from the sale or exchange of
a capital asset. If the fund's book income is less than its taxable
income, the fund could be required to make distributions exceeding book
income to qualify as a regulated investment company that is accorded
special tax treatment.
Return of capital distributions. If the fund makes a distribution to you in excess of its current and accumulated "earnings and profits" in any taxable year, the excess distribution will be treated as a return of capital to the extent of your tax basis in your shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces your tax basis in your shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by you of your shares.
Dividends and distributions on the fund's shares are generally subject to federal income tax as described herein to the extent they do not exceed the fund's realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder's investment. Such distributions are likely to occur in respect of shares purchased at a time when the fund's net asset value reflects gains that are either unrealized, or realized but not distributed. Distributions are taxable to a shareholder even if they are paid from income or gains earned by the fund prior to the shareholder's investment (and thus included in the price paid by the shareholder).
Securities issued or purchased at a discount. The 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, the 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 the 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.
Foreign currency-denominated securities and related hedging transactions. The fund's transactions in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned.
If more than 50% of the fund's assets at year end consists of the securities of foreign corporations, the fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries in respect of foreign securities the fund has held for at least the minimum period specified in the Code. In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholder's ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the amount of such taxes. In particular, shareholders must hold their fund shares (without protection from risk of loss) on the ex-dividend date and for at least 15 additional days during the 30-day period surrounding the ex-dividend date to be eligible to claim a foreign tax credit with respect to a given dividend. Shareholders who do not itemize on their federal income tax returns may claim a credit (but no deduction) for such foreign taxes.
Investment by the 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.
Sale or redemption of shares. The sale, exchange or redemption of fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise the gain or loss on the sale, exchange or redemption of fund shares will be treated as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss will be disallowed for Federal income tax purposes to the extent of any exempt-interest dividends received on such shares. In addition, any loss (not already disallowed as provided in the preceding sentence) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gain distributions received by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of fund shares will be disallowed if other shares of the same fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.
Backup withholding. The fund generally is required to withhold and remit to the U.S. Treasury a percentage of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the fund with a correct taxpayer identification number (TIN), who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is not subject to such withholding. The back-up withholding tax rate is 28% for amounts paid through 2010. This legislation will expire and the back-up withholding rate will be 31% for amounts paid after December 31, 2010, unless Congress enacts tax legislation providing otherwise.
In order for a foreign investor to qualify for exemption from the back-up withholding tax rates and for reduced withholding tax rates under income tax treaties, the foreign investor must comply with special certification and filing requirements. Foreign investors in a fund should consult their tax advisers in this regard.
Tax shelter reporting regulations. Under U.S. Treasury regulations issued on February 28, 2003, if a shareholder realizes a loss on disposition of fund shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies.
MANAGEMENT
Trustees
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Name, Address 1, Date of
Birth, Position(s) Held
with Fund and Length of Principal
Service as a Putnam Fund Occupation(s) During Other Directorships
Trustee 2 Past 5 Years Held by Trustee
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Jameson A. Baxter President of Baxter Director of ASHTA Chemicals, Inc., Banta
(9/6/43), Trustee since 1994 Associates, Inc., Corporation (a printing and digital
a private investment firm imaging firm), Ryerson Tull, Inc.
that she founded in 1986. (a steel service corporation),
Advocate Health Care and BoardSource
(formerly the National Center for Nonprofit
Boards). She is Chairman Emeritus of the
Board of Trustees, Mount Holyoke College,
having served as Chairman for five years and
as a board member for thirteen years. Until
2002, Ms. Baxter was a Director of Intermatic
Corporation (a manufacturer of energy control
products).
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Charles B. Curtis President and Chief Member of the Council on Foreign
(4/27/40), Trustee since 2001 Operating Officer, Relations, and the Trustee Advisory Council
Nuclear Threat Initiative of the Applied Physics Laboratory, Johns
(a private foundation Hopkins University and a Senior Advisor to
dealing with national the United Nations Foundation. Until 2003,
security issues). From Mr. Curtis was a Member of the Electric
August 1997 to December Power Research Institute Advisory Council,
1999, Mr. Curtis was a and the University of Chicago Board of
partner at Hogan & Governors for Argonne National Laboratory.
Hartson L.L.P., a Prior to 2002, Mr. Curtis was a Member of
Washington, DC law firm. the Board of Directors of the Gas Technology
Institute and the Board of Directors of the
Environment and Natural Resources Program
Steering Committee, John F. Kennedy School of
Government, Harvard University. Until 2001,
Mr. Curtis was a Member of the Department of
Defense Policy Board and Director of EG&G
Technical Services, Inc. (a fossil energy
research and development support company).
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John A. Hill Vice Chairman, First Director of Devon Energy Corporation,
(1/31/42), Reserve Corporation (a TransMontaigne Oil Company, Continuum
Trustee since 1985 and private equity buyout Health Partners of New York and various
Chairman since 2000 firm that specializes private companies controlled by First
in energy investments Reserve Corporation, as well as a Trustee
in the diversified of TH Lee Putnam Investment Trust (a
world-wide energy closed-end investment company). He is
industry). also a Trustee of Sarah Lawrence College.
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Ronald J. Jackson Private investor. President of the Kathleen and Ronald J. Jackson
(12/17/43), Foundation (a charitable trust). He is also
Trustee since 1996 a Member of the Board of Overseers of WGBH (a
public television and radio station) as well as
a Member of the Board of Overseers of the
Peabody Essex Museum.
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Paul L. Joskow (6/30/47), Elizabeth and James Director of National Grid Transco (a UK
Trustee since 1997 Killian Professor of based holding company with interests in
Economics and Management, electric and gas transmission and distribution,
and Director of the and telecommunications infrastructure).
Center for Energy and He also serves on the board of the Whitehead
Environmental Policy Institute for Biomedical Research (a non-profit
Research at the research institution) and has been President
Massachusetts Institute of the Yale University Council since 1993.
of Technology. Prior to February 2002, he was a Director of
State Farm Indemnity Company (an automobile
insurance company), and prior to March 2000,
he was a Director of New England Electric
System (a public utility holding company).
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Elizabeth T. Kennan Partner in Cambus-Kenneth Chairman of Northeast Utilities and a Director
(2/25/38), Trustee Farm (cattle and of Talbots, Inc. (a distributor of women's
since 1992 thoroughbred horses). apparel) She is a trustee of Centre College,
She is President Emeritus Midway College (in Midway, Kentucky) and National
of Mount Holyoke College. Trust for Historic Preservation. She is also a
Member of The Trustees of Reservations. Prior to
2001, Dr. Kennan served on the oversight committee
of the Folger Shakespeare Library. Prior to
September 2000, she was a Director of Chastain
Real Estate; prior to June 2000, she was a
Director of Bell Atlantic Corp.; and prior to
November 1999, she was a Director of Kentucky
Home Life Insurance Co.
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John H. Mullin, III Chairman and CEO of Director of The Liberty Corporation (a
(6/15/41), Trustee Ridgeway Farm (a limited broadcasting company), Progress Energy, Inc. (a
since 1997 liability company engaged utility company, formerly known as Carolina Power
in timber and farming). & Light) and Sonoco Products, Inc. (a packaging
company). Mr. Mullin is Trustee Emeritus of
Washington & Lee University where he served as
Chairman of the Investment Committee. Until
February 2004 and May 2001, he was a Director of
Alex Brown Realty, Inc. and Graphic Packaging
International Corp., respectively.
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Robert E. Patterson Senior Partner of Cabot Chairman of the Joslin Diabetes Center and a
(3/15/45), Trustee Properties, L.P. and Director of Brandywine Trust Company. Prior to
since 1984 Chairman of Cabot December 2001 and June 2003, Mr. Patterson served
Properties, Inc. Prior as a Trustee of Cabot Industrial Trust and Sea
to December 2001, he was Education Association, respectively.
President of Cabot
Industrial Trust (a
publicly traded real
estate investment
trust).
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W. Thomas Stephens Serves on a number Director of Xcel Energy Incorporated (a public
(9/2/42), Trustee of corporate boards. utility company), TransCanada Pipelines Limited,
since 1997 Norske Canada, Inc. (a paper manufacturer) and
Qwest Communications. Until 2003, Mr. Stephens
was a Director of Mail-Well, Inc. (a diversified
printing company). Prior to July 2001, Mr.
Stephens was Chairman of Mail-Well; and prior
to October 1999, he was CEO of MacMillan-Bloedel,
Ltd. (a forest products company).
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W. Nicholas Thorndike Serves on the boards Director of Courier Corporation (a book publisher
(3/28/33), Trustee of various corporations and manufacturer). He is also a Trustee of
since 1992 and charitable Northeastern University and an honorary Trustee
organizations. of Massachusetts General Hospital, where he
previously served as Chairman and President.
Prior to November 2003 and September 2000, Mr.
Thorndike was a Director of The Providence Journal
Co. (a newspaper publisher) and Bradley Real
Estate, Inc., respectively. Prior to December 2001
and April 2000, he was a Trustee of Cabot
Industrial Trust and Eastern Utilities
Associates, respectively.
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Interested Trustees
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*George Putnam III President of New Director of The Boston Family Office, L.L.C.
(8/10/51), Trustee Generation Research, Inc. (a registered investment advisor), and a Trustee
since 1984 and (a publisher of financial of St. Mark's School and Shore Country Day School.
President since advisory and other Until 2002, Mr. Putnam was a Trustee of the Sea
2000 research services) and Education Association.
New Generation Advisers,
Inc. (a registered
investment advisor to
private funds).
Both firms he founded
in 1986.
-----------------------------------------------------------------------------------------------------------
*A.J.C. Smith Chairman of Putnam Director of Trident Corp. (a limited partnership
(4/13/34), Trustee Investments, Director of with over thirty institutional investors). He
since 1986 and Consultant to Marsh & is also a Trustee of the Carnegie Hall Society,
McLennan Companies, Inc. the Educational Broadcasting Corporation and the
Prior to May 2000 and National Museums of Scotland. He is Chairman of
November 1999, Mr. Smith the Central Park Conservancy and a Member of the
was Chairman and CEO, Board of Overseers of the Joan and Sanford I.
respectively, of Marsh Weill Graduate School of Medical Sciences of
& McLennan Companies, Inc. Cornell University.
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1 The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of December 31, 2003, there were 101 Putnam Funds.
2 Each Trustee serves for an indefinite term, until his or her resignation,
retirement at age 72, death or removal.
* 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,
Putnam Retail Management or Marsh & McLennan Companies, Inc., the parent
company of Putnam Investments and its affiliated companies. Messrs.
Putnam, III and Smith are deemed "interested persons" by virtue of their
positions as officers or shareholders of the fund or Putnam Management,
Putnam Retail Management or Marsh & McLennan Companies, Inc. George
Putnam, III is the President of your Fund and each of the other Putnam
Funds. A.J.C. Smith is Chairman of Putnam Investments and serves
as Director of and Consultant to Marsh & McLennan Companies, Inc.
|
Officers
In addition to George Putnam III, the other officers of the fund are shown below:
-----------------------------------------------------------------------------------------------------------
Name, Address 1, Date of
Birth, Position(s) Held Length of Service with Principal Occupation(s)
with Fund the Putnam Funds During Past 5 Years
-----------------------------------------------------------------------------------------------------------
Charles E. Porter Since 1989 Managing Director, Putnam Investments and
(7/26/38), Executive Putnam Management.
Vice President, Treasurer
and Principal Executive
Officer
-----------------------------------------------------------------------------------------------------------
Patricia C. Flaherty Since 1993 Senior Vice President, Putnam Investments and
(12/1/46), Senior Vice Putnam Management.
President
-----------------------------------------------------------------------------------------------------------
Steven D. Krichmar Since 2002 Managing Director, Putnam Investments. Prior to
(6/27/58), Vice President 2001, Partner, PricewaterhouseCoopers LLP.
and Principal Financial
Officer
-----------------------------------------------------------------------------------------------------------
Michael T. Healy Since 2000 Managing Director, Putnam Investments.
(1/24/58), Assistant
Treasurer and Principal
Accounting Officer
-----------------------------------------------------------------------------------------------------------
Beth S. Mazor Since 2002 Senior Vice President, Putnam Investments.
