PUTNAM VARIABLE TRUST, 485APOS, 1999-11-17

PUTNAM VARIABLE TRUST
485APOS, 1999-11-17

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As filed with the Securities and Exchange Commission on
November 16, 1999
Registration No. 33-17486
811-5346
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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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. 22 /X/
and ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY /X/
ACT OF 1940 ----
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Amendment No. 23 /X/
(Check appropriate box or boxes) ----

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PUTNAM VARIABLE TRUST
(Exact name of registrant as specified in charter)

One Post Office Square, Boston, Massachusetts 02109
(Address of principal executive offices)

Registrant's Telephone Number, including Area Code
(617) 292-1000
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It is proposed that this filing will become effective
(check appropriate box)

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/ / immediately upon filing pursuant to paragraph (b)
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/ / on (date) pursuant to paragraph (b)
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/ / 60 days after filing pursuant to paragraph (a)(1)
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/ / on (date) pursuant to paragraph (a)(1)
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/ X / 75 days after filing pursuant to paragraph (a)(2)
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/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
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/ / this post-effective amendment designates a new
- ---- effective date for a previously filed post-effective amendment.
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JOHN R. VERANI, 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
One International Place
Boston, Massachusetts 02110
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This Post-Effective Amendment relates solely to the Registrant's
Putnam VT American Government Income Fund series and Putnam VT
Growth Opportunities Fund series. Information contained in the
Registrant's Registration Statement relating to any other series
of the Registrant is neither amended nor superseded hereby.

PROSPECTUS
January 31, 2000

PUTNAM VARIABLE TRUST
Class IA Shares

Putnam Variable Trust (the "Trust") offers shares of beneficial
interest in separate investment portfolios (collectively, the
"funds") for purchase by separate accounts of various insurance
companies. The funds, which have different investment objectives
and policies, offered by this prospectus are:

Growth Fund
Putnam VT Growth Opportunities Fund

Income
Putnam VT American Government Income Fund

This prospectus explains what you should know about the funds of
Putnam Variable Trust listed above, which are available for
purchase by separate accounts of insurance companies. Certain
other funds of the Trust are offered through another prospectus.

Putnam Investment Management, Inc. (Putnam Management), which has
managed mutual funds since 1937, manages the funds. These
securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed upon the
accuracy or adequacy of this prospectus. Any statement to the
contrary is a crime.

CONTENTS
2 Fund summaries (including Goal, Main investment strategies and Main risks)
3 What are the funds' main investment strategies and related risks?
5 Who manages the funds?
6 How to buy and sell fund shares
6 How do the funds price their shares?
7 Fund distributions and taxes

FUND SUMMARIES

The following summaries identify each fund's goal, principal
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, 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 either of the funds. A fund
may not achieve its goals, and neither of the funds is, nor
together are they, intended as a complete investment program. An
investment in either fund is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation
or any other government agency.

PUTNAM VT GROWTH OPPORTUNITIES FUND

GOAL
The fund seeks capital appreciation.

MAIN INVESTMENT STRATEGIES - GROWTH STOCKS
The fund invests mainly in common stocks of U.S. companies, with a
focus on growth stocks. Growth stocks are issued by companies
whose earnings we believe are likely to grow faster than the
economy as a whole. Growth in a company's earnings may lead to an
increase in the price of its stock. The fund invests 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. The fund invests mainly in large companies.

MAIN RISKS
* The risk of loss from investing in fewer issuers than a fund
that invests more broadly. This vulnerability to factors
affecting a single investment can result in greater fund losses
and volatility.
* 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.

PUTNAM VT AMERICAN GOVERNMENT INCOME FUND

GOAL
The fund seeks high current income with preservation of capital as
its secondary objective.

MAIN INVESTMENT STRATEGIES - U.S. GOVERNMENT BONDS
We invest mostly in bonds that

* are obligations of the U.S. government, its agencies and
instrumentalities,

* are a combination of securities backed by the full faith and
credit of the United States, such as U.S. Treasury bonds and
Ginnie Mae mortgage-backed bonds, and those that are backed only
by the credit of a federal agency or government sponsored entity,
such as Fannie Mae mortgage-backed bonds, and

* have intermediate to long-term maturities (three years or longer).

We may also invest in mortgage-backed investments of private
issuers rated, at the time of purchase, AAA (or its equivalent) by
a nationally recognized securities rating agency, or if unrated,
that we determined to be of comparable quality.

MAIN RISKS
* The risk that movements in the securities markets will adversely
affect the value of the fund's investments. This risk includes
interest rate risk, which means that the prices of the fund's
investments are likely to fall if interest rates rise. Interest
rate risk is generally highest for investments with long
maturities.
* The risk that the issuers of the fund's investments will not
make timely payments of interest and principal.
* The risk that, compared to other debt, mortgage-backed
investments may increase in value less when interest rates
decline, and decline in value more when interest rates rise.

WHAT ARE THE FUNDS' MAIN INVESTMENT STRATEGIES AND RELATED RISKS?

The funds are generally managed in styles similar to other open-
end investment companies that we manage and whose shares are
generally offered to the public. These other Putnam funds may,
however, employ different investment practices and may invest in
securities different from those in which their counterpart funds
invest, and consequently will not have identical portfolios or
experience identical investment results. Any investment carries
with it some level of risk that generally reflects its potential
for reward.

The first part of this section describes the investment strategies
and related risks that are particular to each of the funds. The
second part of this section (Common Investment Strategies and
Related Risks) provides additional information on the investment
strategies described in part one of the section. It discusses
investment strategies and related risks that are common to both
funds. In addition, the "Fund summaries" contain important
information about the funds. Investors are urged to read the fund
summaries and both parts of the section that follows for complete
information about the funds.

PUTNAM VT GROWTH OPPORTUNITIES FUND

We pursue the fund's goal by investing mainly in growth stocks.
We will consider, among other things, a company's financial
strength, competitive position in its industry, and projected
future earnings, cash flows and dividends when deciding whether to
buy or sell investments.

* Common stocks. Common stock represents an ownership interest in
a company. The value of a company's stock may fall as a result of
factors relating directly to that company, such as decisions made
by its management or lower demand for the company's products or
services. A stock's value may also fall because of factors
affecting not just the company, but also 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 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.

* Growth stocks. These are stocks of companies whose earnings
we believe are likely to grow faster than the economy as a whole.
Growth stocks typically trade at higher multiples of current
earnings than other stocks. Therefore, the values of growth
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 a company's earnings growth is wrong, or if its
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.

* Foreign investments. We may invest in securities of foreign
issuers. Foreign investments involve certain special risks. For
example, their values may decline in response to changes in
currency exchange rates, unfavorable political and legal
developments, unreliable or untimely information, and economic and
financial instability. In addition, the liquidity of these
investments may be more limited than for U.S. investments, which
means we may at times be unable to sell them at desirable prices.
Foreign settlement procedures may also involve additional risks.
These risks are generally greater in the case of developing (also
known as emerging) markets with less developed legal and financial
systems.

Certain of these risks may also apply to U.S. investments that are
denominated in foreign currencies or that are traded in foreign
markets, or to securities of U.S. companies that have significant
foreign operations.

PUTNAM VT AMERICAN GOVERNMENT INCOME FUND

We pursue the fund's goal by investing mainly in U.S. government
bonds. We will consider, among other things, credit, interest
rate and prepayment risks as well as general market conditions
when deciding whether to buy or sell investments.

* Interest rate risk. The values of bonds and other debt usually
rise and fall in response to changes in interest rates. Declining
interest rates generally raise the value of existing debt
instruments, and rising interest rates generally lower the value
of existing debt instruments. Changes in a debt instrument's
value usually will not affect the amount of income the fund
receives from it, but will affect the value of the fund's shares.
Interest rate risk is generally greater for investments with
longer maturities.

Some investments give the issuer the option to call, or redeem,
these investments before their maturity date. If an issuer
"calls" its 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. You may find it
useful to compare the fund's yield, which factors out the effect
of premium investments, with its current dividend rate, which does
not factor out that effect.

* Mortgage-backed investments. 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.

COMMON INVESTMENT STRATEGIES AND RELATED RISKS

* Frequent trading. The funds may buy and sell investments
relatively often, which involves higher brokerage commissions and
other expenses, and may increase the amount of taxes payable by
shareholders.

* Other investments. In addition to the main investment
strategies described above, the funds may make other types of
investments, and may be subject to other risks, as described in
the Trust's statement of additional information (SAI).

* Alternative strategies. At times we may judge that market
conditions make pursuing a fund's usual investment strategies
inconsistent with the best interests of its shareholders. We then
may temporarily use alternative strategies that are mainly
designed to limit losses. However, we may choose not to use these
strategies for a variety of reasons, even in very volatile market
conditions. These strategies may cause the affected fund to miss
out on investment opportunities, and may prevent the fund from
achieving its goal.

* Changes in policies. The Trust's Trustees may change the funds'
goals, investment strategies and other policies without
shareholder approval, except as otherwise indicated.

WHO MANAGES THE FUNDS?

The Trust's Trustees oversee the general conduct of each fund's
business. The Trustees have retained Putnam Management to be the
funds' investment manager, responsible for making investment
decisions for the funds and managing the funds' other affairs and
business. Each fund pays Putnam Management a quarterly management
fee for these services based on the fund's average net assets.
Putnam Management's address is One Post Office Square, Boston, MA
02109. Putnam VT Growth Opportunities Fund pays Putnam Management
a quarterly management fee for these services at the annual rate
of 0.70% of the first $500 million of average net assets, 0.60% of
the next $500 million, 0.55% of the next $500 million, 0.50% of
the next $5 billion, 0.475% of the next $5 billion, 0.455% of the
next $5 billion, 0.44% of the next $5 billion, 0.43% of the next
$5 billion and 0.42% of any excess thereafter. Putnam VT American
Government Income Fund pays Putnam Management a quarterly
management fee for these services at the annual rate of 0.65% of
the first $500 million of average net assets, 0.55% of the next
$500 million, 0.50% of the next $500 million, 0.45% of the next $5
billion, 0.425% of the next $5 billion, 0.405% of the next $5
billion, 0.39% of the next $5 billion, 0.38% of the next $5
billion, 0.37% of the next $5 billion, 0.36% of the next $5
billion, 0.35% of the next $5 billion and 0.34% of any excess
thereafter.

In order to limit expenses for Putnam VT American Government
Income Fund, Putnam Management has agreed to limit its
compensation (and, to the extent necessary, bear other expenses)
through December 31, 2000 to the extent that the expenses of the
fund (exclusive of brokerage, interest, taxes and extraordinary
expenses, and payments under the fund's distribution plans) would
exceed an annual rate of 0.90% of the fund's average net assets.
For the purpose of determining any such limitation on Putnam
Management's compensation, expenses of the fund do not reflect the
application of commissions or cash management credits that may
reduce designated fund expenses.

The following officers of Putnam Management have had primary
responsibility for the day-to-day management of the relevant
fund's portfolio since the years shown below. Their experience as
either portfolio managers or investment analysts over at least the
last five years is also shown.

Manager Since Experience
Putnam VT Growth Opportunities Fund
C. Beth Cotner
Managing Director 2000 Employed by Putnam Management since
1995. Prior to September 1995,
Ms. Cotner was employed at Kemper
Financial Services.

Jeffrey R. Lindsey
Senior Vice President 2000 Employed by Putnam Management since 1994.

David J. Santos
Senior Vice President 2000 Employed by Putnam Management since 1986.

Putnam VT American Government Income Fund
Kevin Cronin
Managing Director 2000 Employed by Putnam Management since
1997. Prior to February 1997,
Mr. Cronin was employed at MFS
Investment Management.

Michael Martino
Managing Director 2000 Employed by Putnam Management since 1994.

YEAR 2000 ISSUES. The funds could be adversely affected if the
computer systems used by us and the funds' other service providers
do not properly process and calculate the date-related information
relating to the beginning of this century and the end of the last.
While year 2000-related computer problems could have a negative
effect on a fund, both in its operations and in its investments,
we are working to avoid such problems and to obtain assurances
from service providers that they are taking similar steps. No
assurances, though, can be provided that the funds will not be
adversely impacted by these matters.

HOW TO BUY AND SELL FUND SHARES

The Trust has an underwriting agreement relating to the funds with
Putnam Mutual Funds, One Post Office Square, Boston, Massachusetts
02109. Putnam Mutual Funds presently offers shares of each fund
of the Trust continuously to separate accounts of various
insurers. The underwriting agreement presently provides that
Putnam Mutual Funds accepts orders for shares at net asset value
and no sales commission or load is charged. Putnam Mutual Funds
may, at its expense, provide promotional incentives to dealers
that sell variable insurance products.

Shares are sold or redeemed at the net asset value per share next
determined after receipt of an order. Orders for purchases or
sales of shares of a fund must be received by Putnam Mutual Funds
before the close of regular trading on the New York Stock Exchange
in order to receive that day's net asset value. No fee is charged
to a separate account when it redeems fund shares.

Please check with your insurance company to determine which funds
are available under your variable annuity contract or variable
life insurance policy. The funds may not be available in your
state due to various insurance regulations. Inclusion in this
prospectus of a fund that is not available in your state is not to
be considered a solicitation. This prospectus should be read in
conjunction with the prospectus of the separate account of the
specific insurance product which accompanies this prospectus.

The funds currently do not foresee any disadvantages to
policyowners arising out of the fact that the funds offer their
shares to separate accounts of various insurance companies to
serve as the investment medium for their variable products.
Nevertheless, the Trustees intend to monitor events in order to
identify any material irreconcilable conflicts which may possibly
arise, and to determine what action, if any, should be taken in
response to such conflicts. If such a conflict were to occur, one
or more insurance companies' separate accounts might be required
to withdraw their investments in one or more funds and shares of
another fund may be substituted. This might force a fund to sell
portfolio securities at disadvantageous prices. In addition, the
Trustees may refuse to sell shares of any fund to any separate
account or may suspend or terminate the offering of shares of any
fund if such action is required by law or regulatory authority or
is in the best interests of the shareholders of the fund.

Under unusual circumstances, the Trust may suspend repurchases or
postpone payment for up to seven days or longer, as permitted by
federal securities law.

HOW DO THE FUNDS PRICE THEIR SHARES?

The price of a fund's shares is based on its net asset value
(NAV). The NAV per share of each class equals the total value of
its assets, less its liabilities, divided by the number of its
outstanding shares. Shares are only valued as of the close of
regular trading on the New York Stock Exchange each day the
exchange is open.

Each fund values its investments for which market quotations are
readily available at market value. It values short-term
investments that will mature within 60 days at amortized cost,
which approximates market value. It values all other investments
and assets at their fair value.

Each fund translates prices for its investments quoted in foreign
currencies into U.S. dollars at current exchange rates. As a
result, changes in the value of those currencies in relation to
the U.S. dollar may affect each fund's NAV. Because foreign
markets may be open at different times than the New York Stock
Exchange, the value of each fund's shares may change on days when
shareholders are not able to buy or sell them. If events
materially affecting the values of each fund's foreign investments
occur between the close of foreign markets and the close of
regular trading on the New York Stock Exchange, these investments
will be valued at their fair value.

FUND DISTRIBUTIONS AND TAXES

Each of the funds will distribute any net investment income and
net realized capital gains at least annually. Both types of
distributions will be made in shares of such funds unless an
election is made on behalf of a separate account to receive some
or all of the distributions in cash.

Distributions are reinvested without a sales charge, using the net
asset value determined on the ex-dividend date. Distributions on
each share are determined in the same manner and are paid in the
same amount, regardless of class, except for such differences as
are attributable to differential class expenses.

Generally, owners of variable annuity and variable life contracts
are not taxed currently on income or gains realized with respect
to such contracts. However, some distributions from such
contracts may be taxable at ordinary income tax rates. In
addition, distributions made to an owner who is younger than 59
1/2 may be subject to a 10% penalty tax. Investors should ask
their own tax advisors for more information on their own tax
situation, including possible foreign, state or local taxes.

In order for investors to receive the favorable tax treatment
available to holders of variable annuity and variable life
contracts, the separate accounts underlying such contracts, as
well as the funds in which such accounts invest, must meet certain
diversification requirements. Each fund intends to comply with
these requirements. If a fund does not meet such requirements,
income allocable to the contracts would be taxable currently to
the holders of such contracts.

Each fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other requirements
necessary for it to be relieved of federal income taxes on income
and gains it distributes to the separate accounts. For
information concerning federal income tax consequences for the
holders of variable annuity contracts and variable life insurance
policies, contract holders should consult the prospectus of the
applicable separate account.

