As filed with the Securities and Exchange Commission on
March 1, 2005
Registration No. 33-17486
811-05346
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. 34 / X /
and ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940 ----
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Amendment No. 35 / 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) (Zip Code)
/ / on (date) pursuant to paragraph (b)
/ X / on April 30, 2005 pursuant to paragraph (a)(1)
---- 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, 2005
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 Boston
Putnam VT Health Sciences Fund Putnam VT Growth and Income Fund
Putnam VT International New Opportunities Fund Putnam VT International Growth and Income Fund
Putnam VT New Opportunities Fund Putnam VT Mid Cap Value Fund
Putnam VT OTC & Emerging Growth Fund Putnam VT New Value Fund
Putnam VT Vista Fund Putnam VT Small Cap Value Fund
Putnam VT Voyager 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 Money Market Fund
Putnam VT Utilities Growth and 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,
Performance information, and Fees and expenses)
[ ] What are the funds' main investment strategies and related risks?
[ ] Who manages the funds?
[ ] How to buy and sell fund shares
[ ] Distribution Plan
[ ] How do the funds price their shares?
[ ] Policy on excessive short-term trading
[ ] Fund distributions and taxes
[ ] Financial highlights
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 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 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 5.00% 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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
2001 6.82% 2002 8.98% 2003 1.89% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Since inception (2/1/00)
Class IA % %
Class IB % %
Lehman Intermediate
Treasury Bond Index
(no deduction for
fees or expenses) % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. 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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
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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 $ $ $ $
Class IB $ $ $ $
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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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
2001 -13.69% 2002 -22.13% 2003 25.04% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
inception
Past 1 year (9/29/00)
Class IA % %
Class IB % %
Russell 3000 Index
(no deduction for
fees or expenses) % %
|
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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
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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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
2004 %
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
inception
Past 1 year (5/1/03)
Class IA % %
Class IB % %
|
Russell 2500 Index (no deduction for fees or expenses) % %
The fund's performance is compared to the Russell 2500 Index, an unmanaged index of the smallest 2500 companies in the Russell 3000 Index. The fund's performance was previously compared to the Russell 2000 Index, an unmanaged index of common stocks that generally measures the performance of small to midsize companies within the Russell 3000 Index. This index was replaced by the Russell 2500 Index, which is more representative of the types of securities generally held by the fund. The average annual total returns of the Russell 3000 Index for the 1-year and since inception periods ending on 12/31/04 were [ ]% and [ ]%, respectively.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Expense Operating
Fees (12b-1) Fees Expenses reimbursement Expenses
Class IA % N/A % (%) %
Class IB % 0.25% % (%) %
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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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
2001 -30.64% 2002 -29.32% 2003 32.39% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
inception
Past 1 year (9/29/00)
Class IA % %
Class IB % %
Russell Midcap Growth Index
(no deduction for fees or expenses) % %
Russell 2500 Growth Index
(no deduction for fees or expenses) % %
|
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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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. companies.
* High yield sector: lower-rated bonds of U.S. companies.
* 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 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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
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% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Past 10 years
Class IA % % %
Class IB % % %
Lehman Aggregate
Bond Index (no
deduction for fees
or expenses) % % %
Citigroup Non-US
World Government
Bond Index (no
deduction for fees,
expenses or taxes) % % %
JP Morgan Global High
Yield Index (no deduction
for fees, expenses or
taxes) % % %
|
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. The fund's performance is also compared to the Citigroup Non-US World Government Bond Index, an unmanaged index utilizing market capitalization-weighting that tracks the performance of the government bond markets tracked by the Citigroup World Government Bond Index. In addition, the fund's performance is compared to the JP Morgan 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 issues.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
PUTNAM VT EQUITY 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 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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
2004 %
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
inception
Past 1 year (5/1/03)
Class IA % %
Class IB % %
Russell 1000
Value Index
(no deduction
for fees or
expenses) % %
|
The fund's performance is compared to the Russell 1000 Value Index, an unmanaged index of those Russell 1000 companies chosen for their value orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Expense Operating
Fees (12b-1) Fees Expenses reimbursement Expenses
Class IA % N/A % (%) %
Class IB % 0.25% % (%) %
|
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 $ $ $ $
Class IB $ $ $ $
|
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 its 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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
1999 -0.36% 2000 9.82% 2001 0.74% 2002 -8.57% 2003 17.35% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Since inception (4/30/98)
Class IA % % %
Class IB % % %
S&P 500/Barra
Value Index (no
deduction for fees
or expenses) % % %
Lehman Aggregate
Bond Index (no
deduction for
fees or expenses) % % %
George Putnam
Blended Index
(no deduction for
fees or expenses) % % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. 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/BarraValue 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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
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% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Past 10 years
Class IA % % %
Class IB % % %
Russell 3000 Index
(no deduction for
fees or expenses) % % %
Putnam Balanced Blended
Benchmark (no deduction
for fees or expenses) % % %
|
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. The fund's performance is also compared to the Putnam Balanced Blended Benchmark, a benchmark administered by Putnam Management that is 50% the Russell 3000 Index, 35% the Lehman Aggregate Bond Index (an unmanaged index used as a general measure of U.S. fixed income securities), 10% the Morgan Stanley Capital International (MSCI) EAFE Index (an unmanaged index of international stocks from Europe, Australasia and the Far East) and 5% the JP Morgan Developed High Yield Index (an unmanaged index designed to mirror the investable universe of the U.S. dollar global high yield corporate debt market of developed markets). The fund's performance was previously compared to the MSCI World Index, an unmanaged index of securities of developed and emerging markets. This index was replaced by the Russell 3000 Index and the Putnam Balanced Blended Benchmark, which are more representative of the types of securities generally held by the fund. The average annual total returns of the MSCI World Index for the 1-year, 5-year and 10-year periods ending on 12/31/04 were [ ]%, [ ]% and [ ]%, respectively.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
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% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Past 10 years
Class IA % % %
Class IB % % %
MSCI World Index
(no deduction for
fees or expenses) % % %
|
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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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 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 its 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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
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% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Past 10 years
Class IA % % %
Class IB % % %
S&P 500/Barra Value
Index (no deduction
for fees or expenses) % % %
|
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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
2001 -31.92% 2002 -29.38% 2003 23.47% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
inception
Past 1 year (2/1/00)
Class IA % %
Class IB % %
Russell Top 200
Growth Index (no
deduction for fees
or expenses) % %
|
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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
1999 -3.93% 2000 39.14% 2001 -19.53% 2002 -20.21% 2003 18.80% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Since inception (4/30/98)
Class IA % % %
Class IB % % %
S&P 500 Index
(no deduction for
fees or expenses) % % %
Goldman Sachs
Healthcare Index
(no deduction for
fees or expenses) % % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. 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. The fund's performance is also compared to the Goldman Sachs Healthcare Index, an unmanaged index of common stock performance within the health-care sector.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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 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.
PERFORMANCE INFORMATION
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar Chart)
Plot Points
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% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Past 10 years
Class IA % % %
Class IB % % %
JP Morgan Global High
Yield Index (no
deduction for fees
or expenses) % % %
|
The fund's performance is compared to the JP Morgan 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 issues.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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 may invest 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 may increase in value less when interest rates decline, and decline in value more when interest rates rise.
PERFORMANCE INFORMATION
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar Chart)
Plot Points
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% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Past 10 years
Class IA % % %
Class IB % % %
Lehman Aggregate Bond
Index (no deduction for
fees or expenses) % % %
|
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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
1998 18.69% 1999 60.21% 2000 -9.48% 2001 -20.41% 2002 -17.60% 2003 28.91% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
Past 1 year Past 5 years inception
(1/2/97)
Class IA % % %
Class IB % % %
MSCI EAFE Index
(no deduction for
fees or expenses) % % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. 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.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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 its 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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
1998 11.27% 1999 24.59% 2000 1.36% 2001 -20.67% 2002 -13.67% 2003 38.37% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
inception
Past 1 year Past 5 years (1/2/97)
Class IA % % %
Class IB % % %
S&P/Citigroup
World Ex-U.S. Value
Primary Markets Index
(no deduction for
fees or expenses) % % %
|
The fund's performance is compared to the S&P/Citigroup World Ex-U.S. Value Primary Markets 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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
1998 15.58% 1999 102.95% 2000 -38.56% 2001 -28.52% 2002 -13.46% 2003 33.59% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
inception
Past 1 year Past 5 years (1/2/97)
Class IA % % %
Class IB % % %
S&P/Citigroup World
Ex-U.S. Primary Markets
Growth Index (no
deduction for fees
or expenses) % % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. The fund's performance is compared to the S&P/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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot points
1999 30.13% 2000 -18.47% 2001 -24.61% 2002 -23.68% 2003 27.39% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Since inception (4/30/98)
Class IA % % %
Class IB % % %
S&P 500 Index (no
deduction for fees
or expenses) % % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. 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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
2004 %
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
inception
Past 1 year (5/1/03)
Class IA % %
Class IB % %
Russell Midcap
Value Index (no
deduction for fees
or expenses) % %
|
The fund's performance is compared to the Russell Midcap Value Index, an unmanaged index of medium and medium/small companies in the Russell 1000 Index chosen for their value orientation.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Expense Operating
Fees (12b-1) Fees Expenses reimbursement Expenses
Class IA % N/A % (%) %
Class IB % 0.25% % (%) %
|
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 $ $ $ $
Class IB $ $ $ $
|
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 fund 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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
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% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Past 10 years
Class IA % % %
Class IB % % %
Merrill Lynch
91-Day Treasury
Bill Index (no
deduction for fees or
expenses) % % %
Lipper Money
Market Average (no
deduction for fees
or expenses) % % %
|
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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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. 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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
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% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Past 10 years
Class IA % % %
Class IB % % %
Russell 3000 Growth
Index (no deduction
for fees or expenses) % % %
|
The fund's performance is compared to the Russell 3000 Growth Index, an
unmanaged index of those companies in the Russell 3000 Index chosen for
their growth orientation. The fund's performance was previously compared
to the Russell Midcap Growth Index, an unmanaged index of medium and
medium/small companies in the Russell 1000 Index chosen for their growth
orientation. This index was replaced by the Russell 3000 Growth Index,
which is more representative of the types of securities generally held by
the fund. The average annual total returns of the Russell Midcap Growth
Index for the 1-year, 5-year, and 10-year periods ended 12/31/04 were [ ]%,
[ ]% and [ ]%, respectively.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
1998 6.26% 1999 0.27% 2000 22.59% 2001 3.53% 2002 -15.44% 2003 32.86% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
inception
Past 1 year Past 5 years (1/2/97)
Class IA % % %
Class IB % % %
Russell 3000 Value
Index (no deduction
for fees or expenses) % % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. 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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
1999 126.52% 2000 -51.03% 2001 -45.57% 2002 -32.06% 2003 35.94% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Since inception (4/30/98)
Class IA % % %
Class IB % % %
Russell 2500 Growth
Index (no deduction
for fees or expenses) % % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. 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.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % % % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
1999 27.58% 2000 -1.84% 2001 -18.62% 2002 -22.06% 2003 25.69% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Since inception (9/30/98)
Class IA % % %
Class IB % % %
S&P 500 Index (no
deduction for fees
or expenses) % % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. 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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
2000 24.62% 2001 18.42% 2002 -18.06% 2003 50.06% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
inception
Past 1 year Past 5 years (4/30/99)
Class IA % % %
Class IB % % %
Russell 2000 Value
Index (no deduction
for fees or expenses) % % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. 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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
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% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Past 10 years
Class IA % % %
Class IB % % %
S&P Utility
Index (no deduction
for fees or expenses) % % %
|
The fund's performance is compared to the S&P Utility Index, an unmanaged index of 40 utility stocks.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
Total Annual
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
1998 19.48% 1999 52.90% 2000 -3.98% 2001 -33.34% 2002 -30.44% 2003 33.42% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Since
Past 1 year Past 5 years inception
(1/2/97)
Class IA % % %
Class IB % % %
Russell Midcap
Growth Index (no
deduction for fees
or expenses) % % %
|
For portions of the period shown, the fund's performance benefited from Putnam Management's agreement to limit the fund's expenses. 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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
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
CALENDAR YEAR TOTAL RETURNS FOR CLASS IA SHARES
(Bar chart)
Plot Points
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% 2004 % |
Year-to-date performance through 3/31/2005 was [ ]%. During the periods
shown in the bar chart, the highest return for a quarter was [ ]% (quarter
ending [ ]) and the lowest return for a quarter was [ ]% (quarter ending
[ ]).
Average Annual Total Returns (for periods ending 12/31/04)
Past 1 year Past 5 years Past 10 years
Class IA % % %
Class IB % % %
Russell 1000 Growth
Index (no deduction
for fees or expenses) % % %
S&P 500 Index (no
deduction for fees
or expenses) % % %
|
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
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses
Class IA % N/A % %
Class IB % 0.25% % %
|
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 $ $ $ $
Class IB $ $ $ $
|
What are the funds' main investment strategies and related risks?
We generally manage the funds in styles similar to certain funds in the retail Putnam family of funds. However, the counterpart funds will not have identical portfolios or investment results, since we may employ different investment practices and invest in different securities for them.
Any investment carries with it some level of risk that generally reflects its potential for reward. This section provides additional information on the investment strategies and related risks that are identified for each fund in "Fund summaries" at the beginning of this prospectus and discusses investment strategies and related risks that are common to a number of the funds. Not every investment strategy listed below applies to each fund. Please refer to your fund's strategy in the fund summaries section to determine which risks apply to your fund.
Common stocks. 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 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 $[ ] billion and $[ ] 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 $[ ] million and $[ ] 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 most 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.
For 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 40%, 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, Putnam VT Diversified Income Fund, and Putnam VT Global Asset Allocation Fund, we may invest up to 15%, 5% 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 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 to the issuer.
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).
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, for funds that invest significantly outside the United States, 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 stock exchanges, commodities markets and futures markets involve the payment by the funds of brokerage commissions. The following table shows the brokerage commissions that were paid by each fund during the year in dollar amounts and as a percentage of the fund's average net assets. The table also shows commissions that were paid by each fund during the year to brokers who also provided research services in dollar amounts and as a percentage of the fund's average net assets.
Commissions
paid to
Commissions brokers who
paid to also provided
Brokerage brokers who research
Brokerage commissions also provided services (%
commissions (% of average research of average
Fund name ($) net assets) services ($) net assets)
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 $[ ] [ ]% $[ ] [ ]%
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Although brokerage commissions and other portfolio transaction costs are not reflected in the funds' Total Annual Fund Operating Expenses or Net Expenses ratios (as shown in the Annual Fund Operating Expenses table in each fund's "Fees and expenses" section), they are reflected in each fund's total return. Combining the brokerage commissions paid by each fund during the last fiscal year (as a percentage of the fund's average net assets) with the fund's Total Annual Fund Operating Expenses ratio or Net Expenses ratio (if applicable) for class IA shares results in the following "combined cost ratio" as a percentage of the fund's average net assets for class IA shares for the last fiscal year.
Combined Cost Combined Cost
Fund name Ratio Fund name Ratio
Putnam VT American Putnam VT
Government Income Fund [ ]% International Equity Fund [ ]%
Putnam VT Capital Putnam VT
Appreciation Fund [ ]% International Growth and Income Fund [ ]%
Putnam VT Capital Putnam VT
Opportunities Fund [ ]% International New Opportunities Fund [ ]%
Putnam VT Discovery Putnam VT
Growth Fund [ ]% Investors Fund [ ]%
Putnam VT Diversified Putnam VT
Income Fund [ ]% Mid Cap Value Fund [ ]%
Putnam VT Equity Putnam VT
Income Fund [ ]% Money Market Fund [ ]%
Putnam VT The George Putnam VT
Putnam Fund of Boston [ ]% New Opportunities Fund [ ]%
Putnam VT Global Putnam VT
Asset Allocation Fund [ ]% New Value Fund [ ]%
Putnam VT Global Putnam VT
Equity Fund [ ]% OTC & Emerging Growth Fund [ ]%
Putnam VT Growth Putnam VT
and Income Fund [ ]% Research Fund [ ]%
Putnam VT Growth Putnam VT
Opportunities Fund [ ]% Small Cap Value Fund [ ]%
Putnam VT Health Putnam VT
Sciences Fund [ ]% Utilities Growth and Income Fund [ ]%
Putnam VT High Putnam VT
Yield Fund [ ]% Vista Fund [ ]%
Putnam VT Putnam VT
Income Fund [ ]% Voyager Fund [ ]%
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Additional information regarding Putnam's brokerage selection procedures is included in the SAI.
Investors should exercise caution in comparing brokerage commissions and combined cost ratios for different types of funds. For example, while brokerage commissions represent one component of the fund's transaction costs, they do not reflect any undisclosed amount of profit or "mark-up" included in the price paid by the fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities and certain derivatives. In addition, brokerage commissions do not reflect other elements of transaction costs, including the extent to which the fund's purchase and sale transactions may change the market price for an investment (the "market impact").
Another factor in transaction costs is a fund's portfolio turnover rate, which measures how frequently the fund buys and sells investments. During the past five years, each fund's fiscal year portfolio turnover rate was as follows:
Portfolio Turnover 2004 2003 2002 2001 2000 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 [ ]% [ ]% [ ]% [ ]% [ ]% |
The funds may buy and sell investments relatively often. 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. 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 funds.
* Portfolio holdings. The SAI includes a description of the funds' policies with respect to the disclosure of their portfolio holdings. For information on a fund's portfolio, you may visit the Putnam Investments Web site, www.putnaminvestments.com/individual, and click on "Annuities." Each fund's top 10 holdings and related portfolio information may be viewed monthly beginning 10 business days after the end of each month, and the full portfolio holdings of each fund except Putnam VT Money Market Fund may be viewed beginning on the last business day of the month after the end of each calendar quarter. This information will remain available on the Web site until the fund files a Form N-CSR or N-Q with the SEC for the period that includes the date of the information.
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 paid Putnam Management management fees in the following amounts (reflected as a percentage of average net assets for each fund's last fiscal year):
Putnam Management VT Fund Fees 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 [ ]% |
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 its compensation (and, to the extent necessary, bear other expenses of each fund) through December 31, 2005 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 fund's 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.
With respect to Putnam VT Diversified Income Fund, Putnam VT Global Equity Fund, Putnam VT High Yield Fund and Putnam VT International Equity Fund, Putnam Management has retained its affiliate, Putnam Investments Limited ("PIL"), to manage a separate portion of the assets of each fund as determined by Putnam Management from time to time. Subject to the supervision of Putnam Management, PIL is responsible for making investment decisions for the portion of the assets of the funds that it manages.
PIL provides a full range of international investment advisory services to institutional and retail clients.
Putnam Management (and not the fund) pays a quarterly sub-management fee to PIL for its services at the following annual rates:
Putnam VT Global Equity Fund and Putnam VT International Equity Fund: 0.35% of the average aggregate net asset value of the portion of the assets of the fund that may be managed by PIL from time to time.
Putnam VT Diversified Income Fund and Putnam VT High Yield Fund: 0.40% of the average aggregate net asset value of the portion of the assets of the fund that may be managed by PIL from time to time.
PIL's address is Cassini House, 57--59 St James's Street, London, England,
SW1A 1LD.
Investment management teams. Putnam Management's and PIL's investment professionals are organized into investment management teams, with a particular team dedicated to each specific asset class. The members of the team(s) identified after the name of each fund manage the fund's investments. The names of all team members can be found at www.putnaminvestments.com.
The team members identified as the fund's Portfolio Leader(s) and Portfolio Member(s) coordinate the teams' efforts related to each fund and are primarily responsible for the day-to-day management of the fund's portfolio. In addition to these individuals, the teams also include other investment professionals, whose analysis, recommendations and research inform investment decisions made for the fund.
Portfolio Leader Since Employer Positions Over Past Five Years
--------------------------------------------------------------------------------
Kevin M. Cronin 1998 Putnam Management Chief Investment Officer,
1997 -- Present Core Fixed Income Team
-------------------------------------------------------------------------------
Portfolio Member Since Employer Positions Over Past Five Years
--------------------------------------------------------------------------------
Robert A. Bloemker 2002 Putnam Management Mortgage Specialist, Core
1999 -- Present Fixed-Income Team
-------------------------------------------------------------------------------
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Portfolio Leader Since Employer Positions Over Past Five Years
--------------------------------------------------------------------------------
Joshua H. Brooks 2004 Putnam Management Deputy Head of Investments
2003 -- Present Previously, Chief Investment
Officer, U.S. Core and
Director, Global Equity
Research
Delaware Investments Chief Investment Officer,
Prior to April 2003 Value Investing
Previously, Senior Portfolio
Manager
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
--------------------------------------------------------------------------------
Richard P. Cervone 2004 Putnam Management Portfolio Manager
1998 -- Present Previously, Analyst
--------------------------------------------------------------------------------
Joseph P. Joseph 1999 Putnam Management Chief Investment Officer,
1994 -- Present Global Core Small Cap
Previously, Director, Global
Equity Research, Senior
Portfolio Manager and Analyst
--------------------------------------------------------------------------------
James C. Wiess 2004 Putnam Management Senior Portfolio Manager
2000 -- Present
JP Morgan Company Senior Portfolio Manager
Prior to April 2000
--------------------------------------------------------------------------------
James S. Yu 2003 Putnam Management Portfolio Manager
2002 -- Present
John Hancock Funds Portfolio Manager
Prior to Oct. 2002
Merrill Lynch Senior Analyst
Investment
Management
Prior to June 2000
--------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Joseph P. Joseph 2003 Putnam Management Chief Investment Officer,
1994 -- Present Global Core Small Cap
Previously, Director, Global
Equity Research, Senior
Portfolio Manager and Analyst
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Tinh Bui 2003 Putnam Management Portfolio Manager
2001 - Present
PPM America, Inc. Portfolio Manager
Prior to Aug. 2001
-------------------------------------------------------------------------------
John A. Ferry 2004 Putnam Management Portfolio Manager
1998 -- Present Previously, Quantitative
Analyst
-------------------------------------------------------------------------------
Gerald I. Moore 2003 Putnam Management Senior Portfolio Manager
1997 -- Present Previously, Portfolio Manager
-------------------------------------------------------------------------------
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Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Richard B. Weed 2004 Putnam Management Senior Portfolio Manager
2000 -- Present
State Street Global Senior Portfolio Manager
Advisors
Prior to Dec. 2000
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Raymond K. Haddad 2004 Putnam Management Portfolio Manager
2000 -- Present Previously, Analyst
Sanford C. Bernstein Equity Research Associate
& Co.
Prior to Sept. 2000
-------------------------------------------------------------------------------
David J. Santos 2002 Putnam Management Senior Portfolio Manager
1986 -- Present Previously, Senior Analyst
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
D. William Kohli 2002 Putnam Management Director of Core Fixed Income
1994 -- Present
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
Stephen C. Peacher 2002 Putnam Management Chief Investment Officer, Core
1990 -- Present Fixed Income High Yield Team
-------------------------------------------------------------------------------
David L. Waldman 1998 Putnam Management Director of Fixed Income
1997 -- Present Quantitative Research
Previously, Director of
Applied Quantitative Research
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Bartlett R. Geer 2003 Putnam Management Senior Portfolio Manager
2000 -- Present
State Street Research Senior Portfolio Manager
& Management
Prior to Dec. 2000
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Kevin M. Cronin 2003 Putnam Management Chief Investment Officer,
1997 -- Present Core Fixed Income Team
-------------------------------------------------------------------------------
Jeanne L. Mockard 2003 Putnam Management Senior Portfolio Manager
1985 -- Present
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Jeanne L. Mockard 2000 Putnam Management Senior Portfolio Manager
1985 -- Present
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Kevin M. Cronin 2003 Putnam Management Chief Investment Officer,
1997 -- Present Core Fixed Income Team
-------------------------------------------------------------------------------
Jeffrey L. Knight 2001 Putnam Management Chief Investment Officer,
1993 -- Present Global Asset Allocation
-------------------------------------------------------------------------------
Raman Srivastava 2004 Putnam Management Portfolio Manager
1999 -- Present Previously, Portfolio
Construction Specialist;
Quantitative Analyst
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Jeffrey L. Knight 2002 Putnam Management Chief Investment Officer
1993 -- Present
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Robert J. Kea 2002 Putnam Management Portfolio Manager
1989 -- Present Previously, Quantitative
Analyst
-------------------------------------------------------------------------------
Bruce S. MacDonald 2004 Putnam Management Senior Investment Strategist
1998 -- Present Previously, Quantitative
Analyst
-------------------------------------------------------------------------------
Robert J. Schoen 2002 Putnam Management Portfolio Manager
1997 -- Present Previously, Quantitative
Analyst
-------------------------------------------------------------------------------
|
Global Core Team
-------------------------------------------------------------------------------
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Shigeki Makino 2004 Putnam Management Chief Investment Officer,
2000 -- Present Global Core
Previously, Senior Portfolio
Manager
Fidelity Management Director of Research
Prior to Aug. 2000
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Mark A. Bogar 2002 Putnam Management Portfolio Manager
1998 -- Present Previously, Analyst
-------------------------------------------------------------------------------
Joshua H. Brooks 2004 Putnam Management Deputy Head of Investments
2003 -- Present Previously, Chief Investment
Officer, Core Equities and
Director, Global Equity
Research
Delaware Investments Chief Investment Officer
Prior to April 2003
-------------------------------------------------------------------------------
David E. Gerber 2003 Putnam Management Portfolio Manager
1996 -- Present Previously, Portfolio
Construction Specialist
and Senior Portfolio
Associate
-------------------------------------------------------------------------------
Bradford S. 2004 Putnam Management Portfolio Manager
Greenleaf 2004 -- Present
Independence Director of International
Investments Equities
Prior to Nov. 2003
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Hugh H. Mullin 1996 Putnam Management Senior Portfolio Manager
1986 -- Present
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
David L. King 1993 Putnam Management Senior Portfolio Manager
1983 -- Present
-------------------------------------------------------------------------------
Christopher G. 2000 Putnam Management Senior Portfolio Manager
Miller 1998 -- Present Previously, Portfolio Manager
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Brian O'Toole 2002 Putnam Management Chief Investment Officer,
2002 -- Present Large Cap Growth
Citigroup Asset Head of U.S. Growth Equity
Management
Prior to June 2002
-------------------------------------------------------------------------------
Portfolio Member Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
David J. Santos 1999 Putnam Management Senior Portfolio Manager
1986 -- Present Previously, Senior Analyst
-------------------------------------------------------------------------------
|
Portfolio Leaders Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Sheba M. Alexander 2005 Putnam Management Analyst and Sector Team
2001 -- Present Leader, Global Equity
Research. Previously, Analyst.
-------------------------------------------------------------------------------
Kelsey Chen 2005 Putnam Management Analyst and Sector Team
2000 -- Present Leader, Global Equity
Research. Previously, Analyst.
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Stephen C. Peacher 2002 Putnam Management Chief Investment Officer, Core
1990 -- Present Fixed-Income High-Yield
Previously, Director, Credit
Research
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Paul D. Scanlon 2002 Putnam Management Portfolio Manager
1999 -- Present Previously, Analyst
-------------------------------------------------------------------------------
Rosemary H. Thomsen 2002 Putnam Management Senior Portfolio Manager
1986 - Present
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Kevin M. Cronin 2002 Putnam Management Chief Investment Officer,
1997 -- Present Core Fixed Income Team
-------------------------------------------------------------------------------
Portfolio Member Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Robert A. Bloemker 2002 Putnam Management Mortgage Specialist,
1999 -- Present Core Fixed-Income Team
-------------------------------------------------------------------------------
|
Portfolio Leaders Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Joshua L. Byrne 2004 Putnam Management Co-Chief Investment Officer,
1992 -- Present International Core
Previously, Senior Portfolio
Manager, Portfolio Manager
-------------------------------------------------------------------------------
Simon Davis 2004 Putnam Management Co-Chief Investment Officer,
2000 -- Present International Core
Previously, Director,
International Equity,
Senior Portfolio Manager,
Deutsche Asset Portfolio Manager
Management
Prior to Sept. 2000
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Mark D. Pollard 2004 Putnam Management Chief Investment Officer,
2004 -- Present European Equities
Jura Capital LLP Managing Partner
Prior to Aug. 2004
Lazard Asset Head of European Equities
Management
Prior to Feb. 2002
Putnam Management Head of European Equities
Prior to June 2000
-------------------------------------------------------------------------------
George W. Stairs 2002 Putnam Management Senior Portfolio Manager
1994 -- Present
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Pamela R. Holding 2004 Putnam Senior Portfolio Manager
Management Previously, Associate Director
1995 -- Present of Research, Portfolio Manager
and Director of
European Research
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
J. Frederick Copper 2005 Putnam Portfolio Manager
Management Previously, Quantitative
2001 -- Present Analyst
Wellington Quantitative Analyst
Management
Prior to Feb. 2001
-------------------------------------------------------------------------------
George W. Stairs 1997 Putnam Senior Portfolio Manager
Management
1994 -- Present
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Stephen P. Dexter 1999 Putnam Management Chief Investment Officer,
1999 -- Present International Growth
Previously, Director and
Senior Portfolio Manager,
International Equity
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Peter J. Hadden 2003 Putnam Management Senior Portfolio Manager
1992 -- Present Previously, Portfolio Manager
and Senior Analyst
-------------------------------------------------------------------------------
Denise D. Selden 2003 Putnam Management Portfolio Manager
1998 -- Present Previously, Institutional
Portfolio Manager and
Portfolio Advisor
-------------------------------------------------------------------------------
|
U.S. Core Team
-------------------------------------------------------------------------------
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
James C. Wiess 2004 Putnam Management Senior Portfolio Manager
2000 -- Present
JP Morgan Company Senior Portfolio Manager
Prior to April 2000 Positions Over Past Five Years
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Joshua H. Brooks 2004 Putnam Management Deputy Head of Investments
2003 -- Present Previously, Chief Investment
Officer, U.S. Core and
Director, Global Equity
Research
Delaware Investments Chief Investment Officer,
Prior to April 2003 Value Investing
Previously, Senior Portfolio
Manager
-------------------------------------------------------------------------------
Richard P. Cervone 2002 Putnam Management Portfolio Manager
1998 -- Present Previously, Analyst
-------------------------------------------------------------------------------
James S. Yu 2003 Putnam Management Portfolio Manager
2002 -- Present
John Hancock Funds Portfolio Manager
Prior to Oct. 2002
Merrill Lynch Senior Analyst
Investment
Management
Prior to June 2000
-------------------------------------------------------------------------------
|
Portfolio Leaders Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
James A. Polk 2004 Putnam Management Portfolio Manager
1998 -- Present Previously, Senior Analyst
-------------------------------------------------------------------------------
Edward T. Shadek, Jr.2004 Putnam Management Chief Investment Officer,
1997 -- Present Small Cap Value
-------------------------------------------------------------------------------
Portfolio Member Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
J. Frederick Copper 2003 Putnam Management Portfolio Manager
2001 -- Present Previously, Quantitative
Analyst
|
Portfolio Leaders Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Kevin M. Divney 2004 Putnam Management Co-Chief Investment Officer,
1997 -- Present Mid Cap Growth
-------------------------------------------------------------------------------
Paul E. Marrkand 2004 Putnam Management Co-Chief Investment Officer,
1987 -- Present Mid Cap Growth
-------------------------------------------------------------------------------
Portfolio Member Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Richard B. Weed 2004 Putnam Management Senior Portfolio Manager
2000 -- Present
State Street Global Senior Portfolio Manager
Advisors
Prior to Dec. 2000
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
David L. King 1995 Putnam Management Senior Portfolio Manager
1983 -- Present
-------------------------------------------------------------------------------
Portfolio Member Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Michael J. Abata 2002 Putnam Management Portfolio Manager
1997 -- Present Previously, Quantitative
Analyst
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Richard B. Weed 2004 Putnam Management Senior Portfolio Manager
2000 -- Present
State Street Global Senior Portfolio Manager
Advisors
Prior to Dec. 2000
-------------------------------------------------------------------------------
Portfolio Member Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Raymond K. Haddad 2004 Putnam Management Portfolio Manager
2000 -- Present Previously, Analyst
Sanford C. Bernstein Equity Research Associate
& Co.