(4/6/58), Vice President
-----------------------------------------------------------------------------------------------------------
Mark C. Trenchard Since 2002 Senior Vice President, Putnam Investments.
(6/5/62), Vice President
and BSA Compliance Officer
-----------------------------------------------------------------------------------------------------------
William H. Woolverton Since 2003 Managing Director, Putnam Investments, Putnam
(1/17/51), Vice President Management and Putnam Retail Management.
and Chief Legal Officer
-----------------------------------------------------------------------------------------------------------
James P. Pappas Since 2004 Managing Director, Putnam Investments and Putnam
(2/24/53), Vice President Management. During 2002, Mr. Pappas was Chief
Operating Officer of Atalanta/Sosnoff Management
Corporation; prior to 2001 he was President and
Chief Executive Officer of UAM Investment
Services, Inc.
-----------------------------------------------------------------------------------------------------------
Richard S. Robie III Since 2004 Senior Managing Director, Putnam Investments,
(3/30/60), Vice President Putnam Management and Putnam Retail Management.
Prior to 2003, Mr. Robie was Senior Vice President
of United Asset Management Corporation.
-----------------------------------------------------------------------------------------------------------
Judith Cohen Since 1993 Clerk and Assistant Treasurer, The Putnam Funds.
(6/7/45), Clerk and
Assistant Treasurer
-----------------------------------------------------------------------------------------------------------
|
1 The address of each Officer is One Post Office Square, Boston, MA 02109.
Except as stated above, 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.
Committees of the Board of Trustees
Audit and Pricing Committee. The Audit and Pricing Committee provides oversight on matters relating to the preparation of the Funds' financial statements, compliance matters and Code of Ethics issues. This oversight is discharged by regularly meeting with management and the funds' independent auditors and keeping current on industry developments. Duties of this Committee also include the review and evaluation of all matters and relationships pertaining to the funds' independent auditors, including their independence. The members of the Committee include only Trustees who are not "interested persons" of the fund or Putnam Management. Each member of the Committee is "independent" as defined in Sections 303.01(B)(2)(a) and (3) of the listing standards of the New York Stock Exchange and as defined in Section 121(A) of the listing standards of the American Stock Exchange. The Trustees have adopted a written charter for the Committee. The Committee also reviews the funds' policies and procedures for achieving accurate and timely pricing of the funds' shares, including oversight of fair value determinations of individual securities made by Putnam Management or other designated agents of the funds. The Committee oversees compliance by money market funds with Rule 2a-7, interfund transactions pursuant to Rule 17a-7, and the correction of occasional pricing errors. The Committee also receives reports regarding the liquidity of portfolio securities. The Audit and Pricing Committee currently consists of Dr. Joskow (Chairperson), and Messrs. Patterson, Stephens and Thorndike.
Board Policy and Nominating Committee. The Board Policy and Nominating Committee reviews matters pertaining to the operations of the Board of Trustees and its Committees, the compensation of the Trustees and their staff, and the conduct of legal affairs for the funds. The Committee evaluates and recommends all candidates for election as Trustees and recommends the appointment of members and chairs of each board committee. The Committee also reviews policy matters affecting the operation of the Board and its independent staff and makes recommendations to the Board as appropriate. The Committee consists only of Trustees who are not "interested persons" of your fund or Putnam Management. The Committee also oversees the voting of proxies associated with portfolio investments of The Putnam Funds with the goal of ensuring that these proxies are voted in the best interest of the Funds' shareholders. The Board Policy and Nominating Committee currently consists of Ms. Baxter, Dr. Kennan (Chairperson), Messrs. Hill, Patterson and Thorndike. The Board Policy and Nominating Committee will consider nominees for trustee recommended by shareholders of a fund provided shareholders submit their recommendations by the date disclosed in the fund's proxy statement and provided the shareholders' recommendations otherwise comply with applicable securities laws, including Rule 14a-8 under the Securities Exchange Act of 1934.
Brokerage and Custody Committee. The Brokerage and Custody Committee reviews the policies and procedures of the Funds regarding the execution of portfolio transactions for the Funds, including policies regarding the allocation of brokerage commissions and soft dollar credits. The Committee reviews periodic reports regarding the Funds' activities involving derivative securities. The Committee also reviews and evaluates matters relating to the Funds' custody arrangements. The Committee currently consists of Messrs. Curtis, Jackson (Chairperson), Mullin and Thorndike, Ms. Baxter and Dr. Kennan.
Communication, Service, and Marketing Committee. This Committee examines the quality, cost and levels of services provided to the shareholders of The Putnam Funds. The Committee also reviews communications sent from the Funds to their shareholders, including shareholder reports, prospectuses, newsletters and other materials. In addition, this Committee oversees marketing and sales communications of the Funds' distributor. The Committee currently consists of Messrs. Putnam, III, (Chairperson), Smith, Stephens, Thorndike and Dr. Joskow.
Contract Committee. The Contract Committee reviews and evaluates at least annually all arrangements pertaining to (i) the engagement of Putnam Investment Management and its affiliates to provide services to the Funds, (ii) the expenditure of the Funds' assets for distribution purposes pursuant to the Distribution Plans of the Funds, and (iii) the engagement of other persons to provide material services to the Funds, including in particular those instances where the cost of services is shared between the Funds and Putnam Investment Management and its affiliates or where Putnam Investment Management or its affiliates have a material interest. The Committee recommends to the Trustees such changes in arrangements that it deems appropriate. The Committee also reviews the conversion of Class B shares into Class A shares of the Funds in accordance with procedures approved by the Trustees. After review and evaluation, the Committee recommends to the Trustees the proposed organization of new Fund products, and proposed structural changes to existing Funds. The Committee is comprised exclusively of Independent Trustees. The Committee currently consists of Ms. Baxter (Chairperson), Dr. Kennan and Messrs. Curtis, Jackson, and Mullin.
Distributions Committee. This Committee oversees all Fund distributions and the management of the Closed-End Funds. In regard to distributions, the Committee approves the amount and timing of distributions paid by all the Funds to the shareholders when the Trustees are not in session. This Committee also meets regularly with representatives of Putnam Investments to review distribution levels and the Funds' distribution policies. Its oversight of the Closed-End Funds includes (i) investment performance, (ii) trading activity, (iii) determinations with respect to sunroof provisions, (iv) disclosure practices, and (v) the use of leverage. The Committee currently consists of Messrs. Jackson, Patterson (Chairperson) and Thorndike and Dr. Joskow.
Executive Committee. The functions of the Executive Committee are twofold. The first is to ensure that the Funds' business may be conducted at times when it is not feasible to convene a meeting of the Trustees or for the Trustees to act by written consent. The Committee may exercise any or all of the power and authority of the Trustees when the Trustees are not in session. The second is to establish annual and ongoing goals, objectives and priorities for the Board of Trustees and to insure coordination of all efforts between the Trustees and Putnam Investments on behalf of the shareholders of the Putnam Funds. The Committee currently consists of Ms. Baxter and Messrs. Hill (Chairman), Jackson, Putnam, III and Thorndike and Dr. Joskow.
Investment Oversight Committees. These Committees regularly meet with investment personnel of Putnam Investment Management to review the investment performance and strategies of the Putnam Funds in light of their stated investment objectives and policies. Investment Oversight Committee A currently consists of Messrs. Thorndike (Chairperson), Smith and Ms. Baxter. Investment Oversight Committee B currently consists of Messrs. Curtis (Chairperson), Hill and Stephens. Investment Committee C currently consists of Messrs. Mullin (Chairperson), Putnam, III and Dr. Kennan. Investment Oversight Committee D currently consists of Messrs. Patterson (Chairperson), Jackson and Dr. Joskow.
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.
Putnam Management is a subsidiary of Putnam Management Trust, a Massachusetts business trust owned by Putnam LLC, which is also the parent company of Putnam Retail Management, Putnam Advisory Company, LLC (a wholly-owned subsidiary of The Putnam Advisory Company Trust) and Putnam Fiduciary Trust Company. Putnam LLC, which generally conducts business under the name Putnam Investments, is a wholly-owned subsidiary of Putnam Investments Trust, a holding company that, except for a minority stake owned by employees, is 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 that 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 Retail Management 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.
In considering the Management Contract, the Trustees consider numerous factors they believe to be relevant, including the advisor's research and decision-making processes, the methods adopted to assure compliance with the fund's investment objectives, policies and restrictions; the level of research required to select the securities appropriate for investment by the fund; the education, experience and number of advisory personnel; the level of skill and effort required to manage the fund; the value of services provided by the advisor; the economies and diseconomies of scale reflected in the management fee; the advisor's profitability; the financial condition and stability of the advisor; the advisor's trade allocation methods; the standards and performance in seeking best execution; allocation for brokerage and research and use of soft dollars; the fund's total return performance compared with its peers. Putnam has established several management fee categories to fit the particular characteristics of different types of funds.
The nature and complexity of international and global funds generally makes these funds more research intensive than funds that invest mainly in U.S. companies, due to the greater difficulty of obtaining information regarding the companies in which the fund invests, and the governmental, economic and market conditions of the various countries outside of the U.S. In addition, trade execution and settlement may be more costly than in the U.S.
Conversely, the research intensity for a U.S. money market or bond fund is typically less than for a international or global fund or a U.S. equity fund due to the more ready availability of information regarding the issuer, the security, the accessibility of the trading market and the typically lower trading and execution costs. See "Portfolio Transactions - Brokerage and Research Services."
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. The fund pays commissions on certain securities traded in the over-the-counter markets. 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 economic analysis, investment research and database services, industry and company reviews, evaluations of investments, recommendations as to the purchase and sale of investments, performance measurement services, subscriptions, pricing services, quotation services, news services and computer equipment (investment-related hardware and software) utilized by Putnam Management's managers and analysts. Where the services referred to above are used by Putnam Management not exclusively 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 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.
Principal Underwriter
Putnam Retail Management is the principal underwriter of shares of the fund and the other continuously offered Putnam funds. Putnam Retail Management 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 Retail Management.
Personal Investments by Employees of Putnam Management and Putnam Retail
Management and Officers and Trustees of the Fund
Employees of Putnam Management and Putnam Retail Management 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 Retail Management (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, approved 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 that 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.
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 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.
The fund may from time to time pay custodial or investor servicing agent 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. 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.
Counsel to the Trust and the Independent Trustees
Ropes & Gray LLP serves as counsel to the Trust and the independent Trustees, and is located at One International Place, Boston, Massachusetts 02110.
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, normally 4:00 p.m. Eastern time. 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 official closing price for certain markets) 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 ask 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. Currency exchange rates are normally determined at the close of trading in London, England (11:00 a.m., New York time). The closing prices for securities in markets or on exchanges outside the U.S. that close prior to the close of the Exchange not fully reflect events that occur after such close but before the close of the Exchange which will not be reflected in the computation of the fund's net asset value. As a result, the fund has adopted fair value pricing procedures, which, among other things, require the fund to fair value such securities if there has been a movement in the U.S. market that exceeds a specified threshold. Although the threshold may be revised from time to time and the number of days on which fair value prices will be used will depend on market activity, it is possible that fair value prices will be used by the fund to a significant extent. In addition, securities held by some of the funds may be traded in foreign markets that are open for business on days that the 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.
In addition, 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 prior to the close of the Exchange. Occasionally, events affecting the value of such securities may occur between the time of the determination of value 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.
The funds may also value their assets at fair value under other circumstances pursuant to procedures approved by the Trustees.
Money Market Funds
Money market funds generally value their portfolio securities at amortized cost according to Rule 2a-7 under the Investment Company Act of 1940.
Since the net income of a money market fund is declared as a dividend each time it is determined, the net asset value per share of a money market fund remains at $1.00 per share immediately after such determination and dividend declaration. Any increase in the value of a shareholder's investment in a money market fund representing the reinvestment of dividend income is reflected by an increase in the number of shares of that fund in the shareholder's account on the last business day of each month. It is expected that a money market fund's net income will normally be positive each time it is determined. However, if because of realized losses on sales of portfolio investments, a sudden rise in interest rates, or for any other reason the net income of a fund determined at any time is a negative amount, a money market fund may offset such amount allocable to each then shareholder's account from dividends accrued during the month with respect to such account. If, at the time of payment of a dividend, such negative amount exceeds a shareholder's accrued dividends, a money market fund may reduce the number of outstanding shares by treating the shareholder as having contributed to the capital of the fund that number of full and fractional shares which represent the amount of the excess. Each shareholder is deemed to have agreed to such contribution in these circumstances by his or her investment in a money market fund.