Fund investments in foreign securities may be subject to
withholding taxes at the source on dividend or interest payments.
In that case, a fund's yield on those securities would be
decreased.

A fund's investments in certain debt obligations may cause the
fund to recognize taxable income in excess of the cash generated
by such obligations. Thus, the fund could be required at times to
liquidate other investments in order to satisfy its distribution
requirements.

FOR MORE INFORMATION ABOUT THE FUNDS OF PUTNAM VARIABLE TRUST

The Trust's statement of additional information (SAI) with respect
to Putnam VT American Government Income Fund and Putnam VT Growth
Opportunities Fund includes additional information about the
funds. The SAI is incorporated by reference into this prospectus,
which means it is part of this prospectus for legal purposes. You
may get free copies of the SAI, request other information about
the funds and other Putnam funds, or make shareholder inquiries,
by contacting your financial advisor or by calling Putnam toll-
free at 1-800-225-1581.

You may review and copy information about the 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
1-800-SEC-0330 for information about the operation of the public
reference room. You may also access reports and other information
about the funds 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 writing the Public Reference
Section of the Commission, Washington, D.C. 20549-6009. 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.putnaminv.com

File No. 811-5346

PROSPECTUS
January 31, 2000

PUTNAM VARIABLE TRUST
Class IB Shares

Growth Fund
Putnam VT Growth Opportunities Fund

Income Fund
Putnam VT American Government Income Fund

CONTENTS
2 Fund summaries (including Goal, Main investment strategies and Main risks)
3 What are the funds' main investment strategies and related risks?
5 Who manages the funds?
6 How to buy and sell fund shares
6 Distribution Plan
7 How do the funds price their shares?
7 Fund distributions and taxes

FUND SUMMARIES

PUTNAM VT GROWTH OPPORTUNITIES FUND

GOAL
The fund seeks capital appreciation.

PUTNAM VT AMERICAN GOVERNMENT INCOME FUND

GOAL
The fund seeks high current income with preservation of capital as
its secondary objective.

MAIN INVESTMENT STRATEGIES - U.S. GOVERNMENT BONDS
We invest mostly in bonds that

* are obligations of the U.S. government, its agencies and
instrumentalities,

* have intermediate to long-term maturities (three years or longer).

WHAT ARE THE FUNDS' MAIN INVESTMENT STRATEGIES AND RELATED RISKS?

PUTNAM VT GROWTH OPPORTUNITIES FUND

PUTNAM VT AMERICAN GOVERNMENT INCOME FUND

COMMON INVESTMENT STRATEGIES AND RELATED RISKS

* Changes in policies. The Trust's Trustees may change the funds'
goals, investment strategies and other policies without
shareholder approval, except as otherwise indicated.

WHO MANAGES THE FUNDS?

Manager Since Experience
Putnam VT Growth Opportunities Fund
C. Beth Cotner
Managing Director 2000 Employed by Putnam Management since
1995. Prior to September 1995, Ms.
Cotner was employed at Kemper Financial
Services.
Jeffrey R. Lindsey
Senior Vice President 2000 Employed by Putnam Management since 1994.

David J. Santos
Senior Vice President 2000 Employed by Putnam Management since 1986.

Putnam VT American Government Income Fund
Kevin Cronin
Managing Director 2000 Employed by Putnam Management since
1997. Prior to February 1997,
Mr. Cronin was employed at MFS
Investment Management.
Michael Martino
Managing Director 2000 Employed by Putnam Management since 1994.

HOW TO BUY AND SELL FUND SHARES

Under unusual circumstances, the Trust may suspend repurchases or
postpone payment for up to seven days or longer, as permitted by
federal securities law.

DISTRIBUTION PLAN

The Trust has adopted a Distribution Plan with respect to class IB
shares to compensate Putnam Mutual Funds for services provided and
expenses incurred by it as principal underwriter of the class IB
shares, including the payments to insurance companies and their
affiliated dealers mentioned below. The plans provide for
payments by each fund to Putnam Mutual Funds at the annual rate
(expressed as a percentage of average net assets) of up to 0.35%
on class IB shares. The Trustees currently limit payments on
class IB shares to 0.15% of average net assets.

Putnam Mutual Funds compensates insurance companies (or affiliated
broker-dealers) whose separate accounts invest in the Trust
through class IB shares for providing services to their contract
holders investing in the Trust.

Putnam Mutual Funds makes quarterly payments to dealers at the
annual rate of up to 0.15% of the average net asset value of class
IB shares.

Putnam Mutual Funds may suspend or modify its payments to dealers.
The payments are also subject to the continuation of the
Distribution Plan, the terms of service agreements between dealers
and Putnam Mutual Funds, and any applicable limits imposed by the
National Association of Securities Dealers, Inc.

HOW DO THE FUNDS PRICE THEIR SHARES?

FUND DISTRIBUTIONS AND TAXES

Fund investments in foreign securities may be subject to
withholding taxes at the source on dividend or interest payments.
In that case, a fund's yield on those securities would be
decreased.

FOR MORE INFORMATION ABOUT THE FUNDS OF PUTNAM VARIABLE TRUST

PUTNAM INVESTMENTS

ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
1-800-225-1581

ADDRESS CORRESPONDENCE TO
PUTNAM INVESTOR SERVICES
P.O. BOX 989
BOSTON, MASSACHUSETTS 02103

www.putnaminv.com

File No. 811-5346

PUTNAM VT AMERICAN GOVERNMENT INCOME FUND
PUTNAM VT GROWTH OPPORTUNITIES FUND

TWO SERIES OF PUTNAM VARIABLE TRUST
FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION ("SAI")
JANUARY 31, 2000

This SAI is not a prospectus and is only authorized for
distribution when accompanied or preceded by the prospectus of the
funds dated January 31, 2000, as revised from time to time. This
SAI contains information which may be useful to investors but
which is not included in the prospectus. If the funds have more
than one form of current prospectus, each reference to the
prospectus in this SAI shall include all of the funds'
prospectuses, unless otherwise noted. The SAI should be read
together with the applicable prospectus. For a free copy of the
funds' prospectus, call Putnam Investor Services at 1-800-225-1581
or write Putnam Investor Services, Mailing address: P.O. Box
41203, Providence, RI 02940-1203.

TABLE OF CONTENTS

DEFINITIONS B-2
TRUST ORGANIZATIONS AND CLASSIFICATION B-2
INVESTMENT OBJECTIVES AND POLICIES B-3
TAXES B-26
INVESTMENT RESTRICTIONS B-28
MANAGEMENT B-30
INVESTMENT PERFORMANCE OF THE TRUST B-43
DETERMINATION OF NET ASSET VALUE B-43
DISTRIBUTION PLAN B-44
SUSPENSION OF REDEMPTIONS B-45
SHAREHOLDER LIABILITY B-45
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS B-45

PUTNAM VARIABLE TRUST
SAI DEFINITIONS

The "Trust" -- Putnam Variable Trust.
"Putnam Management" -- Putnam Investment Management, Inc., the
Trust's investment manager.
"Putnam Mutual Funds" -- Putnam Mutual Funds Corp., the
Trust's principal underwriter.
"Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company,
Company" the Trust's custodian.
"Putnam Investor Services" -- Putnam Investor Services, a
division of Putnam Fiduciary Trust Company, the Trust's investor
servicing agent.

TRUST ORGANIZATION AND CLASSIFICATION

Putnam Variable Trust is a Massachusetts business trust organized
on September 24, 1987. A copy of the Agreement and Declaration of
Trust, which is governed by Massachusetts law, is on file with the
Secretary of State of The Commonwealth of Massachusetts. Prior to
January 1, 1997, the Trust was known as Putnam Capital Manager
Trust. As of the date of this SAI, Putnam Investments owned 100%
of the shares of the Putnam VT American Government Income Fund and
Putnam VT Growth Opportunities Fund and therefore may be deemed to
"control" these funds.

The Trust is an open-end management investment company with an
unlimited number of authorized shares of beneficial interest.
Shares of the Trust may, without shareholder approval, be divided
into two or more series of shares representing separate investment
portfolios, and are currently divided into twenty-four series of
shares, each representing a separate investment portfolio which is
being offered to separate accounts of various insurance companies.
Each portfolio is a diversified investment company.

Any series of shares of the Trust may be further divided without
shareholder approval into two or more classes of shares having
such preferences and special or relative rights and privileges as
the Trustees may determine. Shares of each series are currently
divided into two classes: class IA shares and class IB shares.
Class IB shares are subject to fees imposed pursuant to a
distribution plan. The funds may also offer other classes of
shares with different sales charges and expenses. Because of
these different sales charges and expenses, the investment
performance of the classes will vary.

The two classes of shares are offered under a multiple class
distribution system approved by the Trust's Trustees, and are
designed to allow promotion of insurance products investing in the
Trust through alternative distribution channels. The insurance
company issuing a variable contract selects the class of shares in
which the separate account funding the contract invests.

Each share has one vote, with fractional shares voting
proportionately. Shares vote as a single class without regard to
series or classes of shares except (i) when required by the 1940
Act, or when the Trustees have determined that the matter affects
one or more series or classes of shares materially differently,
shares shall be voted by individual series or class, and (ii) when
the Trustees have determined that the matter affects only the
interests of one or more series or classes, only the shareholders
of such series or class shall be entitled to vote. Shares are
freely transferable, are entitled to dividends as declared by the
Trustees, and, if the portfolio were liquidated, would receive the
net assets of the portfolio. The Trust may suspend the sale of
shares of any portfolio at any time and may refuse any order to
purchase shares. Although the Trust is not required to hold
annual meetings of its shareholders, shareholders holding at least
10% of the outstanding shares entitled to vote have the right to
call a meeting to elect or remove Trustees, or to take other
actions as provided in the Agreement and Declaration of Trust.

Each of Putnam VT American Government Income Fund and Putnam VT
Growth Opportunities Fund is a "diversified" investment company
under the Investment Company Act of 1940. This means that with
respect to 75% 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) nor may it purchase more than
10% of the voting securities of any such issuer. The remaining
25% of its 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.

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.

INVESTMENT OBJECTIVES AND POLICIES

The Trust consists of twenty-four separate investment portfolios
(the "funds") with differing investment objectives and policies.
The investment objectives and policies of the funds are described
in the prospectus offering such funds. This SAI contains the
investment restrictions of Putnam VT American Government Income
Fund and Putnam VT Growth Opportunities Fund. It also contains
information concerning certain investment practices in which some
or all of the twenty-four funds may engage. The prospectus
indicates which practices are applicable to each fund that it
offers.

Except as described below under "Investment Restrictions of the
Trust," the investment policies described in the prospectus and in
this SAI are not fundamental, and the Trustees may change such
policies without shareholder approval. As a matter of policy, the
Trustees would not materially change the funds' investment
objectives without shareholder approval.

SHORT-TERM TRADING

In seeking a fund's objective or objectives, Putnam Management
will buy or sell portfolio securities whenever Putnam Management
believes it appropriate to do so. In deciding whether to sell a
portfolio security, Putnam Management does not consider how long
the fund has owned the security. From time to time the fund will
buy securities intending to seek short-term trading profits. A
change in the securities held by the fund is known as "portfolio
turnover" and generally involves some expense to the fund. This
expense may include brokerage commissions or dealer markups and
other transaction costs on both the sale of securities and the
reinvestment of the proceeds in other securities. As a result of
a 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. A fund's portfolio turnover rate is not a limiting
factor when Putnam Management considers a change in a fund's
portfolio.

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 funds' 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 funds 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 funds' 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
funds 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.

LOWER-RATED SECURITIES

A fund may invest in lower-rated fixed-income securities (commonly
known as "junk bonds") to the extent described in the prospectus.
The lower ratings of certain securities held by a 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 a fund more volatile and could limit a 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, a 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 organization) does
not reflect an assessment of the volatility of the security's
market value or the liquidity of an investment in the security.
See the prospectus for a description of security 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 a fund's assets. Conversely, during
periods of rising interest rates, the value of a 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 recognized rating services 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 a fund's net asset value. A
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 a fund's investment objective or
objectives.

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 a fund's assets may be invested
in securities of which the fund, by itself or together with other
funds and accounts managed by Putnam Management or its affiliates,
holds all or a major portion. Although Putnam Management
generally considers such securities to be liquid because of the
availability of an institutional market for such securities, it is
possible that, under adverse market or economic conditions or in
the event of adverse changes in the financial condition of the
issuer, a 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 a fund's net asset value. In
order to enforce its rights in the event of a default under such
securities, a 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 addition, each fund's intention to qualify as a
"regulated investment company" under the Internal Revenue Code may
limit the extent to which a fund may exercise its rights by taking
possession of such assets.

Certain securities held by a fund may permit the issuer at its
option to "call," or redeem, its securities. If an issuer were to
redeem securities held by a 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.

A fund may at times invest without limit in so-called "zero-
coupon" bonds and "payment-in-kind" bonds identified in the
prospectus, unless otherwise specified in the prospectus. 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 bonds and payment-in-kind bonds do not
pay current interest in cash, their values are subject to greater
fluctuation in response to changes in market interest rates than
bonds that pay interest currently in cash. 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. A fund is nonetheless 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 a fund to liquidate other investments in order to
satisfy its dividend requirements.

INVESTMENTS IN PREMIUM SECURITIES

Unless otherwise specified in the prospectus or elsewhere in this
SAI, if a fund may invest in premium securities, it may do so
without limit.

INVESTMENTS IN MISCELLANEOUS FIXED-INCOME SECURITIES

Unless otherwise specified in the prospectus or elsewhere in this
SAI, if a 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. None
of the funds, however, currently intends 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.

PRIVATE PLACEMENTS

Each 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, a fund could find it more difficult to
sell such securities when Putnam Management believes it advisable
to do so or may be able to sell such securities only at prices
lower than if such securities were more widely held. At times, it
may also be more difficult to determine the fair value of such
securities for purposes of computing the fund's net asset value.

While such private placements may often offer attractive
opportunities for investment not otherwise available on the open
market, the securities so purchased are often "restricted
securities," i.e., securities which cannot be sold to the public
without registration under the Securities Act of 1933 or the
availability of an exemption from registration (such as Rules 144
or 144A), or which are "not readily marketable" because they are
subject to other legal or contractual delays in or restrictions on
resale.

The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal
expenses, and it may be difficult or impossible for the fund to
sell them promptly at an acceptable price. The fund may have to
bear the extra expense of registering such securities for resale
and the risk of substantial delay in effecting such registration.
Also market quotations are less readily available. The judgment of
Putnam Management may at times play a greater role in valuing
these securities than in the case of unrestricted securities.

Generally speaking, restricted securities may be sold only to
qualified institutional buyers, or in a privately negotiated
transaction to a limited number of purchasers, or in limited
quantities after they have been held for a specified period of
time and other conditions are met pursuant to an exemption from
registration, or in a public offering for which a registration
statement is in effect under the Securities Act of 1933. A 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.

LOAN PARTICIPATIONS

A fund may invest in "loan participations." By purchasing a loan
participation, a fund acquires some or all of the interest of a
bank or other lending institution in a loan to a particular
borrower. Many such loans are secured, and most impose
restrictive covenants which must be met by the borrower.

The loans in which a fund may invest are typically made by a
syndicate of banks, represented by an agent bank which has
negotiated and structured the loan and which is responsible
generally for collecting interest, principal, and other amounts
from the borrower on its own behalf and on behalf of the other
lending institutions in the syndicate and for enforcing its and
their other rights against the borrower. Each of the lending
institutions, including the agent bank, lends to the borrower a
portion of the total amount of the loan, and retains the
corresponding interest in the loan.

A 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 a 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 a 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 a fund will invest, however, Putnam
Management will not rely solely on that credit analysis, but will
perform its own investment analysis of the borrowers. Putnam
Management's analysis may include consideration of the borrower's
financial strength and managerial experience, debt coverage,
additional borrowing requirements or debt maturity schedules,
changing financial conditions, and responsiveness to changes in
business conditions and interest rates. Because loan
participations in which a fund may invest are not generally rated
by independent credit rating agencies, a decision by a fund to
invest in a particular loan participation will depend almost
exclusively on Putnam Management's and the original lending
institutions credit analysis of the borrower.