Prior to Sept. 2000
-------------------------------------------------------------------------------
|
Portfolio Leaders Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Joshua H. Brooks 2005 Putnam Management Chief Investment Officer,
2003 -- Present Core Equities. Previously,
Director, Global Equity
Research
Delaware Investments Chief Investment Officer,
Prior to April 2003 Value Investing
-------------------------------------------------------------------------------
Kelly A. Morgan 2005 Putnam Management Director, Global Equity
1996 -- Present Research.
Previously, Associate
Director, Global Equity
Research; Director, Global
Growth
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Mark A. Bogar 2005 Putnam Management Portfolio Manager. Previously,
1998 -- Present Analyst
-------------------------------------------------------------------------------
John W. Coffey 2005 Putnam Management Analyst and Sector Team
2004 -- Present Leader, Global Equity
Research Previously, Analyst
Citigroup Asset Equity Analyst
Management
Prior to April 2004
-------------------------------------------------------------------------------
Charles E. Dane 2005 Putnam Management Analyst and Sector Team
1995 -- Present Leader, Global Equity Research
Previously, Analyst
-------------------------------------------------------------------------------
PUTNAM VT SMALL CAP VALUE FUND
-------------------------------------------------------------------------------
Small- and Mid-Cap Value Team
-------------------------------------------------------------------------------
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Edward T. Shadek, Jr.1999 Putnam Management Chief Investment Officer,
1997 -- Present Small Cap Value
-------------------------------------------------------------------------------
Portfolio Member Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Eric N. Harthun 2002 Putnam Management Portfolio Manager
2000 -- Present Previously, Senior Analyst
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Michael R. Yogg 2005 Putnam Management Analyst and Sector Team
1997 -- Present Leader, Global Equity Research
Previously, Associate
Director, Global Equity
Research; Analyst
-------------------------------------------------------------------------------
Portfolio Member Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Kevin F. Murphy 2005 Putnam Management Team Leader, High Grade
1999 -- Present Credit, Core Fixed-Income
Previously, Investment
Strategist
-------------------------------------------------------------------------------
|
Mid-Cap Growth Team
-------------------------------------------------------------------------------
Portfolio Members Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Kevin M. Divney 2003 Putnam Management Co-Chief Investment Officer,
1997 -- Present Mid-Cap Growth
Previously, Senior Portfolio
Manager and Portfolio Manager
-------------------------------------------------------------------------------
Paul E. Marrkand 2003 Putnam Management Co-Chief Investment Officer,
1987 -- Present Mid-Cap Growth
Previously, Senior Portfolio
Manager and Portfolio Manager
-------------------------------------------------------------------------------
|
Portfolio Leader Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
Brian P. O'Toole 2002 Putnam Management Chief Investment Officer,
2002 -- Present Large Cap Growth
Citigroup Asset Head of U.S. Growth Equity
Management
Prior to June 2002
-------------------------------------------------------------------------------
Portfolio Member Since Employer Positions Over Past Five Years
-------------------------------------------------------------------------------
David J. Santos 2003 Putnam Management Senior Portfolio Manager
1986 -- Present Previously, Senior Analyst
-------------------------------------------------------------------------------
|
Listed below are the Putnam funds managed by the team members discussed in this report. The individuals listed may also manage other accounts, including retail mutual fund counterparts to the funds in Putnam Variable Trust or other accounts advised by Putnam Management or an affiliate. The SAI provides additional information about other accounts managed by these individuals.
Name Portfolio Leader Portfolio Member
------------------------------------------------------------------------------------------------------------------------
Michael J. Abata Putnam Classic Equity Fund Putnam VT New Value Fund
------------------------------------------------------------------------------------------------------------------------
Sheba Alexander Putnam VT Health Sciences Fund None
------------------------------------------------------------------------------------------------------------------------
Robert A. Bloemker None Putnam VT American Government Income Fund
Putnam VT Income Fund
Putnam Limited Duration Government Income Fund
Putnam U.S. Government Income Trust
------------------------------------------------------------------------------------------------------------------------
Mark A. Bogar None Putnam VT Global Equity Fund
Putnam VT Research Fund
------------------------------------------------------------------------------------------------------------------------
Joshua H. Brooks Putnam VT Capital Appreciation Fund Putnam VT Investors Fund
Putnam VT Research Fund Putnam VT Global Equity Fund
------------------------------------------------------------------------------------------------------------------------
Tinh Bui None Putnam VT Capital Opportunities Fund
------------------------------------------------------------------------------------------------------------------------
Joshua L. Byrne Putnam VT International Equity Fund Putnam Europe Equity Fund
------------------------------------------------------------------------------------------------------------------------
Richard P. Cervone None Putnam VT Capital Appreciation Fund
Putnam VT Investors Fund
Putnam Tax Smart Equity Fund
------------------------------------------------------------------------------------------------------------------------
Kelsey Chen Putnam VT Health Sciences Fund None
------------------------------------------------------------------------------------------------------------------------
John W. Coffey None Putnam VT Research Fund
------------------------------------------------------------------------------------------------------------------------
J. Frederick Copper None Putnam VT International Growth & Income Fund
Putnam VT Mid Cap Value Fund
------------------------------------------------------------------------------------------------------------------------
Kevin M. Cronin Putnam VT American Government Income Fund Putnam VT Equity Income Fund
Putnam VT Income Fund Putnam VT The George Putnam Fund of Boston
Putnam Global Income Trust
Putnam Limited Duration Government Income Fund
Putnam U.S. Government Income Trust
------------------------------------------------------------------------------------------------------------------------
Charles E. Dane None Putnam VT Research Fund
------------------------------------------------------------------------------------------------------------------------
Simon Davis Putnam VT International Equity Fund None
------------------------------------------------------------------------------------------------------------------------
Stephen P. Dexter Putnam VT International New Opportunities Fund None
------------------------------------------------------------------------------------------------------------------------
Kevin M. Divney Putnam VT New Opportunities Fund None
Putnam VT Vista Fund
------------------------------------------------------------------------------------------------------------------------
John A. Ferry None Putnam VT Capital Opportunities Fund
Putnam International Capital Opportunities Fund
------------------------------------------------------------------------------------------------------------------------
Bartlett R. Geer Putnam VT Equity Income Fund None
------------------------------------------------------------------------------------------------------------------------
David E. Gerber None Putnam VT Global Equity Fund
------------------------------------------------------------------------------------------------------------------------
Bradford S. Greenleaf None Putnam VT Global Equity Fund
------------------------------------------------------------------------------------------------------------------------
Raymond K. Haddad None Putnam VT Discovery Growth Fund
Putnam VT OTC & Emerging Growth Fund
------------------------------------------------------------------------------------------------------------------------
Peter J. Hadden None Putnam VT International New Opportunities Fund
------------------------------------------------------------------------------------------------------------------------
Eric N. Harthun None Putnam VT Small Cap Value Fund
------------------------------------------------------------------------------------------------------------------------
Pamela R. Holding Putnam VT International Growth & Income Fund None
------------------------------------------------------------------------------------------------------------------------
Joseph P. Joseph Putnam VT Capital Opportunities Fund Putnam VT Capital Appreciation Fund
International Capital Opportunities Fund
------------------------------------------------------------------------------------------------------------------------
Robert J. Kea None Putnam VT Global Asset Allocation Fund
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
Putnam RetirementReady[R] Funds
------------------------------------------------------------------------------------------------------------------------
David L. King Putnam VT New Value Fund Putnam VT Growth & Income Fund
Putnam Convertible Income-Growth Trust
Putnam High Income Bond Fund
------------------------------------------------------------------------------------------------------------------------
Jeffrey L. Knight Putnam VT Global Asset Allocation Fund Putnam VT The George Putnam Fund of Boston
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
Putnam RetirementReady[R] Funds
------------------------------------------------------------------------------------------------------------------------
William D. Kohli Putnam VT Diversified Income Fund Putnam Global Income Trust
Putnam Master Intermediate Income Trust
Putnam Premier Income Trust
------------------------------------------------------------------------------------------------------------------------
Bruce S. MacDonald None Putnam VT Global Asset Allocation Fund
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
Putnam RetirementReady[REGISTRATION MARK] Funds
------------------------------------------------------------------------------------------------------------------------
Shigeki Makino Putnam VT Global Equity Fund None
------------------------------------------------------------------------------------------------------------------------
Paul E. Marrkand Putnam VT New Opportunities Fund None
Putnam VT Vista Fund
------------------------------------------------------------------------------------------------------------------------
Christopher G. Miller None Putnam VT Growth & Income Fund
------------------------------------------------------------------------------------------------------------------------
Jeanne L. Mockard Putnam VT The George Putnam Fund of Boston Putnam VT Equity Income Fund
------------------------------------------------------------------------------------------------------------------------
Gerald I. Moore None Putnam VT Capital Opportunities Fund
------------------------------------------------------------------------------------------------------------------------
Kelly A. Morgan Putnam VT Research Fund None
------------------------------------------------------------------------------------------------------------------------
Hugh H. Mullin Putnam VT Growth & Income Fund None
------------------------------------------------------------------------------------------------------------------------
Kevin F. Murphy None Putnam VT Utilities Growth & Income
------------------------------------------------------------------------------------------------------------------------
Stephen S. Oler None Putnam VT International Equity Fund
------------------------------------------------------------------------------------------------------------------------
Brian P. O'Toole Putnam VT Growth Opportunities Fund None
Putnam VT Voyager Fund
------------------------------------------------------------------------------------------------------------------------
Stephen C. Peacher Putnam VT High Yield Fund Putnam VT Diversified Income Fund
Putnam High Yield Advantage Fund
Putnam Floating Rate Income Fund
Putnam Managed High Yield Trust
------------------------------------------------------------------------------------------------------------------------
James A. Polk Putnam VT Mid Cap Value Fund None
------------------------------------------------------------------------------------------------------------------------
Mark D. Pollard None Putnam VT International Equity Fund
Putnam Europe Equity Fund
------------------------------------------------------------------------------------------------------------------------
David J. Santos None Putnam VT Discovery Growth Fund
Putnam VT Growth Opportunities Fund
Putnam VT Voyager Fund
------------------------------------------------------------------------------------------------------------------------
Paul D. Scanlon None Putnam VT High Yield Fund
Putnam High Yield Advantage Fund
Putnam Managed High Yield Trust
------------------------------------------------------------------------------------------------------------------------
Robert J. Schoen None Putnam VT Global Asset Allocation Fund
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
Putnam RetirementReady[R] Funds
------------------------------------------------------------------------------------------------------------------------
Denise D. Selden None Putnam VT International New Opportunities Fund
------------------------------------------------------------------------------------------------------------------------
Edward T. Shadek, Jr. Putnam VT Mid Cap Value Fund None
Putnam VT Small Cap Value Fund
------------------------------------------------------------------------------------------------------------------------
Raman Srivastava None Putnam VT The George Putnam Fund of Boston
------------------------------------------------------------------------------------------------------------------------
George W. Stairs None Putnam VT International Equity Fund
Putnam VT International Growth & Income Fund
------------------------------------------------------------------------------------------------------------------------
Rosemary H. Thomsen None Putnam VT High Yield Fund
Putnam High Yield Advantage Fund
Putnam Managed High Yield Trust
------------------------------------------------------------------------------------------------------------------------
David L. Waldman None Putnam VT Diversified Income Fund
Putnam Master Intermediate Income Trust
Putnam Premier Income Trust
------------------------------------------------------------------------------------------------------------------------
Richard B. Weed Putnam VT Discovery Growth Fund Putnam VT New Opportunities Fund
Putnam VT OTC & Emerging Growth Fund
Putnam VT Small Cap Growth Fund
------------------------------------------------------------------------------------------------------------------------
James C. Wiess Putnam VT Investors Fund Putnam VT Capital Appreciation Fund
Putnam Tax Smart Equity Fund
------------------------------------------------------------------------------------------------------------------------
Michael R. Yogg Putnam VT Utilities Growth & Income None
------------------------------------------------------------------------------------------------------------------------
James S. Yu None Putnam VT Capital Appreciation Fund
Putnam VT Investors Fund
Putnam Tax Smart Equity Fund
------------------------------------------------------------------------------------------------------------------------
|
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:
Lipper Variable Products
(Underlying Funds) peer group Funds
-------------------------------------------------------------------------------
Balanced Funds Putnam VT The George Putnam Fund of Boston
Corporate Debt Funds A Rated Putnam VT Income Fund
Equity Income Funds Putnam VT Equity Income Fund
General Bond Funds Putnam VT Diversified Income Fund
General U.S. Government Funds Putnam VT American Government Income Fund
Global Flexible Portfolio Funds Putnam VT Global Asset Allocation Fund
Global Funds Putnam VT Global Equity Fund
High Current Yield Funds Putnam VT High Yield Fund
International Funds Putnam VT International Equity Fund
Putnam VT International Growth and Income Fund
Putnam VT International New Opportunities Fund
Large-Cap Core Funds Putnam VT Investors Fund
Putnam VT Research Fund
Large-Cap Growth Funds Putnam VT Growth Opportunities Fund
Putnam VT Voyager Fund
Large-Cap Value Funds Putnam VT Growth and Income Fund
Mid-Cap Core Funds Putnam VT Capital Opportunities Fund
Mid-Cap Growth Funds Putnam VT OTC & Emerging Growth Fund
Putnam VT Vista Fund
Mid-Cap Value Funds Putnam VT Mid Cap Value Fund
Money Market Funds Putnam VT Money Market Fund
Multi-Cap Core Funds Putnam VT Capital Appreciation Fund
Multi-Cap Growth Funds Putnam VT Discovery Growth Fund
Putnam VT New Opportunities Fund
Multi-Cap Value Funds Putnam VT New Value Fund
Small-Cap Value Funds Putnam VT Small Cap Value Fund
Specialty/Miscellaneous Funds Putnam VT Health Sciences Fund
Utility Funds Putnam VT Utilities Growth and Income Fund
|
The portion of the incentive compensation pool available to each of your investment management teams varies based primarily on its delivery, across all of the portfolios it manages, of consistent, dependable and superior performance over time on a before-tax basis.
* 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, including each fund's Portfolio Leader(s) and Portfolio Member(s), 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, which is influenced by assets under management. Incentive compensation is generally paid as cash bonuses, but a portion of incentive compensation may instead be paid as grants of restricted stock, options or other forms of compensation, based on the factors described above. In addition to incentive compensation, investment team members receive annual salaries that are typically based on seniority and experience. Incentive compensation generally represents at least 70% of the total compensation paid to investment team members.
Regulatory matters and litigation. On April 8, 2004, Putnam Management entered into agreements with the Securities and Exchange Commission (SEC) and the Massachusetts Securities Division representing a final settlement of all charges brought against Putnam Management by those agencies on October 28, 2003 in connection with excessive short-term trading by Putnam employees and, in the case of the charges brought by the Massachusetts Securities Division, by participants in some Putnam-administered 401(k) plans. The settlement with the SEC requires Putnam Management to pay $5 million in disgorgement plus a civil monetary penalty of $50 million, and the settlement with the Massachusetts Securities Division requires Putnam Management to pay $5 million in restitution and an administrative fine of $50 million. The settlements also leave intact the process established under an earlier partial settlement with the SEC under which Putnam Management agreed to pay the amount of restitution determined by an independent consultant, which may exceed the disgorgement and restitution amounts specified above, pursuant to a plan to be developed by the independent consultant.
Putnam Management, and not the investors in any Putnam fund, will bear all costs, including restitution, civil penalties and associated legal fees stemming from both of these proceedings. The SEC's and Massachusetts Securities Division'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 funds 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.
The funds 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.
In addition to the payments described above under "Distribution Plan" with respect to Class IB shares, Putnam Retail Management and its affiliates also pay additional compensation to selected insurance companies (or affiliated broker-dealers) to whom shares of the funds are offered ("Record Owners") and to dealers that sell variable insurance products ("dealers") in recognition of their marketing and/or administrative services support. These payments may create an incentive for a Record Owner firm, dealer firm or their representatives to recommend or offer shares of the funds or other Putnam funds, or insurance products for which the funds serve as underlying investments, to its customers. These additional payments are made by Putnam Retail Management and its affiliates and do not increase the amounts paid by you or the fund as shown under the heading "Fees and Expenses" at the front of this prospectus.
The additional payments to Record Owners and dealers by Putnam Retail Management and its affiliates are generally based on one or more of the following factors: average net assets of a fund attributable to that Record Owner or dealer, sales of a fund attributable to that Record Owner or dealer, or on the basis of a negotiated lump sum payment for services provided. These payments by Putnam Retail Management and its affiliates for marketing and/or administrative support services to any one Record Owner or dealer are not expected, with certain limited exceptions, to exceed 0.20% of the average net assets of the funds attributable to that Record Owner or dealer on an annual basis. Putnam Retail Management and its affiliates may make other payments or allow other promotional incentives to Record Owners and dealers to the extent permitted by SEC and NASD rules and by other applicable laws and regulations.
You can find further details in the SAI about the payments made by Putnam Retail Management and its affiliates and the services provided by your Record Owner or dealer. In addition, you can ask your Record Owner or dealer for information about any payments it receives from Putnam Retail Management and its affiliates and any services provided by your Record Owner or dealer.
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 effected 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. Redemption proceeds may be paid in securities or other property rather than in cash if Putnam determines it is in the best interest of 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 (NYSE) each day the exchange is open.
Each fund (other than Putnam VT Money Market Fund) values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value, which may differ from recent market prices. For example, a fund may value a stock at its fair value when the relevant exchange closes early or trading in the stock is suspended. It may also value a stock at fair value if recent transactions in the stock have been very limited or material information about the issuer becomes available after the close of the relevant market. Market quotations are not considered to be readily available for many debt securities. These securities are generally valued at fair value on the basis of valuations provided by an independent pricing service approved by the fund's Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using information with respect to transactions in the bond being valued, market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities.
Putnam VT Money Market Fund values all of its investments at amortized cost.
From time to time, Putnam OTC & Emerging Growth 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 translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates, which are generally determined as of 11:00 a.m. Eastern time each day the NYSE is open. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect each fund's NAV. If there has been a movement in the U.S. currency market that exceeds a specified threshold that may change from time to time, the funds will generally use exchange rates determined as of 3:00 p.m. Eastern time. Because foreign markets may be open at different times than the NYSE, 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 NYSE 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 NYSE. As a result, the funds have adopted fair value pricing procedures, which, among other things, require each fund to fair value foreign equity securities if there has been a movement in the U.S. market that exceeds a specified threshold that may change from time to time. 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 funds to a significant extent. As noted above, the value determined for an investment using the funds' fair value pricing procedures may differ from recent market prices for the investment. If events materially affecting the values of a fund's foreign fixed-income investments occur between the close of foreign markets and the close of regular trading on the NYSE, these investments will be valued at their fair value.
Policy on excessive short-term trading
Risks of excessive short-term trading. The various insurance company separate accounts that invest in the funds may buy, sell and exchange shares of the funds without limit. Excessive short-term trading activity may reduce a fund's performance and harm all fund shareholders by interfering with portfolio management, increasing the fund's expenses and diluting the fund's net asset value. Depending on the size and frequency of short-term trades in a fund's shares, the fund may experience increased cash volatility, which could require the fund to maintain undesirably large cash positions or buy or sell portfolio securities it would not have bought or sold. The need to execute additional portfolio transactions due to these cash flows may also increase the fund's brokerage and administrative costs. The expected tax advantages associated with the insurance products that invest in the funds (such as tax deferral for gains realized from exchanges among the funds) may make the funds more attractive to excessive short-term traders, although other aspects of these products (such as the penalty tax on some withdrawals) may discourage short-term trading.
When a fund invests in foreign securities, its performance may be adversely impacted and the interests of longer-term shareholders may be diluted as a result of time-zone arbitrage, a short-term trading practice that seeks to exploit changes in the value of the fund's investments that result from events occurring after the close of the foreign markets on which the investments trade, but prior to the later close of trading on the NYSE, the time as of which the fund determines its net asset value. If an arbitrageur is successful, he or she may dilute the interests of other shareholders by trading shares at prices that do not fully reflect their fair value.
When a fund invests in securities that may trade infrequently or may be more difficult to value - such as securities of smaller companies and lower-rated bonds - it may be susceptible to trading by short-term traders who seek to exploit perceived price inefficiencies in the fund's investments. In addition, the market for such securities may at times show "market momentum," in which positive or negative performance may continue from one day to the next for reasons unrelated to the fundamentals of the issuer. Short-term traders may seek to capture this momentum by trading frequently in the fund's shares, which may reduce the fund's performance and dilute the interests of other shareholders. Because securities of smaller companies may be less liquid than securities of larger companies, and lower-rated debt may be less liquid than higher-rated debt, funds that invest in smaller companies or lower-rated debt may also be unable to buy or sell these securities at desirable prices in response to volatile cash flows caused by short-term trading. Similar risks may apply if the fund holds other types of less liquid securities.
Fund policies and limitations. In order to protect the interests of long-term shareholders of the funds, Putnam Management and the funds' Trustees have adopted policies and procedures intended to discourage excessive short-term trading. The funds seek to discourage excessive short-term trading by using fair value pricing procedures to value investments under some circumstances. In addition, Putnam Management monitors aggregate cash flows in each insurance company separate account that invests in the funds. If high cash flows relative to the size of the account or other available information indicate that excessive short-term trading may be taking place in a particular separate account, Putnam Management will contact the insurance company that maintains accounts for the underlying contract holders and seek to have the insurance company enforce the separate account's policies on excessive short-term trading, if any. In addition, Putnam Management and the funds reserve the right to terminate a separate account's ability to invest in the funds if apparent excessive short-term trading activity persists.
As noted above, the funds' shareholders are separate accounts sponsored by various insurance companies. Because Putnam Management currently has little or no access to trading records of individual contract holders, it is difficult or impossible to determine if a particular contract holder is engaging in excessive short-term trading. In certain circumstances, there currently are also operational or technological constraints on Putnam Management's ability to monitor activity. In addition, even when Putnam Management has sufficient information, its detection methods may not capture all excessive short-term trading.
As a result of these limitations, the funds' ability to monitor and deter excessive short-term trading ultimately depends on the capabilities, policies and cooperation of the insurance companies that sponsor the separate accounts. Some of the separate accounts have adopted transfer fees, limits on exchange activity, or other measures to attempt to address the potential for excessive short-term trading, while other separate accounts currently have not. For more information, please see the prospectus of the separate account of the specific insurance product that accompanies this prospectus. The measures used by a separate account may or may not be effective in deterring excessive short-term trading. In addition, the terms of the particular insurance contract may also limit the ability of the insurance company to address excessive short-term trading. As a result, the funds can give no assurances that market timing and excessive short-term trading will not occur in the funds.
Blackout periods for Putnam employees. Putnam Investments imposes blackout periods on investments in the Putnam funds (other than money market funds) by its employees and certain family members. Employees of Putnam Investments and covered family members may not make a purchase followed by a sale, or a sale followed by a purchase, in any non-money market Putnam fund within any 90-calendar day period. Members of Putnam Management's Investment Division, certain senior executives, and certain other employees with access to investment information, as well as their covered family members, are subject to a blackout period of one year. These blackout periods are subject to limited exceptions.
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 12 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 funds' financial statements are included in the funds' annual report to shareholders, which is available upon request.
Class IA shares (For a share outstanding throughout the period) Financial Highlights
[to be filed by amendment]
Class IB Shares (For a share outstanding throughout the period)
Financial Highlights
[to be filed by amendment]
For more information about the funds of Putnam Variable Trust
The Trust's SAI and annual and semi-annual reports to shareholders include additional information about the funds. The SAI, and the independent registered public accounting firm's report and the 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 any Putnam fund, or make shareholder inquiries, by contacting your financial advisor, by visiting Putnam's Internet site at www.putnaminvestments.com, 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 Trust'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. 811-05346
Putnam Variable Trust Class IA and IB Shares Putnam VT American Government Income Fund Putnam VT International Equity Fund Putnam VT Capital Appreciation Fund Putnam VT International Growth and Income Fund Putnam VT Capital Opportunities Fund Putnam VT International New Opportunities Fund Putnam VT Discovery Growth Fund Putnam VT Investors Fund Putnam VT Diversified Income Fund Putnam VT Mid Cap Value Fund Putnam VT Equity Income Fund Putnam VT Money Market Fund Putnam VT The George Putnam Fund of Boston Putnam VT New Opportunities Fund Putnam VT Global Asset Allocation Fund Putnam VT New Value Fund Putnam VT Global Equity Fund Putnam VT OTC & Emerging Growth Fund Putnam VT Growth and Income Fund Putnam VT Research Fund Putnam VT Growth Opportunities Fund Putnam VT Small Cap Value Fund Putnam VT Health Sciences Fund Putnam VT Utilities Growth and Income Fund Putnam VT High Yield Fund Putnam VT Vista Fund Putnam VT Income Fund Putnam VT Voyager Fund |
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
April 30, 2005
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 a prospectus dated April 30, 2005, as revised from time to time, call Putnam Investor Services at 1-800-225-1581 or write Putnam Investor Services, P.O. Box 41203, Providence, RI 02940-1203.
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 REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS I-36 Part II MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1 TAXES II-25 MANAGEMENT II-30 DETERMINATION OF NET ASSET VALUE II-44 DISTRIBUTION PLAN II-46 SUSPENSION OF REDEMPTIONS II-47 SHAREHOLDER LIABILITY II-47 DISCLOSURE OF PORTFOLIO INFORMATION II-47 PROXY VOTING GUIDELINES AND PROCEDURES II-49 SECURITIES RATINGS II-49 DEFINITIONS II-54 APPENDIX A II-55 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 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. The Trust has voluntarily undertaken to hold a shareholder meeting at which the Board of Trustees would be elected at least every five years beginning in 2004.
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 , except for Putnam VT Health Sciences Fund and Putnam VT Utilities Growth and Income Fund, is a diversified investment company. This means that with respect to 75% (50% in the case of Putnam VT Health Sciences Fund and Putnam VT Utilities and Income Fund, each of which is a non-diversified investment company) of its total assets, each fund may not invest more than 5% of its total assets in the securities of any one issuer (except U.S. government securities and securities issued by other investment companies). The remaining 25% (50% in the case of Putnam VT Health Sciences Fund and Putnam VT Utilities Growth and Income Fund) of each fund's total assets is not subject to this restriction. To the extent each fund invests a significant portion of its assets in the securities of a particular issuer, it will be subject to an increased risk of loss if the market value of such issuer's securities declines.
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) 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) 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 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 or to securities issued by other investment companies.
(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 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 or to securities issued by other investment companies.
(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.
Redemptions of fund shares. The Trust has filed an election under Rule 18f-1 under the Investment Company Act of 1940 committing each fund that is a series of the Trust to pay all redemptions of fund shares by a single shareholder during any 90-day period in cash, up to the lesser of (i) $250,000 or (ii) 1% of such fund's net assets measured as of the beginning of such 90-day period.