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 Retail Management 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 Retail Management 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 Retail Management 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.
PROXY VOTING GUIDELINES AND PROCEDURES
The Trustees of the Putnam funds have established proxy voting guidelines and procedures that govern the voting of proxies for the securities held in the funds' portfolios. The proxy voting guidelines summarize the funds' positions on various issues of concern to investors, and provide direction to the proxy voting service used by the funds as to how fund portfolio securities should be voted on proposals dealing with particular issues. The proxy voting procedures explain the role of the Trustees, Putnam Management, the proxy voting service and the funds' proxy coordinator in the proxy voting process, describe the procedures for referring matters involving investment considerations to the investment personnel of Putnam Management and describe the procedures for handling potential conflicts of interest. The Putnam funds' proxy voting guidelines and procedures are included in this SAI as Appendix A. In accordance with SEC regulations, the fund's proxy voting record for the twelve-month period ended June 30, 2004 will be filed with the SEC no later than August 31, 2004.
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
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
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
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
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, LLC, the
fund's investment manager.
"Putnam Retail Management" -- Putnam Retail Management Limited
Partnership, 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 Investments" -- The name under which Putnam LLC, the
parent company of Putnam Management
and its affiliates, generally conducts
business.
|
Appendix A
Proxy voting guidelines of the Putnam funds
The proxy voting guidelines below summarize the funds' positions on various issues of concern to investors, and give a general indication of how fund portfolio securities will be voted on proposals dealing with particular issues. The funds' proxy voting service is instructed to vote all proxies relating to fund portfolio securities in accordance with these guidelines, except as otherwise instructed by the Proxy Coordinator, a member of Trustee Administration who is appointed to assist in the coordination and voting of the fund's proxies.
The proxy voting guidelines are just that - guidelines. The guidelines are not exhaustive and do not include all potential voting issues. Because proxy issues and the circumstances of individual companies are so varied, there may be instances when the funds may not vote in strict adherence to these guidelines. For example, the proxy voting service is expected to bring to the Proxy Coordinator's attention proxy questions that are company-specific and of a non-routine nature and, although covered by the guidelines, may be more appropriately handled on a case-by-case basis.
Similarly, Putnam Management's investment professionals, as part of their ongoing review and analysis of all fund portfolio holdings, are responsible for monitoring significant corporate developments, including proxy proposals submitted to shareholders, and notifying the Proxy Coordinator of circumstances where the interests of fund shareholders may warrant a vote contrary to these guidelines. In such instances, the investment professionals will submit a written recommendation to the Proxy Coordinator and the person or persons designated by Putnam Management's Legal and Compliance Department to assist in processing referral items pursuant to the funds' "Proxy Voting Procedures." The Proxy Coordinator, in consultation with the Senior Vice President, Executive Vice President, and/or the Chair of the Board Policy and Nominating Committee, as appropriate, will determine how the funds' proxies will be voted. When indicated, the Chair of the Board Policy and Nominating Committee may consult with other members of the Committee or the full Board of Trustees.
The following guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals that have been approved and recommended by a company's board of directors. Part II deals with proposals submitted by shareholders for inclusion in proxy statements. Part III addresses unique considerations pertaining to foreign issuers.
I. BOARD-APPROVED PROPOSALS
The vast majority of matters presented to shareholders for a vote involve proposals made by a company itself (sometimes referred to as "management proposals"), which have been approved and recommended by its board of directors. In view of the enhanced corporate governance practices currently being implemented in public companies and the funds' intent to hold corporate boards accountable for their actions in promoting shareholder interests, the funds' proxies generally will be voted in support of decisions reached by independent boards of directors. Accordingly, the funds' proxies will be voted for board-approved proposals, except as follows:
Matters relating to the board of directors
The board of directors has the important role of overseeing management and its performance on behalf of shareholders. The funds' proxies will be voted for the election of the company's nominees for directors and for board-approved proposals on other matters relating to the board of directors (provided that such nominees and other matters have been approved by an independent nominating committee), except as follows:
* The funds will withhold votes for the entire board of directors if
* the board does not have a majority of independent directors or
* the board does not have nominating, audit, and compensation committees composed solely of independent directors
Commentary: While these requirements will likely become mandatory for most public companies in the near future as a result of pending NYSE and NASDAQ rule proposals, the funds' Trustees believe that there is no excuse for public company boards that fail to implement these vital governance reforms at their next annual meeting. For these purposes, an "independent director" is a director who meets all requirements to serve as an independent director of a company under the pending NYSE rule proposals (i.e., no material business relationships with the company, no present or recent employment relationship with the company (including employment of immediate family members); and, in the case of audit committee members, no compensation for non-board services). As indicated below, the funds will generally vote on a case-by-case basis on board-approved proposals where the board fails to meet these basic independence standards.
* The funds will withhold votes for any nominee for director who is considered an independent director by the company and who has received compensation from the company other than for service as a director (e.g., investment banking, consulting, legal, or financial advisory fees).
Commentary: The funds' Trustees believe that receipt of compensation for services other than service as a director raises significant independence issues. The funds will withhold votes for any nominee for director who is considered an independent director by the company and who receives such compensation.
* The funds will withhold votes for the entire board of directors if the board has more than 19 members or fewer than five members, absent special circumstances.
Commentary: The funds' Trustees believe that the size of the board of directors can have a direct impact on the ability of the board to govern effectively. Boards that have too many members can be unwieldy and ultimately inhibit their ability to oversee management performance. Boards that have too few members can stifle innovation and lead to excessive influence by management.
* The funds will vote on a case-by-case basis in contested elections of directors.
* The funds will withhold votes for any nominee for director who attends less than 75% of board and committee meetings without valid reasons for the absences (e.g., illness, personal emergency, etc.).
Commentary: Being a director of a company requires a significant time commitment to adequately prepare for and attend the company's board and committee meetings. Directors must be able to commit the time and attention necessary to perform their fiduciary duties in proper fashion, particularly in times of crisis.
The funds' Trustees are concerned about over-committed directors. In some cases, directors may serve on too many boards to make a meaningful contribution. This may be particularly true for senior executives of public companies (or other directors with substantially full-time employment) who serve on more than a few outside boards. The funds may withhold votes from such directors on a case-by-case basis where it appears that they may be unable to discharge their duties properly because of excessive commitments.
* The funds will withhold votes for any nominee for director of a public company (Company A) who is employed as a senior executive of another public company (Company B) if a director of Company B serves as a senior executive of Company A (commonly referred to as an "interlocking directorate").
Commentary: The funds' Trustees believe that interlocking directorships are inconsistent with the degree of independence required for outside directors of public companies.
Board independence depends not only on its members' individual relationships, but also the board's overall attitude toward management. Independent boards are committed to good corporate governance practices and, by providing objective independent judgment, enhancing shareholder value. The funds may withhold votes on a case-by-case basis from some or all directors who, through their lack of independence, have failed to observe good corporate governance practices or, through specific corporate action, have demonstrated a disregard for the interest of shareholders.
* The funds will vote against proposals to classify a board, absent special circumstances indicating that shareholder interests would be better served by this structure.
Commentary: Under a typical classified board structure, the directors are divided into three classes, with each class serving a three-year term. The classified board structure results in directors serving staggered terms, with usually only a third of the directors up for re-election at any given annual meeting. The funds' Trustees generally believe that it is appropriate for directors to stand for election each year, but recognize that, in special circumstances, shareholder interests may be better served under a classified board structure.
Executive Compensation
The funds generally favor compensation programs that relate executive compensation to a company's long-term performance. The funds will vote on a case-by-case basis on board-approved proposals relating to executive compensation, except as follows:
* Except where the funds are otherwise withholding votes for the entire board of directors, the funds will vote for stock option plans that will result in an average annual dilution of 1.67% or less (including all equity-based plans).
* The funds will vote against stock option plans that permit replacing or repricing of underwater options (and against any proposal to authorize such replacement or repricing of underwater options).
* The funds will vote against stock option plans that permit issuance of options with an exercise price below the stock's current market price.
* Except where the funds are otherwise withholding votes for the entire board of directors, the funds will vote for employee stock purchase plans that have the following features: (1) the shares purchased under the plan are acquired for no less than 85% of their market value; (2) the offering period under the plan is 27 months or less; and (3) dilution is 10% or less.
Commentary: Companies should have compensation programs that are reasonable and that align shareholder and management interests over the longer term. Further, disclosure of compensation programs should provide absolute transparency to shareholders regarding the sources and amounts of, and the factors influencing, executive compensation. Appropriately designed equity-based compensation plans can be an effective way to align the interests of long-term shareholders with the interests of management. The funds may vote against executive compensation proposals on a case-by-case basis where compensation is excessive by reasonable corporate standards, or where a company fails to provide transparent disclosure of executive compensation. In voting on proposals relating to executive compensation, the funds will consider whether the proposal has been approved by an independent compensation committee of the board.
Capitalization
Many proxy proposals involve changes in a company's capitalization, including the authorization of additional stock, the repurchase of outstanding stock, or the approval of a stock split. The management of a company's capital structure involves a number of important issues, including cash flow, financing needs and market conditions that are unique to the circumstances of each company. As a result, the funds will vote on a case-by-case basis on board-approved proposals involving changes to a company's capitalization, except that where the funds are not otherwise withholding votes from the entire board of directors:
* The funds will vote for proposals relating to the authorization of additional common stock (except where such proposals relate to a specific transaction).
* The funds will vote for proposals to effect stock splits (excluding reverse stock splits.)
* The funds will vote for proposals authorizing share repurchase programs.
Commentary: A company may decide to authorize additional shares of common stock for reasons relating to executive compensation or for routine business purposes. For the most part, these decisions are best left to the board of directors and senior management. The funds will vote on a case-by-case basis, however, on other proposals to change a company's capitalization, including the authorization of common stock with special voting rights, the authorization or issuance of common stock in connection with a specific transaction (e.g., an acquisition, merger or reorganization) or the authorization or issuance of preferred stock. Actions such as these involve a number of considerations that may impact a shareholder's investment and warrant a case-by-case determination.
Acquisitions, mergers, reincorporations, reorganizations and other transactions
Shareholders may be confronted with a number of different types of transactions, including acquisitions, mergers, reorganizations involving business combinations, liquidations and sale of all or substantially all of a company's assets, which may require their consent. Voting on such proposals involves considerations unique to each transaction. As a result, the funds will vote on a case-by-case basis on board-approved proposals to effect these types of transactions, except as follows:
* The funds will vote for mergers and reorganizations involving business combinations designed solely to reincorporate a company in Delaware.
Commentary: A company may reincorporate into another state through a merger or reorganization by setting up a "shell" company in a different state and then merging the company into the new company. While reincorporation into states with extensive and established corporate laws - notably Delaware - provides companies and shareholders with a more well-defined legal framework, generally speaking, shareholders must carefully consider the reasons for a reincorporation into another jurisdiction, including especially offshore jurisdictions.
Anti-takeover measures
Some proxy proposals involve efforts by management to make it more difficult for an outside party to take control of the company without the approval of the company's board of directors. These include adoption of a shareholder rights plan, requiring supermajority voting on particular issues, adoption of fair price provisions, issuance of blank check preferred stock and the creation of a separate class of stock with disparate voting rights. Such proposals may adversely affect shareholder rights, lead to management entrenchment, or create conflicts of interest. As a result, the funds will vote against board-approved proposals to adopt such anti-takeover measures, except as follows:
* The funds will vote on a case-by-case basis on proposals to ratify or approve shareholder rights plans (commonly referred to as "poison pills"); and
* The funds will vote on a case-by-case basis on proposals to adopt fair price provisions.