Loan participations may be structured in different forms,
including novations, assignments, and participating interests. In
a novation, a 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. A fund assumes the position of a co-lender with
other syndicate members. As an alternative, a fund may purchase
an assignment of a portion of a lender's interest in a loan. In
this case, a 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. A fund may also purchase a
participating interest in a portion of the rights of a lending
institution in a loan. In such case, it will be entitled to
receive payments of principal, interest, and premium, if any, but
will not generally be entitled to enforce its rights directly
against the agent bank or the borrower, but must rely for that
purpose on the lending institution. A fund may also acquire a
loan participation directly by acting as a member of the original
lending syndicate.

A 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 a fund such payments and to enforce a
fund's rights under the loan. As a result, an insolvency,
bankruptcy, or reorganization of the lending institution may delay
or prevent a fund from receiving principal, interest, and other
amounts with respect to the underlying loan. When a 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 a 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 a 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 a 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 a 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, a 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 a 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, a 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 a 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 a fund may also involve
loans made in foreign currencies. A fund's investment in such
participations would involve the risks of currency fluctuations
described above with respect to investments in the foreign
securities.

FLOATING RATE AND VARIABLE RATE DEMAND NOTES

Certain funds may purchase floating rate and variable rate demand
notes and bonds. These securities may have a stated maturity in
excess of one year, but permit a holder to demand payment of
principal plus accrued interest upon a specified number of days
notice. Frequently, such obligations are secured by letters of
credit or other credit support arrangements provided by banks. The
issuer has a corresponding right, after a given period, to prepay
in its discretion the outstanding principal of the obligation plus
accrued interest upon a specific number of days notice to the
holders. The interest rate of a floating rate instrument may be
based on a known lending rate, such as a bank's prime rate, and is
reset whenever such rate is adjusted. The interest rate on a
variable rate demand note is reset at specified intervals at a
market rate.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

To the extent described in the prospectus, each fund may invest in
mortgage-backed securities, including collateralized mortgage
obligations ("CMOs") and certain stripped mortgage-backed
securities. CMOs and other mortgage-backed securities represent a
participation in, or are secured by, mortgage loans.

Each fund may also invest in asset-backed securities. Asset-backed
securities are structured like mortgage-backed securities, but
instead of mortgage loans or interests in mortgage loans, the
underlying assets may include such items as motor vehicle
installment sales or installment loan contracts, leases of various
types of real and personal property, and receivables from credit
card agreements. The ability of an issuer of asset-backed
securities to enforce its security interest in the underlying
assets may be limited.

Mortgage-backed securities have yield and maturity characteristics
corresponding to the underlying assets. Unlike traditional debt
securities, which may pay a fixed rate of interest until maturity,
when the entire principal amount comes due, payments on certain
mortgage-backed securities include both interest and a partial
repayment of principal. Besides the scheduled repayment of
principal, repayments of principal may result from the voluntary
prepayment, refinancing, or foreclosure of the underlying mortgage
loans. If property owners make unscheduled prepayments of their
mortgage loans, these prepayments will result in early payment of
the applicable mortgage-related securities. In that event a 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, a fund may not be able
to realize the rate of return it expected.

MORTGAGE-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 A FUND.

Prepayments may cause losses on securities purchased at a premium.
At times, some of the mortgage-backed securities in which a fund
may invest will have higher than market interest rates and
therefore will be purchased at a premium above their par value.
Unscheduled prepayments, which are made at par, will cause the
fund to experience a loss equal to any unamortized premium.

CMOs may be issued by a U.S. government agency or instrumentality
or by a private issuer. Although payment of the principal of, and
interest on, the underlying collateral securing privately issued
CMOs may be guaranteed by the U.S. government or its agencies or
instrumentalities, these CMOs represent obligations solely of the
private issuer and are not insured or guaranteed by the U.S.
government, its agencies or instrumentalities or any other person
or entity.

Prepayments could cause early retirement of CMOs. CMOs are
designed to allocate the risk of prepayment among investors by
issuing multiple classes of securities, each having different
maturities, interest rates and payment schedules, and with the
principal and interest on the underlying mortgages allocated among
the several classes in various ways. Payment of interest or
principal on some classes or series of CMOs may be subject to
contingencies or some classes or series may bear some or all of
the risk of default on the underlying mortgages. CMOS of
different classes or series are generally retired in sequence as
the underlying mortgage loans in the mortgage pool are repaid. If
enough mortgages are repaid ahead of schedule, the classes or
series of a CMO with the earliest maturities generally will be
retired prior to their maturities. Thus, the early retirement of
particular classes or series of a CMO held by a fund would have
the same effect as the prepayment of mortgages underlying other
mortgage-backed securities. Conversely, slower than anticipated
prepayments can extend the effective maturities of CMOs,
subjecting them to a greater risk of decline in market value in
response to rising interest rates than traditional debt
securities, and, therefore, potentially increasing the volatility
of the fund.

Prepayments could result in losses on stripped mortgage-backed
securities. Stripped mortgage-backed securities are usually
structured with two classes that receive different portions of the
interest and principal distributions on a pool of mortgage loans.
A fund may invest in both the interest-only or "IO" class and the
principal-only or "PO" class. The yield to maturity on an IO
class of stripped mortgage-backed securities is extremely
sensitive not only to changes in prevailing interest rates but
also to the rate of principal payments (including prepayments) on
the underlying assets. A rapid rate of principal prepayments may
have a measurable adverse effect on the fund's yield to maturity
to the extent it invests in IOs. If the assets underlying the IO
experience greater than anticipated prepayments of principal, the
fund may fail to recoup fully its initial investment in these
securities. Conversely, POs tend to increase in value if
prepayments are greater than anticipated and decline if
prepayments are slower than anticipated.

The secondary market for stripped mortgage-backed securities may
be more volatile and less liquid than that for other mortgage-
backed securities, potentially limiting a fund's ability to buy or
sell those securities at any particular time.

STRUCTURED NOTES

Each fund may invest in so-called structured notes. These
securities are generally derivative instruments whose value is
tied to an underlying index or other security or asset class.
Such structured notes may include, for example, notes that allow a
fund to invest indirectly in certain foreign investments which the
fund would otherwise would not be able to directly invest, often
because of restrictions imposed by local laws.

SECURITIES LOANS

Each 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.

FORWARD COMMITMENTS

Each 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 a 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, a fund may dispose of a commitment prior to
settlement if Putnam Management deems it appropriate to do so. A
fund may realize short-term profits or losses upon the sale of
forward commitments.

A 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 the current market
value of the underlying securities. If the TBA sale commitment is
closed through the acquisition of an offsetting purchase
commitment, that fund realizes a gain or loss on the commitment
without regard to any unrealized gain or loss on the underlying
security. If a 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.

REPURCHASE AGREEMENTS

Each fund (other than Putnam VT Money Market Fund, which may enter
into repurchase agreements without limit) may enter into
repurchase agreements on up to 25% of its total assets. A
repurchase agreement is a contract under which a 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 Trust's
present intention to enter into repurchase agreements only with
commercial banks and registered broker-dealers approved by the
Trustees 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 a 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, a fund could realize a
loss on the sale of the underlying security to the extent that the
proceeds of 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, a 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.

OPTIONS ON SECURITIES

WRITING COVERED OPTIONS. Each fund may write covered call options
and covered put options on optionable securities held in its
portfolio, when in the opinion of Putnam Management such
transactions are consistent with a fund's investment objective(s)
and policies. Call options written by a 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.

Each fund may write only covered options, which means that, so
long as a fund is obligated as the writer of a call option, it
will own the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of
securities exchanges). In the case of put options, the fund will
hold cash and/or high-grade short-term debt obligations equal to
the price to be paid if the option is exercised. In addition, the
fund will be considered to have covered a put or call option if
and to the extent that it holds an option that offsets some or all
of the risk of the option it has written. Each fund may write
combinations of covered puts and calls on the same underlying
security.

A fund will receive a premium from writing a put or call option,
which increases the fund's return on the underlying security in
the event the option expires unexercised or is closed out at a
profit. The amount of the premium reflects, among other things,
the relationship between the exercise price and the current market
value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current
interest rates, and the effect of supply and demand in the options
market and in the market for the underlying security. By writing
a call option, the fund limits its opportunity to profit from any
increase in the market value of the underlying security above the
exercise price of the option but continues to bear the risk of a
decline in the value of the underlying security. By writing a put
option, the fund assumes the risk that it may be required to
purchase the underlying security for an exercise price higher than
its then-current market value, resulting in a potential capital
loss unless the security subsequently appreciates in value.

A 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 a 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. A 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. A 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 a 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 a 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 a 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, a
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 normal market 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, a 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 a 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, the Options Clearing
Corporation 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 a 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.

FUTURES CONTRACTS AND RELATED OPTIONS

Subject to applicable law, a fund may invest without limit in
futures contracts and related options for hedging and non-hedging
purposes, such as to manage the effective duration of the fund's
portfolio or as a substitute for direct investment. A financial
futures contract sale creates an obligation by the seller to
deliver the type of financial instrument called for in the
contract in a specified delivery month for a stated price. A
financial futures contract purchase creates an obligation by the
purchaser to take delivery of the type of financial instrument
called for in the contract in a specified delivery month at a
stated price. The specific instruments delivered or taken,
respectively, at settlement date are not determined until on or
near that date. The determination is made in accordance with the
rules of the exchange on which the futures contract sale or
purchase was made. Futures contracts are traded in the United
States only on commodity exchanges or boards of trade -- known as
"contract markets" -- approved for such trading by the Commodity
Futures Trading Commission (the "CFTC"), and must be executed
through a futures commission merchant or brokerage firm which is a
member of the relevant contract market.

Although futures contracts (other than index futures) by their
terms call for actual delivery or acceptance of commodities or
securities, in most cases the contracts are closed out before the
settlement date without the making or taking of delivery. Closing
out a futures contract sale is effected by purchasing a futures
contract for the same aggregate amount of the specific type of
financial instrument or commodity with the same delivery date. If
the price of the initial sale of the futures contract exceeds the
price of the offsetting purchase, the seller is paid the
difference and realizes a gain. Conversely, if the price of the
offsetting purchase exceeds the price of the initial sale, the
seller realizes a loss. If the fund is unable to enter into a
closing transaction, the amount of the fund's potential loss is
unlimited. The closing out of a futures contract purchase is
effected by the purchaser's entering into a futures contract sale.
If the offsetting sale price exceeds the purchase price, the
purchaser realizes a gain, and if the purchase price exceeds the
offsetting sale price, the purchaser 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 a 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, the
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 a 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.

A fund may elect to close some or all of its futures positions at
any time prior to their expiration date in order to reduce or
eliminate the 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.

None of the funds intend to purchase or sell futures or related
options for other than hedging purposes, if, as a result, the sum
of the initial margin deposits on the fund's existing futures and
related options positions and premiums paid for outstanding
options on futures contracts would exceed 5% of the fund's net
assets.

OPTIONS ON FUTURES CONTRACTS. A 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, a fund may purchase put options or write call options
on futures contracts rather than selling futures contracts.
Similarly, a 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.

A 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 a fund is subject to Putnam
Management's ability to predict movements in various factors
affecting securities markets, including interest rates.

Compared to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts involves less
potential risk to a 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 a fund when
the purchase or sale of a futures contract would not, such as when
there is no movement in the prices of the hedged investments. The
writing of an option on a futures contract involves risks similar
to those risks relating to the sale of futures contracts.

The use of options and futures strategies also involves the risk
of imperfect correlation among movements in the prices of the
securities underlying the futures and options purchased and sold
by the fund, of the options and futures contracts themselves, and,
in the case of hedging transactions, of the securities which are
the subject of a hedge. The successful use of these strategies
further depends on the ability of Putnam Management to forecast
interest rates and market movements correctly.

There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render
certain market clearing facilities inadequate, and thereby result
in the institution by exchanges of special procedures which may
interfere with the timely execution of customer orders.

To reduce or eliminate a position held by a 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 a
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 a 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 a fund has hedged against a decline in the values
of fixed-income securities held by it by selling Treasury security
futures and the values of Treasury securities subsequently
increase while the values of its fixed-income securities decrease,
the fund would incur losses on both the Treasury security futures
contracts written by it and the fixed-income 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. A fund may
enter into stock index futures contracts, debt index futures
contracts, or other index futures contracts appropriate to its
objective(s). A 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 a 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 a 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 a 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 a 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 a 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, a 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

A 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.

A fund will normally use index warrants in a manner similar to its
use of options on securities indices. The risks of a 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.

FOREIGN INVESTMENTS

A fund may invest in securities of foreign issuers that are not
actively traded in U.S. markets. These foreign investments
involve certain special risks described below.

Foreign securities are normally denominated and traded in foreign
currencies. As a result, the value of a fund's foreign
investments and the value of its shares (other than Putnam VT
Money Market Fund) may be affected favorably or unfavorably by
changes in currency exchange rates relative to the U.S. dollar.
There may be less information publicly available about a foreign
issuer than about a U.S. issuer, and foreign issuers are not
generally subject to accounting, auditing and financial reporting
standards and practices comparable to those in the United States.
The securities of some foreign issuers are less liquid and at
times more volatile than securities of comparable U.S. issuers.
Foreign brokerage commissions and other fees are also generally
higher than in the United States. Foreign settlement procedures
and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of a fund's
assets held abroad) and expenses not present in the settlement of
investments in U.S. markets.

In addition, a fund's investments in foreign securities may be
subject to the risk of nationalization or expropriation of assets,
imposition of currency exchange controls or restrictions on the
repatriation of foreign currency, confiscatory taxation, political
or financial instability and diplomatic developments which could
affect the value of a 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 a fund's ability to
invest in securities of certain issuers organized under the laws
of those foreign countries.

The risks described above, including the risks of nationalization
or expropriation of assets, are typically increased in connection
with investments in "emerging markets." For example, political
and economic structures in these countries may be in their infancy
and developing rapidly, and such countries may lack the social,
political and economic stability characteristic of more developed
countries. Certain of these countries have in the past failed to
recognize private property rights and have at times nationalized
and expropriated the assets of private companies. High rates of
inflation or currency devaluations may adversely affect the
economies and securities markets of such countries. Investments
in emerging markets may be considered speculative.

The currencies of certain emerging market countries have
experienced a steady devaluation relative to the U.S. dollar, and
continued devaluations may adversely affect the value of a fund's
assets denominated in such currencies. Many emerging market
companies have experienced substantial, and in some periods
extremely high, rates of inflation for many years, and continued
inflation may adversely affect the economies and securities
markets of such countries.

In addition, unanticipated political or social developments may
affect the value of a fund's investments in emerging markets and
the availability to a fund of additional investments in these
markets. The small size, limited trading volume and relative
inexperience of the securities markets in these countries may make
a fund's investments in securities traded in emerging markets
illiquid and more volatile than investments in securities traded
in more developed countries, and a 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 or 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

Unless otherwise specified in the prospectus or this SAI, a fund
may engage without limit in currency exchange transactions,
including purchasing and selling foreign currency, foreign
currency options, foreign currency forward contracts and foreign
currency futures contracts and related options, to manage its
exposure to foreign currencies. In addition, a fund may write
covered call and put options on foreign currencies for the purpose
of increasing its current return.

Generally, a 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.

A FUND MAY PURCHASE OR SELL A FOREIGN CURRENCY ON A SPOT (OR CASH)
BASIS AT THE PREVAILING SPOT RATE IN CONNECTION WITH THE
SETTLEMENT OF TRANSACTIONS IN PORTFOLIO SECURITIES DENOMINATED IN
THAT FOREIGN CURRENCY. IF CONDITIONS WARRANT, FOR TRANSACTION
HEDGING PURPOSES A 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 A 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. A 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 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 a fund.

Cross hedging transactions by a 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.

For transaction hedging purposes, a 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 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.

A 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 on exchanges or in over-the-counter markets.
In connection with position hedging, a 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 a fund to
purchase additional foreign currency on the spot market (and bear
the expense of such purchase) if the market value of the security
or securities being hedged is less than the amount of foreign
currency the fund is obligated to deliver and a decision is made
to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of
the portfolio security or securities if the market value of such
security or securities exceeds the amount of foreign currency the
fund is obligated to deliver.

Transaction and position hedging do not eliminate fluctuations in
the underlying prices of the securities which the fund owns or
intends to purchase or sell. They simply establish a rate of
exchange which one can achieve at some future point in time.
Additionally, although these techniques tend to minimize the risk
of loss due to a decline in the value of the hedged currency, they
tend to limit any potential gain which might result from the
increase in value of such currency. See "Risk factors in options
transactions" above.