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 incurred the following fees:
Amount
management
fee would
have been
Amount of without
Fiscal Management management expense
Fund name Year fee paid fee waived limitation
Putnam VT American
Government Income Fund 2004 $
2003 $3,140,023 0
2002 $2,319,307 0
Putnam VT Capital
Appreciation Fund 2004 $
2003 $215,178 0
2002 $164,861 0
Putnam VT Capital
Opportunities Fund 2004 $
2003 (i) $ -- $22,638
Putnam VT Discovery
Growth Fund 2004 $
2003 $308,009 0
2002 $171,643 0
Putnam VT Diversified
Income Fund 2004 $
2003 $3,988,636 0
2002 $3,906,665 0
Putnam VT Equity
Income Fund 2004 $
2003 (i) $ 70,005 $48,065
Putnam VT The George
Putnam Fund of Boston 2004 $
2003 $4,082,080 0
2002 $7,359,631 0
Putnam VT Global
Asset Allocation Fund 2004 $
2003 $3,117,621 0
2002 $3,732,096 0
Putnam VT Global
Equity Fund 2004 $
2003 $5,487,317 0
2002 $7,061,185 0
Putnam VT Growth
and Income Fund 2004 $
2003 $25,972,807 0
2002 $31,382,284 0
Putnam VT Growth
Opportunities Fund 2004 $
2003 $487,805 0
2002 $554,393 0
Putnam VT Health
Sciences Fund 2004 $
2003 $2,436,291 0
2002 $2,777,833 0
Putnam VT High
Yield Fund 2004 $
2003 $4,676,407
2002 $4,393,831 0
Putnam VT
Income Fund 2004 $
2003 $6,599,963 0
2002 $6,402,394 0
Putnam VT International
Equity Fund 2004 $
2003 $6,181,201
2002 $5,725,145 0
Putnam VT International
Growth and Income Fund 2004 $
2003 $2,025,812
2002 $2,313,131 0
Putnam VT International
New Opportunities Fund 2004 $
2003 $2,184,720
2002 $2,572,480 0
Putnam VT Investors Fund 2004 $
2003 $3,415,254
2002 $4,171,833 0
Putnam VT Mid Cap Value Fund 2004 $
2003 (i) $ - $49,511
Putnam VT Money Market
Fund 2004 $
2003 $3,134,965 0
2002 $3,982,184 0
Putnam VT New
Opportunities Fund 2004 $
2003 $11,177,975 0
2002 $13,774,768 0
Putnam VT New Value Fund 2004 $
2003 $3,392,243 0
2002 $3,632,692 0
Putnam VT OTC &
Emerging Growth Fund 2004 $
2003 $742,748
2002 $859,693 0
Putnam VT Research Fund 2004 $
2003 $1,508,059 0
2002 $1,756,731 0
Putnam VT Small Cap
Value Fund 2004 $
2003 $3,797,669 0
2002 $3,619,606 0
Putnam VT Utilities Growth
and Income Fund 2004 $
2003 $2,706,376 0
2002 $3,556,606 0
Putnam VT Vista Fund 2004 $
2003 $2,999,047 0
2002 $3,557,362 0
Putnam VT Voyager Fund 2004 $
2003 $17,657,467 0
2002 $22,263,902 0
|
(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 its compensation (and, to the extent necessary, bear other expenses) through December 31, 2005 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.
The funds invest a portion of their assets in Putnam Prime Money Market Fund. In connection with such investment, management fees paid by the funds are reduced by an amount equal to the management fees paid by Putnam Prime Money Market Fund with respect to assets invested by the funds in Putnam Prime Money Market Fund. Net management fees paid for fiscal 2004 reflect the following waivers in management fees otherwise payable by the funds to Putnam Management in respect of such investments:
Amount of
management
fee waived in
connection
with
investment in
Putnam Prime
Money Market
Fund Fund
TO COME TO COME
|
Sub-advisor. Pursuant to the terms of a sub-management agreement between Putnam Management and Putnam Investments Limited ("PIL"), Putnam Management (and not the fund) pays a quarterly sub-management fee to PIL for its services at the annual rate of 0.35% of the average aggregate net asset value of the portion of the fund, if any, managed by PIL from time to time.
Brokerage commissions
The following table shows brokerage commissions paid during the fiscal periods indicated:
Brokerage
Fund name Fiscal year commissions
Putnam VT American
Government Income Fund 2004 $
2003 $7,274
2002 $0
Putnam VT Capital
Appreciation Fund 2004 $
2003 $136,649
2002 $140,306
Putnam VT Capital
Opportunities Fund 2004 $
2003 (i) $35,829
Putnam VT Discovery
Growth Fund 2004 $
2003 $138,167
2002 $142,299
Putnam VT Diversified
Income Fund 2004 $
2003 $32,103
2002 $32,593
Putnam VT Equity
Income Fund 2004 $
2003 (i) $91,378
Putnam VT The George
Putnam Fund of Boston 2004 $
2003 $695,127
2002 $703,616
Putnam VT Global
Asset Allocation Fund 2004 $
2003 $985,091
2002 $973,674
Putnam VT Global
Equity Fund 2004 $
2003 $2,102,459
2002 $5,351,801
Putnam VT Growth
and Income 2004 $
2003 $6,386,638
2002 $8,477,448
Putnam VT Growth
Opportunities Fund 2004 $
2003 $113,940
2002 $139,411
Putnam VT Health
Sciences Fund 2004 $
2003 $546,906
2002 $802,017
Putnam VT High
Yield Fund 2004 $
2003 $0
2002 $2,630
Putnam VT
Income Fund 2004 $
2003 $51,453
2002 $20,094
Putnam VT International
Equity Fund 2004 $
2003 $1,794,394
2002 $1,425,679
Putnam VT International
Growth and Income Fund 2004 $
2003 $590,495
2002 $860,031
Putnam VT International
New Opportunities Fund 2004 $
2003 $877,358
2002 $1,447,559
Putnam VT Investors Fund 2004 $
2003 $1,102,575
2002 $2,137,025
Putnam VT Mid Cap
Value Fund 2004 $
2003 (i) $37,884
Putnam VT Money Market 2004 $
2003 $-
2002 $-
Putnam VT New
Opportunities Fund 2004 $
2003 $3,707,981
2002 $5,471,344
Putnam VT New Value Fund 2004 $
2003 $1,036,414
2002 $1,257,889
Putnam VT OTC & Emerging
Growth Fund 2004 $
2003 $347,511
2002 $372,436
Putnam VT Research Fund 2004 $
2003 $695,245
2002 $1,228,023
Putnam VT Small Cap
Value Fund 2004 $
2003 $1,104,206
2002 $1,758,317
Putnam VT Utilities
Growth and Income Fund 2004 $
2003 $593,287
2002 $1,130,439
Putnam VT Vista Fund 2004 $
2003 $1,365,250
2002 $1,503,894
Putnam VT Voyager Fund 2004 $
2003 $5,501,181
2002 $9,927,959
|
(i) Commenced operations on May 1, 2003.
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
of these total Amount of
transactions transactions commissions
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
|
Administrative expense reimbursement
Each fund reimbursed Putnam Management for administrative services during fiscal 2004, 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
compensation
Total and
reimbursement contributions
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
|
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, 2004. 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 Putnam
funds
overseen by
Name of Trustee Trustee
Jameson A. Baxter over $100,000
Charles B. Curtis over $100,000
Myra R. Drucker 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
Richard B. Worley over $100,000
|
*Charles E. Haldeman, Jr. over $100,000 *George Putnam, III 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, Putnam Retail Management Limited Partnership ("Putnam Retail Management") or Marsh & McLennnan Companies, Inc., the parent company of Putnam Investments and its affiliated companies. Messrs. Putnam, III and Haldeman are deemed "interested persons" by virtue of their positions as officers of the Trust, Putnam Management or Putnam Retail Management or shareholders of Marsh & McLennan Companies, Inc. Mr. Haldeman is the President and Chief Executive Officer of Putnam Investments. Mr. Putnam is the President of the Trust and each of the other Putnam funds. The balance of the Trustees are not "interested persons."
Each independent Trustee of the Trust receives an annual retainer fee and an additional meeting fee for each Trustees' meeting attended. Independent Trustees who serve on board committees receive additional fees for attendance at certain committee meetings and for special services rendered in that connection. All of the current independent Trustees of the Trust are Trustees of all the Putnam funds and receive fees for their services. Mr. Putnam also receives the foregoing fees for his services as Trustee.
The Trustees periodically review their fees to ensure 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 Board Policy and Nominating Committee, which consists solely of independent Trustees of the Trust, 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
Board Policy and Nominating Committee
Brokerage and Custody Committee
Communication, Service and Marketing Committee
Contract Committee
Distributions Committee
Executive Committee
Investment Oversight Committees
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 2004 and the fees paid to each Trustee by all of the Putnam funds during calendar year 2004:
COMPENSATION TABLE
Aggregate compensation (1) from:
Putnam VT Putnam VT Putnam VT Putnam VT Putnam VT Putnam VT
American Capital Capital Discovery Putnam VT Equity The George
Government Appreciation Opportunities Growth Diversified Income Putnam Fund
Trustee/Year Income Fund Fund Fund Fund Income Fund Fund of Boston
Jameson A. Baxter
/1994 (5) $ $ $ $ $ $ $
Charles B. Curtis
/2001
Myra R. Drucker
/2004(6)
Charles E. Haldeman, Jr.
/2004(6)
John A. Hill
/1985 (5)(7)
Ronald J. Jackson
/1996 (5)
Paul L. Joskow
/1997 (5)(7)
Elizabeth T. Kennan
/1992
John H. Mullin, III
/1997 (5)
Robert E. Patterson
/1984
George Putnam, III
/1984 (7)
W. Thomas Stephens
/1997 (5)
W. Nicholas Thorndike
/1992(8)
Richard B. Worley
/2004(6)
Putnam VT Putnam VT Putnam VT Putnam VT
Global Asset Global Putnam VT Growth Health Putnam VT Putnam VT
Allocation Equity Growth and Opportunities Sciences High Yield Income
Trustee/Year Fund Fund Income Fund Fund Fund Fund Fund
Jameson A. Baxter
/1994 (5) $ $ $ $ $ $ $
Charles B. Curtis
/2001
Myra R. Drucker
/2004(6)
Charles E. Haldeman, Jr.
/2004(6)
John A. Hill
/1985 (5)(7)
Ronald J. Jackson
/1996 (5)
Paul L. Joskow
/1997 (5)(7)
Elizabeth T. Kennan
/1992
John H. Mullin, III
/1997 (5)
Robert E. Patterson
/1984
George Putnam, III
/1984 (7)
W. Thomas Stephens
/1997 (5)
W. Nicholas Thorndike
/1992(8)
Richard B. Worley
/2004(6)
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) $ $ $ $ $ $ $
Charles B. Curtis
/2001
Myra R. Drucker
/2004(6)
Charles E. Haldeman, Jr.
/2004(6)
John A. Hill
/1985 (5)(7)
Ronald J. Jackson
/1996 (5)
Paul L. Joskow
/1997 (5)(7)
Elizabeth T. Kennan
/1992
John H. Mullin, III
/1997 (5)
Robert E. Patterson
/1984
George Putnam, III
/1984 (7)
W. Thomas Stephens
/1997 (5)
W. Nicholas Thorndike
/1992(8)
Richard B. Worley
/2004(6)
Putnam VT Putnam VT
Putnam VT OTC & Putnam VT Putnam VT Utilities Putnam VT
New Value Emerging Research Small Cap Growth and Putnam VT Voyager
Trustee/Year Fund Growth Fund Fund Value Fund Income Fund Vista Fund Fund
Jameson A. Baxter
/1994 (5) $ $ $ $ $ $ $
Charles B. Curtis
/2001
Myra R. Drucker
/2004(6)
Charles E. Haldeman, Jr.
/2004(6)
John A. Hill
/1985 (5)(7)
Ronald J. Jackson
/1996 (5)
Paul L. Joskow
/1997 (5)(7)
Elizabeth T. Kennan
/1992
John H. Mullin, III
/1997 (5)
Robert E. Patterson
/1984
George Putnam, III
/1984 (7)
W. Thomas Stephens
/1997 (5)
W. Nicholas Thorndike
/1992(8)
Richard B. Worley
/2004(6)
COMPENSATION TABLE
Pension or retirement benefits accrued as part of fund expenses from:
Putnam VT Putnam VT
American Putnam VT Putnam VT Putnam VT Putnam VT Putnam VT The George
Government Capital Capital Discovery Diversified Equity Putnam
Income Appreciation Opportunities Growth Income Income Fund of
Trustee/Year Fund Fund Fund Fund Fund Fund Boston
Jameson A. Baxter
/1994 (5) $ $ $ $ $ $ $
Charles B. Curtis
/2001
Myra R. Drucker
/2004(6)
Charles E. Haldeman, Jr.
/2004(6)
John A. Hill
/1985 (5)(7)
Ronald J. Jackson
/1996 (5)
Paul L. Joskow
/1997 (5)(7)
Elizabeth T. Kennan
/1992
John H. Mullin, III
/1997 (5)
Robert E. Patterson
/1984
George Putnam, III
/1984 (7)
W. Thomas Stephens
/1997 (5)
W. Nicholas Thorndike
/1992(8)
Richard B. Worley
/2004(6)
Putnam VT
Global Putnam VT Putnam VT Putnam VT Putnam VT Putnam VT
Asset Global Growth and Growth Health Putnam VT Putnam VT International
Allocation Equity Income Opportunities Sciences High Yield Income Equity
Trustee/Year Fund Fund Fund Fund Fund Fund Fund Fund
Jameson A. Baxter
/1994 (5) $ $ $ $ $ $ $ $
Charles B. Curtis
/2001
Myra R. Drucker
/2004(6)
Charles E. Haldeman, Jr.
/2004(6)
John A. Hill
/1985 (5)(7)
Ronald J. Jackson
/1996 (5)
Paul L. Joskow
/1997 (5)(7)
Elizabeth T. Kennan
/1992
John H. Mullin, III
/1997 (5)
Robert E. Patterson
/1984
George Putnam, III
/1984 (7)
W. Thomas Stephens
/1997 (5)
W. Nicholas Thorndike
/1992(8)
Richard B. Worley
/2004(6)
Putnam VT Putnam VT
International International Putnam VT Putnam VT
Growth and New Putnam VT Putnam VT Money New Putnam VT
Income Opportunities Investors Mid Cap Market Opportunities New Value
Trustee/Year Fund Fund Fund Value Fund Fund Fund Fund
Jameson A. Baxter
/1994 (5) $ $ $ $ $ $ $
Charles B. Curtis
/2001
Myra R. Drucker
/2004(6)
Charles E. Haldeman, Jr.
/2004(6)
John A. Hill
/1985 (5)(7)
Ronald J. Jackson
/1996 (5)
Paul L. Joskow
/1997 (5)(7)
Elizabeth T. Kennan
/1992
John H. Mullin, III
/1997 (5)
Robert E. Patterson
/1984
George Putnam, III
/1984 (7)
W. Thomas Stephens
/1997 (5)
W. Nicholas Thorndike
/1992(8)
Richard B. Worley
/2004(6)
Estimated
Putnam VT Putnam VT annual Total
OTC & Utilities benefits from compensation
Emerging Putnam VT Putnam VT Growth and Putnam VT Putnam VT all Putnam from all
Growth Research Small Cap Income Vista Voyager funds upon Putnam
Trustee/Year Fund Fund Value Fund Fund Fund Fund retirement (2) funds (3)(4)
Jameson A. Baxter
/1994 (5) $ $ $ $ $ $100,000 $218,950
Charles B. Curtis
/2001 100,000 244,250
Myra R. Drucker
/2004(6) -- 33,780
Charles E. Haldeman, Jr.
/2004(6) -- --
John A. Hill
/1985 (5)(7) 200,000 [ ]
Ronald J. Jackson
/1996 (5) 100,000 224,000
Paul L. Joskow
/1997 (5)(7) 100,000 294,500
Elizabeth T. Kennan
/1992 100,000 221,500
John H. Mullin, III
/1997 (5) 100,000 216,000
Robert E. Patterson
/1984 100,000 217,750
George Putnam, III
/1984 (7) 125,000 262,500
W. Thomas Stephens
/1997 (5) 100,000 228,250
W. Nicholas Thorndike
/1992(8) 105,783 114,500
Richard B. Worley
/2004(6) -- 33,780
|
(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 2004. For Mr. Thorndike, the annual benefits equal the actual benefits he is currently receiving under the Retirement Plan for Trustees of the Putnam funds.
(3) As of December 31, 2004, there were 110 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 approximately $5,000 to $90,000 per Trustee) for which the Putnam funds were reimbursed by Putnam Management for special Board and committee meetings and additional time spent on behalf of Putnam funds 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, 2004, 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 $ $ $ $ $ $
VT Capital Appreciation Fund
VT Capital Opportunities Fund
VT Discovery Growth Fund
VT Diversified Income Fund
VT Equity Income Fund
VT The George Putnam Fund of Boston
VT Global Asset Allocation Fund
VT Global Equity Fund
VT Growth & Income Fund
VT Growth Opportunities Fund
VT Health Sciences Fund
VT High Yield Fund
VT Income Fund
VT International Equity Fund
VT International Growth & Income Fund
VT International New Opportunities Fund
VT Investors Fund
VT Mid-Cap Value Fund
VT Money Market Fund
VT New Opportunities Fund
VT New Value Fund
VT OTC & Emerging Growth Fund
VT Research Fund
VT Small Cap Value Fund
VT Utilities Growth & Income Fund
VT Vista Fund
VT Voyager Fund
|
(6) Ms. Drucker and Messrs. Haldeman and Worley were elected to the Board of Trustees on December 9, 2004.
(7) Includes additional compensation to Messrs. Hill, Putnam and Dr. Joskow for service as Chairman of the Trustees, President of the Funds and Chairman of the Audit and Pricing Committee, respectively.
(8) Mr. Thorndike retired from the Board of Trustees of the Putnam funds on June 30, 2004.
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 (currently the Board Policy and Nominating Committee) 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. The Trustees have terminated the Plan with respect to any Trustee first elected to the board after 2003.
For additional information concerning the Trustees, see "Management" in this SAI.
Share ownership
At March 31, 2005 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.
[TABLE TO COME]
Distribution fees
During fiscal 2004, class IB shares of the funds paid the following 12b-1 fees to Putnam Retail Management:
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
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
Investor servicing and custody fees and expenses
During fiscal 2004, the Trust incurred $[ ] 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 $
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
OTHER ACCOUNTS MANAGED BY THE FUND'S PORTFOLIO MANAGERS
The following table shows the number and assets of other investment accounts (or portions of investment accounts) that the funds' Portfolio Leaders and Portfolio Members managed as of the funds' fiscal year-end. The other accounts may include accounts for which the individual was not designated as a portfolio leader or portfolio member. Unless noted, none of the other accounts pays a fee based on the account's performance.
Other accounts
(separate accounts,
managed account
Other SEC- programs, single-
registered Other accounts sponsor defined
Portfolio open-end and that pool assets contribution plan
Leader or closed-end from more than offerings and other
Member funds one client accounts)
Number Number Number
of Assets of Assets of Assets
accounts ($000,000) accounts ($000,000) accounts ($000,000)
Name 1 2
Name
Name
|
Information for Mr./Ms. , who was designated a Portfolio Leader/Member after the fund's fiscal year end, is as of [recent date].
1. [#] accounts, with total assets of $ b/million, pay an advisory fee based on account performance.
2. See "Management--Portfolio Transactions--Potential conflicts of interest in managing multiple accounts" in Part II of this SAI for information on how Putnam Management addresses potential conflicts of interest resulting from an individual's management of more than one account.
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 fund 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 REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS
PricewaterhouseCoopers LLP, 125 High Street, Boston, Massachusetts 02110, is the Trust's independent registered public accounting firm, providing audit services, tax return review and other tax consulting services and assistance and consultation in connection with the review of various Securities and Exchange Commission filings. The Report of Independent Registered Public Accounting Firm, financial highlights and financial statements included in the Trust's Annual Report for the fiscal year ended December 31, 2004, filed electronically on [ ], 2005 (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 registered public accounting firm, 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 hedging or non-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 open- and closed-end investment companies and unit investment trusts (which may include exchange-traded funds ("ETFs")), represent interests in collective investment portfolios that, in turn, invest directly in underlying instruments. The fund may invest in other investment companies when it has more uninvested cash than Putnam Management believes is advisable, when it receives cash collateral from securities lending arrangements, when there is a shortage of direct investments available, or when Putnam Management believes that investment companies offer attractive values.
Investment companies may be structured to perform in a similar fashion to a broad -based securities index or may focus on a particular strategy or class of assets. ETFs typically seek to track the performance or dividend yield of specific indexes or companies in related industries. These indexes may be broad-based, sector-based or international. Investing in investment companies involves substantially the same risks as investing directly in the underlying instruments, but also involves expenses at the investment company-level, such as portfolio management fees and operating expenses. These expenses are in addition to the fees and expenses of the fund itself, which may lead to duplication of expenses while the fund owns another investment company's shares. In addition, investing in investment companies involves the risk that they will not perform in exactly the same fashion, or in response to the same factors, as the underlying instruments or index. To the extent the fund invests in other investment companies that are professionally managed, its performance will also depend on the investment and research abilities of investment managers other than Putnam Management.
Open-end investment companies typically offer their shares continuously at net asset value plus any applicable sales charge and stand ready to redeem shares upon shareholder request. The shares of certain other types of investment companies, such as ETFs and closed-end investment companies, typically trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. In the case of closed-end investment companies, the number of shares is typically fixed. The securities of closed-end investment companies and ETFs carry the risk that the price the fund pays or receives may be higher or lower than the investment company's net asset value. ETFs and closed-end investment companies are also subject to certain additional risks, including the risks of illiquidity and of possible trading halts due to market conditions or other reasons, based on the policies of the relevant exchange. The shares of investment companies, particularly closed-end investment companies, may also be leveraged, which would increase the volatility of the fund's net asset value.
The extent to which the fund can invest in securities of other investment companies, including ETFs, is generally 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 and futures based on the volatility or variance experienced by an index) 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. Index futures and futures based on the volatility or variance experienced by an index do not call for actual delivery or acceptance of commodities or securities, but instead require cash settlement of the futures contract on the settlement date specified in the contract. Such contracts may also be closed out before the settlement date. 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.
The Trust has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act (the "CEA"), and therefore, is not subject to registration or regulation as a pool operator under the CEA.
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, and, in the case of index futures and futures based on the volatility or variance experienced by an index, Putnam Management's ability to predict the future level of the index or the future volatility or variance experienced by an index. 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, and, in the case of futures contracts based on the volatility or variance experienced by an index, the ability of Putnam Management to forecast volatility or variance experienced by an index 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. Swap agreements can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. 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, inflation rates or the volatility of an index or one or more securities. The value of the fund's swap positions would increase or decrease depending on the changes in value of the underlying rates, currency values, volatility or other indices or measures. Depending on how they are used, swap agreements may increase or decrease the overall volatility of a fund's investments and its share price. 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 or other attributes 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 Industry Codes"). The Putnam Industry 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. For presentation purposes, the fund may apply the Putnam Industry Codes differently in reporting industry groups in the fund's shareholder reports or other communications.
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 investment company taxable income (as that term is defined in the Code without regard to the deduction for dividends paid--generally, taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses) and net tax-exempt interest income, for such year; and
(c) diversify its holdings so that, at the end of each quarter of the fund's taxable year, (i) at least 50% of the market value of the fund's total 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 not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the fund's total assets is invested (x) 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, or (y) in the securities of one or more qualified publicly traded partnerships (as defined below). In the case of the fund's investments in loan participations, the fund shall treat a financial intermediary as an issuer for the purposes of meeting this diversification requirement.
In general, for purposes of the 90% gross income requirement described in paragraph (a) above, income derived from a partnership will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership which would be qualifying income if realized by the regulated investment company. However, the American Jobs Creation Act of 2004 (the "2004 Act"), provides that for taxable years of a regulated investment company beginning after October 22, 2004, 100% of the net income derived from an interest in a "qualified publicly traded partnership" (defined as a partnership (i) interests in which are traded on an established securities market or readily tradable on a secondary market or the substantial equivalent thereof and (ii) that derives less than 90% of its income from the qualifying income described in paragraph (a) above) will be treated as qualifying income. In addition, although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated investment company with respect to items attributable to an interest in a qualified publicly traded partnership. Finally, for purposes of paragraph (c) above, the term "outstanding voting securities of such issuer" will include the equity securities of a qualified publicly traded partnership.
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, as defined below).
If the fund were to fail 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 Capital Gain Dividends 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.
Non-U.S. Shareholders. In general, dividends (other than Capital Gain
Dividends) paid by the fund to a shareholder that is not a "U.S. person"
within the meaning of the Code (a "foreign person") are subject to
withholding of U.S. federal income tax at a rate of 30% (or lower
applicable treaty rate) even if they are funded by income or gains (such as
portfolio interest, short-term capital gains, or foreign-source dividend
and interest income) that, if paid to a foreign person directly, would not
be subject to withholding. However, under the 2004 Act, effective for
taxable years of the fund beginning after December 31, 2004 and before
January 1, 2008, the fund will not be required to withhold any amounts (i)
with respect to distributions (other than distributions to a foreign person
(w) that has not provided a satisfactory statement that the beneficial
owner is not a U.S. person, (x) to the extent that the dividend is
attributable to certain interest on an obligation if the foreign person is
the issuer or is a 10% shareholder of the issuer, (y) that is within
certain foreign countries that have inadequate information exchange with
the United States, or (z) to the extent the dividend is attributable to
interest paid by a person that is a related person of the foreign person
and the foreign person is a controlled foreign corporation) from
U.S.-source interest income that would not be subject to U.S. federal
income tax if earned directly by an individual foreign person, to the
extent such distributions are properly designated by the fund (an
"interest-related dividend"), and (ii) with respect to distributions (other
than distributions to an individual foreign person who is present in the
United States for a period or periods aggregating 183 days or more during
the year of the distribution) of net short-term capital gains in excess of
net long-term capital losses, to the extent such distributions are properly
designated by the fund (a "short-term capital gain dividend"). In addition,
as indicated above, Capital Gain Dividends will not be subject to
withholding of U.S. federal income tax.
If a beneficial holder who is a foreign person has a trade or business in the United States, and the dividends are effectively connected with the conduct by the beneficial holder of a trade or business in the United States, the dividend will be subject to U.S. federal net income taxation at regular income tax rates. The 2004 Act modifies the tax treatment of distributions from a fund that are paid to a foreign person and are attributable to gain from "U.S. real property interests" ("USRPIs"), which the Code defines to include direct holdings of U.S. real property and interests (other than solely as a creditor) in "U.S. real property holding corporations" such as REITs. The Code deems any corporation that holds (or held during the previous five-year period) USRPIs with a fair market value equal to 50% or more of the fair market value of the corporation's U.S. and foreign real property assets and other assets used or held for use in a trade or business to be a U.S. real property holding corporation; however, if any class of stock of a corporation is traded on an established securities market, stock of such class shall be treated as a USRPI only in the case of a person who holds more than 5% of such class of stock at any time during the previous five-year period. Under the 2004 Act, which is generally effective for taxable years of RICs beginning after December 31, 2004 and which applies to dividends paid or deemed paid on or before December 31, 2007, distributions to foreign persons attributable to gains from the sale or exchange of USRPIs will give rise to an obligation for those foreign persons to file a U.S. tax return and pay tax, and may well be subject to withholding under future regulations.
Under U.S. federal tax law, a beneficial holder of shares who is a foreign person is not, in general, subject to U.S. federal income tax on gains (and is not allowed a deduction for losses) realized on the sale of shares of the fund or on Capital Gain Dividends unless (i) such gain or Capital Gain Dividend is effectively connected with the conduct of a trade or business carried on by such holder within the United States, (ii) in the case of an individual holder, the holder is present in the United States for a period or periods aggregating 183 days or more during the year of the sale or Capital Gain Dividend and certain other conditions are met, or (iii) the shares constitute USRPIs or (effective for taxable years of the fund beginning after December 31, 2004) the Capital Gain Dividends are paid or deemed paid on or before December 31, 2007 and are attributable to gains from the sale or exchange of USRPIs.
MANAGEMENT
Trustees
-----------------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------------
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).
-----------------------------------------------------------------------------------------------------------
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. Until 2003, Mr. Curtis was
dealing with national a Member of the Electric Power Research
security issues) and Institute Advisory Council and the University
serves as Senior Advisor of Chicago Board of Governors for Argonne
to the Untited Nations National Laboratory. Prior to 2002, Mr. Curtis
Foundation. was a Member of 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).
-----------------------------------------------------------------------------------------------------------
Myra R. Drucker Until August 31, 2004, Vice Chair of the Board of Trustees of Sarah
(1/16/48), Trustee since 2004 Ms. Drucker was Managing Lawrence College. She is a Trustee of
Director and a member of Commonfund (a not-for-profit firm specializing
the Board of Directors in asset management for educational endowments
of General Motors Asset and foundations) and a member of the Investment
Management and Chief Committee of the Kresge Foundation (a
Investment Officer of charitable trust). She is an ex-officio member
General Motors Trust of the New York Stock Exchange (NYSE) Pension
Bank. Prior to 2001, Managers Advisory Committee, having served
she served as Chief as Chair for seven years, and a member of the
Investment Officer of Executive Committee of the Committee on
Xerox Corporation (a Investment of Employee Benefit Assets. She is
technology and service Chair of the Advisory Board of Hamilton Lane
company in the document Advisors (an investment management firm) and a
industry). member of the Advisory Board of RCM (an
investment management firm). Until August
2001, Ms. Drucker served as a member of the
NYSE Corporate Accountability and Listing
Standards Committee and the NYSE/NASD IPO
Advisory Committee.
-----------------------------------------------------------------------------------------------------------
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 advised by an
industry). affiliate of Putnam Management). He is also
a Trustee of Sarah Lawrence College.
-----------------------------------------------------------------------------------------------------------
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).
-----------------------------------------------------------------------------------------------------------
Paul L. Joskow (6/30/47), Elizabeth and James Director of National Grid Transco (a UK-based
Trustee since 1997 Killian Professor of holding company with interests in electric and
Economics and Management, gas transmission and distribution and
and Director of the telecommunications infrastructure) and
Center for Energy and TransCanada Corporation (an energy company
Environmental Policy focused on natural gas transmission and power
Research at the services). He has also been President of the
Massachusetts Institute Yale University Council since 1993. Prior to
of Technology. February 2005, he served on the board of the
Whitehead Institute for Biomedical Research
(a non-profit research institution). 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).