Commentary: The funds' Trustees recognize that poison pills and fair price provisions may enhance shareholder value under certain circumstances. As a result, the funds will consider proposals to approve such matters on a case-by-case basis.
Other business matters
Many proxies involve approval of routine business matters, such as changing the company's name, ratifying the appointment of auditors and procedural matters relating to the shareholder meeting. For the most part, these routine matters do not materially affect shareholder interests and are best left to the board of directors and senior management of the company. The funds will vote for board-approved proposals approving such matters, except as follows:
* The funds will vote on a case-by-case basis on proposals to amend a company's charter or bylaws (except for charter amendments necessary or to effect stock splits to change a company's name or to authorize additional shares of common stock).
* The funds will vote against authorization to transact other unidentified, substantive business at the meeting.
* The funds will vote on a case-by-case basis on other business matters where the funds are otherwise withholding votes for the entire board of directors.
Commentary: Charter and bylaw amendments and the transaction of other unidentified, substantive business at a shareholder meeting may directly affect shareholder rights and have a significant impact on shareholder value. As a result, the funds do not view such items as routine business matters. Putnam Management's investment professionals and the funds' proxy voting service may also bring to the Proxy Coordinator's attention company-specific items that they believe to be non-routine and warranting special consideration. Under these circumstances, the funds will vote on a case-by-case basis.
II. SHAREHOLDER PROPOSALS
SEC regulations permit shareholders to submit proposals for inclusion in a company's proxy statement. These proposals generally seek to change some aspect of a company's corporate governance structure or to change some aspect of its business operations. The funds will vote in accordance with the recommendation of the company's board of directors on all shareholder proposals, except as follows:
* The funds will vote for shareholder proposals to declassify a board, absent special circumstances which would indicate that shareholder interests are better served by a classified board structure.
* The funds will vote for shareholder proposals to require shareholder approval of shareholder rights plans.
* The funds will vote for shareholder proposals that are consistent with the fund's proxy voting guidelines for board-approved proposals.
* The funds will vote on a case-by-case basis on other shareholder proposals where the funds are otherwise withholding votes for the entire board of directors.
Commentary: In light of the substantial reforms in corporate governance that are currently underway, the funds' Trustees believe that effective corporate reforms should be promoted by holding boards of directors - and in particular, their independent directors - accountable for their actions, rather than imposing additional legal restrictions on board governance through piecemeal proposals. Generally speaking, shareholder proposals relating to business operations are often motivated primarily by political or social concerns, rather than the interests of shareholders as investors in an economic enterprise. As stated above, the funds' Trustees believe that boards of directors and management are responsible for ensuring that their businesses are operating in accordance with high legal and ethical standards and should be held accountable for resulting corporate behavior. Accordingly, the funds will generally support the recommendations of boards that meet the basic independence and governance standards established in these guidelines. Where boards fail to meet these standards, the funds will generally evaluate shareholder proposals on a case-by-case basis.
III. VOTING SHARES OF FOREIGN ISSUERS
Many of the funds invest on a global basis and, as a result, they may be required to vote shares held in foreign issuers - i.e., issuers that are incorporated under the laws of a foreign jurisdiction and that are not listed on a U.S. securities exchange or the NASDAQ stock market. Because foreign issuers are incorporated under the laws of countries and jurisdictions outside the U.S., protection for shareholders may vary significantly from jurisdiction to jurisdiction. Laws governing foreign issuers may, in some cases, provide substantially less protection for shareholders. As a result, the foregoing guidelines, which are premised on the existence of a sound corporate governance and disclosure framework, may not be appropriate under some circumstances for foreign issuers. The funds will vote proxies of foreign issuers in accordance with the foregoing guidelines where applicable, except as follows:
* The funds will vote for shareholder proposals calling for a majority of the directors to be independent of management.
* The funds will vote for shareholder proposals seeking to increase the independence of board nominating, audit and compensation committees.
* The funds will vote for shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated.
* The funds will vote on case-by-case basis on proposals relating to (1) the issuance of common stock in excess of 20% of a company's outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of a company's outstanding common stock where shareholders have preemptive rights.
Commentary: In many non-U.S. markets, shareholders who vote proxies for shares of a foreign issuer are not able to trade in that company's stock within a given period of time on or around the shareholder meeting date. This practice is known as "share blocking." In countries where share blocking is practiced, the funds will vote proxies only with direction from Putnam Management's investment professionals.
As adopted March 14, 2003
Proxy voting procedures of the Putnam funds
The proxy voting procedures below explain the role of the funds' Trustees, the proxy voting service and the Proxy Coordinator, as well as how the process will work when a proxy question needs to be handled on a case by case basis, or when there may be a conflict of interest.
The role of the funds' Trustees
The Trustees of the Putnam funds exercise control of the voting of proxies through their Board Policy and Nominating Committee, which is composed entirely of independent Trustees. The Board Policy and Nominating Committee oversees the proxy voting process and participates, as needed, in the resolution of issues that need to be handled on a case-by-case basis. The Committee annually reviews and recommends, for Trustee approval, guidelines governing the funds' proxy votes, including how the funds vote on specific proposals and which matters are to be considered on a case-by-case basis. The Trustees are assisted in this process by their independent administrative staff ("Fund Administration"), independent legal counsel, and an independent proxy voting service. The Trustees also receive assistance from Putnam Investment Management, LLC ("Putnam Management"), the funds' investment advisor, on matters involving investment judgments. In all cases, the ultimate decision on voting proxies rests with the Trustees, acting as fiduciaries on behalf of the shareholders of the funds.
The role of the proxy voting service
The funds have engaged an independent proxy voting service to assist in the voting of proxies. The proxy voting service is responsible for coordinating with the funds' custodians to ensure that all proxy materials received by the custodians relating to the funds' portfolio securities are processed in a timely fashion. To the extent applicable, the proxy voting service votes all proxies in accordance with the proxy voting guidelines established by the Trustees. The proxy voting service will refer proxy questions to the Proxy Coordinator (described below) for instructions under circumstances where: (1) the application of the proxy voting guidelines is unclear; (2) a particular proxy question is not covered by the guidelines; or (3) the guidelines call for specific instructions on a case-by-case basis. The proxy voting service is also requested to call to the Proxy Coordinator's attention specific proxy questions that, while governed by a guideline, appear to involve unusual or controversial issues. The funds also utilize research services relating to proxy questions provided by the proxy voting service and by other firms.
The role of the Proxy Coordinator
Each year, a member of Fund Administration is appointed Proxy Coordinator to assist in the coordination and voting of the funds' proxies. The Proxy Coordinator will deal directly with the proxy voting service and, in the case of proxy questions referred by the proxy voting service, will solicit voting recommendations and instructions from Fund Administration, the Chair of the Board Policy and Nominating Committee, and Putnam Management's investment professionals, as appropriate. The Proxy Coordinator is responsible for ensuring that these questions and referrals are responded to in a timely fashion and for transmitting appropriate voting instructions to the proxy voting service.
Voting procedures for referral items
As discussed above, the proxy voting service will refer proxy questions to the Proxy Coordinator under certain circumstances. When the application of the proxy voting guidelines is unclear or a particular proxy question is not covered by the guidelines (and does not involve investment considerations), the Proxy Coordinator will assist in interpreting the guidelines and, as appropriate, consult with the Senior Vice President of Fund Administration, the Executive Vice President of Fund Administration, and the Chair of the Board Policy and Nominating Committee on how the funds' shares will be voted.
For proxy questions that require a case-by-case analysis pursuant to the guidelines or that are not covered by the guidelines but involve investment considerations, the Proxy Coordinator will refer such questions, through a written request, to Putnam Management's investment professionals for a voting recommendation. Such referrals will be made in cooperation with the person or persons designated by Putnam Management's Legal and Compliance Department to assist in processing such referral items. In connection with each such referral item, the Legal and Compliance Department will conduct a conflicts of interest review, as described below under "Conflicts of Interest," and provide a conflicts of interest report (the "Conflicts Report") to the Proxy Coordinator describing the results of such review. After receiving a referral item from the Proxy Coordinator, Putnam Management's investment professionals will provide a written recommendation to the Proxy Coordinator and the person or persons designated by the Legal and Compliance Department to assist in processing referral items. Such recommendation will set forth (1) how the proxies should be voted; (2) the basis and rationale for such recommendation; and (3) any contacts the investment professionals have had with respect to the referral item with non-investment personnel of Putnam Management or with outside parties (except for routine communications from proxy solicitors). The Proxy Coordinator will then review the investment professionals' recommendation and the Conflicts Report with the Senior Vice President and/or Executive Vice President in determining how to vote the funds' proxies. The Proxy Coordinator will maintain a record of all proxy questions that have been referred to Putnam Management's investment professionals, the voting recommendation, and the Conflicts Report.
In some situations, the Proxy Coordinator, the Senior Vice President, and/or the Executive Vice President may determine that a particular proxy question raises policy issues requiring consultation with the Chair of the Board Policy and Nominating Committee, who, in turn, may decide to bring the particular proxy question to the Committee or the full Board of Trustees for consideration.
Conflicts of interest
Occasions may arise where a person or organization involved in the proxy voting process may have a conflict of interest. A conflict of interest may exist, for example, if Putnam Management has a business relationship with (or is actively soliciting business from) either the company soliciting the proxy or a third party that has a material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote. Any individual with knowledge of a personal conflict of interest (e.g., familial relationship with company management) relating to a particular referral item shall disclose that conflict to the Proxy Coordinator and the Legal and Compliance Department and otherwise remove himself or herself from the proxy voting process. The Legal and Compliance Department will review each item referred to Putnam Management's investment professionals to determine if a conflict of interest exists and will provide the Proxy Coordinator with a Conflicts Report for each referral item that (1) describes any conflict of interest; (2) discusses the procedures used to address such conflict of interest; and (3) discloses any contacts from parties outside Putnam Management (other than routine communications from proxy solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation. The Conflicts Report will also include written confirmation that any recommendation from an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.
As adopted March 14, 2003
PUTNAM VARIABLE TRUST
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) 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.
(b) By-Laws, as amended through January 30, 1997 - Incorporated by
reference to Post-Effective Amendment No. 27 to the Registrant's
Registration Statement.
(c)(1) 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.
(c)(2) Portions of By-Laws Relating to Shareholders' Rights --
Incorporated by reference to Post-Effective Amendment No. 14 to the
Registrant's Registration Statement.
(d) Management Contract dated October 2, 1987, as most recently supplemented March 17, 2003 -- Incorporated by reference to Post-Effective Amendment No. 32 to the Registrant's Registration Statement.
(e)(1) Distributor's Contract dated May 6, 1994 -- Incorporated by
reference to Post-Effective Amendment No. 10 to the Registrant's
Registration Statement.
(e)(2) Form of Dealer Sales Contract -- Incorporated by reference to
Post-Effective Amendment No. 11 to the Registrant's Registration
Statement.
(e)(3) Form of Financial Institution Sales Contract -- Incorporated by
reference to Post-Effective Amendment No. 11 to the Registrant's
Registration Statement.
(f) Not applicable.
(g) Custodian Agreement with Putnam Fiduciary Trust Company dated May 3,
1991, as amended June 1, 2001 -- Incorporated by reference to
Post-Effective Amendment No. 29 to the Registrant's Registration
Statement.
(h)(1) 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.
(h)(2) Letter of Indemnity dated December 18, 2003 with Putnam
Investment Management.
(i) Opinion of Ropes & Gray LLP, including consent -- Incorporated by
reference to Post-Effective Amendment No. 32 to the Registrant's
Registration Statement.
(j) Consent of Independent Accountants.
(k) Not applicable.
(l) 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.
(m)(1) Class IB Distribution Plan and Agreement -- Incorporated by
reference to Post-Effective Amendment No. 24 to the Registrant's
Registration Statement.
(m)(2) Form of Dealer Service Agreement -- Incorporated by reference to
Post-Effective Amendment No. 15 to the Registrant's Registration
Statement.
(m)(3) Form of Financial Institution Service Agreement -- Incorporated
by reference to Post-Effective Amendment No. 15 to the Registrant's
Registration Statement.
(n) Rule 18f-3(d) Plan -- Incorporated by reference to Post-Effective
Amendment No. 31 to the Registrant's Registration Statement.