A 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 will not assist the fund in meeting
its objective. 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 A 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 A 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 may
either 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 A 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.

A 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 a 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 a fund at one rate, while
offering a lesser rate of exchange should the fund desire to
resell that currency to the dealer.

RESTRICTED SECURITIES

The SEC Staff currently takes the view that any delegation by the
Trustees of the authority to determine that a restricted security
is readily marketable (as described in the investment restrictions
of the funds) must be pursuant to written procedures established
by the Trustees. It is the present intention of the Trustees
that, if the Trustees decide to delegate such determinations to
Putnam Management or another person, they would do so pursuant to
written procedures, consistent with the Staff's position. Should
the Staff modify its position in the future, the Trustees would
consider what action would be appropriate in light of the Staff's
position at that time.

SWAP AGREEMENTS

The funds may enter into swap agreements and other types of over-
the-counter transactions with broker-dealers or other financial
institutions, in which its investment return will depend on the
change in value of a specified security or index. A fund would
typically receive from the counterparty the amount of any
increase, and pay to the counterparty the amount of any decrease,
in the value of the underlying security or index. The contracts
would thus, absent the failure of the counterparty to complete its
obligations, provide to the investing fund approximately the same
return as it would have realized if it had owned the security or
index directly.

A 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 funds, or the fund may be unable to close out
their positions under such transactions at the same time, or at
the same price, as if they purchased comparable publicly traded
securities.

DERIVATIVES

Certain of the instruments in which the funds may invest, such as
futures contracts, options and forward contracts, are considered
to be "derivatives." Derivatives are financial instruments whose
value depends upon, or is derived from, the value of an underlying
asset, such as a security or an index. Further information about
specific derivatives and the risks involved in their use is
included elsewhere in the prospectus or in this SAI.

YEAR 2000

Like other financial and business organizations, the funds depend
on the proper function of their service providers' computer
systems. To the extent that the systems used by the funds or
their service providers cannot distinguish between the year 1900
and the year 2000 or have other operating difficulties as a result
of the year 2000, the operations of and services provided to the
funds and their shareholders could be adversely impacted. Putnam
Management and its affiliates have reported that each expects to
modify its systems, as necessary, to address this so-called "year
2000 problem," and will, on behalf of the funds, inquire as to the
year 2000 compliance of the funds' other major service providers.
However, there can be no assurance that the operations of and
services provided to the funds and their shareholders will not be
adversely affected. Similarly, companies in which the funds
invest may also experience "year 2000 problems," which could
ultimately result in losses to a fund to the extent that the
securities of any such company decline in value as a result of a
"year 2000 problem."

TAXES

TAXATION OF THE TRUST. Each fund intends to qualify each year as
a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). In order to
qualify for the special tax treatment accorded regulated
investment companies and their shareholders, each fund must, among
other things:

(a) Derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, and
gains from the sale of stock, securities and foreign currencies,
or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its
business of investing in such stock, securities, or currencies;

(b) Distribute with respect to each taxable year at least 90% of
the sum of its taxable net investment income, its net tax-exempt
income, and the excess, if any, of net short-term capital gains
over net long-term capital losses for such year; and

(c) Diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets
is represented by cash and cash items, U.S. government securities,
securities of other regulated investment companies, and other
securities limited in respect of any one issuer to a value not
greater than 5% of the value of the fund's total assets and to not
more than 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of its assets is invested
in the securities (other than those of the U.S. Government or
other regulated investment companies) of any one issuer or of two
or more issuers which the fund controls and which are engaged in
the same, similar, or related trades or businesses.

If a fund qualifies as a regulated investment company that is
accorded special tax treatment, the fund will not be subject to
federal income tax on income paid to its shareholders in the form
of dividends (including capital gain dividends).

If a fund failed to qualify as a regulated investment company
accorded special tax treatment in any taxable year, the fund would
be subject to tax on its taxable income at corporate rates. 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.

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 invest no more than 55% of the value of
their 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 these requirements 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 above 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.

If a fund fails to distribute in a calendar year substantially all
of its ordinary income for such year and substantially all of its
capital gain net income for the one-year period ending October 31
(or later if the fund is permitted so to elect and so elects),
plus any retained amount from the prior year, the fund will be
subject to a 4% excise tax on the undistributed amounts. A fund
is exempt from this distribution requirement and excise tax if at
all times during the calendar year each shareholder in the fund
was "a segregated asset account of a life insurance company held
in connection with variable contracts."

SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. A fund's investment
in securities issued at a discount and certain other obligations
will (and investments in securities purchased at a discount may)
require the fund to accrue and distribute income not yet received.
In order to generate sufficient cash to make the requisite
distributions, 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 a fund are shown in Note 1 (Federal income
taxes) to the financial statements incorporated by reference into
this SAI.

FOREIGN SECURITIES. A fund's investment in foreign securities may
be subject to withholding taxes at the source on dividend or
interest payments. In that case, the fund's yield on these
securities would be decreased.

INVESTMENT BY A FUND IN "PASSIVE FOREIGN INVESTMENT COMPANIES"
COULD SUBJECT THE FUND TO A U.S. FEDERAL INCOME TAX OR OTHER
CHARGE ON THE PROCEEDS FROM THE SALE OF ITS INVESTMENT IN SUCH A
COMPANY; HOWEVER, THIS TAX CAN BE AVOIDED BY MAKING AN ELECTION TO
MARK SUCH INVESTMENTS TO MARKET ANNUALLY OR TO TREAT THE PASSIVE
FOREIGN INVESTMENT COMPANY AS A "QUALIFIED ELECTING FUND."

The qualified electing fund and mark-to-market elections may have
the effect of accelerating the recognition of income (without the
receipt of cash) and increase the amount required to be
distributed for the fund to avoid taxation. Making either of
these elections therefore may require a fund to liquidate other
investments (including times when it is not advantageous to do so)
to meet its distribution requirement, which may affect a fund's
total return.

A "passive foreign investment company" is any foreign corporation:
(i) 75 percent of 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.

This discussion of federal income tax treatment of the Trust and
its shareholders is based on the law as of the date of this SAI.

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 PUTNAM VT
AMERICAN GOVERNMENT INCOME FUND AND PUTNAM VT GROWTH OPPORTUNITIES
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) 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.

(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) WITH RESPECT TO 75% OF ITS TOTAL ASSETS, INVEST IN THE
SECURITIES OF ANY ISSUER IF, IMMEDIATELY AFTER SUCH INVESTMENT,
MORE THAN 5% OF THE TOTAL ASSETS OF THE FUND (TAKEN AT CURRENT
VALUE) WOULD BE INVESTED IN THE SECURITIES OF SUCH ISSUER;
PROVIDED THAT THIS LIMITATION DOES NOT APPLY TO OBLIGATIONS ISSUED
OR GUARANTEED AS TO INTEREST OR PRINCIPAL BY THE U.S. GOVERNMENT
OR ITS AGENCIES OR INSTRUMENTALITIES.

(7) WITH RESPECT TO 75% 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.

(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.

---------------------

With respect to Putnam VT American Government Income Fund, we
normally invest at least 65% of the fund's total assets in U.S.
government securities.

---------------------

IT IS CONTRARY TO EACH FUND'S PRESENT POLICY, WHICH MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL, TO:

(1) 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 FUND 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.

MANAGEMENT

TRUSTEES NAME (AGE)

*+GEORGE PUTNAM (72), Chairman and President. Chairman and
Director of Putnam Management and Putnam Mutual Funds. Director,
Freeport Copper and Gold, Inc. (a mining and natural resource
company), Houghton Mifflin Company (a major publishing company)
and Marsh & McLennan Companies, Inc.

JOHN A. HILL (57), Vice Chairman. Chairman and Managing Director,
First Reserve Corporation (a registered investment adviser
investing in companies in the world-wide energy industry on behalf
of institutional investors). Director of Snyder Oil Corporation,
TransMontaigne Oil Company and various private companies owned by
First Reserve Corporation, such as James River Coal and Anker Coal
Corporation.

+WILLIAM F. POUNDS (70), Vice Chairman. Professor Emeritus of
Management, Alfred P. Sloan School of Management, Massachusetts
Institute of Technology. Director of IDEXX Laboratories, Inc. (a
provider of diagnostic products and services for the animal health
and food and environmental industries), Management Sciences for
Health, Inc. (a non-profit organization), and Sun Company, Inc. (a
petroleum refining and marketing company).

JAMESON A. BAXTER (55), Trustee. President, Baxter Associates,
Inc. (a management consulting and private investments firm).
Director of MB Financial, Inc., ASHTA Chemicals, Inc., Banta
Corporation (printing and digital imaging) and Ryerson Tull, Inc.
(America's largest steel service corporation). Chairman Emeritus
of the Board of Trustees, Mount Holyoke College.

+HANS H. ESTIN (70), Trustee. Chartered Financial Analyst and
Vice Chairman, North American Management Corp. (a registered
investment adviser).

RONALD J. JACKSON (55), Trustee. Former Chairman, President and
Chief Executive Officer of Fisher-Price, Inc. (a major toy
manufacturer).

*PAUL L. JOSKOW (51), Trustee. Professor Emeritus of Economics
and Management and former Chairman of the Department of Economics,
Massachusetts Institute of Technology. Director, New England
Electric System (a public utility holding company), State Farm
Indemnity Company (an automobile insurance company) and Whitehead
Institute for Biomedical Research (a non-profit research
institution).

ELIZABETH T. KENNAN (61), Trustee. President Emeritus and
Professor, Mount Holyoke College. Director, Bell Atlantic (a
telecommunications company), the Kentucky Home Life Insurance
Companies, Bell Atlantic, Northeast Utilities and Talbots (a
distributor of women's apparel).

*LAWRENCE J. LASSER (56), Trustee and Vice President. President,
Chief Executive Officer and Director of Putnam Investments, Inc.
and Putnam Investment Management, Inc. Director of Marsh &
McLennan Companies, Inc. and the United Way of Massachusetts Bay.

JOHN H. MULLIN, III (57), Trustee. Chairman and CEO of Ridgeway
Farm, Director of ACX Technologies, Inc. (a company engaged in the
manufacture of industrial ceramics and packaging products), Alex.
Brown Realty, Inc. and The Liberty Corporation (a company engaged
in the life insurance and broadcasting industries).

+ROBERT E. PATTERSON (53), Trustee. President and Trustee of
Cabot Industrial Trust (a publicly traded real estate investment
trust). Director of Brandywine Trust Company.

*#GEORGE PUTNAM III (47), Trustee. President, New Generation
Research, Inc. (a publisher of financial advisory and other
research services relating to bankrupt and distressed companies)
and New Generation Advisers, Inc. (a registered investment
adviser). Director, Massachusetts Audubon Society and The Boston
Family Office, L.L.C. (a registered investment advisor).

*A.J.C. SMITH (64), Trustee. Chairman and Chief Executive
Officer, Marsh & McLennan Companies, Inc. Director, Trident
Partnership (a $667 million 10-year partnership with over 30
institutional investors.)

W. THOMAS STEPHENS (56), Trustee. President and Chief Executive
Officer of MacMillan Bloedel Ltd. (a major forest products
company.) Director, Qwest Communications (a fiber optics
manufacturer) and New Century Energies (a public utility company).

W. NICHOLAS THORNDIKE (65), Trustee. Director of various
corporations and charitable organizations, including Courier
Corporation (a book manufacturer), Data General Corporation (a
provider of customized computer solutions), Bradley Real Estate,
Inc., and Providence Journal Co.

*Trustees who are or may be deemed to be "interested persons" (as
defined in the Investment Company Act of 1940) of the fund, Putnam
Management or Putnam Mutual Funds.

+Members of the Executive Committee of the Trustees. The
Executive Committee meets between regular meetings of the Trustees
as may be required to review investment matters and other affairs
of the fund and may exercise all of the powers of the Trustees.

#George Putnam, III is the son of George Putnam.

OFFICERS NAME (AGE)

CHARLES E. PORTER (60), Executive Vice President. Managing
Director of Putnam Investments, Inc. and Putnam Management.

PATRICIA C. FLAHERTY (52), Vice President. Senior Vice President
of Putnam Investments, Inc. and Putnam Management.

GORDON H. SILVER (51), Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. and Putnam
Management.

BRETT C. BROWCHUCK (36), Vice President. Managing Director of
Putnam Management.

IAN C. FERGUSON (41), VICE PRESIDENT. Senior Managing Director of
Putnam Investments, Inc., Putnam Management and Putnam Mutual
Funds.

RICHARD MONAGHAN (44), Vice President, Managing Director of Putnam
Investments, Inc. and Putnam Management.

JOHN R. VERANI (59), Vice President. Senior Vice President of
Putnam Investments, Inc. and Putnam Management.

JOHN D. HUGHES (64), Senior Vice President and Treasurer.

JUDITH COHEN (54), Associate Clerk.

-----------------

Each of the following persons is also a Vice President of the
Trust and certain of the other Putnam funds, the total of which is
noted parenthetically. Officers of Putnam Management hold the
same offices in Putnam Management's parent company, Putnam
Investments, Inc.

ROBERT R. BECK (59) (4 FUNDS), Managing Director of Putnam
Management.

EDWARD P. BOUSA (41) (5 FUNDS), Senior Vice President of Putnam
Management.

DAVID G. CARLSON (38) (2 FUNDS), Senior Vice President of Putnam
Management.

DANA CLARK (44) (2 FUNDS), Vice President of Putnam Management.

C. BETH COTNER (47) (4 FUNDS), Managing Director of Putnam
Management. Prior to September 1995, Ms. Cotner was employed at
Kemper Financial Services.

KEVIN M. CRONIN (38) (6 FUNDS), Managing Director of Putnam
Management. Prior to February 1997, Mr. Cronin was employed at
MFS Investment Management.

STEVEN DEXTER (41) (2 FUNDS), Senior Vice President of Putnam
Management. Prior to June 1999, Mr. Dexter was employed at
Scudder Kemper Inc.

JOANNE M. DRISCOLL (29) (2 FUNDS), Vice President of Putnam
Management. Prior to April 1995, Ms. Driscoll was a Graduate
Teaching Assistant in the Finance Department at Northeastern
University.

RICHARD B. ENGLAND (41) (4 FUNDS), Senior Vice President of Putnam
Management.

ROLAND W. GILLIS (50) (6 FUNDS), Managing Director of Putnam
Management. Prior to March 1995, Mr. Gillis was employed at
Keystone Custodian Funds, Inc.

J. PETER GRANT (57) (3 FUNDS), Senior Vice President of Putnam
Management.

OMID KAMSHAD (37) (7 FUNDS), Managing Director of Putnam
Management. Prior to January 1996, Mr. Kamshad was employed at
Lomdard Odier International and prior to April 1995 was employed
at Baring Asset Management Company.

JEFFREY A. KAUFMAN (34) (8 FUNDS), Senior Vice President of Putnam
Management. Prior to August 1998, Mr. Kaufman was employed at MFS
Investment Management.

DAVID L. KING (43) (4 FUNDS), Managing Director of Putnam
Management.

STEVEN L. KIRSON (39) (2 FUNDS), Senior Vice President of Putnam
Management.

D. WILLIAM KOHLI (38) (7 FUNDS), Managing Director of Putnam
Management.

DEBORAH KUENSTNER (41) (3 FUNDS), Managing Director of Putnam
Management. Prior to March 1997, Ms. Kuenstner was employed at
Dupont Pension Fund Investment.

KENNETH W. LANG (33) (2 FUNDS), Vice President of Putnam
Management. Prior to April 1997, Mr. Lang was employed at
Montgomery Securities.

JENNIFER E. LEICHTER (39) (5 FUNDS), Managing Director of Putnam
Management.

JEFFREY R. LINDSEY (37) (6 FUNDS), Senior Vice President of Putnam
Management.

MICHAEL MARTINO (47) (4 FUNDS), Managing Director of Putnam
Management.

KRISHNA K. MEMANI (39) (9 FUNDS), Managing Director of Putnam
Management. Prior to September 1998, Mr. Memani was employed at
Morgan Stanley & Co.

DANIEL L. MILLER (42) (2 FUNDS), Managing Director of Putnam
Management.

JEANNE L. MOCKARD (36) (4 FUNDS), Senior Vice President of Putnam
Management.

KELLY A. MORGAN (37) (2 FUNDS), Senior Vice President of Putnam
Management. Prior to December 1996, Ms. Morgan was employed at
Alliance Capital Management L.P.

MICHAEL J. MUFSON (36) (2 FUNDS), Senior Vice President of Putnam
Management.