-----------------------------------------------------------------------------------------------------------
Elizabeth T. Kennan Partner in Cambus-Kenneth Lead Director of Northeast Utilities and is a
(2/25/38), Trustee Farm (thoroughbred horse Director of Talbots, Inc. (a distributor of
since 1992 and catlle breeding). women's apparel). She is a Trustee of National
She is President Emeritus Trust for Historic Preservation, of Centre
of Mount Holyoke College. College and of Midway College (in Midway,
Kentucky).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.
-----------------------------------------------------------------------------------------------------------
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
in timber and farming). Power & Light) and Sonoco Products, Inc. (a
packaging company). Mr. Mullin is Trustee
Emeritus of The National Humanities Center and
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.
-----------------------------------------------------------------------------------------------------------
Robert E. Patterson Senior Partner of Cabot Chairman Emeritus and Trustee of the Joslin
(3/15/45), Trustee Properties, L.P. and Diabetes Center and a Director of Brandywine
since 1984 Chairman of Cabot Trust Group, LLC. Prior to December 2001 and
Properties, Inc. (a June 2003, Mr. Patterson served as a Trustee of
private equity firm Cabot Industrial Trust and Sea Education
investing in commercial Association, respectively.
real estate). Prior to
December 2001, he was
President of Cabot
Industrial Trust (a
publicly traded real
estate investment
trust).
-----------------------------------------------------------------------------------------------------------
W. Thomas Stephens Chairman and Chief Director of TransCanada Pipelines Limited. Until
(9/2/42), Trustee Executive Officer of 2004, Mr. Stephens was a Director of Xcel Energy
since 1997 Boise Cascade, L.L.C. Incorporated (a public utility company), Qwest
(a paper, forest product Communications and Norske Canada, Inc. (a paper
and timberland assets manufacturer). Until 2003, Mr. Stephens was a
company). Director of Mail-Well, Inc. (a diversified
printing company). Prior to July 2001, Mr.
Stephens was Chairman of Mail-Well.
-----------------------------------------------------------------------------------------------------------
Richard B. Worley Managing Partner of Serves on the Executive Committee of the
(11/15/45), Trustee since 2004 Permit Capital LLC (an University of Pennsylvania Medical Center. He
investment management is a Trustee of The Robert Wood Johnson
firm). Prior to 2002, he Foundation (a philanthropic organization devoted
served as Chief Strategic to health care issues) and Director of The
Officer of Morgan Stanley Colonial Williamsburg Foundation (a historical
Investment Management. He preservation organization). Mr. Worley also
previously served as serves on the investment committees of Mount
President, Chief Holyoke College and World Wildlife Fund (a
Executive Officer and wildlife conservation organization).
Chief Investment Officer
of Morgan Stanley Dean
Witter Investment
Management and as a
Managing Director of
Morgan Stanley (a
financial services firm).
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Interested Trustees
-----------------------------------------------------------------------------------------------------------
*Charles E. Haldeman, Jr. President and Chief Trustee of Dartmouth College and Emeritus
(10/29/48), Trustee since 2004 Executive Officer of Trustee of Abington Memorial Hospital.
Putnam, LLC ("Putnam
Investments"). Member of
Putnam Investments'
Executive Board of
Directors and Advisory
Council. Prior to
November 2003, Mr.
Haldeman served as Co-Head
of Putnam Investments'
Investment Division. Prior
to joining Putnam
Investments in 2002, he
served as Chief Executive
Officer of Delaware
Investments and President
and Chief Operating
Officer of United Asset
Management.
-----------------------------------------------------------------------------------------------------------
*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.
of New Generation
Advisers, Inc. (a
registered investment
adviser to private funds).
Both firms he founded
in 1986.
-----------------------------------------------------------------------------------------------------------
1 The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of December 31, 2004, there were 110 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 Limited Partnership ("Putnam Retail Management")
or Marsh & McLennan Companies, Inc., the parent company of Putnam
Investments and its affiliated companies. Messrs. Putnam, III and Haldeman
are deemed "interested persons" by virtue of their positions as officers
of the fund or Putnam Management or Putnam Retail Management and as
shareholders of Marsh & McLennan Companies, Inc. Charles E. Haldeman, Jr.
is President and Chief Executive Officer of Putnam Investments. George
Putnam, III is the President of your Fund and each of the other Putnam
Funds.
|
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, Putnam
(7/26/38), Executive Advisory Company, Putnam Investor Services and
Vice President, Associate Putnam Management.
Treasurer and Principal
Executive Officer
-----------------------------------------------------------------------------------------------------------
Jonathan S. Horwitz Since 2004 Managing Director, Putnam Investments.
(6/4/55), Senior Vice
President and Treasurer
-----------------------------------------------------------------------------------------------------------
Steven D. Krichmar Since 2002 Managing Director, Putnam Investments and Putnam
(6/27/58), Vice President Investor Services. Prior to 2001, Partner,
and Principal Financial PricewaterhouseCoopers LLP.
Officer
-----------------------------------------------------------------------------------------------------------
Michael T. Healy Since 2000 Managing Director, Putnam Investments and Putnam
(1/24/58), Assistant Investor Services.
Treasurer and Principal
Accounting Officer
-----------------------------------------------------------------------------------------------------------
Beth S. Mazor Since 2002 Senior Vice President, Putnam Investments and
(4/6/58), Vice President Putnam Investor Services.
-----------------------------------------------------------------------------------------------------------
Daniel T. Gallagher Since 2004 Vice President, Putnam Investments. Prior to 2004,
(2/27/62), Vice President Mr. Gallagher was an attorney for Ropes & Gray
and Legal and Compliance LLP; prior to 2000, he was a law clerk for the
Liaison Officer Massachusetts Supreme Judicial Court.
-----------------------------------------------------------------------------------------------------------
Mark C. Trenchard Since 2002 Senior Vice President, Putnam Investments.
(6/5/62), Vice President
and BSA Compliance Officer
-----------------------------------------------------------------------------------------------------------
Francis J. McNamara, III Since 2004 Senior Managing Director, Putnam Investments,
(8/19/55), Vice President Putnam Management and Putnam Retail Management.
and Chief Legal Officer Prior to 2004, Mr. McNamara was General Counsel
of State Street Research & Management Company.
-----------------------------------------------------------------------------------------------------------
Charles A. Ruys de Perez Since 2004 Managing Director, Putnam Investments, Putnam
(10/17/57), Vice President Advisory Company, Putnam Investor Services,
and Chief Compliance Officer Putnam Management and Putnam Retail Management.
-----------------------------------------------------------------------------------------------------------
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 Advisory Company.
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), Ms. Drucker and Messrs. Patterson, Stephens and Worley.
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 Dr. Kennan (Chairperson), Ms. Baxter and Messrs. Hill, Mullin and Patterson. 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. Jackson (Chairperson), Curtis and Mullin, 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 (Chairperson) and Stephens 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. 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), Messrs. Curtis, Jackson, and Mullin and Dr.
Kennan.
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. The Committee currently consists of Messrs. Patterson (Chairperson) and Jackson 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 Messrs. Hill (Chairman), Jackson, and Putnam, Dr. Joskow and Ms. Baxter.
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 Mses. Drucker (Chairperson) and Baxter. Investment Oversight Committee B currently consists of Messrs. Curtis (Chairperson), Hill and Stephens. Investment Committee C currently consists of Messrs. Mullin (Chairperson), Putnam and Patterson and Dr. Kennan. Investment Oversight Committee D currently consists of Messrs. Worley (Chairperson) and Jackson and Dr. Joskow.
Each Trustee of the fund receives an annual retainer fee and an additional meeting 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 who are not "interested persons" of Putnam Management are Trustees of all the Putnam funds and each receives fees for their 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, LLC, which is also the parent company of Putnam Retail Management, The Putnam Advisory Company, LLC (a wholly-owned subsidiary of Putnam Advisory Company, Limited Partnership), Putnam Investments Limited (a wholly-owned subsidiary of The Putnam Advisory Company, LLC) 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. 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 such expense limitation from time to time in effect are described in the prospectus and/or Part I of this SAI.
In addition, through the end of the fund's fiscal year ending in 2005, Putnam Management has agreed to waive fees and reimburse expenses of the fund to the extent necessary to ensure that the fund pays total fund operating expenses at an annual rate that does not exceed the average expenses of the front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund (expressed in each case as a percentage of average net assets). For these purposes, total fund operating expenses of both the fund and the Lipper category average will be calculated without giving effect to 12b-1 fees or any expense offset and brokerage service arrangements that may reduce fund expenses. The Lipper category average will be calculated by Lipper each calendar quarter based on expense information for the most recent fiscal year of each fund included in that category, and the expense limitation will be updated as of the first business day after Lipper publishes the category average (generally shortly after the end of each calendar quarter).
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."
The Sub-Manager
Putnam Investments Limited ("PIL"), a wholly-owned subsidiary of The Putnam Advisory Company, LLC and an affiliate of Putnam Management, has been retained as the sub-manager for a portion of the assets of certain funds as determined by Putnam Management from time to time. PIL is currently authorized to serve as the sub-manager, to the extent determined by Putnam Management from time to time, for the following funds: Putnam VT Diversified Income Fund, Putnam VT High Yield Fund, Putnam VT Global Equity Fund and Putnam VT International Equity Fund. PIL may serve as sub-manager pursuant to the terms of a sub-management agreement between Putnam Management and PIL. PIL's address is Cassini House, 57-59 St James's Street, London, England, SW1A 1LD.
Under the terms of the sub-management contract, PIL, at its own expense, furnishes continuously an investment program for that portion of each such fund that is allocated to PIL from time to time by Putnam Management and makes investment decisions on behalf of such portion of the fund, subject to the supervision of Putnam Management. Putnam Management may also, at its discretion, request PIL to provide assistance with purchasing and selling securities for the fund, including placement of orders with certain broker-dealers. PIL, at its expense, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties.
The sub-management contract provides that PIL shall not be subject to any liability to Putnam Management, the fund or 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 obligations and duties on the part of PIL.
The sub-management contract may be terminated with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund, or by PIL or Putnam Management, on 30 days' written notice. The sub-management contract also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. The sub-management contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the Investment Company Act of 1940.
Portfolio Transactions
Potential conflicts of interest in managing multiple accounts. Like other investment professionals with multiple clients, the fund's Portfolio Leader(s) and Portfolio Member(s) may face certain potential conflicts of interest in connection with managing both the fund and the other accounts listed under "Other Accounts Managed by the Fund's Portfolio Managers" at the same time. The paragraphs below describe some of these potential conflicts, which Putnam Management believes are faced by investment professionals at most major financial firms. As described below, Putnam Management and the Trustees of the Putnam funds have adopted compliance policies and procedures that attempt to address certain of these potential conflicts.
The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance ("performance fee accounts"), may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others:
* The most attractive investments could be allocated to higher-fee accounts or performance fee accounts.
* The trading of higher-fee accounts could be favored as to timing and/or execution price. For example, higher-fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time.
* The trading of other accounts could be used to benefit higher-fee accounts (front- running).
* The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation.
Putnam Management attempts to address these potential conflicts of interest relating to higher-fee accounts through various compliance policies that are generally intended to place all accounts, regardless of fee structure, on the same footing for investment management purposes. For example, under Putnam Management's policies:
* Performance fee accounts must be included in all standard trading and allocation procedures with all other accounts.
* All accounts must be allocated to a specific category of account and trade in parallel with allocations of similar accounts based on the procedures generally applicable to all accounts in those groups (e.g., based on relative risk budgets of accounts).
* All trading must be effected through Putnam's trading desks and normal queues and procedures must be followed (i.e., no special treatment is permitted for performance fee accounts or higher-fee accounts based on account fee structure).
* Front running is strictly prohibited.
* No portfolio manager or team may be guaranteed or specifically allocated any portion of a performance fee. All performance fee revenues are paid and allocated under the same process as other Putnam revenues.
As part of these policies, Putnam Management has also implemented trade oversight and review procedures in order to monitor whether particular accounts (including higher-fee accounts or performance fee accounts) are being favored over time.
Potential conflicts of interest may also arise when the Portfolio Leader(s) or Portfolio Member(s) have personal investments in other accounts that may create an incentive to favor those accounts. As a general matter and subject to limited exceptions, Putnam Management's investment professionals do not have the opportunity to invest in client accounts, other than the Putnam funds. However, in the ordinary course of business, Putnam Management or related persons may from time to time establish "pilot" or "incubator" funds for the purpose of testing proposed investment strategies and products prior to offering them to clients. These pilot accounts may be in the form of registered investment companies, private funds such as partnerships or separate accounts established by Putnam Management or an affiliate. Putnam Management or an affiliate supplies the funding for these accounts. Putnam employees, including the fund's Portfolio Leader(s) and Portfolio Member(s), may also invest in certain pilot accounts. Putnam Management, and to the extent applicable, the Portfolio Leader(s) and Portfolio Member(s) will benefit from the favorable investment performance of those funds and accounts. Pilot funds and accounts may, and frequently do, invest in the same securities as the client accounts. Putnam Management's policy is to treat pilot accounts in the same manner as client accounts for purposes of trading allocation - neither favoring nor disfavoring them except as is legally required. For example, pilot accounts are normally included in Putnam Management's daily block trades to the same extent as client accounts.
A potential conflict of interest may arise when the fund and other accounts purchase or sell the same securities. On occasions when the Portfolio Leader(s) or Portfolio Member(s) consider the purchase or sale of a security to be in the best interests of the fund as well as other accounts, Putnam Management's trading desk may, to the extent permitted by applicable laws and regulations, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to the fund or another account if one account is favored over another in allocating the securities purchased or sold - for example, by allocating a disproportionate amount of a security that is likely to increase in value to a favored account. Putnam Management's trade allocation policies generally provide that each day's transactions in securities that are purchased or sold by multiple accounts are, insofar as possible, averaged as to price and allocated between such accounts (including the fund) in a manner which in Putnam Management's opinion is equitable to each account and in accordance with the amount being purchased or sold by each account. Certain exceptions exist for specialty, regional or sector accounts. Trade allocations are reviewed on a periodic basis as part of Putnam Management's trade oversight procedures in an attempt to ensure fairness over time across accounts.
"Cross trades," in which one Putnam account sells a particular security to another account (potentially saving transaction costs for both accounts), may also pose a potential conflict of interest. Cross trades may be seen to involve a potential conflict of interest if, for example, one account is permitted to sell a security to another account at a higher price than an independent third party would pay. Putnam Management and the fund's Trustees have adopted compliance procedures that provide that any transactions between the fund and another Putnam-advised account are to be made at an independent current market price, as required by law.
Another potential conflict of interest may arise based on the different investment objectives and strategies of the fund and other accounts. For example, another account may have a shorter-term investment horizon or different investment objectives, policies or restrictions than the fund. Depending on another account's objectives or other factors, the Portfolio Leader(s) and Portfolio Member(s) may give advice and make decisions that may differ from advice given, or the timing or nature of decisions made, with respect to the fund. In addition, investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a particular security may be bought or sold for certain accounts even though it could have been bought or sold for other accounts at the same time. More rarely, a particular security may be bought for one or more accounts managed by the Portfolio Leader(s) or Portfolio Member(s) when one or more other accounts are selling the security (including short sales). There may be circumstances when purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts. As noted above, Putnam Management has implemented trade oversight and review procedures to monitor whether any account is systematically favored over time.
The fund's Portfolio Leader(s) and Portfolio Member(s) may also face other potential conflicts of interest in managing the fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the fund and other accounts. For information on restrictions imposed on personal securities transactions of the fund's Portfolio Leader(s) and Portfolio Member(s), please see "Personal Investments by Employees of Putnam Management and Putnam Retail Management and Officers and Trustees of the Fund."
For information about other funds and accounts managed by the fund's Portfolio Leader(s) and Portfolio Member(s), please refer to "Who manages the fund(s)?" in the prospectus and "Other accounts managed by the fund's portfolio managers" in Part I of the SAI.
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 and the assets of the fund.
Certain dealers that are not affiliated with PFTC also receive payments from PFTC in recognition of services they provide to shareholders or retirement plan participants that invest in the fund or other Putnam funds through their retirement plans. These services include subaccounting and similar recordkeeping services. For purposes of this section the term "dealers" includes any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator and any other institution having a selling, services or any similar agreement with Putnam Retail Management or one of its affiliates. Payments by PFTC to dealers for subaccounting services provided to retirement plan participants who invest in the funds are not expected to exceed 0.10% of the total assets in the plans invested in the funds on an annual basis. Payments to dealers for subaccounting services provided to shareholders who invest in the funds through an omnibus account may be determined on the basis of the number of shareholders in such omnibus accounts or the assets held in such account and are not expected to exceed $16 or $19 (depending on whether the shares in which the shareholder invests are subject to a contingent deferred sales charge) for those payments determined on the basis of the number of shareholders in such account or 0.10% or 0.13% (depending on whether the shares in which the shareholder invests are subject to a contingent deferred sales charge) of the total assets in such account invested in the funds on an annual basis for those payments determined on the basis of the assets held in such account. PFTC also makes payments to dealers that charge networking fees for certain services provided in connection with the maintenance of shareholder accounts.
PFTC and its affiliates transferred their defined contribution plan administration business to Mercer HR Outsourcing, LLC ("MHRO"), an affiliate of PFTC, effective January 1, 2005. In connection with that transfer, PFTC has agreed to pay MHRO 0.386% of the average value of the assets in MHRO-administered plans invested in the funds on an annual basis in consideration of recordkeeping, retirement plan administration and other services being provided to participants in MHRO-administered retirement plans with respect to their investments in the funds. These services were previously provided to such participants by PFTC. Putnam Retail Management has also agreed to make additional transitional payments to MHRO (or one of MHRO's affiliates) (i) during 2005 of 0.154% on an annual basis of the average value of the assets invested in the funds by clients whose plans were administered by PFTC prior to the transfer of the business and (ii) during 2006 of 0.077% on an annual basis of the average value of the assets invested in the funds by clients whose plans were administered by PFTC prior to the transfer of the business. Such additional transitional payments are expected to cease after 2006.
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). If there has been a movement in the U.S. currency market that exceeds a specified threshold that may change from time to time, the fund will generally use exchange rates determined as of 3:00 p.m. Eastern time. The closing prices for securities in markets or on exchanges outside the U.S. that close prior to the close of the Exchange may not fully reflect events that occur after such close but before the close of the Exchange. As a result, the fund has adopted fair value pricing procedures, which, among other things, require the fund to fair value foreign equity 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.
DISCLOSURE OF PORTFOLIO INFORMATION
The Trustees of the Putnam funds have adopted policies with respect to the disclosure of the fund's portfolio holdings by the fund, Putnam Management, or their affiliates. These policies provide that information about the fund's portfolio generally may not be released to any party prior to (i) the posting of such information on the Putnam Investments Web site, (ii) the filing of the information with the SEC in a required filing, or (iii) the dissemination of such information to all shareholders simultaneously. Certain limited exceptions pursuant to the fund's policies are described below. The Trustees will periodically receive reports from the fund's Chief Compliance Officer regarding the operation of these policies and procedures, including any arrangements to make non-public disclosures of the fund's portfolio information to third parties. Putnam Management and its affiliates are not permitted to receive compensation or other consideration in connection with disclosing information about the fund's portfolio holdings to third parties.
Public Disclosures
The fund's portfolio holdings are currently disclosed to the public through required filings with the SEC and on the Putnam Investments Web site. The fund files its portfolio holdings with the SEC for each fiscal quarter on Form N-CSR (with respect to each annual period and semi-annual period) and Form N-Q (with respect to the first and third quarters of the fund's fiscal year). Shareholders may obtain the fund's Form N-CSR and N-Q filings on the SEC's Web site at http://www.sec.gov. In addition, the fund's Form N-CSR and N-Q filings may be reviewed and copied at the SEC's public reference room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC's Web site or the operation of the public reference room.
Putnam Management also currently makes the fund's portfolio information publicly available on the Putnam Investments Web site, www.putnaminvestments.com, as disclosed in the following table:
Information Frequency of Disclosure Date of Web Posting
------------------------------------------------------------------------------
Full Portfolio Holdings(1) Quarterly Last business day of the month
following the end of each
calendar quarter
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Top 10 Portfolio Holdings Monthly 10 business days after the end
and other portfolio statistics of each month
------------------------------------------------------------------------------
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(1) Putnam VT Money Market Fund does not currently make full quarterly holdings available on the Putnam Investments Web site.
The scope of the information relating to the fund's portfolio that is made available on the Web site may change from time to time without notice. In addition, the posting of fund holdings may be delayed in some instances for technical reasons.
Putnam Management or its affiliates may include fund portfolio information that has already been made public through a Web posting or SEC filing in marketing literature and other communications to shareholders, advisors or other parties, provided that, in the case of information made public through the Web, the information is disclosed no earlier than the day after the date of posting to the Web site.
Other Disclosures
The fund's policies require that non-public disclosures of information regarding the fund's portfolio may be made only if there is a legitimate business purpose consistent with fiduciary duties to all shareholders of the fund. In addition, the party receiving the non-public information must sign a non-disclosure agreement unless otherwise approved by Putnam Management's Compliance Department. Arrangements to make non-public disclosures of the fund's portfolio information must be approved by the Chief Compliance Officer of the fund. The Chief Compliance Officer will report on an ongoing basis to a committee of the fund's Board of Trustees consisting only of Trustees who are not "interested persons" of the fund or Putnam Management regarding any such arrangement that the fund may enter into with third parties other than service providers to the fund.
The fund periodically discloses its portfolio information on a confidential basis to various service providers that require such information in order to assist the fund with its day-to-day business affairs. In addition to Putnam Management and its affiliates, including PFTC and PRM, these service providers include the fund's sub-custodians, which currently include Mellon Bank N.A., State Street Bank and Trust Company, Brown Brothers Harriman & Co., UMB Bank, N.A., JPMorgan Chase Bank, and Citibank N.A., the fund's independent registered public accounting firm, legal counsel, and financial printer (McMunn Associates, Inc.), and the fund's proxy voting service, currently Investor Responsibility Research Center, Inc. These service providers are required to keep such information confidential, and are prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the fund.
The fund may also periodically provide non-public information about its portfolio holdings to rating and ranking organizations, such as Lipper Inc. and Morningstar Inc., in connection with those firms' research on and classification of the fund and in order to gather information about how the fund's attributes (such as volatility, turnover, and expenses) compare with those of peer funds. Any such firm would be required to keep the fund's portfolio information confidential and would be prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the fund.
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. Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available on the Putnam Individual Investor Web site, www.putnam.com/individual, and on the SEC's Web site at www.sec.gov. If you have questions about finding forms on the SEC's Web site, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds' proxy voting guidelines and procedures by calling Putnam's Shareholder Services at 1-800-225-1581.
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.
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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 the Office of the Trustees who is appointed to assist in the coordination and voting of the funds' 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 that, even if 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 funds' 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 put forth by management and 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 non-U.S. issuers.
The Putnam funds will disclose their proxy votes in accordance with the timetable established by SEC rules (i.e., not later than August 31 of each year for the most recent 12-month period ended June 30).
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 of the funds' intent to hold corporate boards accountable for their actions in promoting shareholder interests, the funds' proxies generally will be voted for the decisions reached by majority independent boards of directors, except as otherwise indicated in these guidelines. Accordingly, the funds' proxies will be voted for board-approved proposals, except as follows:
Matters relating to the Board of Directors
Uncontested Election of Directors
The funds' proxies will be voted for the election of a company's nominees for the board of directors, 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,
* the board has not established independent nominating, audit, and compensation committees,
* the board has more than 19 members or fewer than five members, absent special circumstances,
* the board has not acted to implement a policy requested in a shareholder proposal that received the support of a majority of the shares of the company at its previous two annual meetings, or
* the board has adopted or renewed a shareholder rights plan (commonly referred to as a "poison pill") without shareholder approval during the current or prior calendar year.
* 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),
* attends less than 75% of board and committee meetings without valid reasons for the absences (e.g., illness, personal emergency, etc.),
* as a director of a public company (Company A), 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"), or
* serves on more than five unaffiliated public company boards (for the purpose of this guideline, boards of affiliated registered investment companies will count as one board).
Commentary:
Board independence: Unless otherwise indicated, for the purposes of determining whether a board has a majority of independent directors and independent nominating, audit, and compensation committees, an "independent director" is a director who (1) meets all requirements to serve as an independent director of a company under the final NYSE Corporate Governance Rules (e.g., no material business relationships with the company and no present or recent employment relationship with the company (including employment of an immediate family member as an executive officer)), and (2) has not accepted directly or indirectly any consulting, advisory, or other compensatory fee from the company other than in his or her capacity as a member of the board of directors or any board committee. The funds' Trustees believe that the receipt of compensation for services other than service as a director raises significant independence issues.
Board size: 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.
Time commitment: 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.
Interlocking directorships: The funds' Trustees believe that interlocking directorships are inconsistent with the degree of independence required for outside directors of public companies.
Corporate governance practices: Board independence depends not only on its members' individual relationships, but also on 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.
Contested Elections of Directors
* The funds will vote on a case-by-case basis in contested elections of directors.
Classified Boards
1. 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.
Other Board-Related Proposals
The funds will generally vote for board-approved proposals that have been approved by a majority independent board, and on a case-by-case basis on board-approved proposals where the board fails to meet the guidelines' basic independence standards (i.e., majority of independent directors and independent nominating, audit, and compensation committees).
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:
1. Except where the funds are otherwise withholding votes for the entire board of directors, the funds will vote for stock option and restricted stock plans that will result in an average annual dilution of 1.67% or less (based on the disclosed term of the plan and including all equity-based plans).
* The funds will vote against stock option and restricted stock plans that will result in an average annual dilution of greater than 1.67% (based on the disclosed term of the plan and including all equity-based plans).
* The funds will vote against any stock option or restricted stock plan where the company's actual grants of stock options and restricted stock under all equity-based compensation plans during the prior three (3) fiscal years have resulted in an average annual dilution of greater than 1.67%.
4. The funds will vote against stock option plans that permit the replacing or repricing of underwater options (and against any proposal to authorize such replacement or repricing of underwater options).
5. The funds will vote against stock option plans that permit issuance of options with an exercise price below the stock's current market price.
6. Except where the funds are otherwise withholding votes for the entire board of directors, the funds will vote for an employee stock purchase plan that has 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 a proposal 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 issuance of 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 the 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 and issuance 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 affect a shareholder's investment and that 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 the 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, shareholders must carefully consider the reasons for a reincorporation into another jurisdiction, including especially an offshore jurisdiction.
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 the adoption of a shareholder rights plan, requiring supermajority voting on particular issues, the adoption of fair price provisions, the 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; 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 a 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 the company's corporate governance structure or to change some aspect of its business operations. The funds generally 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 funds' 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 NON-U.S. ISSUERS
Many of the Putnam funds invest on a global basis, and, as a result, they may be required to vote shares held in non-U.S. issuers - i.e., issuers that are incorporated under the laws of foreign jurisdictions and that are not listed on a U.S. securities exchange or the NASDAQ stock market. Because non-U.S. 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 non-U.S. 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 non-U.S. issuers.
In many non-U.S. markets, shareholders who vote proxies of a non-U.S. issuer are not able to trade in that company's stock 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.
In addition, some non-U.S. markets require that a company's shares be re-registered out of the name of the local custodian or nominee into the name of the shareholder for the meeting. This practice is known as "share re-registration." As a result, shareholders, including the funds, are not able to trade in that company's stock until the shares are re-registered back in the name of the local custodian or nominee. In countries where share re-registration is practiced, the funds will generally not vote proxies.
The funds will vote proxies of non-U.S. issuers in accordance with the foregoing guidelines where applicable, except as follows:
Uncontested Election of Directors
Japan
* For companies that have established a U.S.-style corporate structure, the funds will withhold votes for the entire board of directors if
* the board does not have a majority of outside directors,
* the board has not established nominating and compensation committees composed of a majority of outside directors, or
* the board has not established an audit committee composed of a majority of independent directors.
* The funds will withhold votes for the appointment of members of a company's board of statutory auditors if a majority of the members of the board of statutory auditors is not independent.
Commentary:
Board structure: Recent amendments to the Japanese Commercial Code give companies the option to adopt a U.S.-style corporate structure (i.e., a board of directors and audit, nominating, and compensation committees). The funds will vote for proposals to amend a company's articles of incorporation to adopt the U.S.-style corporate structure.
Definition of outside director and independent director: Corporate governance principles in Japan focus on the distinction between outside directors and independent directors. Under these principles, an outside director is a director who is not and has never been a director, executive, or employee of the company or its parent company, subsidiaries or affiliates. An outside director is "independent" if that person can make decisions completely independent from the managers of the company, its parent, subsidiaries, or affiliates and does not have a material relationship with the company (i.e., major client, trading partner, or other business relationship; familial relationship with current director or executive; etc.). The guidelines have incorporated these definitions in applying the board independence standards above.
Korea
* The funds will withhold votes for the entire board of directors if
* the board does not have a majority of outside directors,
* the board has not established a nominating committee composed of at least a majority of outside directors, or
* the board has not established an audit committee composed of at least three members and in which at least two-thirds of its members are outside directors.
Commentary: For purposes of these guideline, an "outside director" is a director that is independent from the management or controlling shareholders of the company, and holds no interests that might impair performing his or her duties impartially from the company, management or controlling shareholder. In determining whether a director is an outside director, the funds will also apply the standards included in Article 415-2(2) of the Korean Commercial Code (i.e., no employment relationship with the company for a period of two years before serving on the committee, no director or employment relationship with the company's largest shareholder, etc.) and may consider other business relationships that would affect the independence of an outside director.
United Kingdom
* The funds will withhold votes for the entire board of directors if
* the board does not have at least a majority of independent non-executive directors,
* the board has not established nomination committees composed of a majority of independent non-executive directors, or
* the board has not established compensation and audit committees composed of (1) at least three directors (in the case of smaller companies, two directors) and (2) solely of independent non-executive directors.