(p)(1) The Putnam Funds Code of Ethics -- Incorporated by reference to
Post-Effective Amendment No. 24 to the Registrant's Registration
Statement.
(p)(2) Putnam Investments Code of Ethics.
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
---- -----------------------------------------
Yannick Aron Prior to June 2002, Quantitative Analyst and
Vice President Risk Manager, New Flag Asset Management
Limited, 8-10 Haymarket, London, England;
Prior to December 2002, Consultant, Reech
Capital PLC, CNU Tower, 1 Undershaft,
London, England.
Matthew P. Beagle Prior to August 2002, Manager, DiamondCluster
Assistant Vice President International, Suite 3000, John Hancock Center,
N. Michigan Ave., Chicago, IL 60611
Navin Belani Prior to December 2002, Associate, Salomon
Vice President Smith Barney, 388 Greenwich St., New York, NY
10013
Michael Boam Prior to June 2002, Credit Analyst and Deputy
Vice President Portfolio Manager, New Flag Asset Management
Limited, 8-10 Haymarket, London, England
Daniel S. Choquette Prior to September 2002, Fixed Income Derivatives
Senior Vice President Trader, Lehman Brothers, 745 7th Avenue,
New York, NY 10019
John R.S. Cutler Member, Burst Media, L.L.C., 10 New England
Vice President Executive Park, Burlington, MA 01803
Timothy Francis Edmonstone Prior to December 2002, Vice President and
Vice President Equities Analyst, BT Funds Management, Chifley
Tower, One Chifley Place, Sydney NSW 2000,
Australia
Irene M. Esteves Board of Directors Member, SC Johnson
Managing Director Commercialmarkets, 8310 16th St., Stutevant,
WI 53177; Board of Directors Member, Mrs.
Bairds Bakeries, 515 Jones St., Suite 200,
Fort Worth, Texas 76102
Gian D. Fabbri Partner, KF Style, LLC, 73 Charles St., Boston,
Assistant Vice President MA 02114
Maria Garcia-Lomas Prior to July 2003, Research Analyst, J.P. Morgan
Vice President Securities Ltd., 125 London Wall, London, England
Haralabos E. Gakidis Prior to October 2003, Head of Consulting and
Vice President Business Development, The RISConsulting Group LLC,
420 Boylston Street, Suite 302, Boston, MA 02116
Charles E. Haldeman Prior to October 2002, Chief Executive Officer,
President and Chief Delaware Management Holdings, Inc., 2005 Market
Executive Officer Street, Philadelphia, PA 19103
Carolyn J. Herzog Prior to August, 2002, Consultant, Ajilon, One
Assistant Vice President Van de Graaf Road, Burlington, MA 01803
Andrew Holmes Prior to June 2002, Director, New Flag Asset
Senior Vice President Management Limited, 8-10 Haymarket, London, England
Anna M. Lester Prior to June 2002, Owner, Sloan Sweatshirt Company,
Assistant Vice President 50 Memorial Drive, Cambridge, MA 02142
David Mael Prior to April 2002, Senior Consultant, Solutions
Senior Vice President Atlantic, 109 Kingston St., Boston, MA 02210
Cyril S. Malak Prior to April 2002, Associate, JPMorgan Chase,
Vice President 270 Park Ave., New York, NY 10019
Michael Mills Prior to June 2002, Senior Credit Analyst, New Flag
Vice President Asset Management Limited, 8-10 Haymarket, London,
England
Donald E. Mullin Corporate Representative and Board Member, Delta
Senior Vice President Dental Plan of Massachusetts, 10 Presidents Landing,
P.O. Box 94104, Medford, MA 02155
Terrence W. Norchi Prior to April 2002, Senior Vice President, Citigroup
Senior Vice President Asset Management, 100 First Stamford Place, Stamford,
CT 06902
Brian P. O'Toole Prior to June 2002, Managing Director, Citigroup
Managing Director Asset Management, 100 First Stamford Place, Stamford,
CT 06902
Walton D. Pearson Prior to February 2003, Senior Vice President and
Senior Vice President Senior Portfolio Manager, Alliance Capital Management
L.P., 1345 Avenue of the Americas, New York, NY 10105
Michael C. Petro Prior to October 2002, Senior Research Associate, RBC
Vice President Dain Rauscher, 60 S. 6th St., Minneapolis, MN 55402
Lauritz Ringdal Prior to August 2002, Research Analyst, Standard Bank
Vice President London, Cannon Bridge House, 25 Dowgate Hill, London,
England
Richard S. Robie III Prior to November 2001, Senior Vice President, Old
Managing Director Mutual (US) Asset Managers, One International Place,
Boston, MA 02110
David H. Schiff Prior to July 2002, Principal, State Street Global
Senior Vice President Advisors, Two International Place, Boston, MA 02110
Justin M. Scott Director, DSI Proprieties (Neja) Ltd., Epping Rd.,
Managing Director Reydon, Essex CM19 5RD
Anton D. Simon Prior to June 2002, Chief Investment Officer, New Flag
Senior Vice President Asset Management Limited, 8-10 Haymarket, London, England
Julian Wellesley Prior to November 2002, Senior Vice President, Schroder
Senior Vice President Investment Management Inc., 875 Third Avenue, New York,
NY 10020
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
Fifield W. Whitman Prior to August 2002, Vice President and Portfolio
Vice President Manager, Credit Suisse Asset Management, 3 Exchange
Square, 44th Floor, Hong Kong
James Yu Prior to October 2002, Vice President and Portfolio
Vice President Manager, John Hancock Funds, 101 Huntington Ave.,
Boston, MA 02199
|
Item 27. Principal Underwriter
(a) Putnam Retail Management Limited Partnership 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 Asset Allocation Funds, Putnam California Tax Exempt Income Fund, Putnam Capital Appreciation Fund, Putnam Classic Equity Fund, Putnam Convertible Income-Growth Trust, Putnam Discovery Growth Fund (formerly Putnam Voyager Fund II), Putnam Diversified Income Trust, Putnam Equity Income Fund, Putnam Europe Equity Fund (formerly 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 Income Trust, Putnam Global Natural Resources Fund, The Putnam Fund for Growth and Income, 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 Equity Fund (formerly 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 Ohio Tax Exempt Income Fund, Putnam OTC & Emerging Growth Fund, Putnam Pennsylvania Tax Exempt 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.
(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 Gordon Silver Vice President |
The principal business address of each person is One Post Office Square, Boston, MA 02109:
Name Position and Office with the Underwriter ----------------------------------------------------------------------------- Aaron III, Jefferson F. Senior Vice President Ahearn, Paul D. Assistant Vice President Ahonen, Jennifer D. Vice President Alpaugh, Christopher S. Senior Vice President Amisano, Paulette C. Vice President Arends, Michael K. Senior Vice President Asher, Steven E. Senior Vice President Avery, Scott A. Senior Vice President Ayala-Macey, Ann C. Assistant Vice President Aymond, Christian E. Senior Vice President Babcock III, Warren W. Senior Vice President Baker, Christopher H. Vice President Baker, Erin L. Assistant Vice President Barker, Andrew R. Senior Vice President Barnett, William E. Vice President Barrett, Thomas Senior Vice President Bartony, Paul A. Assistant Vice President Beatty, Elizabeth A. Vice President Beatty, Steven M. Senior Vice President Bergeron, Christopher E. Vice President Beringer, Thomas C. Senior Vice President Blackall, William B. Vice President Borden, Richard S. Vice President Bosinger, Paul C. Vice President Bouchard, Keith R. Senior Vice President Bradford Jr., Linwood E. Managing Director Brady, Jeremy V. Assistant Vice President Brandt, Sarah J. Assistant Vice President Brennan, Sean M. Assistant Vice President Bromberger, Steven L. Assistant Vice President Buckner, Gail D. Senior Vice President Bumpus, James F. Managing Director Bunker, Christopher M. Senior Vice President Burns, Robert J. Assistant Vice President Bush, Jessica Scoon Assistant Vice President Cabana, Susan D. Senior Vice President Call, Timothy W. Senior Vice President Callinan, Richard E. Vice President Campbell, Christopher F. Assistant Vice President Caramazza, Pierre C. Vice President Card, Victoria R. Assistant Vice President Carey, Christopher P. Vice President Carlson, Erik C. Assistant Vice President Caruso, Robert M. Vice President Casey, David M. Senior Vice President Cass, William D. Senior Vice President Caswell, Kendra L. Assistant Vice President Ceruolo, Christopher Vice President Chang, America J. Assistant Vice President Chapman, Frederick Vice President Church, Brian T. Vice President Clark, James F. Assistant Vice President Colman, Donald M. Vice President Condon, Meagan L. Vice President Condron, Brett P. Vice President Coneeny, Mark L. Managing Director Connelly, Donald A. Senior Vice President Connolly, William T. Managing Director Cooley, Jonathan A. Vice President Corbett, Dennis T. Senior Vice President Corvinus, F. Nicholas Managing Director Corwin, Kathleen K. Vice President Cosentino, Joseph D. Assistant Vice President Coveney, Anne M. Senior Vice President Covington, Ryan R. Vice President Crean, Jeremy P. Assistant Vice President Cristo, Chad H. Senior Vice President Croft, Ariane D. Assistant Vice President Crotty, Kenneth Brian Assistant Vice President Curry, John D. Senior Vice President Dabney, Richard W. Senior Vice President Dahill, Jessica E. Vice President Damon, James G. Vice President Davidian, Raymond A. Vice President Days, Nancy M. Assistant Vice President DeAngelis, Adam Vice President DeFao, Michael E. Vice President DeGregorio Jr., Richard A. Assistant Vice President DeNitto, James P. Vice President Demmler, Joseph L. Managing Director Dempsey, Thomas F. Vice President Dence, Mark A. Vice President Derbyshire, Ralph C. Managing Director Dewey Jr., Paul S. Senior Vice President DiBuono, Jeffrey P. Assistant Vice President DiGiacomo, Jill M. Assistant Vice President Donadio, Joyce M. Vice President Doyle, Michelle Anne Assistant Vice President Economou, Stefan G. Assistant Vice President Eidelberg, Kathleen E. Assistant Vice President Elder, Michael D. Managing Director Emhof, Joseph R. Senior Vice President Esteves, Irene M. Sr Managing Director Ethington, Robert H. Assistant Vice President Fanning, Virginia A. Senior Vice President Fardy, Michael S. Vice President Favaloro, Beth A. Senior Vice President Felan III, Catarino Vice President Feldman, Susan H. Senior Vice President Fiedler, Stephen J. Vice President Fishman, Mitchell B. Managing Director Fleming, Robert A. Assistant Vice President Flynn, Kevin M. Vice President Foley, Timothy P. Senior Vice President Forrester, Gordon M. Managing Director Foster, Laura G. Vice President Fronc, Richard Joseph Assistant Vice President Gaudette, Marjorie B. Vice President Gelinas, Christopher S. Assistant Vice President Giessler, Todd C. Vice President Gipson, Zachary A. Vice President Graham, Trevor C. Assistant Vice President Grant, Lisa M. Vice President Grant, Mitchell T. Managing Director Greenwood, Julie M. Assistant Vice President Greenwood, Todd M. Assistant Vice President Gundersen, Jan S. Vice President Hachey, Andrew J. Senior Vice President Hagan IV, J. Addison Vice President Haines, James B. Vice President Halloran, James E. Senior Vice President Halloran, Thomas W. Managing Director Hartigan, Craig W. Senior Vice President Hartigan, Maureen A. Vice President Hassinger, Aaron D. Assistant Vice President Herman, C. Christopher Senior Vice President Herold, Karen Assistant Vice President Hess Jr., William C. Vice President Hill, Kelli K. Senior Vice President Holland, Jeffrey K. Vice President Holmes, Maureen A. Senior Vice President Holt, Michael A. Assistant Vice President Hooley Jr., Daniel F. Vice President Howe, Denise M. Assistant Vice President Howley, Sean J. Senior Vice President Hoyt, Paula J. Vice President Hughes, Carolyn Senior Vice President Hyland, John P. Vice President Iglesias, Louis X. Senior Vice President Iris, Stefan K. Assistant Vice President Jean, Ellen F. Assistant Vice President Jeans, Kathleen A. Assistant Vice President Jones, Thomas A. Senior Vice President Jordan, Stephen R. Assistant Vice President Kapinos, Peter J. Senior Vice President Kay, Karen R. Senior Vice President Kelley, Brian J. Senior Vice President Kelly, A. Siobhan Senior Vice President Kelly, David Managing Director Kennedy, Daniel J. Senior Vice President Kerivan, John R. Senior Vice President Kersten, Charles N. Vice President King, Brian Francis Vice President Kinsman, Anne M. Senior Vice President Kircher, Richard T. Assistant Vice President Kirk Kahn, Deborah H. Senior Vice President Kline, Bonnie S. Assistant Vice President Knutzen, Erik L. Managing Director Kokos, Casey T. Assistant Vice President Komodromos, Costas G. Senior Vice President Kotsiras, Steven Vice President Kringdon, Joseph D. Managing Director LaGreca, Jennifer J. Assistant Vice President Lacascia, Charles M. Senior Vice President