HUGH H. MULLIN (37) (3 FUNDS), Senior Vice President of Putnam
Management.

JEFFREY NETOLS (46) (2 FUNDS), Senior Vice President of Putnam
Management.

STEPHEN OLER (38) (4 FUNDS), Senior Vice President of Putnam
Management. Prior to June 1997, Mr. Oler was employed at
Templeton Investments and prior to March 1996 was employed at
Baring Asset Management Co.

MARGERY C. PARKER (49) (4 FUNDS), Senior Vice President of Putnam
Management. Prior to December 1997, Ms. Parker was employed at
Keystone Investments.

CARMEL PETERS (48) (4 FUNDS), Senior Vice President of Putnam
Management. Prior to May 1997, Ms. Peters was employed at
Wheelock Natwest Investment Management, Hong Kong, and prior to
February 1996 was employed at Rothschild Asset Management Asia
Pacific, Hong Kong.

MARK D. POLLARD (40) (3 FUNDS), Senior Vice President of Putnam
Management.

JAMES PRUSKO (33) (5 FUNDS), Senior Vice President of Putnam
Management.

DAVID J. SANTOS (42) (6 FUNDS), Senior Vice President of Putnam
Management.

ANTHONY C. SANTOSUS (41) (2 FUNDS), Senior Vice President of
Putnam Management.

JUSTIN M. SCOTT (42) (4 FUNDS), Managing Director of Putnam
Management.

EDWARD T. SHADEK, JR. (39) (2 FUNDS), Managing Director of Putnam
Management. Prior to March 1997, Mr. Shadek was employed at
Newbold's Asset Management Co.

SHELDON N. SIMON (42) (2 FUNDS), Senior Vice President of Putnam
Management.

MICHAEL P. STACK (41) (4 FUNDS), Senior Vice President of Putnam
Management. Prior to November 1997, Mr. Stack was employed at
Independence Investment Associates, Inc.

GEORGE W. STAIRS (50) (3 FUNDS), Senior Vice President of Putnam
Management.

LISA SVENSSON (37) (2 FUNDS), Senior Vice President of Putnam
Management.

CHARLES H. SWANBERG (51) (4 FUNDS), Senior Vice President of
Putnam Management.

ROBERT SWIFT (39) (5 FUNDS), Managing Director of Putnam
Management. Prior to August 1995, Mr. Swift was employed at IAI
International/Hill Samuel Investments Advisors.

ROSEMARY H. THOMSEN (39) (3 FUNDS), Senior Vice President of
Putnam Management.

DAVID L. WALDMAN (33) (9 FUNDS), Managing Director of Putnam
Management. Prior to June 1997, Mr. Waldman was employed at
Lazard Freres and prior to April 1995 was employed at Goldman
Sachs.

PAUL WARREN (39) (7 FUNDS), Senior Vice President of Putnam
Management. Prior to May 1997, Mr. Warren was employed at IDS
Fund Management.

MANUEL WEISS (51) (5 FUNDS), Senior Vice President of Putnam
Management.

ERIC M. WETLAUFER (37) (2 FUNDS), Managing Director of Putnam
Management. Prior to November 1997, Mr. Wetlaufer was employed at
Cadence Capital Management.

Except as stated below, the principal occupations of the officers
and Trustees for the last five years have been with the employers
as shown above, although in some cases they have held different
positions with such employers. Prior to July, 1998, Mr. Joskow was
Chairman of the Department of Economics, Massachusetts Institute
of Technology, and, prior to September, 1998, he was a consultant
to National Economic Research Associates. Prior to 1996, Mr.
Stephens was Chairman of the Board of Directors, President and
Chief Executive Officer of Johns Manville Corporation. Prior to
April, 1996, Mr. Ferguson was CEO at Hong Kong Shanghai Banking
Corporation. Prior to February, 1998, Mr. Patterson was Executive
Vice President and Director of Acquisitions of Cabot Partners
Limited Partnership.

The Trust pays each Trustee a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of other Putnam
funds. The Trustees periodically review their fees to assure that
such fees continue to be appropriate in light of their
responsibilities as well as in relation to fees paid to trustees
of other mutual fund complexes. The Trustees meet monthly over a
two-day period, except in August. The Board Policy Committee,
which consists solely of Trustees not affiliated with Putnam
Management and is responsible for recommending Trustee
compensation, estimates that Committee and Trustee meeting time
together with the appropriate preparation requires the equivalent
of at least three business days per Trustee meeting. The
following table shows the year each Trustee was first elected a
Trustee of the Putnam funds, the estimated fees expected to be
paid for the first full fiscal year, and the fees paid to each
Trustee by all of the Putnam funds for the year ended December 31,
1998:
<TABLE><CAPTION>
COMPENSATION TABLE
Pension or retirement benefits
Estimated Aggregate accrued as part of fund expenses
compensation (1) from: from:
<S> <C> <C> <C> <C> <C> <C>
Putnam VT Putnam VT Putnam VT Putnam VT Estimated annual Total
American Growth American Growth benefits from all compensation
Government Opportunities Government Opportunities Putnam funds from all Putnam
TRUSTEE/YEAR Income Fund+ Fund+ Income Fund++Fund++ upon retirement(2) funds(3)
Jameson A. Baxter/1994 $130 $280 $0 $0 $ 95,000 $207,000(4)
Hans H. Estin/1972 122 272 0 0 95,000 182,500
John A. Hill/1985 (5) 130 301 0 0 115,000 200,500(4)
Ronald J. Jackson/1996 131 285 0 0 95,000 200,500(4)
Paul L. Joskow/1997 122 272 0 0 95,000 180,500(4)
Elizabeth T. Kennan/1992 128 278 0 0 95,000 200,500
Lawrence J. Lasser/1992 121 271 0 0 95,000 178,500
John H. Mullin, III/1997 127 285 0 0 95,000 180,500(4)
Robert E. Patterson/1984 121 268 0 0 95,000 181,500
William F. Pounds/1971 (5) 122 280 0 0 115,000 215,000
George Putnam/1957 121 271 0 0 95,000 179,500
George Putnam, III/1984 121 271 0 0 95,000 181,500
A.J.C. Smith/1986 118 265 0 0 95,000 176,500
W. Thomas Stephens 121 269 0 0 95,000 181,500(4)
W. Nicholas Thorndike/1992 122 272 0 0 95,000 182,500
</TABLE>

+ Reflects estimated amounts to be paid for the current fiscal year.
++ For certain newly created funds, actual pension or retirement
benefit information is not yet available.
(1) Includes an annual retainer and an attendance fee for each
meeting attended.
(2) Assumes that each Trustee retires at the normal retirement
date. Estimated benefits for each Trustee are based on Trustee
fee rates in effect during calendar 1998.
(3) As of December 31, 1998, there were 113 funds in the Putnam
family.
(4) Includes compensation deferred pursuant to a Trustee
Compensation Deferral Plan.
(5) Includes additional compensation for service as Vice Chairman
of the Putnam funds.

Under a Retirement Plan for Trustees of the Putnam funds (the
"Plan"), each Trustee who retires with at least five years of
service as a Trustee of the funds is entitled to receive an annual
retirement benefit equal to one-half of the average annual
compensation paid to such Trustee for the last three years of
service prior to retirement. This retirement benefit is payable
during a Trustee's lifetime, beginning the year following
retirement, for a number of years equal to such Trustee's years of
service. A death benefit is also available under the Plan which
assures that the Trustee and his or her beneficiaries will receive
benefit payments for the lesser of an aggregate period of (i) ten
years or (ii) such Trustee's total years of service.

The Plan Administrator (a committee comprised of Trustees that are
not "interested persons" of the fund, as defined in the Investment
Company Act of 1940) may terminate or amend the Plan at any time,
but no termination or amendment will result in a reduction in the
amount of benefits (i) currently being paid to a Trustee at the
time of such termination or amendment, or (ii) to which a current
Trustee would have been entitled had he or she retired immediately
prior to such termination or amendment.

For additional information concerning the Trustees, see
"Management" in this SAI.

The Agreement and Declaration of Trust of the Trust provides that
the Trust 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
Trust, except if it is determined in the manner specified in such
Agreement and Declaration of Trust that such Trustees and officers
have not acted in good faith in the reasonable belief that their
actions were in the best interests of the Trust or that such
indemnification would relieve any officer or Trustee of any
liability to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
his or her duties. The Trust, at its expense, provides liability
insurance for the benefit of its Trustees and officers.

Trustees and officers of the Trust who are also officers of Putnam
Management or its affiliates or stockholders of Marsh & McLennan
Companies, Inc. will benefit from the advisory fees, transfer
agency fees and custodian fees and fees paid or allowed by the
Trust. As of the date of this SAI, the officers and Trustees as a
group owned directly no shares of the Trust or any fund.

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 COULD BE PURCHASED BY THE
INVESTOR INDIVIDUALLY; THE RESULTING DIVERSIFICATION HELPS REDUCE
INVESTMENT RISK. PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS
SINCE 1937. TODAY, THE FIRM SERVES AS THE INVESTMENT MANAGER FOR
THE FUNDS IN THE PUTNAM FAMILY, WITH NEARLY $222 BILLION IN ASSETS
IN NEARLY 11 MILLION SHAREHOLDER ACCOUNTS AT DECEMBER 31, 1998.
AN AFFILIATE, THE PUTNAM ADVISORY COMPANY, INC., MANAGES DOMESTIC
AND FOREIGN INSTITUTIONAL ACCOUNTS AND MUTUAL FUNDS, INCLUDING THE
ACCOUNTS OF MANY FORTUNE 500 COMPANIES. ANOTHER AFFILIATE, PUTNAM
FIDUCIARY TRUST COMPANY, PROVIDES INVESTMENT ADVICE TO
INSTITUTIONAL CLIENTS UNDER ITS BANKING AND FIDUCIARY POWERS. AT
DECEMBER 31, 1998, PUTNAM MANAGEMENT AND ITS AFFILIATES MANAGED
OVER $294 BILLION IN ASSETS, INCLUDING OVER $20 BILLION IN TAX-
EXEMPT SECURITIES AND OVER $71 BILLION IN RETIREMENT PLAN ASSETS.

Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., a holding
company which in turn is, except for a minority stake owned by
employees, owned by Marsh & McLennan Companies, Inc., a publicly-
owned holding company whose principal businesses are international
insurance and reinsurance brokerage, employee benefit consulting
and investment management.

Trustees and officers of a 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 Trust and Putnam
Management dated October 2, 1987, as supplemented March 2, 1990,
and as further supplemented February 27, 1992, July 9, 1993, April
5, 1994, June 2, 1994, April 7, 1995, July 13, 1995, July 11, 1996
and as further supplemented, December 20, 1996, February 6, 1998,
and July 10, 1998, March 4, 1999, July 1, 1999 and November 8,
1999, subject to such policies as the Trustees may determine,
Putnam Management, at its expense, furnishes continuously an
investment program for the funds and makes investment decisions on
their behalf. Subject to the control of the Trustees, Putnam
Management also manages, supervises and conducts the other affairs
and business of the Trust, furnishes office space and equipment,
provides bookkeeping and clerical services (including
determination of the net asset value, but excluding shareholder
accounting services) and places all orders for the purchase and
sale of the Trust's portfolio securities. Putnam Management may
place the Trust's portfolio transactions with broker-dealers which
furnish Putnam Management, without cost to it, certain research,
statistical and quotation services of value to Putnam Management
and its affiliates in advising the Trust and other clients. In so
doing, Putnam Management may cause a fund to pay greater brokerage
commissions than it might otherwise pay.

The compensation payable to Putnam Management under the Management
Contract for its investment management services to the funds is
paid quarterly at the following annual rates of each fund's
average net assets, as determined at the close of each business
day during the quarter:
Fund Rate

Putnam VT American Government Income Fund
0.65% of the first $500 million of average net assets, 0.55% of
the next $500 million, 0.50% of the next $500 million, 0.45% of
the next $5 billion, 0.425% of the next $5 billion, 0.405% of the
next $5 billion, 0.39% of the next $5 billion, 0.38% of the next
$5 billion, 0.37% of the next $5 billion, 0.36% of the next $5
billion, 0.35% of the next $5 billion and 0.34% of any excess thereafter.

Putnam VT Growth Opportunities Fund
0.70% of the first $500 million of average net assets, 0.60% of
the next $500 million, 0.55% of the next $500 million, 0.50% of
the next $5 billion, 0.475% of the next $5 billion, 0.455% of the
next $5 billion, 0.44% of the next $5 billion, 0.43% of the next
$5 billion and 0.42% of any excess thereafter.

The Trust pays affiliates of Putnam Management additional amounts
for investor servicing and custody services.

In addition to the fee paid to Putnam Management, the Trust
reimburses Putnam Management for the compensation and related
expenses of certain officers of the funds and certain persons who
assist them in carrying out the responsibilities of their offices.
The Trust may also pay or reimburse Putnam Management for all or a
part of the compensation and related expenses of one or more other
officers of the Trust 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.
Currently the Trust is reimbursing Putnam Management for the
compensation and related expenses of the Senior Vice President and
the Clerk of the Trust. The aggregate amount of all such payments
and reimbursements is determined annually by the Trustees. Putnam
Management pays all other salaries of officers of the Trust. The
Trust pays all expenses not assumed by Putnam Management
including, without limitation, auditing, legal, custodial,
investor servicing and shareholder reporting expenses. The Trust
pays any cost of typesetting for its prospectuses and any cost of
printing and mailing prospectuses sent to its shareholders.
Putnam Mutual Funds pays the cost of printing and distributing all
other prospectuses.

The Management Contract provides that Putnam Management shall not
be subject to any liability to the Trust or to any shareholder of
the Trust for any act or omission in the course of or connected
with rendering services to the Trust 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 as to the Trust or as to any fund
without penalty by vote of the Trustees or the shareholders of one
or more Funds affected, or by Putnam Management, on 30 days'
written notice. It may be amended with respect to a fund only by
a vote of the shareholders of that 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 as to any fund only so long as such continuance
is approved at least annually by vote of either the Trustees or
the shareholders of that fund, and, in either case, by a majority
of the Trustees who are not "interested persons" of Putnam
Management or any fund. In each of the foregoing cases, the vote
of the shareholders of any fund is the affirmative vote of a
"majority of the outstanding voting securities" of such fund as
defined in the Investment Company Act of 1940. 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 A FUND'S EXPENSES EXCEED SUCH
LOWER EXPENSE LIMITATION AS PUTNAM MANAGEMENT MAY, BY NOTICE TO
THE FUND, DECLARE TO BE EFFECTIVE. THE EXPENSES SUBJECT TO THIS
LIMITATION ARE EXCLUSIVE OF BROKERAGE COMMISSIONS, INTEREST,
TAXES, EXTRAORDINARY EXPENSES AND, IF THE FUND HAS A DISTRIBUTION
PLAN, PAYMENTS REQUIRED UNDER SUCH PLAN. FOR THE PURPOSE OF
DETERMINING ANY SUCH LIMITATION ON PUTNAM MANAGEMENT'S
COMPENSATION, EXPENSES OF THE FUND SHALL NOT REFLECT THE
APPLICATION OF COMMISSIONS OR CASH MANAGEMENT CREDITS THAT MAY
REDUCE DESIGNATED FUND EXPENSES.

MANAGEMENT FEES

PORTFOLIO TRANSACTIONS

INVESTMENT DECISIONS. Investment decisions for each of the funds
and for the other investment advisory clients of Putnam Management
and its affiliates are made with a view to achieving their
respective investment objectives. Investment decisions are the
product of many factors in addition to basic suitability for the
particular client involved. Thus, a particular security may be
bought or sold for certain clients even though it could have been
bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one
or more other clients are selling the security. In some
instances, one client may sell a particular security to another
client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as possible,
averaged as to price and allocated between such clients in a
manner which in Putnam Management's opinion is equitable to each
and in accordance with the amount being purchased or sold by each.
There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on
other clients.

BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock
exchanges, commodities markets and futures markets and other
agency transactions involve the payment by the Trust of negotiated
brokerage commissions. Such commissions vary among different
brokers. Also, a particular broker may charge different
commissions according to such factors as the difficulty and size
of the transaction. Transactions in foreign investments often
involve the payment of fixed brokerage commissions, which may be
higher than those in the United States. There is generally no
stated commission in the case of securities traded in the over-the-
counter markets, but the price paid by the Trust usually includes
an undisclosed dealer commission or mark-up. In underwritten
offerings, the price paid includes a disclosed, fixed commission
or discount retained by the underwriter or dealer.