* 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:
Application of guidelines: Although the U.K.'s Combined Code on Corporate Governance ("Combined Code") has adopted the "comply and explain" approach to corporate governance, the funds' Trustees believe that the guidelines discussed above with respect to board independence standards are integral to the protection of investors in U.K. companies. As a result, these guidelines will be applied in a prescriptive manner.
Definition of independence: For the purposes of these guidelines, a non-executive director shall be considered independent if the director meets the independence standards in section A.3.1 of the Combined Code (i.e., no material business or employment relationships with the company, no remuneration from the company for non-board services, no close family ties with senior employees or directors of the company, etc.), except that the funds do not view service on the board for more than nine years as affecting a director's independence.
Smaller companies: A smaller company is one that is below the FTSE 350 throughout the year immediately prior to the reporting year.
Canada
In January 2004, Canadian securities regulators issued proposed policies that would impose new corporate governance requirements on Canadian public companies. The recommended practices contained in these new corporate governance requirements mirror corporate governance reforms that have been adopted by the NYSE and other U.S. national securities exchanges and stock markets. As a result, the funds will vote on matters relating to the board of directors of Canadian issuers in accordance with the guidelines applicable to U.S. issuers.
Commentary: Like the U.K.'s Combined Code, the proposed policies on corporate governance issued by Canadian securities regulators embody the "comply and explain" approach to corporate governance. Because the funds' Trustees believe that the board independence standards contained in the proxy voting guidelines are integral to the protection of investors in Canadian companies, these standards will be applied in a prescriptive manner.
Other Matters
* The funds will vote for shareholder proposals calling for a majority of a company's 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.
1. 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.
1. The funds will vote on a case-by-case basis on proposals relating to
(1) the issuance of common stock in excess of 20% of the company's
outstanding common stock where shareholders do not have preemptive
rights, or (2) the issuance of common stock in excess of 100% of the
company's outstanding common stock where shareholders have preemptive
rights.
As adopted December 10, 2004
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) Amended and Restated Agreement and Declaration of Trust dated January 14, 2005
(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)(1) 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.
(d)(2) Sub-Management Contract dated September 13, 2004
(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) Trustee Retirement Plan dated October 4, 1996, as amended July 21, 2000
(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 -- Incorporated by reference to Post-Effective
Amendment No. 33 to the Registrant's Registration Statement.
(h)(3) Liability Insurance Allocation Agreement
(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 Registered Public Accounting Firm -- To be filed by amendment.
(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
(p)(2) Putnam Investments Code of Ethics
(p)(3) Amendment to Putnam Investments Code of Ethics dated December 15, 2004
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).
Items 26 and 27.
Item 25. 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
---- -----------------------------------------
Zhikai Chen Prior to May 2004, Equity Research Analyst,
Vice President Citigroup Asset Management, 100 First Stamford
Place, Stamford, CT 06902
John W. Coffey Prior to April 2004, Managing Director,
Managing Director Citigroup Asset Management, 399 Park Avenue,
New York, NY 10022
Emily F. Cooper Prior to May 2004, Vice President, LNR Property
Vice President Corporation, 1601 Washington Avenue, Suite 700,
Miami Beach, FL 33139
John R.S. Cutler Member, Burst Media, L.L.C., 10 New England
Vice President Executive Park, Burlington, MA 01803
Gian D. Fabbri Partner, KF Style, LLC, 73 Charles St.,
Assistant Vice President Boston, MA 02114
Maria Garcia-Lomas Prior to July 2003, Research Analyst, J.P.
Vice President Morgan Securities Ltd., 125 London Wall,
London, England
Haralabos E. Gakidis Prior to October 2003, Head of Consulting and
Vice President Business Development, The RIS Consulting Group
LLC, 420 Boylston Street, Suite 302, Boston,
MA 02116
David Morgan Prior to June 2004, Director, Equity Analyst,
Senior Vice President Citigroup Asset Management. Citigroup Centre,
Canada Square, Canary Wharf, London, England
E14 5LB
Walton D. Pearson Prior to February 2003, Senior Vice President
Senior Vice President and Senior Portfolio Manager, Alliance Capital
Management L.P., 1345 Avenue of the Americas,
New York, NY 10105
Masroor Taale Siddiqui Prior to February 2004, Managing Director,
Senior Vice President Jefferies & Co., 520 Madison Avenue, New York,
NY 10022
Jeffrey M. Stought Prior to March 2004, Vice President, Goldman
Vice President Sachs International, 133 Fleet Street, London,
England EC4A 2BB
|
Item 26. 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, Putnam Diversified Income Trust, 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 Trust, Putnam High Yield Advantage Fund, Putnam Income Fund, Putnam International Equity Fund, Putnam Investment Funds, Putnam Investors Fund, Putnam Limited Duration Government Income Fund (formerly Intermediate U.S. Government Income Fund), Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income 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.Except as noted below, none of the officers are officers of the Registrant.
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 Amisano, Paulette C. Vice President Arends, Michael K. Senior Vice President Ayala-Macey, Ann C. Assistant Vice President Babcock III, Warren W. Senior Vice President Baker, Christopher H. Vice President Baker, Erin L. Assistant Vice President Ballingall, Keith R. Assistant Vice President Barnett, William E. Vice President Barrett, Thomas Senior Vice President Bartony, Paul A. Vice President Bergeron, Christopher E. Vice President Beringer, Thomas C. Senior Vice President Bernaldo, Bryan L. Assistant 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. Vice President Brennan, Sean M. Assistant Vice President Brown, Michael D. Assistant Vice President Bumpus, James F. Managing Director Bunker, Christopher M. Senior Vice President Burns, Robert T. Senior 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. Senior Vice President Card, Victoria R. Assistant Vice President Carey, Christopher P. Vice President Casey, David M. Senior Vice President Cass, William D. Senior Vice President Caswell, Kendra L. Vice President Chang, America J. Assistant Vice President Chapman, Frederick Vice President Ciesluk, James D. Assistant Vice President Clare, Michael J. Assistant Vice President Clark, James F. Assistant Vice President Colman, Donald M. Vice President Condon, Meagan L. Vice President Condron, Brett P. Senior 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. Senior 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 DeAngelis, Adam Vice President DeGregorio Jr., Richard A. Assistant Vice President DeNitto, James P. Vice President Dempsey, Thomas F. Vice President Dewey Jr., Paul S. Senior Vice President DiBuono, Jeffrey P. Assistant Vice President Donadio, Joyce M. Vice President Dowie, Kevin T. Assistant Vice President Doyle, Michelle 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 Ethington, Robert H. Assistant Vice President Fanning, Virginia A. Senior 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 Foley, Timothy P. Senior Vice President Foresyth, Charles W. Vice President Forrester, Gordon M. Managing Director Foster, Laura G. Vice President Fronc, Richard Joseph Assistant Vice President Gambale, Kevin L. Vice President Gaudette, Marjorie B. Vice President Gebhard, Louis F. Assistant Vice President Giessler, Todd C. Vice President Gipson, Zachary A. Vice President Girald, Kristin M. Assistant Vice President Greenwood, Julie M. Assistant Vice President Gundersen, Jan S. 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 Hazzard, Jessica L. Senior Vice President Herold, Karen Assistant Vice President Hershenow, Andrew B. Assistant Vice President Hess Jr., William C. Vice President Holland, Jeffrey K. Vice President Holmes, Maureen A. Senior 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 Keith, Pamela J. Assistant Vice President Kelley, Brian J. Senior Vice President Kelly, A. Siobhan Senior Vice President Kelly, David Managing Director Kennedy, Daniel J. Vice President Kerivan, John R. Senior Vice President Kersten, Charles N. Vice President King, Brian F. Vice President Kinsman, Anne M. Senior Vice President Kirk Kahn, Deborah H. Senior Vice President 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 Lampron, Michelle S. Assistant Vice President Larson, John R. Vice President Lecce, Vincent L. Vice President Leveille, Robert R. Vice President Levy, Norman S. Senior Vice President Lieberman, Samuel L. Senior Vice President Lighty, Brian C. Assistant Vice President Link, Christopher H. Senior Vice President Lohmeier, Andrew Vice President Loomis, Marcy R. Assistant Vice President Lukens, James W. Senior Vice President Maglio, Nancy T. Assistant Vice President Mahoney, Julie M. Vice President Mansfield, Scott D. Vice President Martin, David M. Vice President Martin, Kevin J. Vice President Massey, Shannon M. Assistant Vice President McCafferty, Karen A. Senior Vice President McCarran, Matthew P. Assistant Vice President McCarthy, Anne B. Assistant Vice President McCollough, Martha J. Assistant Vice President McConville, Paul D. Senior Vice President McCutcheon, Bruce A. Senior Vice President McDermott, Robert J. Senior Vice President McInis, Brian S. Vice President McKenna, Mark J. Managing Director Mee, Kellie F. Assistant Vice President Mehta, Ashok Senior Vice President Metelmann, Claye A. Senior Vice President Michejda, Marek A. Senior Vice President Miller Jr., Edward D. Vice President Millette, Michelle T. Assistant Vice President Minsk, Judith Vice President Mintzer, Matthew P. Senior Vice President Molesky, Kevin P. Vice President Monaghan, Richard A. Director 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. Vice President Nickse, Gail A. Assistant Vice President Nicolazzo, Jon C. Senior Vice President Noble, John D. Senior Vice President Norcross, George H. Assistant Vice President O'Connell Jr., Paul P. Senior Vice President O'Connor, Brian P. Senior Vice President O'Connor, Matthew P. Senior Vice President O'Connor, Scott D. Assistant Vice President O'Sullivan, Shawn M. Vice President Olsen, Stephen Assistant Vice President Ondek, David P. Assistant 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 Pitcher, Ciara L. Assistant Vice President Platt, Thomas R. Senior Vice President Pulkrabek, Scott M. Senior Vice President Puzzangara, John C. Vice President Quinn, Brian J. Vice President Reid, Sandra L. Vice President Rickson, Alexander Assistant Vice President Ritter, Jesse D. Vice President Rodammer, Kris Senior Vice President Rose, Laura Assistant Vice President Rosmarin, Adam L. 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 Saunders, Catherine A. Managing Director Sawyer, Matthew A. Senior Vice President Schaub, Gerald D. Vice President Schlafman, Jonathan E. Vice President Schug, Mark R. Assistant Vice President Schultz, Susan L. Assistant Vice President Segers, Elizabeth R. Managing Director Seward, Lindsay H. Vice President Seydler, Bonnie S. Vice President Sheridan, Michael F. Assistant Vice President Short Jr., Harold P. Senior Vice President Short, Jonathan D. Senior Vice President Siebold, Mark J. Senior Vice President Siemon Jr., Frank E. Senior Vice President Sliney, Michael J. Vice President Spigelmeyer III, Carl M. Vice President Spooner, Andrew C. Assistant Vice President Squires, Melissa H. Vice President Stark, Kerri A. Vice President Stathoulopoulos, Manny Assistant 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 Tierney, Tracy L. Assistant Vice President Totovian, James H. Assistant Vice President Tucker, Jason A. Senior Vice President Tyrie, David C. Managing Director Urban, Elke R. Assistant Vice President Valentin-Hess, Carmen Assistant Vice President Wadera-Sandhu, Jyotsana Assistant Vice President Wallace, Stephen Senior Vice President Werths, Beth K. Vice President Wilde, Michael R. Assistant Vice President Williams, Christopher J. Assistant Vice President Williams, Jason M. Vice President Zannino, David J. Assistant Vice President Zechello, Steven R. Vice President Zografos-Preusser, Laura J. Senior Vice President deMont, Lisa M. Senior Vice President |
* Mr. Ruys de Perez is Vice President and Chief Compliance Officer of the Registrant.
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 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
We, the undersigned Trustees of Putnam Variable Trust, hereby severally constitute and appoint John Hill, George Putnam III, Charles E. Porter, Jonathan S. Horwitz, Daniel T. Gallagher, John W. Gerstmayr and Bryan Chegwidden, and each of them singly, our true and lawful attorneys, with full power to them and each of them, to sign for us, and in our names and in the capacities indicated below, the Registration Statements on Form N-1A of Putnam Variable Trust 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 untoour 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/ Myra R. Drucker ---------------------------- Trustee December 9, 2004 Myra R. Drucker /s/ Charles E. Haldeman, Jr. ---------------------------- Trustee December 9, 2004 Charles E. Haldeman, Jr. /s/ Richard B. Worley ---------------------------- Trustee December 9, 2004 Richard B. Worley |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant 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 1st day of March, 2005.
Putnam Variable Trust
By: /s/ Charles E. Porter, Executive Vice President, Associate Treasurer and Principal Executive Officer |
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
Myra R. Drucker Trustee
Charles E. Haldeman, Jr. Trustee
Ronald J. Jackson Trustee
Paul L. Joskow Trustee
Elizabeth T. Kennan Trustee
John H. Mullin, III Trustee
Robert E. Patterson Trustee
W. Thomas Stephens Trustee
Richard B. Worley Trustee
By: /s/ Charles E. Porter, as Attorney-in-Fact
March 1, 2005
EXHIBIT INDEX
Item 23 Exhibit
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(a) Amended and Restated Agreement and Declaration of Trust dated January 14, 2005
(d)(2) Sub-Management Contract dated September 13, 2004
(f) Trustee Retirement Plan dated October 4, 1996, as amended July 21, 2000
(h)(3) Liability Insurance Allocation Agreement
(p)(1) The Putnam Funds Code of Ethics
(p)(2) Putnam Investments Code of Ethics
(p)(3) Amendment to Putnam Investments Code of Ethics dated December 15, 2004
PUTNAM VARIABLE TRUST
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
This AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts, this 14th day of January, 2005 hereby amends and restates in its entirety this Trust's Agreement and Declaration of Trust, dated December 30, 1996. This Amended and Restated Agreement and Declaration of Trust shall be effective upon filing with the Secretary of The Commonwealth of Massachusetts.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into their hands as trustees of a Massachusetts voluntary association with transferable shares in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash, securities and other assets, which they may from time to time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the following terms and conditions for the pro rata benefit of the holders from time to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Name
Section 1. This Trust shall be known as "Putnam Variable Trust" and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine.
Definitions
Section 2. Whenever used herein, unless otherwise required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established by this Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or elected in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable units of interest into which the beneficial interest in the Trust shall be divided from time to time or, if more than one series or class of Shares is authorized by the Trustees, the equal proportionate transferable units into which each series or class of Shares shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 and the Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Affiliated Person", "Assignment", "Commission", "Interested Person", "Principal Underwriter" and "Majority Shareholder Vote" (the 67% or 50% requirement of the third sentence of Section 2(a)(42) of the 1940 Act, whichever may be applicable) shall have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Amended and Restated Agreement and Declaration of Trust as amended or restated from time to time;
(h) "Bylaws" shall mean the Bylaws of the Trust as amended from time to time;
(i) The terms "series" or "series of Shares" refers to the one or more separate investment portfolios of the Trust into which the assets and liabilities of the Trust may be divided and the Shares of the Trust representing the beneficial interest of Shareholders in such respective portfolios; and
(j) The term "class" or "class of Shares" refers to the division of Shares representing any series into two or more classes as provided in Article III, Section 1 hereof.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment primarily in securities, debt instruments and other instruments and rights of a financial character.
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Shares of the Trust shall be issued in one or more series as the Trustees may, without shareholder approval, authorize. Each series shall be preferred over all other series in respect of the assets allocated to that series within the meaning of the 1940 Act and shall represent a separate investment portfolio of the Trust. The beneficial interest in each series shall at all times be divided into Shares, without par value, each of which shall, except as provided in the following sentence, represent an equal proportionate interest in the series with each other Share of the same series, none having priority or preference over another. The Trustees may, without Shareholder approval, divide the Shares of any series into two or more classes, Shares of each such class having such preferences and special or relative rights and privileges (including conversion rights, if any) as the Trustees may determine and as shall be set forth in the Bylaws. The number of Shares authorized shall be unlimited. The Trustees may from time to time divide or combine the Shares of any series or class into a greater or lesser number without thereby changing the proportionate beneficial interests in the series or class.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on the books of the Trust or a transfer or similar agent. No certificates certifying the ownership of Shares shall be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of Share certificates, the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to who are the Shareholders of each series and class and as to the number of Shares of each series and class held from time to time by each Shareholder.
Investment in the Trust
Section 3. The Trustees shall accept investments in the Trust from such persons and on such terms and for such consideration, which may consist of cash or tangible or intangible property or a combination thereof, as they or the Bylaws from time to time authorize.
All consideration received by the Trust for the issue or sale of Shares of each series, together with all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to the series of Shares with respect to which the same were received by the Trust for all purposes, subject only to the rights of creditors, and shall be so handled upon the books of account of the Trust and are herein referred to as "assets of" such series.
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property giving only the rights provided in this Declaration of Trust or the Bylaws. Every Shareholder by virtue of having become a Shareholder shall be held to have expressly assented and agreed to the terms of this Declaration of Trust and the Bylaws and to have become a party thereto. The death of a Shareholder during the continuance of the Trust shall not operate to terminate the same nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but only to the rights of said decedent under this Trust. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders partners. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally any Shareholder, nor except as specifically provided herein to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay.
ARTICLE IV
The Trustees
Election
Section 1. A Trustee may be elected either by the Trustees or by the Shareholders. There shall be not less than three Trustees. The number of Trustees shall be fixed by the Trustees. Each Trustee elected by the Trustees or the Shareholders shall serve until he or she retires, resigns, is removed or dies or until the next meeting of Shareholders called for the purpose of electing Trustees and until the election and qualification of his or her successor. At any meeting called for the purpose, a Trustee may be removed by vote of the holders of two-thirds of the outstanding Shares. The initial Trustees, each of whom shall serve until the first meeting of Shareholders at which Trustees are elected and until his or her successor is elected and qualified, or until he or she sooner dies, resigns or is removed, shall be George Putnam, Richard M. Cutler and Alla O'Brien and such other persons as the Trustee or Trustees then in office shall, prior to any sale of Shares pursuant to public offering, appoint.
Effect of Death, Resignation, etc. of a Trustee
Section 2. The death, declination, resignation, retirement, removal or incapacity of the Trustees, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust.
Powers
Section 3. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Trustees, and they shall have all powers necessary or convenient to carry out that responsibility. Without limiting the foregoing, the Trustees may adopt Bylaws not inconsistent with this Declaration of Trust providing for the conduct of the business of the Trust and may amend and repeal them to the extent that such Bylaws do not reserve that right to the Shareholders; they may fill vacancies in or add to their number, and may elect and remove such officers and appoint and terminate such agents as they consider appropriate; they may appoint from their own number, and terminate, any one or more committees consisting of two or more Trustees, including an executive committee which may, when the Trustees are not in session, exercise some or all of the power and authority of the Trustees as the Trustees may determine; they may employ one or more custodians of the assets of the Trust and may authorize such custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities, retain a transfer agent or a Shareholder servicing agent, or both, provide for the distribution of Shares by the Trust, through one or more principal underwriters or otherwise, set record dates for the determination of Shareholders with respect to various matters, and in general delegate such authority as they consider desirable to any officer of the Trust, to any committee of the Trustees and to any agent or employee of the Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or in the name of the Trustees or of the Trust or in the name of a custodian, subcustodian or other depositary or a nominee or nominees or otherwise;
(f) Subject to the provisions of Article III, Section 3, to allocate assets, liabilities, income and expenses of the Trust to a particular series of Shares or to apportion the same among two or more series, provided that any liabilities or expenses incurred by or arising in connection with a particular series of Shares shall be payable solely out of the assets of that series; and to the extent necessary or appropriate to give effect to the preferences and special or relative rights and privileges of any classes of Shares, to allocate assets, liabilities, income and expenses of a series to a particular class of Shares of that series or to apportion the same among two or more classes of Shares of that series;
(g) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer, any security of which is or was held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer, and to pay calls or subscriptions with respect to any security held in the Trust;
(h) To join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of or against the Trust or any matter in controversy, including but not limited to claims for taxes;
(j) To enter into joint ventures, general or limited partnerships and any other combinations or associations;
(k) To borrow funds;
(l) To endorse or guarantee the payment of any notes or other obligations of any person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof; and to mortgage and pledge the Trust property or any part thereof to secure any of or all such obligations;
(m) To purchase and pay for entirely out of Trust property such insurance as they may deem necessary or appropriate for the conduct of the business, including without limitation, insurance policies insuring the assets of the Trust and payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers or managers, principal underwriters, or independent contractors of the Trust individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person as Shareholder, Trustee, officer, employee, agent, investment adviser or manager, principal underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such person against such liability; and
(n) To pay pensions for faithful service, as deemed appropriate by the Trustees, and to adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any present or future law or custom in regard to investments by trustees. Except as otherwise provided herein or from time to time in the Bylaws, any action to be taken by the Trustees may be taken by a majority of the Trustees present at a meeting of the Trustees (a quorum being present), within or without Massachusetts, including any meeting held by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting, or by written consents of a majority of the Trustees then in office.
Payment of Expenses by Trust
Section 4. The Trustees are authorized to pay or to cause to be paid out of the assets of the Trust, all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the Trust, or in connection with the management thereof, including, but not limited to, the Trustees' compensation and such expenses and charges for the services of the Trust's officers, employees, investment adviser or manager, principal underwriter, auditor, counsel, custodian, transfer agent, Shareholder servicing agent, and such other agents or independent contractors and such other expenses and charges as the Trustees may deem necessary or proper to incur, provided, however, that all expenses, fees, charges, taxes and liabilities incurred or arising in connection with a particular series of Shares shall be payable solely out of the assets of that series.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of each series of Shares and of the Trust shall at all times be considered as vested in the Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable Majority Shareholder Vote, the Trustees may, at any time and from time to time, contract for exclusive or nonexclusive advisory and/or management services with any corporation, trust, association or other organization (the "Manager"), every such contract to comply with such requirements and restrictions as may be set forth in the Bylaws; and any such contract may contain such other terms interpretive of or in addition to said requirements and restrictions as the Trustees may determine, including, without limitation, authority to determine from time to time what investments shall be purchased, held, sold or exchanged and what portion, if any, of the assets of the Trust shall be held uninvested and to make changes in the Trust's investments. The Trustees may also, at any time and from time to time, contract with the Manager or any other corporation, trust, association or other organization, appointing it exclusive or nonexclusive distributor or principal underwriter for the Shares, every such contract to comply with such requirements and restrictions as may be set forth in the Bylaws; and any such contract may contain such other terms interpretive of or in addition to said requirements and restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, manager, adviser, principal underwriter or distributor or agent of or for any corporation, trust, association, or other organization, or of or for any parent or affiliate of any organization, with which an advisory or management contract, or principal underwriter's or distributor's contract, or transfer, Shareholder servicing or other agency contract may have been or may hereafter be made, or that any such organization, or any parent or affiliate thereof, is a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with which an advisory or management contract or principal underwriter's or distributor's contract, or transfer, Shareholder servicing or other agency contract may have been or may hereafter be made also has an advisory or management contract, or transfer, Shareholder servicing or other agency contract with one or more other corporations, trusts, associations, or other organizations, or has other business or interests shall not affect the validity of any such contract or disqualify any Shareholder, Trustee or officer of the Trust from voting upon or executing the same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting powers of one or more classes of
Shares as set forth elsewhere in this Declaration of Trust or in the
Bylaws, the Shareholders shall have power to vote only (i) for the
election of Trustees as provided in Article IV, Section 1, (ii) for the
removal of Trustees as provided in Article IV, Section 1, (iii) with
respect to any Manager as provided in Article IV, Section 6, (iv) with
respect to any termination of this Trust to the extent and as provided
in Article IX, Section 4, (v) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Article IX,
Section 7, (vi) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the
Shareholders, and (vii) with respect to such additional matters relating
to the Trust as may be required by this Declaration of Trust, the Bylaws
or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote. On any matter submitted
to a vote of Shareholders, all Shares of the Trust then entitled to vote
shall, except as otherwise provided in the Bylaws, be voted in the
aggregate as a single class without regard to series or classes of
shares, except (1) when required by the 1940 Act or when the Trustees
shall 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 (2) when the Trustees have determined
that the matter affects only the interests of one or more series or
classes, only Shareholders of such series or classes shall be entitled
to vote thereon. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid
if executed by any one of them unless at or prior to exercise of the
proxy the Trust receives a specific written notice to the contrary from
any one of them. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the
challenger. Until Shares of any series or class are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or Bylaws to be taken by
Shareholders as to such series or class.
Voting Power and Meetings
Section 2. Meetings of Shareholders of any or all series or classes may be called by the Trustees from time to time for the purpose of taking action upon any matter requiring the vote or authority of the Shareholders of such series or classes as herein provided or upon any other matter deemed by the Trustees to be necessary or desirable. Written notice of any meeting of Shareholders shall be given or caused to be given by the Trustees by mailing such notice at least seven days before such meeting, postage prepaid, stating the time, place and purpose of the meeting, to each Shareholder entitled to vote at such meeting at the Shareholder's address as it appears on the records of the Trust. If the Trustees shall fail to call or give notice of any meeting of Shareholders for a period of 30 days after written application by Shareholders holding at least 10% of the then outstanding shares of all series and classes entitled to vote at such meeting or of all series if all series are entitled to vote at such meeting requesting a meeting to be called for a purpose requiring action by the Shareholders as provided herein or in the Bylaws, then Shareholders holding at least 10% of the then outstanding shares of all series and classes entitled to vote at such meeting or of all series if all series are entitled to vote at such meeting may call and give notice of such meeting, and thereupon the meeting shall be held in the manner provided for herein in case of call thereof by the Trustees. Notice of a meeting need not be given to any Shareholder if a written waiver of notice, executed by him or her before or after the meeting, is filed with the records of the meeting, or to any Shareholder who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him or her.
Quorum and Required Vote
Section 3. Thirty percent of Shares entitled to vote shall be a quorum for the transaction of business at a Shareholders' meeting, except that where any provision of law or of this Declaration of Trust permits or requires that holders of any series shall vote as a series, then thirty percent of the aggregate number of Shares of that series entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series. Any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may be held, within a reasonable time after the date set for the original meeting, without the necessity of further notice. Except when a larger vote is required by any provision of this Declaration of Trust or the Bylaws, a majority of the Shares voted shall decide any questions and a plurality shall elect a Trustee, provided that where any provision of law or of this Declaration of Trust permits or requires that the holders of any series or class shall vote as an individual series or class then a majority of the Shares of that series or class voted on the matter (or a plurality with respect to the election of a Trustee) shall decide that matter insofar as that series or class is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be taken without a meeting if a majority of Shareholders entitled to vote on the matter (or such larger proportion thereof as shall be required by any express provision of this Declaration of Trust or the Bylaws) consent to the action in writing and such written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders.
Additional Provisions
Section 5. The Bylaws may include further provisions of Shareholders' votes and meetings and related matters.
ARTICLE VI
Distributions, Redemptions and Repurchases
Distributions
Section 1. The Trustees may each year, or more frequently if they so determine, distribute to the Shareholders of each series out of the assets of such series such amounts as the Trustees may determine. Any such distribution to the Shareholders of a particular series shall be made to said Shareholders pro rata in proportion to the number of Shares of such series held by each of them, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of Shares of that Series, and any distribution to the Shareholders of a particular class of Shares shall be made to such Shareholders pro rata in proportion to the number of Shares of such class held by each of them. Such distributions shall be made in cash, Shares or a combination thereof, as determined by the Trustees. Any such distribution paid in Shares will be paid at the net asset value thereof as determined in accordance with the Bylaws.
Notwithstanding the provisions of the foregoing paragraph, with respect to any money market series seeking to maintain a constant net asset value per share, the Trustees shall each year, or more frequently if they so determine in their sole discretion, distribute to the Shareholders of such series an amount approximately equal to the Net Income of such series, and may from time to time distribute such additional amounts as they may authorize to the Shareholders of such series. Such Net Income shall consist of: (i) all interest income (including both original issue and market discount earned on discount paper accrued ratably to the date of maturity) accrued on portfolio investments of such series, (ii) plus or minus realized or unrealized gains and losses on portfolio investments determined by valuing the portfolio investments of such series in a manner consistent with the requirements of the actual and accrued expenses and liabilities of such series determined in accordance with good accounting practices. Such Net Income shall be determined by the Trustees or as they may authorize on each business day at the times and in the manner provided in the Bylaws, and all such Net Income, which is a positive amount, since the last determination of Net Income, shall be declared as a dividend on Shares of such series. Determinations of Net Income of any such money market series made by the Trustees, or as they may authorize, in good faith, shall be binding on all parties concerned. If, for any reason, the Net Income of such series determined at any time is a negative amount, each Shareholder's pro rata share of such negative amount shall constitute a liability of such Shareholder to the Trust which shall be paid at such times and in such manner as the Trustees may from time to time determine out of the accrued dividend account of such Shareholder, by reducing the number of Shares of such series in the account of such Shareholder or otherwise. As a result of such determinations and declarations as a dividend of the Net Income of such series, the net asset value per Share of such series is intended to remain at a constant amount immediately after each such determination and declaration; subject, however, to the power of the Trustees as provided in Section I of Article III to divide or combine the Shares of such series into a greater or lesser number.
Notwithstanding the provisions of the foregoing paragraph for calculation and distribution of Net Income, the Trustees may, from time to time and for so long as they may deem appropriate, for purposes of calculating and distributing income of any such money market series to the Shareholders of such series divide Shares of such series into as many classes as they deem appropriate and pay distributions of differing amounts to each class of Shares (provided all Shares of the same class receive equal distributions), provided, that the division of Shares of any such money market series into classes and the payment of differing distributions to such classes shall be made in a manner consistent with the requirements of the 1940 Act, the rules and regulations thereunder and exemptions therefrom, and provided further, that except as otherwise specifically authorized by the Trustees pursuant to this paragraph, the Trustees shall continue to calculate and distribute Net Income of such series in the manner provided in the preceding paragraph.