Lacour, Jayme J. Assistant Vice President Landers, Michael J. Vice President Larson, John R. Vice President Lathrop, James D. Senior Vice President Lawson, Louise A. Vice President Legge, Deirdre M. Vice President Levy, Eric S. Managing Director Levy, Norman S. Senior Vice President Lewandowski Jr., Edward V. Senior Vice President Lighty, Brian C. Assistant Vice President Link, Christopher H. Vice President Lohmeier, Andrew Vice President Loomis, Marcy R. Assistant Vice President Lukens, James W. Senior Vice President Mackey, Paul Stuart Assistant Vice President Maglio, Nancy T. Assistant Vice President Mahoney, Julie M. Vice President Malonson, Michelle T. Assistant Vice President Mansfield, Scott D. Vice President Martin, David M. Vice President Martin, Kevin J. Assistant Vice President Massey, Shannon M. Assistant Vice President McCafferty, Karen A. Senior Vice President McCarthy, Anne B. Assistant Vice President McCarthy, Conor W. Senior Vice President McCollough, Martha J. Assistant Vice President McConville, Paul D. Senior Vice President McCullough, Ronald L. Senior Vice President McCutcheon, Bruce A. Senior Vice President McDermott, Robert J. Vice President McDonough, Timothy M. Assistant Vice President McInis, Brian S. Vice President McKenna, Mark J. Managing Director Mehta, Ashok Senior Vice President Metelmann, Claye A. Senior Vice President Michejda, Marek A. Senior Vice President Mikami, Darryl K. Managing Director Miller, Bart D. Senior Vice President Mills, Ronald K. Vice President Minsk, Judith Vice President Mintzer, Matthew P. Senior Vice President Moffitt, Kevin L. Vice President Molesky, Kevin P. Vice President Monaghan, Richard A. Director Monahan, Kimberly A. Vice President Moody, Paul R. Senior Vice President Moret, Mitchell L. Senior Vice President Nadherny, Robert Charles Managing Director Nakamura, Denise-Marie Senior Vice President Nardone, Laura E. Assistant Vice President Nelson, Brian W. Vice President Nickodemus, John P. Managing Director Nickolini, Michael A. Assistant Vice President Nickse, Gail A. Assistant Vice President Nicolazzo, Jon C. Senior Vice President Nielson, James D. Assistant Vice President Noble, John D. Senior Vice President Nowak, Kristin M. Assistant Vice President O'Callaghan, John Senior Vice President O'Connell Jr., Paul P. Vice President O'Connor, Brian P. Senior Vice President O'Connor, Matthew P. Senior Vice President O'Sullivan, Shawn M. Vice President Olsen, Stephen Assistant Vice President Olson, Christopher W. Vice President Otsuka, Fumihiko Senior Vice President Palmer, Patrick J. Senior Vice President Patton, Robert J. Senior Vice President Perkins, Erin M. Vice President Phoenix, Joseph T. Managing Director Piersol, Willow B. Vice President Platt, Thomas R. Senior Vice President Prina, Paul Senior Vice President Pulkrabek, Scott M. Senior Vice President Puzzangara, John C. Vice President Quinn, Brian J. Vice President Reed, Frank C. Vice President Regner, Thomas M. Managing Director Reid, Sandra L. Vice President Reilly, Michael A. Vice President Rickenbach, Christian R. Assistant Vice President Rider, Wendy A. Senior Vice President Riley, Megan G. Assistant Vice President Ritter, Jesse D. Assistant Vice President Rodammer, Kris Senior Vice President Rosalanko, Thomas J. Managing Director Rose, Laura Assistant Vice President Rosmarin, Adam L. Vice President Rountree, G. Manning Senior Vice President Rowe, Robert B. Senior Vice President Ruys de Perez, Charles A. Managing Director Ryan, Deborah A. Vice President Ryan, William M. Senior Vice President Salsman, Elizabeth P. Assistant Vice President Saunders, Catherine A. Managing Director Saur, Karl W. Vice President Sawyer, Matthew A. Senior Vice President Schaub, Gerald D. Vice President Schultz, Susan L. Assistant Vice President Schwartz, Brian M. Assistant Vice President Segers, Elizabeth R. Managing Director Seward, Lindsay H. Assistant Vice President Shanahan, Christopher W. Vice President Short Jr., Harold P. Senior Vice President Short, Jonathan D. Senior Vice President Siebold, Mark J. Vice President Siemon Jr., Frank E. Vice President Silva, J. Paul Senior Vice President Silver, Gordon H. Sr Managing Director Sliney, Michael J. Vice President Sorenson, Carolyn L. Assistant Vice President Spiegel, Steven Sr Managing Director Spigelmeyer III, Carl M. Vice President Spooner, Andrew C. Assistant Vice President Squires, Melissa H. Vice President Stairs, Ben Senior Vice President Stark, Kerri A. Vice President Stickney, Paul R. Senior Vice President Storkerson, John K. Senior Vice President Stuart, James F. Vice President Sullivan, Brian L. Senior Vice President Sullivan, Elaine M. Senior Vice President Sweeney, Brian S. Vice President Sweeney, Janet C. Senior Vice President Taber, Rene B. Vice President Tanner, B. Iris Vice President Tassinari, Michael J. Assistant Vice President Tavares, April M. Vice President Telling, John R. Senior Vice President Terry, Kimberley A. Assistant Vice President Tierney, Tracy L. Assistant Vice President Totovian, James H. Assistant Vice President Tyrie, David C. Managing Director Urban, Elke R. Assistant Vice President Valentin, Carmen Assistant Vice President Vaughan, Lindsey G. Senior Vice President Wadera-Sandhu, Jyotsana Assistant Vice President Wallace, Stephen Vice President Walsh, Julia A. Vice President Weiss, Manuel Managing Director Werths, Beth K. Vice President Whitaker, J. Greg Senior Vice President Whiting, Amanda M. Vice President Wilde, Michael R. Assistant Vice President Williams, Christopher J. Assistant Vice President Williams, Jason M. Vice President Wolfson, Jane Senior Vice President Woolverton, William H. Managing Director Young, Kathleen M. Vice President Zechello, Steven R. Vice President Zografos, Laura J. Senior Vice President deMont, Lisa M. 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 Clerk, Judith Cohen; Registrant's investment adviser, Putnam Investment Management LLC; Registrant's principal underwriter, Putnam Retail Management Limited Partnership; 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 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
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.
POWER OF ATTORNEY
I, the undersigned Officer of each of the funds listed on Schedule A hereto, hereby severally constitute and appoint John Hill, George Putnam III, Patricia Flaherty, John W. Gerstmayr and Bryan Chegwidden, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacities indicated below, the Registration Statements on Form N-1A or Form N-14 of each of the funds listed on Schedule A hereto and any and all amendments (including post-effective amendments) to said Registration Statements and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof.
WITNESS my hand and seal on the date set forth below.
Signature Title Date
/s/Charles E. Porter
------------------------ Executive Vice President; March 19, 2004
Charles E. Porter Treasurer and Principal
Executive Officer
|
Schedule A
Putnam American Government Income Fund
Putnam Arizona Tax Exempt Income Fund
Putnam Asset Allocation Funds
Putnam California Tax Exempt Income Fund
Putnam Capital Appreciation Fund
Putnam Classic Equity Fund
Putnam Convertible Income-Growth Trust
Putnam Diversified Income Trust
Putnam Discovery Growth Fund
Putnam Equity Income Fund
Putnam Europe Equity Fund
Putnam Florida Tax Exempt Income Fund
Putnam Funds Trust
The George Putnam Fund of Boston
Putnam Global Equity Fund
Putnam Global Income Trust
Putnam Global Natural Resources Fund
The Putnam Fund for Growth and Income
Putnam Health Sciences Trust
Putnam High Yield Advantage Fund
Putnam High Yield Trust
Putnam Income Fund
Putnam Intermediate U.S. Government Income Fund
Putnam International Equity 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 Ohio Tax Exempt Income Fund
Putnam OTC & Emerging Growth Fund
Putnam Pennsylvania 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
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 29th day of April, 2004.
Putnam Variable Trust
By: /s/ Charles E. Porter, Executive 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
John A. Hill Chairman of the Board and Trustee
George Putnam, III President and Trustee
Charles E. Porter Executive Vice President; Treasurer and
Principal Executive Officer
Steven D. Krichmar Vice President and Principal Financial Officer
Michael T. Healy Assistant Treasurer and
Principal Accounting Officer
Jameson A. Baxter Trustee
Charles B. Curtis Trustee
Ronald J. Jackson Trustee
Paul L. Joskow Trustee
Elizabeth T. Kennan Trustee
John H. Mullin, III Trustee
Robert E. Patterson Trustee
A.J.C. Smith Trustee
W. Thomas Stephens Trustee
W. Nicholas Thorndike Trustee
By: /s/ Charles E. Porter,
as Attorney-in-Fact
April 29, 2004
|
EXHIBIT INDEX
Item 23 Exhibit
(h)(2) Letter of Indemnity dated December 18, 2003 with Putnam Investment Management.
(j) Consent of Independent Accountants
(p)(2) Putnam Investments Code of Ethics
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective Amendment No. 33 to the registration statement on Form N-1A (File No. 33-17486) ("Registration Statement") of our report dated February 17, 2004, relating to the financial statements and financial highlights appearing in the December 31, 2003 Annual Report of Putnam Variable Trust, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial highlights" and "Independent Auditors and Financial Statements" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts April 26, 2004 |
December 18, 2003
The Putnam Funds
One Post Office Square
Boston, MA 02109
Re: Letter of Indemnity
Ladies and Gentlemen:
Reference is made to the administrative proceedings (the "Administrative Proceedings") commenced on October 28, 2003 against Putnam Investment Management LLC ("Putnam") by the Securities and Exchange Commission and by the Massachusetts Securities Division alleging various matters related to market timing or other improper trading activity in Putnam Fund shares. Putnam serves as investment manager for each of the Putnam Funds (the "Funds") pursuant to Management Contracts which are subject to termination by the Funds on 60 days notice. Putnam is an indirect wholly-owned subsidiary of Putnam Investments LLC, which is in turn an indirect majority-owned subsidiary of March & McLennan Companies Inc.
Whereas the independent trustees of the Funds have undertaken various investigations of the matters alleged in the Administrative Proceedings; and
Whereas these matters and related matters (such as the fair valuation of portfolio holdings, the disclosure of portfolio holdings and prospectus disclosures related to the foregoing) may be the basis of further regulatory actions involving or potentially affecting the Funds or Putnam;
Whereas these matters and related matters are the basis in whole or in part for numerous private actions brought by shareholders of the Funds, in many cases as purported class actions or derivative actions, variously against the Funds, their Trustees and officers, Putnam and certain other parties (the "Private Litigation"); and
Whereas these matters and related matters may be the basis for further private actions against the Funds, their Trustees and officers;
In consideration of the continuation of the current Management Contract and other contractual and financial arrangements between each Fund and Putnam and its affiliates, Putnam hereby agrees to indemnify and hold harmless each of the Funds against any and all loss, damage, liability and expense, including reasonable fees and expenses of counsel, arising out of the matters alleged in the Administrative Proceedings, the Private Litigation or any proceedings or actions that may be threatened or commenced in the future by any person (including any regulatory authority) arising out of matters reasonably related to the foregoing matters, including without limitation:
(i) all legal and other expenses incurred by the Funds in connection with investigations undertaken by the independent Trustees;
(ii) all legal and other expenses incurred by the Funds in connection with any such proceedings or actions, including without limitation expenses related to the defense of any such proceedings or actions, compliance with disclosure requirements related to the foregoing and any special communications to Fund shareholders;
(iii) all liabilities and expenses incurred by the Funds in connection with any judgment resulting from, or settlement of, any such proceedings or actions; and
(iv) all liabilities and expenses incurred by the Funds under the provisions of the Agreement and Declaration of Trust of any Fund providing for indemnification of trustees and officers.