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 these 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 funds'
portfolio transactions and from third parties with which these
broker-dealers have arrangements. These services include such
matters as general economic and market reviews, industry and
company reviews, evaluations of investments, recommendations as to
the purchase and sale of investments, newspapers, magazines,
pricing services, quotation services, news services and personal
computers utilized by Putnam Management's managers and analysts.
Where the services referred to above are not used exclusively by
Putnam Management for research purposes, Putnam Management, based
upon its own allocations of expected use, bears that portion of
the cost of these services which directly relates to their non-
research use. Some of these services are of value to Putnam
Management and its affiliates in advising various of their clients
(including the Trust), although not all of these services are
necessarily useful and of value in managing the Trust. The
management fee paid by the Trust 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 each fund and buys and sells investments
for each fund through a substantial number of brokers and dealers.
In so doing, Putnam Management uses its best efforts to obtain for
each 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 each 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 a 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 agency 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 a fund to pay any such greater
commissions is also subject to such policies as the Trustees may
adopt from time to time. Putnam Management does not currently
intend to cause the Trust 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 efforts 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 a 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 each fund soliciting dealer fees
on the tender of the fund's portfolio securities in tender or
exchange offers. Any such fees which may be recaptured are likely
to be minor in amount.

Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable
price and execution available and such other policies as the
Trustees may determine, Putnam Management may consider sales of
shares of the Trust (and, if permitted by law, of the other Putnam
funds) as a factor in the selection of broker-dealers to execute
portfolio transactions for the Funds.

PRINCIPAL UNDERWRITER

Putnam Mutual Funds is the principal underwriter of shares of the
Trust, which are continuously offered, and shares of the other
continuously offered Putnam funds. Putnam Mutual Funds is not
obligated to sell any specific amount of shares of the Trust and
will purchase shares for resale only against orders for shares.

INVESTOR SERVICING AGENT AND CUSTODIAN

Putnam Investor Services, a division of Putnam Fiduciary Trust
Company ("PFTC"), is the Trust's investor servicing agent
(transfer, plan and dividend disbursing agent), for which it
receives fees which are paid monthly by the Trust as an expense of
all its shareholders. The fee paid to Putnam Investor Services is
determined on the basis of the number of shareholder accounts, the
number of transactions and the assets of the fund. Putnam
Investor Services has won the DALBAR Service Award eight times in
the past nine years. In 1997 and 1998, Putnam was the only
company to win all three DALBAR Awards: for service to investors,
to financial advisors, and to variable annuity contract holders.
DALBAR, Inc. an independent research firm, presents the awards to
financial services firms that provide consistently excellent
service.

Putnam Fiduciary Trust Company ("PFTC") is the custodian of the
Trust's assets. In carrying out its duties under its custodian
contract, PFTC may employ one or more subcustodians whose
responsibilities will include safeguarding and controlling the
Trust's cash and securities, handling the receipt and delivery of
securities and collecting interest and dividends on the Trust's
investments. PFTC and any subcustodians employed by it have a
lien on the securities of each fund (to the extent permitted by
the Trust'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 Trust for the
benefit of that fund. The Trust expects that such advances will
exist only in unusual circumstances. Neither PFTC nor any
subcustodian determines the investment policies of any fund or
decides which securities a fund will buy or sell. PFTC pays the
fees and other charges of any subcustodians employed by it. The
Trust may from time to time pay custodial expenses in full or in
part through the placement by Putnam Management of the Trust's
portfolio transactions with the subcustodians or with a third-
party broker having an agreement with the subcustodians. The Trust
pays PFTC an annual fee based on each 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 fees paid by the Trust for investor servicing and custody may
be reduced by credits allowed by PFTC.

INVESTMENT PERFORMANCE OF THE TRUST

STANDARD PERFORMANCE MEASURES

YIELD AND TOTAL RETURN DATA FOR THE FUNDS MAY FROM TIME TO TIME BE
PRESENTED IN THE PROSPECTUS, THIS SAI AND ADVERTISEMENTS. IN THE
CASE OF FUNDS WITH MORE THAN ONE CLASS OF SHARES, ALL PERFORMANCE
INFORMATION IS CALCULATED SEPARATELY FOR EACH CLASS. THE DATA IS
CALCULATED AS FOLLOWS.

Total return for the one-, five- and ten year periods (or for such
shorter periods as the fund has been in operation or shares of the
relevant class have been outstanding) is determined by calculating
the actual dollar amount of investment return on a $1,000
investment in a fund at the beginning of the period, at net asset
value for class IA and IB shares and then calculating the annual
compounded rate of return which would produce that amount. Total
return for a period of one year is equal to the actual return of a
fund during that period. Total return calculations assume
deduction of the fund's maximum sales charge or CDSC, if
applicable, and reinvestment of all fund distributions at net
asset value on their respective reinvestment dates.

A fund's yield is presented for a specified thirty-day period (the
"base period"). Yield is based on the amount determined by (i)
calculating the aggregate amount of dividends and interest earned
by the fund during the base period less expenses accrued for that
period, and (ii) dividing that amount by the product of (A) the
average daily number of shares of the fund outstanding during the
base period and entitled to receive dividends and (B) the per
share net asset value for class IA and IB shares of the fund on
the last day of the base period. The result is annualized on a
compounding basis to determine the fund's yield. For this
calculation, interest earned on debt obligations held by the fund
is generally calculated using the yield to maturity (or first
expected call date) of such obligations based on their market
values (or, in the case of receivables-backed securities such as
GNMAs, based on cost). Dividends on equity securities are accrued
daily at their stated dividend rates. The amount of expenses used
in determining the fund's yield includes, in addition to expenses
actually accrued by the fund, an estimate of the amount of
expenses that the fund would have incurred if brokerage
commissions had not been used to reduce such expenses.

DETERMINATION OF NET ASSET VALUE

THE TRUST VALUES THE SHARES OF EACH FUND DAILY ON 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 TRUST DETERMINES NET ASSET VALUE
AS OF THE CLOSE OF REGULAR TRADING ON THE EXCHANGE, CURRENTLY 4:00
P.M. HOWEVER, EQUITY OPTIONS HELD BY A 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 A FUND ARE PRICED AS OF THEIR CLOSE OF TRADING AT 4:15
P.M.

Each of the funds determines net asset value as follows:
Securities for which market quotations are readily available are
valued at prices which, in the opinion of the Trustees or Putnam
Management, most nearly represent the market values of such
securities. Currently, such prices are determined using the last
reported sale price or, if no sales are reported (as in the case
of some securities traded over-the-counter) the last reported bid
price, except that certain U.S. government securities are valued
at the mean between the last reported bid and asked prices. Short-
term investments having remaining maturities of 60 days or less
are stated at amortized cost, which approximates market value.
All other securities and assets are valued at their fair value
following procedures approved by the Trustees. 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 approved by the
Trustees, 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 a fund are
restricted as to resale, Putnam Management determines their fair
value following procedures approved by the Trustees. The fair
value of such securities is generally determined as the amount
which the fund could reasonably expect to realize from an orderly
disposition of such securities over a reasonable period of time.
The valuation procedures applied in any specific instance are
likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other
fundamental analytical data relating to the investment and to the
nature of the restrictions on disposition of the securities
(including any registration expenses that might be borne by the
fund in connection with such disposition). In addition, specific
factors are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of the
same class, the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any
available analysts' reports regarding the issuer.

Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various times
prior to the close of the Exchange. The values of these
securities used in determining the net asset value of the Trust's
shares are computed as of such times. Also, because of the amount
of time required to collect and process trading information as to
large numbers of securities issues, the values of certain
securities (such as convertible bonds, U.S. government securities,
and tax-exempt securities) are determined based on market
quotations collected earlier in the day at the latest practicable
time prior to the close of the Exchange. Occasionally, events
affecting the value of such securities may occur between such
times and the close of the Exchange which will not be reflected in
the computation of the funds' net asset values. If events
materially affecting the values of such securities occur during
such period, then these securities will be valued at their fair
value following procedures approved by the Trustees. In addition,
securities held by some of the funds may be traded in foreign
markets that are open for business on days that a fund is not, and
the trading of such securities on those days may have an impact on
the value of a shareholder's investment at a time when the
shareholder cannot buy and sell shares of the fund.

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 class IB 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. The class IB plan may terminate 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 a fund, as the case may be.

Putnam Mutual Funds pays service fees to insurance companies and
their affiliated dealers at the rates set forth in the Prospectus.
Service fees are paid quarterly to the insurance company or dealer
of record for that quarter.

Financial institutions receiving payments from Putnam Mutual Funds
as described above may be required to comply with various state
and federal regulatory requirements, including among others those
regulating the activities of insurance companies and securities
brokers or dealers.

Except as otherwise agreed between Putnam Mutual Funds and a
dealer, for purposes of determining the amounts payable to
insurance companies or their affiliates, "average net asset value"
means the product of (i) the average daily share balance in such
account(s) and (ii) the average daily net asset value of the
relevant class of shares over the quarter.

SUSPENSION OF REDEMPTIONS

THE TRUST MAY NOT SUSPEND SHAREHOLDERS' RIGHT OF REDEMPTION OR
POSTPONE PAYMENT FOR MORE THAN SEVEN DAYS UNLESS THE NEW YORK
STOCK EXCHANGE IS CLOSED FOR OTHER THAN CUSTOMARY WEEKENDS OR
HOLIDAYS, OR EXCEPT, 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 TRUST 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 Trust. However, the Agreement and Declaration of Trust
disclaims shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the Trust 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 that fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which a fund would be unable to meet
its obligations. The likelihood of such circumstances is remote.

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

PricewaterhouseCoopers LLP are the Trust's independent
accountants, providing audit services, tax return review and other
tax consulting services and assistance and consultation in
connection with the review of various Securities and Exchange
Commission filings.

<PAGE>

II-101
Oct/28/99

TABLE OF CONTENTS

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1

TAXES.. II-25

MANAGEMENT II-28

DETERMINATION OF NET ASSET VALUE II-36

HOW TO BUY SHARES II-37

DISTRIBUTION PLANS II-48

INVESTOR SERVICES II-52

SIGNATURE GUARANTEES II-56

SUSPENSION OF REDEMPTIONS II-56

SHAREHOLDER LIABILITY II-56

STANDARD PERFORMANCE MEASURES II-57

COMPARISON OF PORTFOLIO PERFORMANCE II-58

SECURITIES RATINGS II-61

DEFINITIONS II-66

THE PUTNAM FUNDS
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 fund may
employ other investment practices and may be subject
to other risks, which are described below. Because
the following is a combined description of
investment strategies of all of the Putnam funds,
certain matters described herein may not apply to
your fund. Unless a strategy or policy described
below is specifically prohibited by the investment
restrictions explained in a fund's prospectus or
part I of this SAI, or by applicable law, the fund
may engage in each of the practices described below.
Shareholders who purchase shares at net asset value
through employer-sponsored defined contribution
plans should also consult their employer for
information about the extent to which the matters
described below apply to them.

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS

FOREIGN INVESTMENTS

The fund may invest in securities of foreign
issuers. These foreign investments involve certain
special risks described below.

Foreign securities are normally denominated and
traded in foreign currencies. As a result, the value
of the fund's foreign investments and the value of
its shares may be affected favorably
or unfavorably by changes in currency exchange rates
relative to the U.S. dollar. There may be less
information publicly available about a foreign issuer
than about a U.S. issuer, and foreign issuers are not
generally subject to accounting, auditing and
financial reporting standards and practices
comparable to those in the United States. The
securities of some foreign issuers are less liquid
and at times more volatile than securities of
comparable U.S. issuers. Foreign brokerage
commissions and other fees are also generally higher
than in the United States. Foreign settlement
procedures and trade regulations may involve certain
risks (such as delay in payment or delivery of
securities or in the recovery of the fund's assets
held abroad) and expenses not present in the
settlement of investments in U.S. markets.

In addition, the fund's investments in foreign
securities may be subject to the risk of
nationalization or expropriation of assets,
imposition of currency exchange controls, foreign
withholding taxes or restrictions on the repatriation
of foreign currency, confiscatory taxation, political
or financial instability and diplomatic developments
which could affect the value of the fund's
investments in certain foreign countries. Dividends
or interest on, or proceeds from the sale of, foreign
securities may be subject to foreign withholding
taxes, and special U.S. tax considerations may apply.

Legal remedies available to investors in certain
foreign countries may be more limited than those
available with respect to investments in the United
States or in other foreign countries. The laws of
some foreign countries may limit the fund's ability
to invest in securities of certain issuers organized
under the laws of those foreign countries.

The risks described above, including the risks of
nationalization or expropriation of assets, are
typically increased in connection with investments in
"emerging markets." For example, political and
economic structures in these countries may be in
their infancy and developing rapidly, and such
countries may lack the social, political and economic
stability characteristic of more developed countries.
Certain of these countries have in the past failed to
recognize private property rights and have at times
nationalized and expropriated the assets of private
companies. High rates of inflation or currency
devaluations may adversely affect the economies and
securities markets of such countries. Investments in
emerging markets may be considered speculative.

The currencies of certain emerging market countries
have experienced a steady devaluation relative to the
U.S. dollar, and continued devaluations may adversely
affect the value of a fund's assets denominated in
such currencies. Many emerging market companies have
experienced substantial, and in some periods
extremely high, rates of inflation or deflation for
many years, and continued inflation may adversely
affect the economies and securities markets of such
countries.

In addition, unanticipated political or social
developments may affect the value of the fund's
investments in emerging markets and the availability
to the fund of additional investments in these
markets. The small size, limited trading volume and
relative inexperience of the securities markets in
these countries may make the fund's investments in
securities traded in emerging markets illiquid and
more volatile than investments in securities traded
in more developed countries, and the fund may be
required to establish special custodial or other
arrangements before making investments in securities
traded in emerging markets. There may be little
financial or accounting information
available with respect to issuers of emerging market
securities, and it may be difficult as a result to
assess the value of prospects of an investment in
such securities.

Certain of the foregoing risks may also apply to some
extent to securities of U.S. issuers that are
denominated in foreign currencies or that are traded
in foreign markets, or securities of U.S. issuers
having significant foreign operations.

FOREIGN CURRENCY TRANSACTIONS

The fund may engage without limit in currency
exchange transactions, including purchasing and
selling foreign currency, foreign currency options,
foreign currency forward contracts and foreign
currency futures contracts and related options, to
manage its exposure to foreign currencies. In
addition, the fund may write covered call and put
options on foreign currencies for the purpose of
increasing its current return.

Generally, the fund may engage in both "transaction
hedging" and "position hedging." The fund may also
engage in foreign currency transactions for non-
hedging purposes, subject to applicable law. When it
engages in transaction hedging, the fund enters into
foreign currency transactions with respect to
specific receivables or payables, generally arising
in connection with the purchase or sale of portfolio
securities. The fund will engage in transaction
hedging when it desires to "lock in" the U.S. dollar
price of a security it has agreed to purchase or
sell, or the U.S. dollar equivalent of a dividend or
interest payment in a foreign currency. By
transaction hedging the fund will attempt to protect
itself against a possible loss resulting from an
adverse change in the relationship between the U.S.
dollar and the applicable foreign currency during the
period between the date on which the security is
purchased or sold, or on which the dividend or
interest payment is earned, and the date on which
such payments are made or received.

The fund may purchase or sell a foreign currency on a
spot (or cash) basis at the prevailing spot rate in
connection with the settlement of transactions in
portfolio securities denominated in that foreign
currency. If conditions warrant, for transaction
hedging purposes the fund may also enter into
contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and purchase and
sell foreign currency futures contracts. A foreign
currency forward contract is a negotiated agreement
to exchange currency at a future time at a rate or
rates that may be higher or lower than the spot rate.
Foreign currency futures contracts are standardized
exchange-traded contracts and have margin
requirements. In addition, for transaction hedging
purposes the fund may also purchase or sell exchange-
listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign
currencies.
The fund may also enter into contracts to purchase
or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign
currency futures contracts.

For transaction hedging purposes the fund may also
purchase exchange-listed and over-the-counter call
and put options on foreign currency futures
contracts and on foreign currencies. A put option
on a futures contract gives the fund the right to
assume a short position in the futures contract
until the expiration of the option. A put option on
a currency gives the fund the right to sell the
currency at an exercise price until the expiration
of the option. A call option on a futures contract
gives the fund the right to assume a long position
in the futures contract until the expiration of the
option. A call
option on a currency gives the fund the right to
purchase the currency at the exercise price until the
expiration of the option.