Redemptions and Repurchases
Section 2. The Trust shall purchase such Shares as are offered by any Shareholder for redemption, upon the presentation of any certificate for the Shares to be purchased, a proper instrument of transfer and a request directed to the Trust or a person designated by the Trust that the Trust purchase such Shares, or in accordance with such other procedures for redemption as the Trustees may from time to time authorize; and the Trust will pay therefor the net asset value thereof, as next determined in accordance with the Bylaws, less any redemption charge fixed by the Trustees. Payment for said Shares shall be made by the Trust to the Shareholder within seven days after the date on which the request is made. The obligation set forth in this Section 2 is subject to the provision that in the event that any time the New York Stock Exchange is closed for other than customary weekends or holidays, or, if permitted by the rules of the Commission, during periods when trading on the Exchange is restricted or during any emergency which makes it impractical for the Trust to dispose of its investments or to determine fairly the value of its net assets, or during any other period permitted by order of the Commission for the protection of investors, such obligation may be suspended or postponed by the Trustees. The Trust may also purchase or repurchase Shares at a price not exceeding the net asset value of such Shares in effect when the purchase or repurchase or any contract to purchase or repurchase is made. Payment for any redemption, purchase or repurchase may be made in cash or in other property, or in any combination thereof. The composition of any such payment shall be determined by the Trust in its sole discretion, and the Trust shall have no obligation to effect a pro rata division of cash or other property in making any such payment. In no event shall the Trust be liable for any delay of any other person in transferring securities or other property selected for delivery as all or part of any payment.
Redemptions at the Option of the Trust
Section 3. The Trust shall have the right at its option and at any time to redeem Shares of any Shareholder at the net asset value thereof as determined in accordance with the Bylaws: (i) if at such time such Shareholder owns fewer Shares than, or Shares having an aggregate net asset value of less than, an amount determined from time to time by the Trustees; or (ii) to the extent that such Shareholder owns Shares of a particular series of Shares equal to or in excess of a percentage of the outstanding Shares of that series determined from time to time by the Trustees; or (iii) to the extent that such Shareholder owns Shares of the Trust representing a percentage equal to or in excess of such percentage of the aggregate number of outstanding Shares of the Trust or the aggregate net asset value of the Trust determined from time to time by the Trustees.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Compensation
Section 1. The Trustees as such shall be entitled to reasonable compensation from the Trust; they may fix the amount of their compensation. Nothing herein shall in any way prevent the employment of any Trustee for advisory, management, legal, accounting, investment banking or other services and payment for the same by the Trust.
Limitation of Liability
Section 2. The Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, manager or principal underwriter of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee, but nothing herein contained shall protect any Trustee against any liability to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been executed or done only in or with respect to their or his or her capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon.
ARTICLE VIII
Indemnification
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and officers (including persons who serve at the Trust's request as directors, officers or trustees of another organization in which the Trust has any interest as a shareholder, creditor or otherwise) (hereinafter referred to as a "Covered Person") against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by any Covered Person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such Covered Person may be or may have been involved as a party or otherwise or with which such Covered Person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Covered Person except with respect to any matter as to which such Covered Person shall have been finally adjudicated in any such action, suit or other proceeding (a) not to have acted in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Trust or (b) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office. Expenses, including counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), shall be paid from time to time by the Trust in advance of the final disposition of any such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Covered Person to repay amounts so paid to the Trust if it is ultimately determined that indemnification of such expenses is not authorized under this Article, provided, however, that either (a) such Covered Person shall have provided appropriate security for such undertaking, (b) the Trust shall be insured against losses arising from any such advance payments or (c) either a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter), or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a full trial type inquiry) that there is reason to believe that such Covered Person will be found entitled to indemnification under this Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication by a court, or by any other body before which the proceeding was brought, that such Covered Person either (a) did not act in good faith in the reasonable belief that his or her action was in the best interests of the Trust or (b) is liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, indemnification shall be provided if (a) approved as in the best interests of the Trust, after notice that it involves such indemnification, by at least a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter) upon a determination, based upon a review of readily available facts (as opposed to a full trial type inquiry) that such Covered Person acted in good faith in the reasonable belief that his or her action was in the best interests of the Trust and is not liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, or (b) there has been obtained an opinion in writing of independent legal counsel, based upon a review of readily available facts (as opposed to a full trial type inquiry) to the effect that such Covered Person appears to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Trust and that such indemnification would not protect such Covered Person against any liability to the Trust to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Any approval pursuant to this Section shall not prevent the recovery from any Covered Person of any amount paid to such Covered Person in accordance with this Section as indemnification if such Covered Person is subsequently adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Trust or to have been liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office.
Indemnification Not Exclusive
Section 3. The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which such Covered Person may be entitled. As used in this Article VIII, the term "Covered Person" shall include such person's heirs, executors and administrators and a "disinterested Trustee" is a Trustee who is not an "interested person" of the Trust as defined in Section 2(a)(19) of the 1940 Act (or who has been exempted from being an "interested person" by any rule, regulation or order of the Commission) and against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or has been pending. Nothing contained in this Article shall affect any rights to indemnification to which personnel of the Trust, other than Trustees or officers, and other persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of any such person.
Shareholders
Section 4. In case any Shareholder or former Shareholder shall be held to be personally liable solely by reason of his or her being or having been a Shareholder and not because of his or her acts or omissions or for some other reason, the Shareholder or former Shareholder (or his or her heirs, executors, administrators or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified against all loss and expense arising from such liability, but only out of the assets of the particular series of Shares of which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting with or having any claim against the Trust or a particular series of Shares shall look only to the assets of the Trust or the assets of that particular series of Shares for payment under such credit, contract or claim, and neither the Shareholders nor the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Nothing in this Declaration of Trust shall protect any Trustee against any liability to which such Trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or issued by the Trustees or by any officer or officers shall give notice that this Declaration of Trust is on file with the Secretary of The Commonwealth of Massachusetts and shall recite that the same was executed or made by or on behalf of the Trust or by them as Trustee or Trustees or as officer or officers and not individually and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only upon the assets and property of the Trust, and may contain such further recital as he or she or they may deem appropriate, but the omission thereof shall not operate to bind any Trustee or Trustees or officer or officers or Shareholder or Shareholders individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers and discretions hereunder shall be binding upon everyone interested. A Trustee shall be liable for his or her own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required.
Liability of Third Persons Dealing with Trustee
Section 3. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by vote of Shareholders holding at least 66-2/3% of the Shares entitled to vote or by the Trustees by written notice to the Shareholders. Any series of Shares may be terminated at any time by vote of Shareholders holding at least 66-2/3% of the Shares of such series entitled to vote or by the Trustees by written notice to the Shareholders of such series. Upon termination of the Trust or of any one or more series of Shares, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated, of the Trust or of the particular series as may be determined by the Trustees, the Trust shall in accordance with such procedures as the Trustees consider appropriate reduce the remaining assets to distributable form in cash or shares or other securities, or any combination thereof, and distribute the proceeds to the Shareholders of the series involved, ratably according to the number of Shares of such series held by the several Shareholders of such series on the date of termination, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of Shares of that series, provided that any distribution to the Shareholders of a particular class of Shares shall be made to such Shareholders pro rata in proportion to the number of Shares of such class held by each of them.
Filing of Copies, References, Headings
Section 5. The original or a copy of this instrument and of each amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each amendment hereto shall be filed by the Trust with the Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk, as well as any other governmental office where such filing may from time to time be required. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such amendments have been made and as to any matters in connection with the Trust hereunder, and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such amendments. In this instrument and in any such amendment, references to this instrument and all expressions like "herein", "hereof" and "hereunder" shall be deemed to refer to this instrument as amended or affected by any such amendments. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. This instrument may be executed in any number of counterparts each of which shall be deemed an original.
Applicable Law
Section 6. This Declaration of Trust is made in The Commonwealth of Massachusetts, and it is created under and is to be governed by and construed and administered according to the laws of said Commonwealth. The Trust shall be of the type commonly called a Massachusetts business trust and, without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust.
Amendments
Section 7. This Declaration of Trust may be amended at any time by an instrument in writing signed by a majority of the then Trustees when authorized to do so by vote of Shareholders holding a majority of the Shares entitled to vote, except that an amendment which shall affect the holders of one or more series or classes of Shares but not the holders of all outstanding series and classes shall be authorized by vote of the Shareholders holding a majority of the Shares entitled to vote of each series and class affected and no vote of Shareholders of a series or class not affected shall be required. Amendments having the purpose of changing the name of the Trust or of supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision contained herein shall not require authorization by Shareholder vote.
IN WITNESS WHEREOF, the undersigned, being a majority of the Trustees of the Trust, hereunto set their hands in the City of Boston, Massachusetts for themselves and their assigns, as of the day and year first above written.
/s/ John A. Hill /s/ Paul L. Joskow ----------------------------- ----------------------------- John A. Hill Paul L. Joskow /s/ George Putnam, III /s/ Elizabeth T. Kennan ----------------------------- ----------------------------- George Putnam, III Elizabeth T. Kennan /s/ Jameson A. Baxter /s/ John H. Mullin, III ----------------------------- ----------------------------- Jameson A. Baxter John H. Mullin, III /s/ Charles B. Curtis /s/ Robert E. Patterson ----------------------------- ----------------------------- Charles B. Curtis Robert E. Patterson /s/ Myra R. Drucker ----------------------------- ----------------------------- Myra R. Drucker A.J.C. Smith /s/ Charles E. Haldeman, Jr. /s/ W. Thomas Stephens ----------------------------- ----------------------------- Charles E. Haldeman, Jr. W. Thomas Stephens /s/ Ronald J. Jackson /s/ Richard B. Worley ----------------------------- ----------------------------- Ronald J. Jackson Richard B. Worley |
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss.
On this 13th day of January, 2005, before me, the undersigned notary public, personally appeared the above-listed individuals, proved to me through satisfactory evidence of identification, to be the persons whose name is signed on the preceding or attached document, and acknowledged to me that he or she signed it voluntarily for its stated purpose as a Trustee of Putnam Variable Trust, a Massachusetts business trust.
/s/ J. Scott Harris ----------------------------- Notary Public My Commission Expires: 10/7/2005 |
The address of the Trust is One Post Office Square, Boston, Massachusetts 02109
TRUSTEES ADDRESSES
MRS. JAMESON A. BAXTER DR. ELIZABETH T. KENNAN
626 OLD BARN ROAD CAMBUS-KENNETH FARM
LAKE BARRINGTON, IL 60010 1567 NORTH DANVILLE BYPASS
DANVILLE, KY 40422
CHARLES B. CURTIS, ESQ. MR. JOHN H. MULLIN, III
5300 HAMPDEN LANE 700 RIDGEWAY FARM LANE
BETHESDA, MD 20814 BROOKNEAL, VA 24528
MS. MYRA R. DRUCKER ROBERT E. PATTERSON, ESQ.
24 WOLFPITS ROAD 370 BEACON STREET
BETHEL, CT 06801 BOSTON, MA 02116
MR. CHARLES E. HALDEMAN GEORGE PUTNAM, III, ESQ.
5 ARLINGTON STREET 4 SMITH'S POINT ROAD
BOSTON, MA 02114 MANCHESTER, MA 01944
MR. JOHN A. HILL MR. A.J.C. SMITH
33 AVON ROAD 630 PARK AVENUE
BRONXVILLE, NY 10708 APT. 11-C
NEW YORK, NY 10021
MR. RONALD J. JACKSON MR. W. THOMAS STEPHENS
35 PAINE AVENUE 3333 EAST PLATTE AVENUE
PRIDES CROSSING, MA 01965 GREENWOOD VILLAGE, CO 80121
DR. PAUL L. JOSKOW MR. RICHARD B. WORLEY
7 CHILTON STREET 1111 BARBERRY ROAD
BROOKLINE, MA 02446 BRYN MAWR, PA 19010
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PUTNAM FUNDS
SUB-MANAGEMENT CONTRACT
Sub-Management Contract dated as of September 13, 2004 between PUTNAM INVESTMENT MANAGEMENT, LLC, a Delaware limited liability company (the "Manager") and PUTNAM INVESTMENTS LIMITED, a company organized under the laws of England and Wales (the "Sub-Manager").
WHEREAS, the Manager is the investment manager of each of the investment companies registered under the United States Investment Company Act of 1940, as amended, that are identified on Schedule A hereto, as it may from time to time be amended by the Manager (the "Funds"), and a registered investment adviser under the United States Investment Advisers Act of 1940, as amended;
WHEREAS, the Sub-Manager is licensed as an investment manager by the Financial Services Authority of the United Kingdom (the "FSA"); and
WHEREAS, the Manager desires to engage the Sub-Manager from time to time to manage a portion of certain of the Funds:
NOW THEREFORE, in consideration of the mutual covenants herein contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-MANAGER
(a) The Sub-Manager, at its expense, will furnish continuously an investment program for that portion of any Fund the management of which is allocated from time to time by the Manager to the Sub-Manager (an "Allocated Sleeve"). The Manager shall, in its sole discretion, determine which Funds will have an Allocated Sleeve and the amount of assets allocated from time to time to such Allocated Sleeve; provided that, with respect to any Fund, the Trustees of such Fund must have approved the use of the Sub-Manager prior to the creation of an Allocated Sleeve for such Fund. The Sub-Manager will determine what investments shall be purchased, held, sold or exchanged by any Allocated Sleeve and what portion, if any, of the assets of the Allocated Sleeve shall be held uninvested and shall, on behalf of the Fund, make changes in the Fund's investments held in such Allocated Sleeve.
(b) The Manager may also, at its discretion, request the Sub-Manager to provide assistance with purchasing and selling securities for any Fund, including the placement of orders with broker-dealers selected in accordance with Section 1(d), even if the Manager has not established an Allocated Sleeve for such Fund.
(c) The Sub-Manager at its expense will furnish all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully.
(d) The Sub-Manager shall place all orders for the purchase and sale of portfolio investments for any Allocated Sleeve with brokers or dealers selected by the Sub-Manager. In the selection of such brokers or dealers and the placing of such orders, the Sub-Manager shall use its best efforts to obtain for the related Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Sub-Manager, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, 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 or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Funds may determine, the Sub-Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused a Fund to pay a broker or dealer that provides brokerage and research services to the Manager or the Sub-Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Sub-Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or its overall responsibilities with respect to the Fund and to other clients of the Manager or the Sub-Manager as to which the Manager or the Sub-Manager exercises investment discretion. The Sub-Manager agrees that in connection with purchases or sales of portfolio investments for any Fund, neither the Sub-Manager nor any officer, director, employee or agent of the Sub-Manager shall act as a principal or receive any commission other than as provided in Section 3.
(e) The Sub-Manager shall not be obligated to pay any expenses of or for the Manager or any Fund not expressly assumed by the Sub-Manager pursuant to this Section 1.
(f) In the performance of its duties, the Sub-Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of each applicable Fund and such Fund's stated investment objectives, policies and restrictions, and will use its best efforts to safeguard and promote the welfare of such Fund and to comply with other policies which the Manager or the Trustees may from time to time determine and shall exercise the same care and diligence expected of the Manager.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and employees of a Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Sub-Manager, and in any person controlled by or under common control with the Sub-Manager, and that the Sub-Manager and any person controlled by or under common control with the Sub-Manager may have an interest in such Fund. It is also understood that the Sub-Manager and any person controlled by or under common control with the Sub-Manager have and may have advisory, management, service or other contracts with other organizations and persons, and may have other interests and business.
3. COMPENSATION.
The Manager will pay to the Sub-Manager as compensation for the Sub-Manager's services rendered, a fee, computed and paid quarterly at the annual rate of 0.35% per annum of average aggregate net asset value of the assets in equity Sleeved Accounts and 040% per annum of average aggregate net asset value of the assets in fixed income Sleeved Accounts. Such average net asset value shall be determined by taking an average of all of the determinations of such net asset value during a quarter at the close of business on each business day during such quarter while this Contract is in effect. Such fee shall be payable for each quarter within 30 days after the close of such quarter. The Sub-Manager shall look only to the Manager for payment of its fees. No Fund shall have any responsibility for paying any fees due the Sub-Manager.
If the Sub-Manager shall serve for less than the whole of a quarter, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate without the payment of any penalty, in the event of its assignment; and this Contract shall not be amended with respect to any Allocated Sleeve unless such amendment be approved at a meeting by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the related Fund who are not interested persons of such Fund or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall remain in full force and effect continuously thereafter (unless terminated automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto or, with respect to any Allocated Sleeve, the related Fund may at any time terminate this Contract by not more than sixty days' nor less than thirty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or
(b) With respect to any Allocated Sleeve, if (i) the Trustees of the related Fund or the shareholders by the affirmative vote of a majority of the outstanding shares of such Fund, and (ii) a majority of the Trustees of such Fund who are not interested persons of such Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Contract, then this Contract shall automatically terminate at the close of business on the anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later, or
(c) With respect to any Allocated Sleeve, automatically upon termination of the Manager's investment management contract with the related Fund.
Action by a Fund under (a) above may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of such Fund.
Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of a Fund" means the affirmative vote, at a duly called and held meeting of shareholders of such Fund, (a) of the holders of 67% or more of the shares of such Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of such Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of such Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person," "control," "interested person" and "assignment" shall have their respective meanings defined in the United States Investment Company Act of 1940 and the Rules and Regulations thereunder (the "1940 Act"), subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 Act, and the Rules and Regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the United States Securities Exchange Act of 1934 and the Rules and Regulations thereunder.
7. NON-LIABILITY OF SUB-MANAGER.
In the absence of willful misfeasance, bad faith or gross negligence on the part of the Sub-Manager, or reckless disregard of its obligations and duties hereunder, the Sub-Manager shall not be subject to any liability to the Manager, any Fund or to any shareholder of any Fund, for any act or omission in the course of, or connected with, rendering services hereunder.
8. ADDITIONAL PROVISIONS
(a) The Sub-Manager represents that it is regulated by the FSA in the conduct of its investment business. The Sub-Manager has in operation a written procedure in accordance with FSA rules for the effective consideration and proper handling of complaints from customers. Any complaint by the Manager or any Fund should be sent to the Compliance Officer of the Sub-Manager. The Manager and any Fund is also entitled to make any complaints about the Sub-Manager to the Financial Ombudsman Service established by the FSA. The Manager and any Fund may also request a statement describing its rights to compensation in the event of the Sub-Manager's inability to meet its liabilities.
(b) The Manager represents that it and each Fund are "IntermediateCustomers" in the meaning of FSA rules.
(c) Although each Fund is not a party hereto and shall have no responsibility for the Manager's or the Sub-Manager's obligations hereunder, each Fund is named as explicit third party beneficiary of the parties' agreements hereunder.
IN WITNESS WHEREOF, PUTNAM INVESTMENTS LIMITED and PUTNAM INVESTMENT MANAGEMENT, LLC have each caused this instrument to be signed in duplicate on its behalf by an officer duly authorized, all as of the day and year first above written.
PUTNAM INVESTMENTS LIMITED
By: /s/ Jeffrey F. Peters
-------------------------
Name: Jeffrey F. Peters
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PUTNAM INVESTMENT MANAGEMENT, LLC
By: /s/ Simon Davis
-------------------------
Name: Simon Davis
|
Schedule A
Putnam Diversified Income Trust
Putnam VT Diversified Income Fund
Putnam Europe Equity Fund
Putnam High Yield Advantage Fund
Putnam High Yield Trust
Putnam VT High Yield Fund
Putnam Global Equity Fund
Putnam VT Global Equity Fund
Putnam Global Income Trust
Putnam International Equity Fund
Putnam VT International Equity Fund
Putnam International Growth and Income Fund
Putnam VT International Growth and Income Fund
Putnam High Income Bond Fund
Putnam High Income Opportunities Trust
Putnam Managed High Yield Trust
Putnam Master Income Trust
Putnam Master Intermediate Income Trust
Putnam Premier Income Trust
RETIREMENT PLAN
FOR THE
TRUSTEES OF THE PUTNAM FUNDS
1. General; effective date. This Retirement Plan For The Trustees Of The Putnam Funds is intended to provide, on the terms and conditions specified below, cash retirement benefits to certain individuals who have served as trustees ("Trustees") of the Funds. Except as provided at Section 12 below, the Plan is effective with respect to retirements occurring on or after January 1, 1996.
2. Statement of Purpose. The purpose of this Plan is to assist the Funds in attracting and retaining highly qualified individuals to serve as Trustees of the Putnam Funds by providing a form of deferred compensation which is competitive with compensation practices of other major investment company complexes as well as those of major business corporations and which recognizes the benefits to the Funds and of having Trustees with many years of experience with the affairs of the Funds.
3. Defined terms. When used in the Plan, the following terms shall have the meanings set forth in this Section:
* "Administrator": such committee, consisting solely of Trustees who are not "interested persons" of the Funds within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as may be designated from time to time by the Trustees to administer the Plan.
* "Service": active service as a Trustee of one or more of the Funds for which the Trustee is compensated by such Fund(s), including service prior to the Effective Date. For purposes of this definition, service for an entity that was a Fund at the time of such service shall not be disregarded merely because the entity later ceases to be a Fund. A Participant who dies prior to retirement or who retires by reason of total and permanent disability (as determined by the Administrator) shall be deemed to have served at least one hundred twenty (120) months of Service regardless of his or her actual period of service.
* "Effective Date": the date specified in the second sentence of Section 1.
* "Final Average Remuneration": the quotient obtained by dividing (i) a Participant's total retainer and meeting fees paid to the individual by the Funds for the last thirty-six (36) months of the individual's Service as a Trustee, by (ii) three.
* "Fund": any of the Putnam Funds, other than any such Fund that has either (i) elected by vote of a majority of its Trustees who are not "interested persons" of the Fund (as defined above) not to participate in the Plan, or (ii) terminated its participation in the Plan in accordance with Section 14(c).
* "Participant": a Trustee with at least sixty (60) months of Service.
* "Plan": the Retirement Plan For The Trustees Of The Putnam Funds set forth herein, as the same may from time to time be amended and in effect.
* "Retirement": ceasing to be an active Trustee (regardless of whether service to one or more Funds continues in a capacity other than as a Trustee) for any reason other than (i) termination for cause as determined by the Administrator, or (ii) death. The terms "retire," "retires" and "retired" shall be similarly construed.
* "Trustee": a trustee of any of the Funds.
4. Eligibility for retirement benefit. Each Participant shall receive the normal retirement benefit specified in Section 5 below commencing in the calendar year next following the date of retirement.
5. Form and amount of retirement benefit. The retirement benefit payable to a Participant shall be an annual cash payment equal to fifty percent (50%) of the Participant's Final Average Remuneration. Such retirement benefit shall be paid on January 15 of each calendar year commencing with the year specified in Section 4 above and continuing for the lesser of (i) a number of years equal to the Participant's years of Service (rounded to the nearest whole year) or (ii) the lifetime of the Participant.
6. Death benefit. The only death benefits payable under the Plan shall be those described in this Section:
(a) If a Participant dies after retirement but before ten (10) annual retirement benefit payments have been made, the Participant's designated beneficiary shall be entitled to receive an annual death benefit, in the same amount, payable on January 15 of each year for the lesser of (i) the remainder, if any, of the period specified in clause (i) of Section 5 above or (ii) the remainder of such 10-year period.
(b) If a Participant dies before retirement, there shall be paid to his or her designated beneficiary an annual death benefit equal in amount to the annual retirement benefit specified in Section 5 above. The death benefit described in this paragraph (b) shall be paid on January 15 of each year commencing in the calendar year next following the Participant's death for a number of years equal to the lesser of (i) the period specified in clause (i) of Section 5 above or (ii) ten (10) years.
(c) The Administrator in its discretion may commute any death benefit under this Section to an immediate lump sum payment or may otherwise accelerate such payments, in each case applying such reasonable discount rates as it deems appropriate.
7. Designation of beneficiary. For purposes of Section 6 above, a Participant's designated beneficiary shall be such person or persons, including a trust, as the Participant shall have designated in writing on a form acceptable to and delivered to the Administrator. In the absence of an effective beneficiary designation governing the payment of any portion of the death benefit described in Section 6 above, payment of such portion shall be made to the Participant's estate, which shall be deemed to be the Participant's designated beneficiary for all purposes hereunder. If the person designated as the beneficiary to receive any portion of the death benefit should die prior to completion of payments to such beneficiary without the Participant having made effective provision (by a designation delivered to the Administrator as hereinabove prescribed) for a successor or contingent beneficiary, payment of such portion or the remainder thereof shall be made to the decedent beneficiary's estate.
8. Agreement not to compete, etc. Eligibility for and payment of
benefits under the Plan is conditioned on agreement by the Participant
(i) to refrain from engaging in any business activity in competition
with the Funds, and (ii) not to disclose any proprietary or otherwise
confidential information pertaining to the Funds. Any breach by an
active or retired Trustee of the agreement or conditions specified in
the preceding sentence shall be grounds for termination or reduction by
the Administrator of benefits under the Plan.
9. Nature of rights. Nothing in the Plan shall be construed as requiring the Funds, or any of them, to set aside or to segregate any assets of any kind to meet any of its obligations hereunder or otherwise to fund the Plan. The rights of persons claiming benefits under the Plan shall be no greater than those of general unsecured creditors of a Fund, and no such person shall have any right in or to any specific assets of any Fund. All rights to benefits under the Plan shall be construed and interpreted consistent with the continued qualification of each Fund as a registered investment company under the Investment Company Act of 1940, as amended.
10. Rights non-assignable. No Participant, beneficiary or other person shall have any right to assign, pledge, encumber, or otherwise alienate or transfer any right to receive benefits or payments hereunder or any other interest under the Plan, in whole or in part, and any attempt by any such person to effectuate such an assignment, pledge, encumbrance, or other alienation or transfer shall be null and void.
11. No rights to continuation of status. Nothing in the Plan shall be construed as giving any individual a right to continue to serve as a Trustee of the Funds, or any of them, or to receive any particular level of remuneration for any such service.
12. Application of Plan to certain persons. This Plan supersedes in its entirety the voluntary retirement program heretofore maintained by the Funds and any benefits previously authorized under such program but not yet paid for periods commencing on or after January 1, 1996. Reference is made to those former Trustees listed on Schedule A hereto who retired prior to the effective date of this Plan and who are currently receiving benefits under such voluntary retirement program. In addition, reference is made to a current Trustee listed on Schedule B hereto who previously received certain retirement benefits under such voluntary retirement program following such Trustee's initial retirement from the Funds. Each person listed on Schedules A or B shall be entitled to a retirement benefit in the amount and payable in accordance with the terms of the Plan except that, to the extent inconsistent with the generally applicable provisions of the Plan, the specific provisions of Schedule A and B shall control.
13. Payment of benefits. Benefits shall be paid by the Funds, in cash, upon direction by the Administrator. The Administrator shall allocate the obligation to make payments with respect to a Trustee under the Plan for any calendar year among the Funds in proportion to their respective cumulative liabilities accrued with respect to such Trustee's participation in the Plan for financial reporting purposes or on such other reasonable basis as the Administrator may determine.
14. Amendment and termination.
(a) Amendment. The Plan may be amended at any time by the Administrator. No amendment shall reduce the benefits or future benefits of any Trustee who has retired, and in the case of a Participant who is still an active Trustee no amendment shall reduce the amount such Trustee would have been entitled to receive if he or she had ceased to serve as a Trustee immediately prior to such amendment.
(b) Termination of the Plan as a whole. The Plan as a whole may be terminated by the Administrator. Upon termination of the Plan as a whole, benefits in pay status shall continue to be paid. Any Participant not yet in pay status shall continue to be entitled to a benefit equal to the benefit to which he or she would have been entitled had retirement as a Trustee occurred immediately prior to such Plan termination. Notwithstanding the foregoing, in its discretion the Administrator may commute and pay as a single lump sum payment any benefits remaining payable upon termination of the Plan as a whole, and in determining such lump sum amounts the Administrator may apply such reasonable discount factors and mortality assumptions as it determines in its discretion.
(c) Termination by individual Fund. A Fund may terminate its participation in the Plan at any time by vote of a majority of its Trustees who are not "interested persons" of the Fund (as defined under "Administrator" in Section 3 above), provided that upon any such termination such Fund shall remain liable for its allocable share of the benefits to which Participants would have been entitled if the Plan as a whole had been terminated as of the date of such individual termination, as determined by the Administrator in its sole discretion.
As Adopted October 4, 1996 and amended July 21, 2000
SCHEDULE A
Annual Retirement Benefit Payable to Certain Former Trustees
Each former Trustee listed below, who is currently receiving a retirement benefit under the voluntary retirement program heretofore maintained by the Funds, shall be entitled to receive an annual retirement benefit in accordance with the terms and conditions of the Plan except that (i) such benefit shall be payable for the remainder of his or her lifetime in the amount shown below, and (ii) no death benefit shall be payable upon or following the death of such former Trustee.
1. D. Reid Weedon -- annual benefit of $45,325.08.
2. Richard Cutler -- annual benefit of $45,999.96.
3. Alla O'Brien -- annual benefit of $59,570.04.
4. Robert Seamans -- annual benefit of $43,449.96.
5. Carol Goldberg -- annual benefit of $43,875.00.
SCHEDULE B
Retirement Benefit Payable to Eli Shapiro.
In recognition of his service as a Trustee prior to his retirement in 1989 and his receipt of certain retirement benefits prior to his re-election as a Trustee, Eli Shapiro shall be entitled to receive retirement benefits in accordance with the terms and conditions of the Plan (including without limitation the death benefit provided in Section 6 of the Plan) except that (i) if he retires prior to the third anniversary of his re-election as a Trustee, his "Final Average Remuneration" shall be computed solely on the basis of his compensation for the period of Service since such re-election, (ii) his period of Service shall be computed including his period of Service prior to his initial retirement, and (iii) the number of annual payments specified in clause (i) of Section 5 of the Plan shall be equal to his years of Service (including prior Service as provided above) reduced by the number of years during which he received retirement benefits following
his initial retirement as a Trustee.