The Funds will use their best efforts to notify Putnam of any proceedings or actions commenced against them or against their Trustees or officers, but the failure to provide such notification shall not relieve Putnam of any liability or obligation hereunder. The Funds shall be entitled to defend any such proceedings or action against them using counsel of their choosing. Putnam shall be entitled, at its expense, to participate in the defense of any such proceedings or actions against the Funds and shall be entitled to defend any such proceedings or actions against Putnam, in each case using counsel of their choosing. The Funds will not enter into any settlement of any such proceeding or action without the consent of Putnam which consent shall not be unreasonably withheld.
In the event that the foregoing indemnification shall be unavailable to any Fund, then Putnam hereby agrees to contribute to the amount paid or payable by a Fund as a result of any loss, damage, liability or expense in such proportion as is appropriate to reflect the relative fault of Putnam and such Fund with respect to the matters which resulted in such loss, damage, liability or expense, as well as any other relevant equitable considerations.
To the extent Putnam or MMC makes a payment under this indemnity agreement, Putnam or MMC may seek reimbursement for such payment under any applicable policies of insurance.
The foregoing undertakings by Putnam shall survive the termination of any of the aforesaid Management Contracts.
Please acknowledge your receipt and acceptance of the foregoing by signing the enclosed copy of this letter in the space provided below.
Very truly yours,
Putnam Investment Management LLC
By -----------------------------
The foregoing undertakings are hereby accepted:
The Putnam Funds
By -----------------------------
GUARANTY
For good and valuable consideration, the receipt of which is hereby acknowledged, Marsh & McLennan Companies, Inc. hereby absolutely, unconditionally and irrevocably guarantees the payment by Putnam when due of all sums payable by it under this Agreement.
IN WITNESS WHEREOF, it has caused this Guaranty to be executed by its officers hereunto duly authorized as of the day and year first written above.
Marsh & McLennan Companies, Inc.
By -----------------------------
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 9/2003
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 Transactions.............................................6
C. Discouraged Transactions...........................................10
D. Exempted Transactions..............................................11
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
Investments Limited.......................................31
Section V. Reporting Requirements for All Employees...................33
Section VI. Education Requirements....................................37
Section VII. Compliance and Appeal Procedures.........................39
Appendix A............................................................41
Preamble..............................................................43
Definitions: Insider Trading.........................................45
Section 1. Rules Concerning Inside Information........................47
Section 2. Overview of Insider Trading................................51
Appendix B. Policy Statement Regarding Employee Trades in Shares
of Putnam Closed-End Funds................................57
Appendix C. Clearance Form for Portfolio Manager Sales Out of
Personal Account of Securities Also Held by Fund
(For compliance with "Contra-Trading" Rule)...............59
Appendix D. Procedures for Approval of New Financial Instruments..... 61
Appendix E. AIMR Code of Ethics and Standards of Professional
Responsibility .......................................................63
Index.................................................................71
|
* Overview
Every Putnam employee is required, as a condition of continued employment, to read, understand, and comply with the entire Code of Ethics. Additionally, employees are expected to comply with the policies and procedures contained within the Putnam Employee Handbook, which can be accessed on-line through www.ibenefitcenter.com. 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. 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 $100 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 through the on-line pre-clearance system or 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).
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 broad market 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 purchase and then sell at a profit, or sell and then repurchase at a lower price, 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 purposes of the law are to ensure that companies and their employees comply with all applicable laws and 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 and the law.
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, LLC (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), exchange traded index funds containing a portfolio or securities of 25 or more issuers (e.g., SPDRs, WEBs, QQQs), 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 (in the "Workplace Community" section of ibenefitcenter.com) 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 the Putnam ibenefitcenter
(https://www.ibenefitcenter.com) Workplace Community tab, Employee
Essentials menu. 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 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. 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 Transactions
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 broad market indexes (such as the Dow Jone Industrial Average, the NASDAQ index and the S&P 100 and 500 indexes) and short selling "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.
RULE 6
No Putnam employee shall engage in market timing strategies within Putnam mutual funds, including within Putnam's Profit Sharing Retirement Plan accounts and deferred compensation accounts.
EXCEPTIONS
None.
COMMENTS
"Market timing" occurs when a person frequently purchases and sells shares of mutual funds based upon the activity of equity markets on the days that the purchases and sales are effected. Putnam has determined that market timing has a detrimental effect on the performance of the mutual funds managed by Putnam, and Putnam has taken steps to reduce instances of market timing by brokers and shareholders in the mutual funds. Putnam therefore expects that Putnam employees will avoid making frequent trades into and out of the Putnam mutual funds, including transactions made within Putnam's Profit Sharing Retirement Plan and other deferred compensation vehicles.
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 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 purchase and then sell at a profit, or sell and then repurchase at a lower price, 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 (including a Chief Investment Officer with respect to an account he manages) 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 (including designation of a security for inclusion in the portfolio of the Putnam Research Fund), he shall sell any such security or related derivative security purchased in a transaction for his personal account within the preceding seven calendar days.
EXCEPTIONS
None.
COMMENTS
1. This Rule applies to portfolio managers (including Chief Investment Officers with respect to accounts they manage) in connection with any purchase (no matter how small) in any client account managed 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 or CIO to be aware of the placement of all orders for purchases of a security by client accounts that he or she manages 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 (including a Chief Investment Officer with respect to an account she manages) 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 (including designation of a security for inclusion in the portfolio of the Putnam Research Fund); 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 (including the removal of a security from the portfolio of the Putnam Research Fund).
EXCEPTIONS
None.
COMMENTS
1. This Rule applies to portfolio managers (including Chief Investment Officers with respect to accounts they manage) in connection with to any transaction (no matter how small) in any client account managed 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 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 $100 in value, or any accumulation of gifts which in aggregate exceeds $100 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 $100.
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. In addition, all employees responsible for the preparation, filing, or distribution of any regulatory filings or public communications must ensure that such filings or communications are timely, complete, fair, accurate, and understandable.
EXCEPTIONS
None.
COMMENTS
1. 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.
2. All financial books and records must be prepared and maintained in accordance with Generally Accepted Accounting Principles and Putnam's existing accounting controls, to the extent applicable.
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.
COMMENTS
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., Thomas H. Lee Partners, L.P., Ampega Asset Management, GMBH, and Sceptre Investment Counsel, Ltd.
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
Putnam's policy statements relating to these matters are contained in the "Computer System and Network Responsibilities" section of the "Employment Issues" category within the Employee Handbook. The on-line Employee Handbook is located in the Putnam ibenefitcenter (https://www.ibenefitcenter.com) at the "Policies and Procedures" section of the "Workplace Community" tab.
RULE 16
All employees must follow and abide by the spirit of the Code of Ethics and the Standards of Professional Conduct of the Association of Investment Management and Research (AIMR). The texts of the AIMR Code of Ethics and Standards of Professional Conduct are set forth in Exhibit E.
RULE 17
Except as provided below, no employee may disclose to any outside organization or person any non-public personal information about any individual who is a current or former shareholder of any Putnam retail or institutional fund, or current or former client of a Putnam company. All employees shall follow the security procedures as established from time to time by a Putnam company to protect the confidentiality of all shareholder and client account information.
Except as Putnam's Legal and Compliance Department may expressly authorize, no employee shall collect any non-public personal information about a prospective or current shareholder of a Putnam Fund or prospective or current client of a Putnam company, other than through an account application (or corresponding information provided by the shareholder's financial representative) or in connection with executing shareholder or client transactions, nor shall any information be collected other than the following: name, address, telephone number, social security number, and investment, broker, and transaction information.
EXCEPTIONS
Putnam Employees. Non-public personal information may be disclosed to Putnam employees in connection with processing transactions or maintaining accounts for shareholders of a Putnam fund and clients of a Putnam company, to the extent that access to such information is necessary to the performance of that employee's job functions.
Shareholder Consent Exception. Non-public personal information about a shareholder's or client's account may be provided to a non-Putnam organization at the specific request of the shareholder or client or with the shareholder's or client's prior written consent.
Broker or Adviser Exception. Non-public personal information about a shareholder's or client's account may be provided to the shareholder's or client's broker of record.
Third Party Service Provider Exception. Non-public personal information may be disclosed to a service provider that is not affiliated with a Putnam fund or Putnam company only when such disclosure is necessary for the service provider to perform the specific services contracted for, and only (a) if the service provider executes Putnam's standard confidentiality agreement, or (b) pursuant to an agreement containing a confidentiality provision that has been approved by the Legal and Compliance Department. Examples of such service providers include proxy solicitors and proxy vote tabulators, mail services and providers of other administrative services, and Information Services Division consultants who have access to non-public personal information.
COMMENTS
1. Non-public personal information is any information that personally identifies a shareholder of a Putnam fund or client of a Putnam company and is not derived from publicly available sources. This privacy policy applies to shareholders or clients that are individuals, not institutions. However, as a general matter, all information that we receive about a shareholder of a Putnam fund or client of a Putnam company shall be treated as confidential. No employee may sell or otherwise provide shareholder or client lists or any other information relating to a shareholder or client to any marketing organization.
2. All Putnam employees with access to shareholder or client account information must be trained in and follow Putnam's security procedures designed to safeguard that information from unauthorized use. For example, a telephone representative must be trained in and follow Putnam's security procedures to verify the identity of a caller requesting account information.
3. Any questions regarding this privacy policy should be directed to Putnam's Legal and Compliance Department. A violation of this policy will be subject to the sanctions imposed for violations of Putnam's Code of Ethics.
4. Employees must report any violation of this policy or any possible breach of the confidentiality of client information (whether intentional or accidental) to the Managing Director in charge of the employee's business unit. Managing Directors who are notified of such a violation or possible breach must immediately report it in writing to Putnam's General Counsel and, in the event of a breach of computerized data, Putnam's Chief Technology Officer.
RULE 18
No employee may engage in any money laundering activity or facilitate any money-laundering activity through the use of any Putnam account or client account. Any situations giving rise to a suspicion that attempted money laundering may be occurring in any account must be reported immediately to the Managing Director in charge of the employee's business unit. Managing Directors who are notified of such a suspicion of money laundering activity must immediately report it in writing to Putnam's General Counsel and Chief Financial Officer.
RULE 19
All employees must comply with the record retention requirements applicable to the business unit.
COMMENT
Employees should check with their managers or the Chief Administrative Officer of their division to determine what record retention requirements apply to their business unit.
* Section IV. Special Rules for Officers and Employees of Putnam Investments Limited
RULE 1
In situations subject to Section I.A., Rule 1 (Restricted List Personal Securities Transactions), the Putnam Investments Limited. ("PIL") employee must obtain clearance not only as provided in that rule, but also from PIL'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 PIL 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 PIL 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 PIL.
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 PIL 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 PIL. No PIL employee may enter into any margin or any other special dealing arrangement with any broker-dealer without the prior written consent of the PIL Compliance Officer.
EXCEPTIONS
None.
IMPLEMENTATION
PIL employees will be notified separately of this requirement once a year by the PIL Compliance Officer, and are required to provide an annual certification of compliance with the Rule.
All PIL 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 PIL. The London Administrator will forward copies of the confirms to the Boston Administrator. PIL 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, PIL 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, PIL employees must observe the relevant procedures set forth in PIL's Compliance Manual, a copy of which is sent to each PIL 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 Investments Limited ("PIL"). Employees of PIL 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 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 by e-mail 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 could give rise to a claim against Putnam 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.