The fund may engage in position hedging to protect
against a decline in the value relative to the U.S.
dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase
in the value of the currency in which the securities
the fund intends to buy are denominated, when the
fund holds cash or short-term investments). For
position hedging purposes, the fund may purchase or
sell, on exchanges or in overthe-counter markets,
foreign currency futures contracts, foreign currency
forward contracts and options on foreign currency
futures contracts and on foreign currencies. In
connection with position hedging, the fund may also
purchase or sell foreign currency on a spot basis.

It is impossible to forecast with precision the
market value of portfolio securities at the
expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for the
fund to purchase additional foreign currency on the
spot market (and bear the expense of such purchase)
if the market value of the security or securities
being hedged is less than the amount of foreign
currency the fund is obligated to deliver and a
decision is made to sell the security or securities
and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the
sale of the portfolio security or securities if the
market value of such security or securities exceeds
the amount of foreign currency the fund is obligated
to deliver.

Transaction and position hedging do not eliminate
fluctuations in the underlying prices of the
securities which the fund owns or intends to purchase
or sell. They simply establish a rate of exchange
which one can achieve at some future point in time.
Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the
value of the hedged currency, they tend to limit any
potential gain which might result from the increase
in value of such currency. See "Risk factors in
options transactions."

The fund may seek to increase its current return or
to offset some of the costs of hedging against
fluctuations in current exchange rates by writing
covered call options and covered put options on
foreign currencies. The fund receives a premium from
writing a call or put option, which increases the
fund's current return if the option expires
unexercised or is closed out at a net profit. The
fund may terminate an option that it has written
prior to its expiration by entering into a closing
purchase transaction in which it purchases an option
having the same terms as the option written.

The fund's currency hedging transactions may call for
the delivery of one foreign currency in exchange for
another foreign currency and may at times not involve
currencies in which its portfolio securities are then
denominated. Putnam Management will engage in such
"cross hedging" activities when it believes that such
transactions provide significant hedging
opportunities for the fund. Cross hedging
transactions by the fund involve the risk of
imperfect correlation between changes in the values
of the currencies to which such transactions relate
and changes in the value of the currency or other
asset or liability which is the subject of the hedge.

The fund may also engage in non-hedging currency
transactions. For example, Putnam Management may
believe that exposure to a
currency is in the fund's best interest but that
securities denominated in that currency are
unattractive. In that case the fund may purchase a
currency forward contract or option in order to
increase its exposure to the currency. In accordance
with SEC regulations, the fund will segregate liquid
assets in its portfolio to cover forward contracts
used for non-hedging purposes.

The value of any currency, including U.S. dollars and
foreign currencies, may be affected by complex
political and economic factors applicable to the
issuing country. In addition, the exchange rates of
foreign currencies (and therefore the values of
foreign currency options, forward contracts and
futures contracts) may be affected significantly,
fixed, or supported directly or indirectly by U.S.
and foreign government actions. Government
intervention may increase risks involved in
purchasing or selling foreign currency options,
forward contracts and futures contracts, since
exchange rates may not be free to fluctuate in
response to other market forces.

The value of a foreign currency option, forward
contract or futures contract reflects the value of an
exchange rate, which in turn reflects relative values
of two currencies, the U.S. dollar and the foreign
currency in question. Because foreign currency
transactions occurring in the interbank market
involve substantially larger amounts than those that
may be involved in the exercise of foreign currency
options, forward contracts and futures contracts,
investors may be disadvantaged by having to deal in
an odd-lot market for the underlying foreign
currencies in connection with options at prices that
are less favorable than for round lots. Foreign
governmental restrictions or taxes could result in
adverse changes in the cost of acquiring or disposing
of foreign currencies.

There is no systematic reporting of last sale
information for foreign currencies and there is no
regulatory requirement that quotations available
through dealers or other market sources be firm or
revised on a timely basis. Available quotation
information is generally representative of very large
round-lot transactions in the interbank market and
thus may not reflect exchange rates for smaller odd-
lot transactions (less than $1 million) where rates
may be less favorable. The interbank market in
foreign currencies is a global, around-the-clock
market. To the extent that options markets are
closed while the markets for the underlying
currencies remain open, significant price and rate
movements may take place in the underlying markets
that cannot be reflected in the options markets.

The decision as to whether and to what extent the
fund will engage in foreign currency exchange
transactions will depend on a number of factors,
including prevailing market conditions, the
composition of the fund's portfolio and the
availability of suitable transactions. Accordingly,
there can be no assurance that the fund will engage
in foreign currency exchange transactions at any
given time or from time to time.

CURRENCY FORWARD AND FUTURES CONTRACTS. A forward
foreign currency contract involves an obligation to
purchase or sell a specific currency at a future
date, which may be any fixed number of days from the
date of the contract as agreed by the parties, at a
price set at the time of the contract. In the case
of a cancelable forward contract, the holder has the
unilateral right to cancel the contract at maturity
by paying a specified fee.
The contracts are traded in the interbank market
conducted directly between currency traders (usually
large commercial banks) and their customers. A
forward contract generally has no
deposit requirement, and no commissions are charged at
any stage for trades. A foreign currency futures
contract is a standardized contract for the future
delivery of a specified amount of a foreign currency
at a price set at the time of the contract. Foreign
currency futures contracts traded in the United States
are designed by and traded on exchanges regulated by
the CFTC, such as the New York Mercantile Exchange.

Forward foreign currency exchange contracts differ
from foreign currency futures contracts in certain
respects. For example, the maturity date of a forward
contract may be any fixed number of days from the date
of the contract agreed upon by the parties, rather
than a predetermined date in a given month. Forward
contracts may be in any amount agreed upon by the
parties rather than predetermined amounts. Also,
forward foreign exchange contracts are traded directly
between currency traders so that no intermediary is
required. A forward contract generally requires no
margin or other deposit.

At the maturity of a forward or futures contract, the
fund either may accept or make delivery of the
currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving
the purchase or sale of an offsetting contract.
Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a
party to the original forward contract. Closing
transactions with respect to futures contracts are
effected on a commodities exchange; a clearing
corporation associated with the exchange assumes
responsibility for closing out such contracts.

Positions in the foreign currency futures contracts
may be closed out only on an exchange or board of
trade which provides a secondary market in such
contracts. Although the fund intends to purchase or
sell foreign currency futures contracts only on
exchanges or boards of trade where there appears to be
an active secondary market, there is no assurance that
a secondary market on an exchange or board of trade
will exist for any particular contract or at any
particular time. In such event, it may not be
possible to close a futures position and, in the event
of adverse price movements, the fund would continue to
be required to make daily cash payments of variation
margin.

FOREIGN CURRENCY OPTIONS. In general, options on
foreign currencies operate similarly to options on
securities and are subject to many of the risks
described above. Foreign currency options are traded
primarily in the over-the-counter market, although
options on foreign currencies are also listed on
several exchanges. Options are traded not only on the
currencies of individual nations, but also on the
euro, the joint currency of most countries in the
European Union.

The fund will only purchase or write foreign currency
options when Putnam Management believes that a liquid
secondary market exists for such options. There can
be no assurance that a liquid secondary market will
exist for a particular option at any specific time.
Options on foreign currencies are affected by all of
those factors which influence foreign exchange rates
and investments generally.

SETTLEMENT PROCEDURES. Settlement procedures relating
to the fund's investments in foreign securities and to
the fund's foreign currency exchange transactions may
be more complex than settlements with respect to
investments in debt or equity securities of U.S.
issuers, and may involve certain risks not present in
the fund's domestic investments. For example,
settlement of transactions involving foreign
securities or
foreign currencies may occur within a foreign country,
and the fund may be required to accept or make
delivery of the underlying securities or currency in
conformity with any applicable U.S. or foreign
restrictions or regulations, and may be required to
pay any fees, taxes or charges associated with such
delivery. Such investments may also involve the risk
that an entity involved in the settlement may not meet
its obligations.

FOREIGN CURRENCY CONVERSION. Although foreign
exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the
difference (the "spread") between prices at which they
are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the
fund at one rate, while offering a lesser rate of
exchange should the fund desire to resell that
currency to the dealer.

OPTIONS ON SECURITIES

WRITING COVERED OPTIONS. The fund may write covered
call options and covered put options on optionable
securities held in its portfolio, when in the opinion
of Putnam Management such transactions are consistent
with the fund's investment objective(s) and policies.
Call options written by the fund give the purchaser
the right to buy the underlying securities from the
fund at a stated exercise price; put options give the
purchaser the right to sell the underlying securities
to the fund at a stated price.

The fund may write only covered options, which means
that, so long as the fund is obligated as the writer
of a call option, it will own the underlying
securities subject to the option (or comparable
securities satisfying the cover requirements of
securities exchanges). In the case of put options,
the fund will hold cash and/or high-grade short-term
debt obligations equal to the price to be paid if the
option is exercised. In addition, the fund will be
considered to have covered a put or call option if and
to the extent that it holds an option that offsets
some or all of the risk of the option it has written.
The fund may write combinations of covered puts and
calls on the same underlying security.

The fund will receive a premium from writing a put or
call option, which increases the fund's return on the
underlying security in the event the option expires
unexercised or is closed out at a profit. The amount
of the premium reflects, among other things, the
relationship between the exercise price and the
current market value of the underlying security, the
volatility of the underlying security, the amount of
time remaining until expiration, current interest
rates, and the effect of supply and demand in the
options market and in the market for the underlying
security. By writing a call option, the fund limits
its opportunity to profit from any increase in the
market value of the underlying security above the
exercise price of the option but continues to bear the
risk of a decline in the value of the underlying
security. By writing a put option, the fund assumes
the risk that it may be required to purchase the
underlying security for an exercise price higher than
its then-current market value, resulting in a
potential capital loss unless the security
subsequently appreciates in value.

The fund may terminate an option that it has written
prior to its expiration by entering into a closing
purchase transaction, in which it purchases an
offsetting option. The fund realizes a profit or loss
from a closing transaction if the cost of the
transaction (option premium plus transaction costs) is
less or more than the premium received from writing
the option. If the
fund writes a call option but does not own the
underlying security, and when it writes a put option,
the fund may be required to deposit cash or securities
with its broker as "margin," or collateral, for its
obligation to buy or sell the underlying security. As
the value of the underlying security varies, the fund
may have to deposit additional margin with the broker.
Margin requirements are complex and are fixed by
individual brokers, subject to minimum requirements
currently imposed by the Federal Reserve Board and by
stock exchanges and other self-regulatory
organizations.

PURCHASING PUT OPTIONS. The fund may purchase put
options to protect its portfolio holdings in an
underlying security against a decline in market value.
Such protection is provided during the life of the put
option since the fund, as holder of the option, is
able to sell the underlying security at the put
exercise price regardless of any decline in the
underlying security's market price. In order for a
put option to be profitable, the market price of the
underlying security must decline sufficiently below
the exercise price to cover the premium and
transaction costs. By using put options in this
manner, the fund will reduce any profit it might
otherwise have realized from appreciation of the
underlying security by the premium paid for the put
option and by transaction costs.

PURCHASING CALL OPTIONS. The fund may purchase call
options to hedge against an increase in the price of
securities that the fund wants ultimately to buy.
Such hedge protection is provided during the life of
the call option since the fund, as holder of the call
option, is able to buy the underlying security at the
exercise price regardless of any increase in the
underlying security's market price. In order for a
call option to be profitable, the market price of the
underlying security must rise sufficiently above the
exercise price to cover the premium and transaction
costs.

RISK FACTORS IN OPTIONS TRANSACTIONS

The successful use of the fund's options strategies
depends on the ability of Putnam Management to
forecast correctly interest rate and market movements.
For example, if the fund were to write a call option
based on Putnam Management's expectation that the
price of the underlying security would fall, but the
price were to rise instead, the fund could be required
to sell the security upon exercise at a price below
the current market price. Similarly, if the fund were
to write a put option based on Putnam Management's
expectation that the price of the underlying security
would rise, but the price were to fall instead, the
fund could be required to purchase the security upon
exercise at a price higher than the current market
price.

When the fund purchases an option, it runs the risk
that it will lose its entire investment in the option
in a relatively short period of time, unless the fund
exercises the option or enters into a closing sale
transaction before the option's expiration. If the
price of the underlying security does not rise (in the
case of a call) or fall (in the case of a put) to an
extent sufficient to cover the option premium and
transaction costs, the fund will lose part or all of
its investment in the option. This contrasts with an
investment by the fund in the underlying security,
since the fund will not realize a loss if the
security's price does not change.

The effective use of options also depends on the
fund's ability to terminate option positions at times
when Putnam Management deems it desirable to do so.
There is no assurance that the fund
will be able to effect closing transactions at any
particular time or at an acceptable price.

If a secondary market in options were to become
unavailable, the fund could no longer engage in
closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for
particular options or series of options. A market may
discontinue trading of a particular option or options
generally. In addition, a market could become
temporarily unavailable if unusual events -- such as
volume in excess of trading or clearing capability --
were to interrupt its normal operations.

A market may at times find it necessary to impose
restrictions on particular types of options
transactions, such as opening transactions. For
example, if an underlying security ceases to meet
qualifications imposed by the market or the Options
Clearing Corporation, new series of options on that
security will no longer be opened to replace expiring
series, and opening transactions in existing series
may be prohibited. If an options market were to
become unavailable, the fund as a holder of an option
would be able to realize profits or limit losses only
by exercising the option, and the fund, as option
writer, would remain obligated under the option until
expiration or exercise.

Disruptions in the markets for the securities
underlying options purchased or sold by the fund could
result in losses on the options. If trading is
interrupted in an underlying security, the trading of
options on that security is normally halted as well.
As a result, the fund as purchaser or writer of an
option will be unable to close out its positions until
options trading resumes, and it may be faced with
considerable losses if trading in the security reopens
at a substantially different price. In addition, the
Options Clearing Corporation or other options markets
may impose exercise restrictions. If a prohibition on
exercise is imposed at the time when trading in the
option has also been halted, the fund as purchaser or
writer of an option will be locked into its position
until one of the two restrictions has been lifted. If
the Options Clearing Corporation were to determine
that the available supply of an underlying security
appears insufficient to permit delivery by the writers
of all outstanding calls in the event of exercise, it
may prohibit indefinitely the exercise of put options.
The fund, as holder of such a put option, could lose
its entire investment if the prohibition remained in
effect until the put option's expiration.

Foreign-traded options are subject to many of the same
risks presented by internationally-traded securities.
In addition, because of time differences between the
United States and various foreign countries, and
because different holidays are observed in different
countries, foreign options markets may be open for
trading during hours or on days when U.S. markets are
closed. As a result, option premiums may not reflect
the current prices of the underlying interest in the
United States.

Over-the-counter ("OTC") options purchased by the fund
and assets held to cover OTC options written by the
fund may, under certain circumstances, be considered
illiquid securities for purposes of any limitation on
the fund's ability to invest in illiquid securities.

INVESTMENTS IN MISCELLANEOUS FIXED-INCOME SECURITIES

If the fund may invest in inverse floating
obligations, premium securities, or interest-only or
principal-only classes of mortgage-backed securities
(IOs and POs), it may do so without
limit. The fund, however, currently does not intend
to invest more than 15% of its assets in inverse
floating obligations or more than 35% of its assets in
IOs and POs under normal market conditions.

LOWER-RATED SECURITIES

The fund may invest in lower-rated fixed-income
securities (commonly known as "junk bonds"). The
lower ratings of certain securities held by the fund
reflect a greater possibility that adverse changes in
the financial condition of the issuer or in general
economic conditions, or both, or an unanticipated rise
in interest rates, may impair the ability of the
issuer to make payments of interest and principal.
The inability (or perceived inability) of issuers to
make timely payment of interest and principal would
likely make the values of securities held by the fund
more volatile and could limit the fund's ability to
sell its securities at prices approximating the values
the fund had placed on such securities. In the
absence of a liquid trading market for securities held
by it, the fund at times may be unable to establish
the fair value of such securities.

Securities ratings are based largely on the issuer's
historical financial condition and the rating
agencies' analysis at the time of rating.
Consequently, the rating assigned to any particular
security is not necessarily a reflection of the
issuer's current financial condition, which may be
better or worse than the rating would indicate. In
addition, the rating assigned to a security by Moody's
Investors Service, Inc. or Standard & Poor's (or by
any other nationally recognized securities rating
agency) does not reflect an assessment of the
volatility of the security's market value or the
liquidity of an investment in the security. See
"Securities ratings."