LIABILITY INSURANCE ALLOCATION AGREEMENT
This Insurance Allocation Agreement (the "Agreement") is made as of December 18, 2003, by and among the Putnam Funds (the "Funds"), Marsh & McLennan Companies, Inc. ("MMC") and Putnam Investments LLC ("Putnam") acting on its own behalf and on behalf of Putnam Investment Management LLC (the "Investment Manager") and its other direct and indirect subsidiaries (individually hereinafter referred to as an "Affiliate" or collectively as "Affiliates").
WHEREAS, the Investment Manager acts as investment manager (or investment adviser and administrator) of the Funds and in such capacity participates in the application for and purchase of joint liability insurance policies for the protection of Putnam and its Affiliates and the Funds and may also from time to time participate in the handling and settlement of claims under such policies;
WHEREAS, the Funds, MMC, Putnam and the Affiliates have been named as joint insured parties ("Insureds") under joint mutual fund/investment advisor professional liability insurance policies and excess multi-line joint insurance policies and such other joint insurance policies (hereinafter referred to individually as a "Policy" and collectively as the "Policies") approved, from time to time, by the Funds' respective Boards of Trustees;
WHEREAS, the Funds and the Investment Manager entered into a letter of indemnity dated as of December 18, 2003 (the "Letter of Indemnity"), pursuant to which the Investment Manager agreed to indemnify and hold harmless 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 (as defined in the Letter of Indemnity), the Private Litigation (as defined in the Letter of Indemnity) 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 Administrative Proceedings or the Private Litigation (any loss, damage, liability and expense reasonably related to the foregoing proceedings is hereinafter referred to as an "Indemnifiable Loss");
WHEREAS, certain of the parties hereto have heretofore entered into an Agreement dated as of January 21, 2003 providing for certain minimum coverages for the Funds, their Trustees and their officers (hereinafter referred to collectively as the "Fund Insureds");
WHEREAS, the parties desire to establish the criteria by which the amounts payable under the Policies shall be allocated among the parties to this Agreement and to provide for certain contingencies;
NOW, THEREFORE, it is agreed as follows:
1. In the event that the claims of loss of two or more Insureds under the Policies for any period exceed the amount of insurance coverage available to pay such claims, or in the event that the aggregate recovery by two or more Insureds under the claims, or in the event that the aggregate recovery by two or more Insureds under the policies for any related claims is less that the aggregate loss incurred by the Insureds that gave rise to such claims, the following rules shall determine, as among the claimants, the allocation of the amounts payable under the Policies:
Such amounts shall be allocated as follows: (i) the first $15 million
shall be allocated to any losses of the Fund Insureds, other than Fund
Insureds who were directors or officers of MMC, Putnam or its Affiliates
at any time after January 1, 1997 (the "Affiliated Fund Insureds") and
(ii) the balance shall be allocated first (A) on an equitable and
proportionate basis among the Fund Insureds (other than the Affiliated
Fund Insureds), MMC and Putnam and its Affiliates with respect to any
losses of the Fund Insureds (other than the Affiliated Fund Insureds)
and any losses (other than losses arising out of the proceedings that
are the subject of the Letter of Indemnity) of MMC and Putnam and its
Affiliates, and then (B) to MMC and Putnam and its Affiliates with
respect to any losses arising out of the proceedings that are the
subject of the Letter of Indemnity (including without limitation any
Indemnifiable Losses paid by MMC and Putnam and its Affiliates to the
Funds pursuant to the Letter of Indemnity).
As used in this Agreement, the terms "loss" and "losses" shall include and be limited to any covered loss, damage, judgment, settlement cost, legal or other expense or other cost which is covered under a Policy, but, with respect to the Funds, such terms shall not include any loss with respect to which payment has been made to the Funds pursuant to the Letter of Indemnity. The aforesaid allocation shall not adversely affect the rights of any insured person or entity entitled to make a claim under the Policies who is not a party to this Agreement, including, without limitation, the individual directors and others of MMC, Putnam or its Affiliates. In the event that any party to this Agreement receives payment of any insurance claim in contravention of the allocation priorities established herein, whether or not ascertainable at the time of such receipt, such party shall on demand promptly pay such amount over to the parties entitled to such payment under the terms of this Agreement.
2. In the event that insurance coverage under any Policy shall be denied for any claim of loss made by any Fund Insureds (other than the Affiliated Fund Insureds) based on any alleged misrepresentation made by MMC, Putnam and/or its Affiliates in connection with the application for such Policy or other alleged improper conduct by MC, Putnam and/or its Affiliates or any director, officer or employee thereof, then MMC, Putnam and its Affiliates will be responsible, jointly and severally, for payment of such loss. The defense of any claim pertaining to any such loss shall be conducted in accordance with the procedural provisions of the Letter of Indemnity.
3. To the extent that any amounts payable under the Policies are paid to any current or former director, trustee, officer or employee of MMC, Putnam and/or its Affiliates on account of losses incurred by such person in connection with proceedings or actions that are the subject of the Letter of Indemnity, with the result that the amounts payable under the Policies that are paid to any individual Fund Insured other than (other than the Affiliated Fund Insureds) are insufficient to cover fully all loss incurred by such person in connection with the aforesaid proceedings or actions, then MMC, Putnam and its Affiliates will be responsible, jointly and severally, for payment of such loss.
4. In the event that MMC, Putnam or its Affiliates pay any Indemnifiable Losses of the Funds pursuant to the Letter to Indemnity that would otherwise constitute claims that the Funds would be entitled to assert under the Policies, then upon request by MMC or Putnam and its Affiliates, the Funds shall assign their interest in such claims to MMC or Putnam and its Affiliates, as the case may be. Such assigned claims shall be subordinated as provided in clause (ii)(B) of the second paragraph of Section 1 above.
5. This Agreement shall be effective as to any and all Policies now or heretofore in effect and may be terminated only by mutual agreement of the parties. This Agreement supersedes all prior agreements dealing with the subject matter hereof. This Agreement shall survive the termination of any management contract between any Fund and the Investment Manager.
6. The Funds are organized as Massachusetts business trusts, and this Agreement is not binding upon any of the trustees or holders of shares of beneficial interest of any such trust individually, but shall bind only the assets and property of such Funds.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their officers, as appropriate, hereunto duly authorized all as of the day and year first above written.
The Putnam Funds
By: /s/ Charles E. Porter, Executive Vice President Marsh & McLennan Companies, Inc. By: /s/ William L. Rosoff Putnam Investments, LLC on behalf of itself and each of its Affiliates By: /s/ Gordon H. Silver, Senior Managing Director |
THE PUTNAM FUNDS
Code of Ethics
Each of The Putnam Funds (the "Funds") has determined to adopt this Code of Ethics with respect to certain types of personal securities transactions by officers and Trustees of the Funds which might be deemed to create possible conflicts of interest and to establish reporting requirements and enforcement procedures with respect to such transactions.
I. Rules Applicable to Officers and Trustees Affiliated with Putnam Investments Trust or Its Subsidiaries
A. Incorporation of Adviser's Code of Ethics. The provisions of the Code of Ethics for employees of Putnam Investments Trust and its subsidiaries (the "Putnam Investments Code of Ethics"), which is attached as Appendix A hereto, are hereby incorporated herein as the Funds' Code of Ethics applicable to officers and Trustees of the Funds who are employees of the Funds or officers, directors or employees of Putnam Investments Trust or its subsidiaries. A violation of the Putnam Investments' Code of Ethics shall constitute a violation of the Funds' Code.
B. Reports. Officers and Trustees of each of the Funds who are made subject to the Putnam Investments' Code of Ethics pursuant to the preceding paragraph shall file the reports required by the Putnam Investments' Code of Ethics with the Code of Ethics Officer designated therein. A report filed with the Code of Ethics Officer shall be deemed to be filed with each of the Funds of which the reporting individual is an officer or Trustee.
C. Review and Reporting.
(1) The Code of Ethics Officer shall cause the reported personal securities transactions to be compared with completed and contemplated portfolio transactions of each of the Funds to determine whether a violation of this Code may have occurred. Before making any determination that a violation has been committed by any person, the Code of Ethics Officer shall give such person an opportunity to supply additional explanatory material.
(2) If the Code of Ethics Officer determines that a violation of any provision of this Code has or may have occurred, he shall submit his written determination, together with any additional explanatory material, to the Audit and Pricing Committee of the Funds at its next meeting.
D. Sanctions. In addition to reporting violations of this Code to the Audit and Pricing Committee of the Funds as provided in Section I-C(2), the Code of Ethics officer shall also report to such Committee any sanctions imposed with respect to such violations. The Committee reserves the right to impose such additional sanctions as it deems appropriate.
II. Rules Applicable to Unaffiliated Trustees
A. Definitions.
(1) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
(2) "Control" means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company.
(3) "Interested Trustee" means a Trustee of a Fund who is an "interested person" of the Fund within the meaning of the Investment Company Act.
(4) "Purchase or sale of a security" includes, among other things, the writing of an option to purchase or sell a security.
(5) "Security" shall have the same meaning as that set forth in Section 2(a)(36) of the Investment Company Act (in effect, all securities) except that it shall not include securities issued by the Government of the United States or an agency thereof, bankers' acceptances, bank certificates of deposit, commercial paper and high-quality short-term debt investments, including repurchase agreements, and shares of registered open-end investment companies, but shall include any security convertible into or exchangeable for a security.
(6) "Unaffiliated Trustee" means a Trustee who is not made subject to the Putnam Investments Code of Ethics pursuant to Part I hereof.
B. Prohibited Purchases and Sales. No Unaffiliated Trustee of any of the Funds shall purchase or sell, directly or indirectly, any security in which he has, or by reason of such transaction acquires, any direct or indirect beneficial ownership and which to his actual knowledge at the time of such purchase or sale:
(1) is being considered for purchase or sale by the Fund;
(2) is being purchased or sold by the Fund; or
(3) was purchased or sold by the Fund within the most recent five days if such person participated in the recommendation to, or the decision by, Putnam Investment Management to purchase or sell such security for the Fund.
C. Exempted Transactions. The prohibitions of Section II-B of this Code shall not apply to:
(1) purchases or sales of securities effected in any account over which the Unaffiliated Trustee has no direct or indirect influence or control;
(2) purchases or sales of securities which are non-volitional on the part of either the Unaffiliated Trustee or the Fund;
(3) purchases of securities which are part of an automatic dividend reinvestment plan;
(4) purchases of securities effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired;
(5) purchases or sales of securities other than those exempted in (1) through (4) above which do not cause the Unaffiliated Trustee to gain improperly a personal benefit through his relationship with the Fund and are only remotely potentially harmful to a Fund because they would be very unlikely to affect a highly institutional market, and are previously approved by the Legal and Compliance Liaison Officer of the Funds, in consultation with the Code of Ethics Officer, which approval shall be confirmed in writing.
D. Reporting.
(1) Whether or not one of the exemptions listed in Section II-C applies and except as provided in Section II-C(5), every Unaffiliated Trustee of a Fund shall file with the Funds' Legal and Compliance Liaison Officer a report containing the information described in Section II-D(2) of this Code with respect to purchases or sales of any security in which such Unaffiliated Trustee has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, if such Trustee, at the time of that transaction, knew or, in the ordinary course of fulfilling his official duties as a Trustee of the Fund, should have known that, during the 15-day period immediately preceding or after the date of the transaction by the Trustee:
(a) such security was or is to be purchased or sold by the Fund or
(b) such security was or is being considered for purchase or sale by the Fund;
provided, however, that an Unaffiliated Trustee shall not be required to make a report with respect to transactions effected for any account over which such person does not have any direct or indirect influence or control.
(2) Every report shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information:
(a) The date of the transaction, the title, the number of shares, the interest rate and maturity date (if applicable) and the principal amount of each security involved;
(b) The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
(c) The price at which the transaction was effected; and
(d) The name of the broker, dealer or bank with or through whom the transaction was effected; and
(e) the date that the report is submitted by each Unaffiliated Trustee.
(3) Every report concerning a purchase or sale prohibited under Section II-B hereof with respect to which the reporting person relies upon one of the exemptions provided in Section II-C shall contain a brief statement of the exemption relied upon and the circumstances of the transaction.
(4) Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he has any direct or indirect beneficial ownership in the security to which the report relates.
(5) Notwithstanding anything to the contrary contained herein, an Unaffiliated Trustee who is an "interested person" of the Funds shall file the reports required by Rule 17j-1(d)(1) under the Investment Company Act of 1940 with the Code of Ethics Officer of Putnam Investments. Such reports shall be reviewed by such Officer as provided in Section I-C(1) and any related violations shall be reported by him to the Audit and Pricing Committee as provided in Section I-C(2). The Committee may impose such additional sanctions as it deems appropriate.
E. Review and Reporting.
(1) The Legal and Compliance Liaison Officer of the Funds, in consultation with the Code of Ethics Officer of Putnam Investments, shall cause the reported personal securities transactions that he receives pursuant to Section II-D(1) to be compared with completed and contemplated portfolio transactions of the Funds to determine whether any transaction ("Reviewable Transactions") listed in Section II-B (disregarding exemptions provided by Section II-C(1) through (5)) may have occurred.
(2) If the Legal and Compliance Liaison Officer determines that a Reviewable Transaction may have occurred, he shall then determine whether a violation of this Code may have occurred, taking into account all the exemptions provided under Section II-C. Before making any determination that a violation has occurred, the Legal and Compliance Liaison Officer shall give the person involved an opportunity to supply additional information regarding the transaction in question.
F. Sanctions. If the Legal and Compliance Liaison determines that a violation of this Code has occurred, he shall so advise the Funds' Audit and Pricing Committee, and provide the Committee with a report of the matter, including any additional information supplied by such person. The Committee may impose such sanctions as it deems appropriate.
III. Miscellaneous
A. Amendments to the Putnam Investments' Code of Ethics. Any amendment to the Putnam Investments' Code of Ethics shall be deemed an amendment to Section I-A of this Code effective 30 days after written notice of such amendment shall have been received by the Chairman of the Funds, unless the Trustees of the Funds expressly determine that such amendment shall become effective at an earlier or later date or shall not be adopted.
B. Records. The Funds shall maintain records in the manner and to the extent set forth below, which records may be maintained on microfilm under the conditions described in Rule 31a-2(f)(1) under the Investment Company Act and shall be available for examination by representatives of the Securities and Exchange Commission.
(1) A copy of this Code and any other code which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place;
(2) A record of any violation of this Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs;
(3) A copy of each report made by an officer or Trustee pursuant to this Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; and
(4) A list of all persons who are, or within the past five years have been, required to make reports pursuant to this Code shall be maintained in an easily accessible place.
To the extent any record required to be kept by this section is also required to be kept by Putnam Investments pursuant to the Putnam Investments' Code of Ethics, Putnam Investments shall maintain such record on behalf of the Funds as well.
C. Confidentiality. All reports of securities transactions and any other information filed with any Fund pursuant to this Code shall be treated as confidential, but are subject to review as provided herein and by personnel of the Securities and Exchange Commission.
D. Interpretation of Provisions. The Trustees may from time to time adopt such interpretations of this Code as they deem appropriate.
E. Delegation by Chairman. The Chairman of the Funds may from time to time delegate any or all of his responsibilities under this Code, either generally or as to specific instances, to such officer or Trustee of the Funds as he may designate.
As revised
November 1, 2004
working@Putnam August 2004
CODE OF ETHICS
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 fund shareholders and other clients, or to do anything that could damage or erode the trust our fund shareholders and other clients place in Putnam and its employees.
TABLE OF CONTENTS OVERVIEW.............................................................iii PREAMBLE..............................................................vi DEFINITIONS: Code of Ethics .........................................vii SECTION I. Personal Securities Rules for All Employees ............... 1 A. Pre-clearance and the Restricted List ............................. 1 B. Prohibited Transactions.............................................5 C. Discouraged Transactions.......................................... 11 D. Exempted Transactions .............................................11 SECTION II. Additional Special Rules for Personal Securities Transactions of Access Persons and Certain Investment Professionals.. 13 SECTION III. General Rules for All Employees .........................18 SECTION IV. Special Rules for Officers and Employees of Putnam Investments Limited ................................................. 29 SECTION V. Reporting Requirements for All Employees.................. 31 SECTION VI. Education Requirements ...................................34 SECTION VII. Compliance and Appeal Procedures.........................35 APPENDIX A: Policy Statement Concerning Insider Trading Prohibitions PREAMBLE ............................................................ 37 DEFINITIONS: Insider Trading..........................................38 SECTION I. Rules Concerning Inside Information .......................39 SECTION II. Overview of Insider Trading ..............................41 APPENDIX B: Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds ..............................................45 APPENDIX C: Contra-Trading Rule Clearance Form........................46 APPENDIX D: AIMR Code of Ethics and Standards of Professional Conduct .................................................47 APPENDIX E: Report of Entertainment Form..............................53 INDEX ................................................................55 |
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 online 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 fund shareholders or other 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 material, non-public
information (inside information) concerning the security or the issuer.
A violation of Putnam's insider trading policies may result in criminal
and civil penalties, including imprisonment and substantial fines. An
employee aware of or in possession of inside information must report it
immediately to the Code of Ethics Officer. See Appendix A, Section ll:
Overview of Insider Trading.
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 or other entity 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. Clearance is facilitated through the online pre-clearance system for equity securities, and directly with the Code of Ethics Administrator for fixed-income securities and transactions in Putnam closed-end funds. Certain securities are exempted from this pre-clearance requirement (e.g., shares of open-end (not closed-end) mutual funds).
Clearance must be obtained in advance, between 11:30 a.m. and 4:00 p.m. Eastern Standard Time (EST) on the day of the trade, except in the case of a trade for up to 1,000 shares of stock of an issuer whose capitalization exceeds $5 billion, clearance may be obtained between 9:00 a.m. and 4:00 p.m. EST on the day of the trade. A clearance is valid only for the day it is obtained. Putnam employees are strongly discouraged from engaging in excessive trading for their personal accounts. Beginning with the fourth quarter of 2004, employees will be prohibited from making more than 25 trades in individual securities. Trading in excess of this level will be reviewed with the Code of Ethics Oversight Committee.
Putnam mutual funds
All employees and certain family members are subject to a minimum 90-day holding period for shares in Putnam's open-end mutual funds. This restriction does not apply to Putnam's money market funds. Except in limited circumstances, all employees must hold Putnam open-end fund shares in accounts at Putnam Preferred Access.
Portfolio managers and others with access to investment information (so-called "Access Persons") are subject to a minimum one-year holding period for holding Putnam open-end fund shares.
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. Note, however, that short selling "against the box" or otherwise hedging an investment in shares of Marsh & McLennan (MMC) stock is prohibited.
Confirmations of trading and periodic account statements
All Putnam employees must have their brokers send confirmations and statements 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
Access persons 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 (even those to which pre-clearance may not apply) 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 may be reduced. Egregious conduct, e.g., willful failures to report, will be subject to harsher sanctions, which may include termination of employment.
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.
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. (Refer to Section II for details):
* 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 seven 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 seven 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 seven 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 an appropriate CIO and the Code of Ethics Officer.
* No portfolio 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 as you are responsible for understanding the restrictions.
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 fund shareholders or other 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 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 advisor and its clients. 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.
The Code that follows represents a balancing of important interests. On the one hand, as a registered investment advisor, 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 below are defined specifically for the purpose 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., beginning on the dates from which the measurement is made.
Access Persons
Access Persons are (a) employees within Putnam's Investment Division, and (b) 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 (such as certain Information Services Division employees and certain members of the Legal and Compliance Department). Each employee will be informed if he or she is considered a Code of Ethics Access Person. The Code of Ethics Officer maintains a list of all Access Persons.
Code of Ethics Administrator
The individual designated by the Code of Ethics Officer to assume responsibility for day-to-day, nondiscretionary 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 Chief Compliance Officer or such other person as is designated by the Chief Executive Officer of Putnam Investments. If the Code of Ethics Officer is unavailable, the Deputy Code of Ethics Officer shall act in his or her stead. The Code of Ethics Officer is Tony Ruys de Perez. The Deputy Code of Ethics Officer is Kathleen Griffin.
Code of Ethics Oversight Committee
Has oversight responsibility for administering the Code of Ethics. Members include the Code of Ethics Officer 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.
Narrow-based derivative
A future, swap, option, or similar derivative instrument whose return is determined by reference to fewer than 25 underlying issuers. Single stock futures and exchange traded funds based on fewer than 25 issuers are included.
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 offered to the public and not requiring 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; this includes the writing of an option.
Putnam
Any or all of Putnam Investments Trust, and its subsidiaries, any one of which shall be a Putnam company.
Putnam client
Any of the Putnam mutual 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; any rights relating to a security, such as warrants, convertible securities, and any narrow-based derivative. Pre-clearance in all trades for any narrow-based derivative is required. 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. Exchange traded index funds containing a portfolio or securities of 25 or more issuers (e.g., SPDRs, WEBs, QQQs), commodities, and any option on a broad-based market index or an exchange-traded futures contract or option thereon are excluded.
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 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. Pre-clearance and the Restricted List
Rule 1
No Putnam employee shall purchase or sell for his personal account any security (other than shares of open-end investment companies) without prior clearance obtained through Putnam's intranet pre-clearance system (under the @Putnam tab of www.ibenefitcenter.com). Fixed-income securities must be pre-cleared by calling the Code of Ethics Administrator, and there are special rules for trading in Putnam closed-end funds. See Appendix B. Subject to the limited exceptions below, no clearance will be granted for securities appearing on the
Restricted List. Securities will 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 for any Putnam client, unless the security is a nonconvertible investment grade rated (BBB by S&P or Baa by Moody's) fixed-income investment;
(b) When such a security is a voting security of a corporation in the banking, savings and loan, communications, or gaming (i.e., casinos) industries, if holdings of Putnam clients in that corporation 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.
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 online at ibenefitcenter.com. Select Employee Essentials under the @Putnam tab. 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. EST.
Pre-clearance of fixed income securities and Putnam closed-end funds must be made by calling the Code of Ethics Administrator.
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 any applicable 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.
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. Pre-clearing Transactions Effected by Share Subscription. The purchase 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) Because 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.
C. Trades in Approved Discretionary Brokerage Accounts. A transaction does not need to be pre-cleared if it takes place in an account that the Code of Ethics Officer has approved in writing as exempt from the pre-clearance requirement. In the sole discretion of the Code of Ethics Officer accounts that will be considered for exclusion from the pre-clearance requirement are only those for which an employee's securities broker or investment advisor has complete discretion (a discretionary account) and the following conditions are met (i) the employee certifies annually in writing that the employee has no influence over the transactions in the discretionary account and is not aware of the transactions in the discretionary account prior to their execution, (ii) the compliance department of the employee's broker or investment advisor certifies annually in writing that the employee has no influence over the transactions in the discretionary account and is not aware of the transactions in the discretionary account prior to their execution; and (iii) each calendar quarter, the broker or investment advisor sends Putnam's Code of Ethics Administrator copies of each quarterly statement for the discretionary account. Employees wishing to seek such an exemption must send a written request to the Code of Ethics Administrator.
COMMENTS
* Pre-clearance. Subpart (a) of Rule 1 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.
* 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 (5% for public utilities) of any issuer in those industries. 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.
* 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. The automatic 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.
* Involuntary transactions. Involuntary personal securities transactions are exempted from the Code. Special attention should be paid to this exemption. (See Section I.D.)
* Tender offers. This Rule does not prohibit an employee from tendering securities from his personal account in response to an any and all tender offer, even if Putnam clients are also tendering securities. A Putnam employee is, however, prohibited from tendering securities from his personal account in response to a partial tender offer, if Putnam clients are also tendering securities.
* MMC securities. The pre-clearance, reporting and the rules applicable to personal trading apply to securities of MMC, including MMC shares held in the Putnam 401(k) plans and in the MMC Stock Purchase Plan.
SANCTION GUIDELINES
A. Failure to Pre-clear a Personal Trade
* First violation: One month trading ban with written warning that a future violation will result in a longer trading ban.
* Second violation: Three month trading ban and written notice to the Senior Managing Director of the employee's division.
* 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
* 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.
* Second violation: Disgorgement of any profit from the transaction, three month trading ban, and written notice to the Senior Managing Director of the employee's division.
* 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 two-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 has violated the Code of Ethics intentionally 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: (a) small-cap stocks (i.e., stocks not entitled to the Large Cap exception) and (b) 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.
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. Employees are prohibited from hedging investments made in securities of MMC.
EXCEPTIONS
Short selling against broad market indexes (such as the Dow Jones Industrial Average, the NASDAQ index, and the S&P 100 and 500 indexes) and short selling against the box are permitted (except that short selling shares of MMC against the box is not 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
* 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.
* 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.
* 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. Privately placed limited partnerships are specifically included in this Rule.
COMMENTS
* 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.
* 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.
* 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, and subject to the condition that the hedge fund does not invest significantly in registered investment companies.
(b) Private placements where the investment cannot relate, or be expected to relate, directly or indirectly to Putnam or investments by a Putnam client.
* 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.
* 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
Putnam employees may not hold shares of Putnam open-end U.S. mutual funds other than through accounts maintained at Putnam through Putnam Preferred Access (PPA). Employees placing purchase orders in shares of Putnam open-end funds must place such orders through Putnam and not through an outside broker or other intermediary. Employees redeeming or exchanging shares of Putnam open-end funds must place those orders through Putnam and not through an outside broker or other intermediary. Contact a PPA representative at 1-800-634-1590 for instructions on how to transfer these funds.
NOTE:
For purposes of this Rule, "employee" includes:
* Members of the immediate family of a Putnam employee who share the same household as the employee or for whom the Putnam employee has investment discretion (family member);
* Any trust in which a Putnam employee or family member is a trustee with investment discretion and in which such Putnam employee or any family member are collectively beneficiaries;
* Any closely-held entity (such as a partnership, limited liability company, or corporation) in which a Putnam employee and his or her family members hold a controlling interest and with respect to which they have investment discretion; and
* Any account (including any retirement, pension, deferred compensation, or similar account) in which a Putnam employee or family member has a substantial economic interest and over which said Putnam employee or family member exercises investment discretion.
COMMENTS
* These requirements also apply to self-directed IRA accounts holding Putnam fund shares.
* For Putnam Profit Sharing Plan or other Putnam deferred compensation accounts, trades may continue to be placed through ibenefitcenter.com.
* These Rules apply to variable insurance accounts, which invest in Putnam Variable Trust such as the Putnam/Hartford Capital Manager. Employees must designate Putnam Retail Management as the broker of record for all such accounts.
EXCEPTION
Retirement, pension, deferred compensation and similar accounts that cannot be legally transferred to Putnam are not subject to the requirement. For example, a spouse of a Putnam employee may have a 401(k) plan with her employer that invests in Putnam funds. Any employee who continues to hold shares in open-end Putnam funds outside of Putnam must notify the Code of Ethics Officer in writing of the account information, provide the reason why the account cannot be transferred to Putnam and arrange for a quarterly statement of transaction in such account to be sent to the Code of Ethics Administrator.
Rule 7
(a) Employees defined in Rule 6 may not, within a 90-calendar day period, make a purchase followed by a sale, or a sale followed by a purchase, of shares of the same open-end Putnam mutual fund even if the transactions occur in different accounts.
(b) Employees who are Access Persons may not, within a one-year period, make a purchase followed by a sale, or a sale followed by a purchase, of shares of the same open-end Putnam mutual fund or of shares of any U.S. registered mutual fund to which Putnam acts as advisor or sub-advisor even if the transactions occur in different accounts.
COMMENTS
* This restriction applies across all accounts maintained by an employee as follows:
An employee who buys shares of an open-end Putnam mutual fund may not sell any shares of the same mutual fund until 90 calendar days have passed.
Example. If an employee buys shares of a Putnam fund on Day 1 for a retail account and then sells (by exchange) shares of the same fund for his or her Putnam Profit Sharing 401(k) Plan account on Day 85, the employee has violated the rule.
Similarly, an employee who sells shares of an open-end Putnam mutual fund may not buy any shares of the same mutual fund until 90 calendar days have passed.
Example. If an employee sells shares of a Putnam fund on day 1 for a retail account and then sells (by exchange out) shares of the same fund for his or her Putnam Profit Sharing 401(k) Plan account on day 85, the employee may not buy (or exchange in) shares of that fund in any account until day 176, which is more than 90 days after the most recent sale of shares of that fund.
* The purpose of these blackout periods restriction is to prevent any market timing, or appearance of market timing activity.
* This Rule applies to transactions by a Putnam employee in any type of account, including retail, IRA, variable annuity, college savings 529 plans, Profit Sharing 401(k) Plan, and any deferred compensation accounts.
* The minimum sanction for an initial violation of the blackout period shall be disgorgement of any profit made on the transaction. Additional sanctions may apply, including termination of employment.
EXCEPTIONS
A. This restriction does not apply to Putnam's money market funds and Putnam Stable Value Fund.
B. Profit Sharing 401(k) Plan Contributions and Payroll Deductions. The 90-day restriction is not triggered by initial allocation of regular employee or employer contributions or forfeitures to an employee's account under the terms of Putnam employee benefit plans or a Putnam payroll deduction direct investment program; later exchanges of these contributions will be subject to the 90-day blackout period.
C. Systematic Programs. This restriction does not apply with respect to shares sold or acquired as a result of participation in a systematic program for contributions, withdrawals or exchanges, provided that an election to participate in any such program and the participation dates of the program may not be changed more often than quarterly after the program is elected by the employee. Access Persons may elect a quarterly or semiannual rebalancing program although it may only be changed on an annual basis;
D. Employee Benefit Plan Withdrawals and Distributions. This restriction does not apply with respect to shares sold for withdrawals, loans or distributions under the terms of Putnam employee benefit plans;
E. Dividends, Distributions, Mergers, and Share Class Conversions. This restriction does not apply with respect to the requisitioned shares as a result of reinvestment of dividends, distributions, mergers, conversions of share classes, or other similar actions. Subsequent transactions with respect to the shares will be covered.