RULE 9
If a Putnam employee believes that there has been a violation of any of the rules of the Code of Ethics, that employee must promptly notify the Code of Ethics Officer, Bill Woolverton, or the Deputy Code of Ethics Officer, Andy Hachey, of the violation.
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 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 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 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, LLC, 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 Investments Limited ("PIL") 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. 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. 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, LLC 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
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:
SPECIFIC REASON SALE OF SECURITIES IS INAPPROPRIATE FOR FUND:
CIO APPROVAL: DATE:
------------------------------- ---------------------
LEGAL/COMPLIANCE APPROVAL: DATE:
------------------ ---------------------
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* 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.
Appendix E. AIMR Code of Ethics and Standards of Professional Conduct
The Code of Ethics (Full Text)
Members of the Association for Investment Management and Research shall:
1. Act with integrity, competence, dignity, and in an ethical manner when dealing with the public, clients, prospects, employers, employees, and fellow members.
2. Practice and encourage others to practice in a professional and ethical manner that will reflect credit on members and their profession.
3. Strive to maintain and improve their competence and the competence of others in the profession.
4. Use reasonable care and exercise independent professional judgment.
The Standards of Professional Conduct
All members of the Association for Investment Management and Research and the holders of and candidates for the Chartered Financial Analyst designation are obligated to conduct their activities in accordance with the following Code of Ethics. Disciplinary sanctions may be imposed for violations of the Code and Standards.
Fundamental Responsibilities
Relationships with and Responsibilities to a Profession
Relationships with and Responsibilities to an Employer
Relationships with and Responsibilities to Clients and Prospects
Relationships with and Responsibilities to the Public
Standards of Practice Handbook
Standard I: Fundamental Responsibilities
Members shall:
A. Maintain knowledge of and comply with all applicable laws, rules, and regulations (including AIMR's Code of Ethics and Standards of Professional Conduct) of any government, governmental agency, regulatory organization, licensing agency, or professional association governing the members' professional activities.
B. Not knowingly participate in or assist any violation of such laws, rules, or regulations.
Standard II: Relationships with and Responsibilities to the Profession
A. Use of Professional Designation.
1. AIMR members may reference their membership only in a dignified and judicious manner. The use of the reference may be accompanied by an accurate explanation of the requirements that have been met to obtain membership in these organizations.
2. Those who have earned the right to use the Chartered Financial Analyst designation may use the marks "Chartered Financial Analyst" or "CFA" and are encouraged to do so, but only in a proper, dignified, and judicious manner. The use of the designation may be accompanied by an accurate explanation of the requirements that have been met to obtain the right to use the designation.
3. Candidates in the CFA Program, as defined in the AIMR Bylaws, may reference their participation in the CFA Program, but the reference must clearly state that an individual is a candidate in the CFA Program and cannot imply that the candidate has achieved any type of partial designation.
B. Professional Misconduct.
1. Members shall not engage in any professional conduct involving dishonesty, fraud, deceit, or misrepresentation or commit any act that reflects adversely on their honesty, trustworthiness, or professional competence.
2. Members and candidates shall not engage in any conduct or commit any act that compromises the integrity of the CFA designation or the integrity or validity of the examinations leading to the award of the right to use the CFA designation.
C. Prohibition against Plagiarism.
Members shall not copy or use, in substantially the same form as the original, material prepared by another without acknowledging and identifying the name of the author, publisher, or source of such material. Members may use, without acknowledgment, factual information published by recognized financial and statistical reporting services or similar sources.
Standard III: Relationships with and Responsibilities to the Employer
A. Obligation to Inform Employer of Code and Standards. Members shall:
1. Inform their employer in writing, through their direct supervisor, that they are obligated to comply with the Code and Standards and are subject to disciplinary sanctions for violations thereof.
2. Deliver a copy of the Code and Standards to their employer if the employer does not have a copy.
B. Duty to Employer. Members shall not undertake any independent practice that could result in compensation or other benefit in competition with their employer unless they obtain written consent from both their employer and the persons or entities for whom they undertake independent practice.
C. Disclosure of Conflicts to Employer. Members shall:
1. Disclose to their employer all matters, including beneficial ownership of securities or other investments, that reasonably could be expected to interfere with their duty to their employer or ability to make unbiased and objective recommendations.
2. Comply with any prohibitions on activities imposed by their employer if a conflict of interest exists.
D. Disclosure of Additional Compensation Arrangements. Members shall disclose to their employer in writing all monetary compensation or other benefits that they receive for their services that are in addition to compensation or benefits conferred by a member's employer.
E. Responsibilities of Supervisors. Members with supervisory responsibility, authority, or the ability to influence the conduct of others shall exercise reasonable supervision over those subject to their supervision or authority to prevent any violation of applicable statutes, regulations, or provisions of the Code and Standards. In so doing, members are entitled to rely on reasonable procedures to detect and prevent such violations.
Standard IV: Relationships with and Responsibilities to Clients and Prospects
A. Investment Process.
A.1 Reasonable Basis and Representations. Members shall:
a. Exercise diligence and thoroughness in making investment recommendations or in taking investment actions.
b. Have a reasonable and adequate basis, supported by appropriate research and investigation, for such recommendations or actions.
c. Make reasonable and diligent efforts to avoid any material misrepresentation in any research report or investment recommendation.
d. Maintain appropriate records to support the reasonableness of such recommendations or actions.
A.2 Research Reports. Members shall:
a. Use reasonable judgment regarding the inclusion or exclusion of relevant factors in research reports.
b. Distinguish between facts and opinions in research reports.
c. Indicate the basic characteristics of the investment involved when preparing for public distribution a research report that is not directly related to a specific portfolio or client.
A.3 Independence and Objectivity. Members shall use reasonable care and judgment to achieve and maintain independence and objectivity in making investment recommendations or taking investment action.
B. Interactions with Clients and Prospects.
B.1 Fiduciary Duties. In relationships with clients, members shall use particular care in determining applicable fiduciary duty and shall comply with such duty as to those persons and interests to whom the duty is owed. Members must act for the benefit of their clients and place their clients' interests before their own.
B.2 Portfolio Investment Recommendations and Actions. Members shall:
a. Make a reasonable inquiry into a client's financial situation, investment experience, and investment objectives prior to making any investment recommendations and shall update this information as necessary, but no less frequently than annually, to allow the members to adjust their investment recommendations to reflect changed circumstances.
b. Consider the appropriateness and suitability of investment recommendations or actions for each portfolio or client. In determining appropriateness and suitability, members shall consider applicable relevant factors, including the needs and circumstances of the portfolio or client, the basic characteristics of the investment involved, and the basic characteristics of the total portfolio. Members shall not make a recommendation unless they reasonably determine that the recommendation is suitable to the client's financial situation, investment experience, and investment objectives.
c. Distinguish between facts and opinions in the presentation of investment recommendations.
d. Disclose to clients and prospects the basic format and general principles of the investment processes by which securities are selected and portfolios are constructed and shall promptly disclose to clients and prospects any changes that might significantly affect those processes.
B.3 Fair Dealing. Members shall deal fairly and objectively with all clients and prospects when disseminating investment recommendations, disseminating material changes in prior investment recommendations, and taking investment action.
B.4 Priority of Transactions. Transactions for clients and employers shall have priority over transactions in securities or other investments of which a member is the beneficial owner so that such personal transactions do not operate adversely to their clients' or employer's interests. If members make a recommendation regarding the purchase or sale of a security or other investment, they shall give their clients and employer adequate opportunity to act on their recommendations before acting on their own behalf. For purposes of the Code and Standards, a member is a "beneficial owner" if the member has
a. a direct or indirect pecuniary interest in the securities;
b. the power to vote or direct the voting of the shares of the securities or investments;
c. the power to dispose or direct the disposition of the security or investment.
B.5 Preservation of Confidentiality. Members shall preserve the confidentiality of information communicated by clients, prospects, or employers concerning matters within the scope of the client-member, prospect-member, or employer-member relationship unless a member receives information concerning illegal activities on the part of the client, prospect, or employer.
B.6 Prohibition against Misrepresentation. Members shall not make any statements, orally or in writing, that misrepresent
a. the services that they or their firms are capable of performing;
b. their qualifications or the qualifications of their firm;
c. the member's academic or professional credentials.
Members shall not make or imply, orally or in writing, any assurances or guarantees regarding any investment except to communicate accurate information regarding the terms of the investment instrument and the issuer's obligations under the instrument.
B.7 Disclosure of Conflicts to Clients and Prospects. Members shall disclose to their clients and prospects all matters, including beneficial ownership of securities or other investments, that reasonably could be expected to impair the members' ability to make unbiased and objective recommendations.
B.8 Disclosure of Referral Fees. Members shall disclose to clients and prospects any consideration or benefit received by the member or delivered to others for the recommendation of any services to the client or prospect.
Standard V: Relationships with and Responsibilities to the Public
A. Prohibition against Use of Material Nonpublic Information. Members who possess material nonpublic information related to the value of a security shall not trade or cause others to trade in that security if such trading would breach a duty or if the information was misappropriated or relates to a tender offer. If members receive material nonpublic information in confidence, they shall not breach that confidence by trading or causing others to trade in securities to which such information relates. Members shall make reasonable efforts to achieve public dissemination of material nonpublic information disclosed in breach of a duty.
B. Performance Presentation.
1. Members shall not make any statements, orally or in writing, that misrepresent the investment performance that they or their firms have accomplished or can reasonably be expected to achieve.
2. If members communicate individual or firm performance information directly or indirectly to clients or prospective clients, or in a manner intended to be received by clients or prospective clients, members shall make every reasonable effort to assure that such performance information is a fair, accurate, and complete presentation of such performance.
* 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, 33
AIMR Code of Ethics and Standards of
Professional Conduct, 63
Analysts
special rules on trading by, 13
Appeals
Procedures, 39
Bankers' acceptances
excluded from securities, x
Blackout rule
on trading by portfolio managers, analysts and CIOs, 15
Boycotts
reporting of requests to participate, 35
Bribes, 21
CDs
excluded from securities, x
Claims against Putnam
reporting of, 35
Clearance
how long pre-clearance is valid, 4
required for personal securities transactions, 1
Closed-end funds
rules on trading, 57
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, 27
Confirmations
of personal transactions required, 33
Conflicts of interest
with Putnam and Putnam clients prohibited, 19
Contra-trading rule
transactions by managers and CIOs, 16
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
Exchange traded index funds, excluded from securities, x
Exemptions
basis for, 11
Family members
covered in personal securities transactions, x, 45
Fiduciary
serving as for another entity prohibited, 23
Fraudulent or irregular activities
reporting of, 35
Gifts
restrictions on receipt of by employees, 19
Government or regulatory agencies
reporting of communications from, 35
Holdings
disclosure of by Access Persons, 34
Initial public offerings/IPOs
purchases in prohibited, 6
Insider trading
policy statement and explanations, 41
prohibited, 9
Investment clubs
prohibited, 24
Investment Grade Exception
for clearance of fixed income securities on Restricted List, 2
Involuntary personal securities transactions
exempted, 11
exemption defined, 6
Large Cap Exception
for clearance of securities on Restricted List, 1
Market Timing, prohibition against, 9
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, 10
New financial instruments
procedures for approval, 61
Non-Putnam affiliates (NPAs)
transactions and relationships with, 25
Officer
serving as for another entity prohibited, 26
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, 45
Personal securities transaction
defined, x, 45
Pink sheet reports
quarterly reporting requirements, 34
Political contributions, 22
Portfolio managers
special rules on trading by, 13
Privacy Policy, 27
Private offerings or placements
purchases of prohibited, 7
Putnam Investments Limited
special rules for, 31
Quarterly Report of securities transactions, 34
Repurchase agreements
excluded from securities, x
Sale
defined, x, 45
Sanctions, viii
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
Tender offers
partial exemption from clearance rules, 6
Trustee
serving as for another entity prohibited, 23
Trusts
covered in personal securities transactions, x, 45
U.S. government obligations
excluded from securities, x
Violations of Law
reporting of, 35
Warrants
defined as securities, x
9/30/03