F. In special situations, Putnam's Code of Ethics Oversight Committee may grant exceptions to the blackout periods as a result of death, disability, or special circumstances (such as, personal hardship), all as determined from time to time by the Committee. Employees can request an exception by submitting a written request to the Code of Ethics Officer.
Rule 8: Good Until Canceled Orders
Good Until Canceled (GTC) Orders and Limit Orders are prohibited.
Any order not executed on the day of pre-clearance must be resubmitted for pre-clearance before being executed on a subsequent day. "Good until canceled" or "limit" orders are prohibited because of the potential failure to pre-clear.
Rule 9: Excessive Trading
Putnam employees are strongly discouraged from engaging in excessive trading for their personal accounts. Beginning with the fourth quarter of 2004, employees will be prohibited from making more than 25 trades in individual securities in any given quarter. Excessive trading within Putnam open-end mutual funds is prohibited.
COMMENTS
* 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. Short-term trading is strongly discouraged while employees are encouraged to take a long-term view.
* Employees should be aware that their trading activity is closely
monitored. Ten trades or more per quarter will be discouraged and will
warrant a review memo. Activity exceeding 25 trades per quarter will be
prohibited by the Code of Ethics Oversight Committee. Sanctions will be
imposed such as a trading ban or a more stringent sanction may be
determined at the discretion of the Committee. Different rules apply
with respect to trading in shares of Putnam open-end mutual funds. See
Section I. B, Rule 7 above.
C. Discouraged Transactions
Rule 1
Putnam employees are strongly discouraged from engaging in writing (selling) naked options for their personal accounts.
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.
EXCEPTIONS
None.
D. Exempted Transactions
Rule 1
Transactions that 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
* This exemption is based on categories of conduct that the Securities and Exchange Commission does not consider "abusive."
* 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.
* 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.
* 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 4.
Rule 2
Transactions that have been determined in writing by the Code of Ethics Officer before the transaction occurs to be no more than remotely 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.
IMPLEMENTATION
An employee may seek an ad-hoc exemption under this Rule by following the procedures in Section VII, Part 4.
COMMENTS
* This exemption is also based upon categories of conduct that the Securities and Exchange Commission does not consider "abusive."
* 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 vii)
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
A. The 60-Day Rule applies to all Access Persons, as defined in the Definitions section of the Code.
B. 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.
C. 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.
COMMENTS
* 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.
* 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.
* Effective in the fourth quarter of 2004, the 60-Day Rule will become a Black Out Rule. An Access Person cannot trade a security within 60 days regardless of tax lot election.
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) Comanagers: Before a portfolio manager places an order to buy a security for any Putnam client he manages, his comanager shall sell any such security or related derivative security purchased in a 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.
COMMENTS
* This Rule applies to portfolio managers (including chief investment officers (CIO) 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 seven days following the purchase of that security for his or her personal account.
* 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. The recipient charity will be chosen by the Code of Ethics Officer.
* This Rule is designed to avoid even the appearance of a conflict of interest between an investment professional and a Putnam client. A greater burden is placed on these professionals given their positions in the organization. Transactions executed for the employee's personal account must be conducted in a manner consistent with the Code of Ethics and in such a manner as to avoid any actual or perceived conflict of interest or any abuse of the employee's position of trust and responsibility.
* "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.
EXCEPTIONS
None.
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 comanages; 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 comanages.
(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).
COMMENTS
* 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 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 seven days preceding a transaction in that security for his or her personal account.
* 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.
* 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.
EXCEPTIONS
None.
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 comanages
(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 and written approval are 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, for her approval, within 24 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
* 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.
* 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
General Rules for All Employees
Rule 1: Compliance with All Laws, Regulations and Policies
All employees must comply with applicable laws and regulations as well as company policies. This includes tax, anti-trust, political contribution, and international boycott laws. In addition, no employee at Putnam may engage in fraudulent conduct of any kind.
EXCEPTIONS
None.
COMMENTS
* Putnam may report to the appropriate legal authorities conduct by Putnam employees that violates this Rule.
* 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: Conflicts of Interest
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
* This Rule is designed to recognize the fundamental principle that Putnam employees owe their chief duty and loyalty to Putnam and Putnam clients.
* 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: Gifts and Entertainment Policy
No Putnam employee shall accept anything of material value from any broker-dealer, financial institution, corporation or other entity, any existing or prospective supplier of goods or services with a business relationship to Putnam, or any company or other entity whose securities are held in or are being considered as investments for the Putnam funds, or any other client account. Included are gifts, favors, preferential treatment, special arrangements, or access to special events.
COMMENTS
This Rule is intended to permit the acceptance of only proper types of customary and limited business amenities.
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.
IMPLEMENTATION
A. Gifts. An employee may not accept small gifts with an aggregate value of more than $100 in any year from any one source. Any Putnam employee who is offered or receives an item exceeding $100 in value is prohibited by this Rule and must report the details to the Code of Ethics Officer. Any entertainment event provided to an employee where the host is not in attendance is treated as a gift and is subject to the $100 per year per source limit.
B. Entertainment. Putnam's rules are designed to permit reasonable, ordinary business entertainment, but prohibit any events, which may be perceived as extravagant or involving lavish expenditures.
1. Occasional lunches, dinners, cocktail parties, or comparable gatherings conducted for business purposes are permitted.
For example, occasional attendance at group functions sponsored by sell side firms is permitted where the function relates to investments or other business activity. Occasional attendance at these functions is not required to be counted against the limits described in paragraph 2(b) below.
2. Other entertainment events, such as, sporting events, theater, movies, concerts, or other forms of entertainment conducted for business purposes, are permitted only under the following conditions:
(i) The host must be present for the event.
(ii) The location of the event must be in the metropolitan area in which the office of the employee is located.
(iii) Spouses or other family members of the employee may not attend the entertainment event or any meals before or after the entertainment event.
(iv) The value of the entertainment event provided to the employee may not exceed $150, not including the value of any meals that may be provided to the employee before or after the event.
Acceptance of entertainment events having a market value materially exceeding the face value of the entertainment including, for example, attendance at sporting event playoff games, is prohibited. This prohibition applies even if the face value of tickets to the events is $150 or less or when the Putnam employee offers to pay for the tickets. If there is any ambiguity about whether to accept an entertainment event in these circumstances, please consult the Code of Ethics Officer.
(v) The employee may not accept entertainment events under this provision (B)(2) more than six times a year and not more than two times in any year from any single source.
(vi) The Code of Ethics Officer may grant exceptions to these rules. For example, it may be appropriate for an employee attending a legitimate conference in a location away from the office to attend a business entertainment event in that location. All exceptions must be approved in advance by written request to the Code of Ethics Officer.
3. Any employee attending any entertainment event under (B)(1) or (B)(2) above must file a Report of Entertainment Form (attached as Appendix E) with the Code of Ethics Officer within 10 days following the date of the entertainment event. Failure to file the notice is a violation of the Code of Ethics.
4. Meals and entertainment, which are part of the regular program at an investment conference (i.e., open to all participants) are not subject to the limits of this section (B)(2) above.
C. Among the items that are prohibited are:
1. Any entertainment event attendance, which would reflect badly on Putnam as a firm of the highest fiduciary and ethical standards. For example, events involving adult entertainment or gambling must be avoided.
2. Entertainment involving travel away from the metropolitan area in which the employee is located. Even in the event an exception is granted as contemplated by (B)(2)(vi) above, payment by a third party of the cost of transportation to a location outside the employee's metropolitan area, lodging while in another location, and any meals not specifically approved by the Code of Ethics officer, are prohibited;
3. Personal loans to a Putnam employee on terms more favorable than those generally available for comparable credit standing and collateral; and
4. Preferential brokerage or underwriting commissions or spreads or allocations of shares or interests in an investment for the personal account of a Putnam employee; and
5. Cash or cash equivalents
D. 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 number 3 of Section VII.
E. No Putnam employee may solicit any gift or entertainment from any person, even if the gift or entertainment, if unsolicited, would be permitted.
F. The Rule does not prohibit employees on business travel from using local transportation and arrangements customarily supplied by brokers or similar entities. For example, it is customary for brokers in developing markets to make local transportation arrangements. These arrangements are permitted so long as the expense of lodging and air travel are paid by Putnam.
Rule 4: Anti-bribery/Kickback Policy
No Putnam employee shall 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 (which are described in Rule 5 below), 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 fundraisers) on behalf of Putnam, and no employee will be reimbursed by Putnam for such contributions made by the employee personally.
Rule 5: Political Contributions/Solicitations Policy
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.
COMMENTS
* 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.
* This rule prohibits solicitation on personal letterhead by Putnam employees except as approved by the Code of Ethics Officer.
* Certain officers and employees of Putnam Retail Management and other employees involved in Putnam's College Advantage Section 529 Plan with Ohio Tuition Trust Authority are subject to special rules on political contributions. For questions on these requirements, please call the Code of Ethics Administrator.
Rule 6: Confidentiality of Putnam Business Information
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 unless doing so has a valid business purpose and is in accord with any relevant procedures established by Putnam relating to such disclosures.
COMMENT
All information about Putnam and Putnam clients is strictly confidential. Putnam research information should not be disclosed without proper approval and never for personal gain.
Rule 7: Roles At Other Entities
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. Requests for a role at a publicly-traded company will be closely reviewed and permission will be granted on an ad-hoc basis.
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 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 unless the employee is responsible for day-to-day portfolio management of the account.
COMMENTS
* 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.
* Positions with public companies are especially problematic and will normally not be approved.
* 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: Role as Trustee or Fiduciary Outside of Putnam
No Putnam employee shall serve as a trustee, executor, custodian, any other fiduciary, or as an investment advisor or counselor for any account outside Putnam.
EXCEPTIONS
A. 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 unless the employee is responsible for day-to-day portfolio management of the account.
B. 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: Investment Clubs
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 vii).
Rule 10: Business Negotiations For Putnam
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: Accurate Records
No employee may create, alter or destroy (or participate in the creation, alteration or destruction of) any record that is intended to mislead anyone or to conceal anything that is, or is reasonably believed to be, 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
* 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.
* 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 12: Interest in Entities Doing Business with Putnam
No employee shall 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 13: Affiliated Entities
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 a Non-Putnam affiliate or 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 unless doing so has a valid business purpose and is in accord with any relevant procedures established by Putnam relating to such disclosures,
(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 derived from the employee's service as a director or officer of the NPA.
COMMENTS
* 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 should 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
advisor or sub-advisor to the NPA or one of its products, in which case
normal Putnam aggregation rules apply.
* 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.
* 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.
* Entities that are currently non-Putnam affiliates within the scope of this Rule are: Cisalpina Gestioni, S.p.A., Nissay Asset Management Co., Ltd., Thomas H. Lee Partners, L.P., Ampega Asset Management, GMBH, and Sceptre Investment Counsel, Ltd.
Rule 14: Computer System/Network Policies
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.
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 online Employee Handbook is located online at www.ibenefitcenter.com under Policies and Procedures under the @Putnam tab.
EXCEPTIONS
None.
Rule 15: AIMR Code of Ethics
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 D.
EXCEPTIONS
None.
Rule 16: Privacy Policy
Except as provided below, no employee may disclose to any outside organization or person any nonpublic 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 nonpublic 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
A. Putnam Employees. Nonpublic 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.
B. Shareholder Consent Exception. Nonpublic 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.
C. Broker or Advisor Exception. Nonpublic personal information about a shareholder's or client's account may be provided to the shareholder's or client's broker of record.
D. Third-Party Service Provider Exception. Nonpublic 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 nonpublic personal information.
COMMENTS
* Nonpublic 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 who 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.
* 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.
* 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.
* 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 chief compliance officer and, in the event of a breach of computerized data, Putnam's chief technology officer.
Rule 17: Anti-money Laundering Policy
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 chief compliance officer and chief financial officer.
Rule 18: Record Retention
All employees must comply with the record retention requirements applicable to the business unit. 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 requirements of
Section I.A. 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 the Financial Services Authority, 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 may 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 and statements 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 UK 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 copies of all confirmations for securities transactions for his personal brokerage accounts, and, beginning in the fourth quarter 2004, brokerage account statements are sent to the Putnam Compliance Department's (Code of Ethics Administrator). (For the purpose of this Rule, securities shall also include ETFs, futures, and other derivatives on broad-based market indexes excluded from the pre-clearance requirement.) Statements and confirmations are required for Putnam funds not held at PPA or in a Putnam retirement plan, as well as for U.S. mutual funds sub-advised by Putnam.
EXCEPTION
None.
IMPLEMENTATION
A. Putnam employees must instruct their broker-dealers to send statements and confirmations to Putnam and must follow up with the broker-dealer on a reasonable basis to ensure that the instructions are being followed. For brokerage accounts, Putnam employees should contact the Code of Ethics Administrator to obtain a letter from Putnam authorizing the setting up of a personal brokerage account.
B. Statements and confirmations should be submitted to the Code of Ethics Administrator.
C. Specific procedures apply to employees of PIL. Employees of PIL should contact the London Code of Ethics Administrator.
D. 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. Similarly, failure by an employee to report the existence of a personal account (and, if the account is opened after joining Putnam, failure to obtain proper authorization to establish the account) shall be a violation of this Rule.
E. Statements and confirmations must also be sent for members of an employees' immediate family, including statements received with respect to a family member's 401(k) plan at another employer.
COMMENTS
* Transactions for personal accounts is defined broadly to include more than transaction in accounts under an employee's own name. See Definitions.
* Statements and confirmations are required for all personal securities transactions, whether or not exempted or excepted by this Code.
* 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 exchange traded funds (ETF), futures, and any option on a security or securities index, including broad-based market indexes excluded from the pre-clearance requirement and also includes transactions in Putnam open-end funds if the account for the Putnam funds is not held at PPA or in a Putnam retirement plan and for transactions in U.S. mutual funds sub-advised by Putnam.)
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.
COMMENTS
* The date for each transaction required to be disclosed in the quarterly report is the trade date for the transaction, not the settlement date.
* 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. It is the responsibility of the employee to request an early report if he has knowledge of a planned absence, i.e., vacation or business trip.
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 within ten calendar days of hire and thereafter on an annual basis. This requirement is mandated by SEC regulations and is 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.
Reporting Irregular Activity
Rule 4
If a Putnam employee suspects that fraudulent, illegal, or other irregular activity (including violations of the Code of Ethics) might be occurring at Putnam, the activity should 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 financial officer and Putnam's Chief Compliance Officer.
An employee who does not feel comfortable reporting this activity to the relevant managing director may instead contact the chief compliance officer, the Putnam or MMC Ethics hotlines or the ombudsman.
Rule 5
Putnam has established a formal Office of the Ombudsman as an additional mechanism for an employee to report an impropriety or conduct that is not in line with the company's value system. The ombudsman is a person who is authorized to receive complaints or questions confidentially about alleged acts, omissions, improprieties, and broader systemic problems within the organization. Communication with the Ombudsman is confidential.
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 annually 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 employee will annually be required to complete training on Putnam's Code of Ethics.
SECTION VII
Compliance and Appeal Procedures
A. 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. 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.
B. 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 exception. 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.
C. 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.
D. 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 number 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 reasonable efforts to promptly render a written determination concerning the request for an ad hoc exemption.
E. 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.
F. Information Concerning Identity of Compliance Personnel
The names of Code of Ethics personnel are available by contacting the Legal and Compliance Department and will be published on Putnam's Web site.
APPENDIX A: Policy Statement Concerning Insider Trading Prohibitions
PREAMBLE
Putnam has always forbidden trading on material nonpublic information (inside information) by its employees. Tough federal laws make it important for Putnam to state 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. Federal law provides that an individual convicted of trading on inside information may go to jail for a 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, as well as penalties substantially greater than 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. An employee aware of or in possession of inside information must report it immediately to the Code of Ethics Officer. 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.
APPENDIX A
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 chief compliance officer or such other person as is designated by the chief executive officer of Putnam Investments. If he or she is unavailable, the Deputy Code of Ethics Officer (to be appointed by the Code of Ethics Officer) shall act in his or her 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, 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 all securities of any type.)
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 PIL must also consult
the relevant procedures on compliance with U.K. insider dealing
legislation set forth in PIL's Compliance Manual (See Rule 3 of Section
IV of the Code of Ethics).
APPENDIX A
SECTION I: 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
* 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.
* 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.
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, the Deputy Code of Ethics Officer or, in their absence, the general counsel 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.
IMPLEMENTATION
A. 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.
B. 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 (and time to gather such 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. In appropriate situations, the Code of Ethics Officer shall place the affected security or securities on the Red List pending the completion of his evaluation.
C. 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.
D. Members of the executive board of directors and members of chief financial officer's staff may not trade securities of MMC in the period from the end of each calendar quarter to the date of announcement of MMC's earnings for such quarter.
COMMENTS
While all employees must pre-clear trades of MMC securities and make sure they are not in possession of material inside information about MMC when trading, certain employees who may receive information about Putnam's earnings are subject to the rules above concerning trading black out periods.
APPENDIX A
SECTION II: Overview of Insider Trading
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.
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. The following sections help explain the definition.
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 that 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.
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.
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.
Insiders and Temporary Insiders
Corporate insiders have a duty not to take advantage of inside information. The concept of insider is broad. It includes officers, directors, and employees of a corporation. In addition, a person can be a temporary insider if she enters into a special confidential relationship with a corporation and as a result is given access to information concerning the corporation's affairs. A temporary insider can include, among others, accounting firms, consulting firms, law firms, banks, and the employees of such organizations. Putnam would generally be a temporary insider of a corporation it advises or for which it performs other services, because typically Putnam clients expect Putnam to keep any information disclosed to it confidential.
EXAMPLE
An investment advisor 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 advisor or its employees, nor its clients can trade on the basis of that information, because the investment advisor and its employees could be considered "temporary insiders" of Acme.
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 Investment 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 Investment 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.
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.
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 Investment 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.)
Penalties for insider trading
Penalties for misuse of inside information are severe, both for individuals involved in such unlawful conduct and their employers. A person who violates the insider trading laws can be subject to some or all of the types penalties below, even if he does not personally benefit from the violation. Penalties include:
* Jail sentences, criminal monetary penalties.
* 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 substantially greater than 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.
* 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
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. The automated pre-clearance system is not available for Putnam closed-end fund clearance. Trading in shares of closed-end funds is subject to all the rules of the Code of Ethics. Contact the Code of Ethics Administrator with these pre-clearance requests.
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 Administrator for further information.
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: Contra-Trading Rule Clearance Form
To: Code of Ethics Officer
From: __________________________________________________________________
Date: __________________________________________________________________
Re: Personal Securities Transaction of__________________________________
This serves as prior written approval of the personal securities transaction described below:
Name of portfolio manager contemplating personal trade: ______________________
Security to be traded: _______________________________________________________
Amount to be traded: _________________________________________________________
Fund holding securities: _____________________________________________________
Amount held by fund: _________________________________________________________
Reason for personal trade: ___________________________________________________
(Please attach additional sheets if necessary.)
CIO approval: ___________________________________ Date:_______________________
Legal/compliance approval: ________________________ Date:_____________________
APPENDIX D: 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:
* Act with integrity, competence, dignity, and in an ethical manner when dealing with the public, clients, prospects, employers, employees, and fellow members.
* Practice and encourage others to practice in a professional and ethical manner that will reflect credit on members and their profession.
* Strive to maintain and improve their competence and the competence of others in the profession.
* 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
Fundamental Responsibilities
Members shall 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. Not knowingly participate in or assist any violation of such laws, rules, or regulations.
Relationships with and Responsibilities to the Profession
Use of Professional Designation
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.
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.
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.
Professional Misconduct
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.
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.
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.
Relationships with and Responsibilities to the Employer
Obligation to Inform Employer of Code and Standards
Members shall 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.
Members shall deliver a copy of the Code and Standards to their employer if the employer does not have a copy.
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.
Disclosure of Conflicts to Employer
Members shall comply with any prohibitions on activities imposed by their employer if a conflict of interest exists.
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.
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.
Relationships with and Responsibilities to Clients and Prospects
Investment Process
REASONABLE BASIS AND REPRESENTATIONS
* Exercise diligence and thoroughness in making investment recommendations or in taking investment actions.
* Have a reasonable and adequate basis, supported by appropriate research and investigation, for such recommendations or actions.
* Make reasonable and diligent efforts to avoid any material misrepresentation in any research report or investment recommendation.
* Maintain appropriate records to support the reasonableness of such recommendations or actions.
RESEARCH REPORTS
* Use reasonable judgment regarding the inclusion or exclusion of relevant factors in research reports.
* Distinguish between facts and opinions in research reports.
* 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.
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.
Interactions with Clients and Prospects
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.
PORTFOLIO INVESTMENT RECOMMENDATIONS AND ACTIONS
Members shall:
* 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.
* 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.
* Distinguish between facts and opinions in the presentation of investment recommendations.
* 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.
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.
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:
* direct or indirect pecuniary interest in the securities;
* the power to vote or direct the voting of the shares of the securities or investments;
* the power to dispose or direct the disposition of the security or investment.
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.
PROHIBITION AGAINST MISREPRESENTATION
Members shall not make any statements, orally or in writing, that misrepresent
* the services that they or their firms are capable of performing;
* their qualifications or the qualifications of their firm;
* 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.
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.
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.
Relationships with and Responsibilities to the Public
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.
PERFORMANCE PRESENTATION
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. 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.
APPENDIX E: Report of Entertainment Form
This form must be filed with the Putnam Legal and Compliance Department within 10 days of date of entertainment.
Send to:
Laura Rose
Assistant Vice President and Code of Ethics Administrator
Mailstop L-5
OR
Attach to an e-mail to:
laura_rose@putnam.com
Name of employee:____________________________________________
Name of party providing entertainment:
Firm: _______________________________________________________
Person:______________________________________________________
Date of entertainment:_______________________________________
Describe entertainment provided:_____________________________
(e.g., name and location of restaurant, sporting, or cultural event)
Value of entertainment (excluding meals):____________________
Signature: ____________________________________ Date:_______________
INDEX
7-Day Rule transactions by portfolio managers, analysts, and CIOs .......................................................14 60-Day Rule...............................................................13 A Access Persons definition ............................................................. vii special rules on trading..................................................13 AIMR Code of Ethics and Standards of Professional Conduct .................................................... 47 Analysts special rules on trading................................................. 14 Appeals Procedures................................................................36 B Bankers' acceptances excluded from securities ...............................................viii Blackout rule trading by portfolio managers, analysts and CIOs........................................................ 15 Boycott anti-trust and other laws.................................................18 Bribes ...................................................................21 C Certificates of Deposit excluded from securities ...............................................viii Clearance how long pre-clearance is valid............................................2 required for personal securities transactions ...................................................1 Closed-end funds pre-clearance and reporting ..............................................45 Commercial paper excluded from securities ...............................................viii Commodities (other than securities indices) excluded from securities ...............................................viii Computer use compliance with corporate policies required ........................................................26 Confidentiality required of all employees.............................................22, 26 Confirmations and broker statements required for personal transactions........................................31 Conflicts of interest with Putnam and Putnam clients............................................18 Contra-trading rule transactions by portfolio managers and CIOs .................................................................16 Convertible securities defined as securities...................................................viii Currencies excluded as securities..................................................viii D Definitions..............................................................vii Director prohibited to serve for another entity....................................23 Dividend reinvestment program.............................................11 E Employee prohibited to serve for another entity ...................................23 Excessive trading (over 25 trades) prohibited ............................10 Exchange traded index funds, excluded from securities ...............................................viii Exemptions..........................................................3, 4, 11 F Family members covered in personal securities transactions .........................................viii, 7, 38 Fiduciary prohibited to serve for another entity....................................23 Fraudulent or irregular activities reporting ................................................................24 G Gifts and Entertainment Policy .......................................18, 19 Good-until-canceled orders................................................10 H Holdings of securities disclosure by Access Persons..............................................32 I Initial public offerings/IPOs purchases are prohibited...................................................5 Insider trading policy statement and explanations ........................................38 prohibited............................................................iii, 5 Investment clubs prohibited................................................................23 Involuntary personal securities transactions exemptions ............................................................4, 11 L Large Cap Exception for clearance of securities on Restricted List............................................................2 Limit Orders..............................................................10 M Market timing prohibition..................................................9 Money market instruments excluded from securities............................................... viii N Naked options by employees discouraged..................................................11 Non-Putnam affiliates (NPAs) transactions and relationships............................................25 O Officer prohibited to serve for another entity ...............................22, 23 Options defined as securities...................................................viii relationship to securities on Restricted or Red Lists....................................................3 Ombudsman.................................................................33 P Partner prohibited to serve as general partner of another entity........................................................... 23 Partnerships covered in personal securities transactions ...................................................... viii, 37 Personal securities transaction defined ............................................................viii, 38 Political contributions...................................................21 Portfolio managers special rules on trading..............................................14, 17 Privacy policy ...........................................................26 Private offerings, purchases in private placements................................................................ 6 Putnam Investments Limited special rules ............................................................29 Q Quarterly Report of securities transactions ..............................32 R Reporting requirements....................................................31 Repurchase agreements excluded from securities................................................viii S Sanctions ................................................................vi for failure to pre-clear properly ........................................ 4 Shares by subscription procedures to preclear trades............................................. 2 Short sales prohibited conduct........................................................ 5 T Tender offers .............................................................4 Trustee prohibited to serve for another entity....................................23 Trusts covered in personal securities transactions .......................................................viii, 38 U U.S. government obligations excluded from securities................................................viii V Violations of Law reporting ................................................................33 W Warrants defined as securities...................................................viii PUTNAM INVESTMENTS One Post Office Square Boston, Massachusetts 02109 1-800-225-1581 www.putnaminvestments.com 215845 8/04 |
Supplement - dated December 15, 2004 to Putnam Code of Ethics
The Putnam Code of Ethics Oversight Committee has approved the following amendments to the August 2004 Code of Ethics.
Sanctions Guidelines
The Sanctions Guidelines in Section 1A of the Code (page 4 of August Code) have been withdrawn and are replaced with the following new Sanctions Guidelines effective with the first quarter of 2005:
"The Code of Ethics Oversight Committee is responsible for setting sanctions policies for violating the Code. The Committee has adopted the following minimum monetary sanctions for violations of the Code. These sanctions apply even if the exception results from inadvertence rather than intentional misbehavior. The Code of Ethics Officer is authorized to impose the minimum sanction on employees without further Committee action. However, the sanctions noted below are only minimums and the Committee reserves the right to impose additional sanctions such as higher monetary sanctions, trading bans, suspension or termination of employment as it determines to be appropriate.
The minimum sanction for a violation of the following Rules is disgorgement of any profits or payment of avoided losses and the following payments:
Section IA, Rule 1 (Pre-clearance and Restricted List)
Section IB, Rule 1 (Short-selling)
Section IB, Rule 2 (IPOs)
Section IB, Rule 3 (Private Placements)
Section IB, Rule 4 (Trading with Inside Information)
Section IB, Rules 6-8 (Holding and trading of Putnam Funds)
Section II, Rule 2 (7-Day Rule)
Section II, Rule 3 (Black-out Rule)
Section II, Rule 4, (Contra-Trading Rule)
Section II, Rule 5 (Trading for personal benefit)
Officer Level SMD/MD SVP/VP AVP/non-officer -------------------------------------------------------------------------- 1st violation $500 $250 $50 2nd $1,000 $500 $100 |
3rd Minimum monetary sanction as above with ban on all new personal individual investments.
The minimum sanction for violations of all other rules in the Code is as follows:
Officer Level SMD/MD SVP/VP AVP/non-officer -------------------------------------------------------------------------- 1st violation $100 $50 $25 Subsequent $200 $100 $50 |
The reference period for determining whether a violation is initial or subsequent will be five years.
Excessive Trading
Effective with the 2nd quarter of 2005, the maximum number of trades
permitted in individual securities per quarter is reduced from 25 to 10.
Section 1B, Rule 9 is effective April 1, 2005, will read as follows:
"Putnam employees are strongly discouraged from engaging in excessive trading for their personal accounts. Beginning in the second quarter of 2005, employees will be prohibited from making more than 10 trades in individual securities in any given quarter. Excessive trading within Putnam open-end funds is prohibited."
Access Persons; Holding Period for Individual Securities
Effective with the 2nd quarter of 2005, the holding period rule for Access Person investments in individual securities will increase from 60 to 90 days. Section II, Rule 1 will read, effective April 1, 2005 as follows:
"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 with 90 calendar days."
Access Person Reporting
The deadline by which Access Persons are required to file quarterly statements of all transactions has been increased from 10 to 15 calendar days after the end of each quarter. This change will be effective in the April, 2005 filing. Accordingly Section V, Rule 2, will now read as follows:
"Every Access Person shall file a quarterly report within 15 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 purposes of this Rule, securities shall include exchange traded funds (ETFs), futures and any option on a security or securities index, including broad based market indices excluded from the pre-clearance requirement and also includes transactions in Putnam open-end funds if the account for the Putnam funds is not held at Putnam Securities Services or in a Putnam retirement plan and for transactions in US mutual funds sub-advised by Putnam."
Access Person Definition
As required by new SEC rule 204A-1, the definition of Access Persons under the Code has been amended, effective February 1, 2005 to include Putnam employees with access to non public information about affiliated mutual fund portfolio holdings. The definition of Access Person will read as of February 1, 2005 as follows:
"Access Persons are:
(a) all employees in Putnam's Investment Division;
(b) all directors and officers of all Putnam entities which are SEC registered investment advisers;
(c) all members of Putnam's Executive Board and all Managing Directors in Putnam's marketing and sales organizations; and
(d) any other employee of Putnam who, in connection with regular duties, has access to nonpublic information about any client's purchase or sale of securities or to information regarding recommendations with respect to such purchases or sales or who has access to nonpublic information regarding the portfolio holdings of any Putnam advised or sub-advised mutual fund.
Each employee will be informed if he or she is considered an Access Person. The Code of Ethics Officer maintains a list of all Access Persons."