Like those of other fixed-income securities, the
values of lowerrated securities fluctuate in response
to changes in interest rates. A decrease in interest
rates will generally result in an increase in the
value of the fund's assets. Conversely, during
periods of rising interest rates, the value of the
fund's assets will generally decline. The values of
lower-rated securities may often be affected to a
greater extent by changes in general economic
conditions and business conditions affecting the
issuers of such securities and their industries.
Negative publicity or investor perceptions may also
adversely affect the values of lower-rated securities.
Changes by nationally recognized securities rating
agencies in their ratings of any fixed-income security
and changes in the ability of an issuer to make
payments of interest and principal may also affect the
value of these investments. Changes in the value of
portfolio securities generally will not affect income
derived from these securities, but will affect the
fund's net asset value. The fund will not necessarily
dispose of a security when its rating is reduced below
its rating at the time of purchase. However, Putnam
Management will monitor the investment to determine
whether its retention will assist in meeting the
fund's investment objective(s).

Issuers of lower-rated securities are often highly
leveraged, so that their ability to service their debt
obligations during an economic downturn or during
sustained periods of rising interest rates may be
impaired. Such issuers may not have more traditional
methods of financing available to them and may be
unable to repay outstanding obligations at maturity by
refinancing. The risk of loss due to default in
payment of interest or repayment of principal by such
issuers is significantly greater because such
securities frequently are
unsecured and subordinated to the prior payment of
senior indebtedness.

At times, a substantial portion of the fund's assets
may be invested in securities of which the fund, by
itself or together with other funds and accounts
managed by Putnam Management or its affiliates, holds
all or a major portion. Although Putnam Management
generally considers such securities to be liquid
because of the availability of an institutional
market for such securities, it is possible that, under
adverse market or economic conditions or in the event
of adverse changes in the financial condition of the
issuer, the fund could find it more difficult to sell
these securities when Putnam Management believes it
advisable to do so or may be able to sell the
securities only at prices lower than if they were more
widely held. Under these circumstances, it may also
be more difficult to determine the fair value of such
securities for purposes of computing the fund's net
asset value. In order to enforce its rights in the
event of a default of such securities, the fund may be
required to participate in various legal proceedings
or take possession of and manage assets securing the
issuer's obligations on such securities. This could
increase the fund's operating expenses and adversely
affect the fund's net asset value. In the case of tax-
exempt funds, any income derived from the fund's
ownership or operation of such assets would not be tax-
exempt. The ability of a holder of a tax-exempt
security to enforce the terms of that security in a
bankruptcy proceeding may be more limited than would
be the case with respect to securities of private
issuers. In addition, the fund's intention to qualify
as a "regulated investment company" under the Internal
Revenue Code may limit the extent to which the fund
may exercise its rights by taking possession of such
assets.

Certain securities held by the fund may permit the
issuer at its option to "call," or redeem, its
securities. If an issuer were to redeem securities
held by the fund during a time of declining interest
rates, the fund may not be able to reinvest the
proceeds in securities providing the same investment
return as the securities redeemed.

The fund may invest without limit in so-called "zero-
coupon" bonds and "payment-in-kind" bonds. Zero-
coupon bonds are issued at a significant discount from
their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer,
at its option, to make current interest payments on
the bonds either in cash or in additional bonds.
Because zero-coupon and payment-in-kind bonds do not
pay current interest in cash, their value is subject
to greater fluctuation in response to changes in
market interest rates than bonds that pay interest
currently. Both zero-coupon and payment-in-kind bonds
allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such
bonds may involve greater credit risks than bonds
paying interest currently in cash. The fund is
required to accrue interest income on such investments
and to distribute such amounts at least annually to
shareholders even though such bonds do not pay current
interest in cash.
Thus, it may be necessary at times for the fund to
liquidate investments in order to satisfy its dividend
requirements.

To the extent the fund invests in securities in the
lower rating categories, the achievement of the fund's
goals is more dependent on Putnam Management's
investment analysis than would be the case if the fund
were investing in securities in the higher rating
categories. This may be particularly true with
respect to taxexempt securities, as the amount of
information about the financial condition of an issuer
of tax-exempt securities may not
be as extensive as that which is made available by
corporations whose securities are publicly traded.

LOAN PARTICIPATIONS

The fund may invest in "loan participations." By
purchasing a loan participation, the fund acquires
some or all of the interest of a bank or other lending
institution in a loan to a particular borrower. Many
such loans are secured, and most impose restrictive
covenants which must be met by the borrower.

The loans in which the fund may invest are typically
made by a syndicate of banks, represented by an agent
bank which has negotiated and structured the loan and
which is responsible generally for collecting
interest, principal, and other amounts from the
borrower on its own behalf and on behalf of the other
lending institutions in the syndicate and for
enforcing its and their other rights against the
borrower. Each of the lending institutions, including
the agent bank, lends to the borrower a portion of the
total amount of the loan, and retains the
corresponding interest in the loan.

The fund's ability to receive payments of principal
and interest and other amounts in connection with loan
participations held by it will depend primarily on the
financial condition of the borrower. The failure by
the fund to receive scheduled interest or principal
payments on a loan participation would adversely
affect the income of the fund and would likely reduce
the value of its assets, which would be reflected in a
reduction in the fund's net asset value. Banks and
other lending institutions generally perform a credit
analysis of the borrower before originating a loan or
participating in a lending syndicate. In selecting
the loan participations in which the fund will invest,
however, Putnam Management will not rely solely on
that credit analysis, but will perform its own
investment analysis of the borrowers. Putnam
Management's analysis may include consideration of the
borrower's financial strength and managerial
experience, debt coverage, additional borrowing
requirements or debt maturity schedules, changing
financial conditions, and responsiveness to changes in
business conditions and interest rates. Because loan
participations in which the fund may invest are not
generally rated by independent credit rating agencies,
a decision by the fund to invest in a particular loan
participation will depend almost exclusively on Putnam
Management's, and the original lending institution's,
credit analysis of the borrower.

Loan participations may be structured in different
forms, including novations, assignments, and
participating interests.
In a novation, the fund assumes all of the rights of a
lending institution in a loan, including the right to
receive payments of principal and interest and other
amounts directly from the borrower and to enforce its
rights as a lender directly against the borrower. The
fund assumes the position of a co-lender with other
syndicate members. As an alternative, the fund may
purchase an assignment of a portion of a lender's
interest in a loan. In this case, the fund may be
required generally to rely upon the assigning bank to
demand payment and enforce its rights against the
borrower, but would otherwise be entitled to all of
such bank's rights in the loan. The fund may also
purchase a participating interest in a portion of the
rights of a lending institution in a loan. In such
case, it will be entitled to receive payments of
principal, interest, and premium, if any, but will not
generally be entitled to enforce its rights directly
against the agent bank or the borrower, but must rely
for that purpose on the lending institution. The fund
may also acquire a
loan participation directly by acting as a member of
the original lending syndicate.

The fund will in many cases be required to rely upon
the lending institution from which it purchases the
loan participation to collect and pass on to the fund
such payments and to enforce the fund's rights under
the loan. As a result, an insolvency, bankruptcy, or
reorganization of the lending institution may delay or
prevent the fund from receiving principal, interest,
and other amounts with respect to the underlying loan.
When the fund is required to rely upon a lending
institution to pay to the fund principal, interest,
and other amounts received by it, Putnam Management
will also evaluate the creditworthiness of the lending
institution.

The borrower of a loan in which the fund holds a
participation interest may, either at its own election
or pursuant to terms of the loan documentation, prepay
amounts of the loan from time to time. There is no
assurance that the fund will be able to reinvest the
proceeds of any loan prepayment at the same interest
rate or on the same terms as those of the original
loan participation.

Corporate loans in which the fund may purchase a loan
participation are made generally to finance internal
growth, mergers, acquisitions, stock repurchases,
leveraged buy-outs, and other corporate activities.
Under current market conditions, most of the corporate
loan participations purchased by the fund will
represent interests in loans made to finance highly
leveraged corporate acquisitions, known as "leveraged
buy-out" transactions. The highly leveraged capital
structure of the borrowers in such transactions may
make such loans especially vulnerable to adverse
changes in economic or market conditions. In addition,
loan participations generally are subject to
restrictions on transfer, and only limited
opportunities may exist to sell such participations in
secondary markets. As a result, the fund may be
unable to sell loan participations at a time when it
may otherwise be desirable to do so or may be able to
sell them only at a price that is less than their fair
market value.

Certain of the loan participations acquired by the
fund may involve revolving credit facilities under
which a borrower may from time to time borrow and
repay amounts up to the maximum amount of the
facility. In such cases, the fund would have an
obligation to advance its portion of such additional
borrowings upon the terms specified in the loan
participation. To the extent that the fund is
committed to make additional loans under such a
participation, it will at all times hold and maintain
in a segregated account liquid assets in an amount
sufficient to meet such commitments. Certain of the
loan participations acquired by the fund may also
involve loans made in foreign currencies. The fund's
investment in such participations would involve the
risks of currency fluctuations described above with
respect to investments in the foreign securities.

FLOATING RATE AND VARIABLE RATE DEMAND NOTES

Certain funds may purchase floating rate and variable
rate demand notes and bonds. These securities may have
a stated maturity in excess of one year, but permit a
holder to demand payment of principal plus accrued
interest upon a specified number of days notice.
Frequently, such obligations are secured by letters of
credit or other credit support arrangements provided
by banks. The issuer has a corresponding right, after
a given period, to prepay in its discretion the
outstanding principal of the
obligation plus accrued interest upon a specific
number of days notice to the holders. The interest
rate of a floating rate instrument may be based on a
known lending rate, such as a bank's prime rate, and
is reset whenever such rate is adjusted. The interest
rate on a variable rate demand note is reset at
specified intervals at a market rate.

MORTGAGE RELATED AND ASSET-BACKED SECURITIES

The fund may invest in mortgage-backed securities,
including collateralized mortgage obligations ("CMOs")
and certain stripped mortgage-backed securities. CMOs
and other mortgage-backed securities represent a
participation in, or are secured by, mortgage loans.

The fund may also invest in asset-backed securities.
Asset-backed securities are structured like mortgage-
backed securities, but instead of mortgage loans or
interests in mortgage loans, the underlying assets
may include such items as motor vehicle installment
sales or installment loan contracts, leases of various
types of real and personal property, and receivables
from credit card agreements. The ability of an issuer
of asset-backed securities to enforce its security
interest in the underlying assets may be limited.

Mortgage-backed securities have yield and maturity
characteristics corresponding to the underlying
assets. Unlike traditional debt securities, which may
pay a fixed rate of interest until maturity, when the
entire principal amount comes due, payments on certain
mortgage-backed securities include both interest and a
partial repayment of principal. Besides the scheduled
repayment of principal, repayments of principal may
result from the voluntary prepayment, refinancing, or
foreclosure of the underlying mortgage loans. If
property owners make unscheduled prepayments of their
mortgage loans, these prepayments will result in early
payment of the applicable mortgage-related securities.
In that event the fund may be unable to invest the
proceeds from the early payment of the mortgage-
related securities in an investment that provides as
high a yield as the mortgage-related securities.
Consequently, early payment associated with mortgage-
related securities may cause these securities to
experience significantly greater price and yield
volatility than that experienced by traditional fixed
income securities. The occurrence of mortgage
prepayments is affected by factors including the level
of interest rates, general economic conditions, the
location and age of the mortgage and other social and
demographic conditions. During periods of falling
interest rates, the rate of mortgage prepayments tends
to increase, thereby tending to decrease the life of
mortgagerelated securities. During periods of rising
interest rates, the rate of mortgage prepayments
usually decreases, thereby tending to increase the
life of mortgage-related securities. If the life of a
mortgage-related security is inaccurately predicted,
the fund may not be able to realize the rate of return
it expected.

Mortgage-backed and asset-backed securities are less
effective than other types of securities as a means of
"locking in" attractive long-term interest rates. One
reason is the need to reinvest prepayments of
principal; another is the possibility of significant
unscheduled prepayments resulting from declines in
interest rates. These prepayments would have to be
reinvested at lower rates. As a result, these
securities may have less potential for capital
appreciation during periods of declining interest
rates than other securities of comparable maturities,
although they may have a similar risk of decline in
market value during periods of rising interest rates.
Prepayments may also
significantly shorten the effective maturities of
these securities, especially during periods of
declining interest rates. Conversely, during periods
of rising interest rates, a reduction in prepayments
may increase the effective maturities of these
securities, subjecting them to a greater risk of
decline in market value in response to rising interest
rates than traditional debt securities, and,
therefore, potentially increasing the volatility of
the fund.

Prepayments may cause losses on securities purchased
at a premium. At times, some of the mortgage-backed
and asset-backed securities in which the fund may
invest will have higher than market interest rates and
therefore will be purchased at a premium above their
par value. Unscheduled prepayments, which are made at
par, will cause the fund to experience a loss equal to
any unamortized premium.

CMOs may be issued by a U.S. government agency or
instrumentality or by a private issuer. Although
payment of the principal of, and interest on, the
underlying collateral securing privately issued CMOs
may be guaranteed by the U.S. government or its
agencies or instrumentalities, these CMOs represent
obligations solely of the private issuer and are not
insured or guaranteed by the U.S. government, its
agencies or instrumentalities or any other person or
entity.

Prepayments could cause early retirement of CMOs.
CMOs are designed to reduce the risk of prepayment for
investors by issuing multiple classes of securities,
each having different maturities, interest rates and
payment schedules, and with the principal and interest
on the underlying mortgages allocated among the
several classes in various ways. Payment of interest
or principal on some classes or series of CMOs may be
subject to contingencies or some classes or series may
bear some or all of the risk of default on the
underlying mortgages. CMOS of different classes or
series are generally retired in sequence as the
underlying mortgage loans in the mortgage pool are
repaid.
If enough mortgages are repaid ahead of schedule, the
classes or series of a CMO with the earliest
maturities generally will be retired prior to their
maturities. Thus, the early retirement of particular
classes or series of a CMO held by the fund would have
the same effect as the prepayment of mortgages
underlying other mortgage-backed securities.
Conversely, slower than anticipated prepayments can
extend the effective maturities of CMOs, subjecting
them to a greater risk of decline in market value in
response to rising interest rates than traditional
debt securities, and, therefore, potentially
increasing the volatility of the fund.

Prepayments could result in losses on stripped
mortgage-backed securities. Stripped mortgage-backed
securities are usually structured with two classes
that receive different portions of the interest and
principal distributions on a pool of mortgage loans.
The fund may invest in both the interest-only or "IO"
class and the principal-only or "PO" class. The yield
to maturity on an IO class of stripped mortgage-backed
securities is extremely sensitive not only to changes
in prevailing interest rates but also to the rate of
principal payments (including prepayments) on the
underlying assets. A rapid rate of principal
prepayments may have a measurable adverse effect on
the fund's yield to maturity to the extent it invests
in IOs. If the assets underlying the IO experience
greater than anticipated prepayments of principal, the
fund may fail to recoup fully its initial investment
in these securities. Conversely, POs tend to increase
in value if prepayments are greater than anticipated
and decline if prepayments are slower than
anticipated.

The secondary market for stripped mortgage-backed
securities may be more volatile and less liquid than
that for other mortgagebacked securities, potentially
limiting the fund's ability to buy or sell those
securities at any particular time.

STRUCTURED NOTES

A fund may be able to invest in so-called structured
notes. These securities are generally derivative
instruments whose value is tied to an underlying index
or other security or asset class. Such structured
notes may include, for example, notes that allow a
fund to invest indirectly in certain foreign
investments which the fund would otherwise would not
be able to directly invest often because of
restrictions imposed by local laws.

TAX-EXEMPT SECURITIES

GENERAL DESCRIPTION. As used in this SAI, the term
"Tax-exempt securities" includes debt obligations
issued by a state, its political subdivisions (for
example, counties, cities, towns, villages, districts
and authorities) and their agencies, instrumentalities
or other governmental units, the interest from which
is, in the opinion of bond counsel, exempt from
federal income tax and the appropriate state's
personal income tax. Such obligations are issued to
obtain funds for various public purposes, including
the construction of a wide range of public facilities,
such as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets and
water and sewer works. Other public purposes for
which Tax-exempt securities may be issued include the
refunding of outstanding obligations or the payment of
general operating expenses.

Short-term Tax-exempt securities are generally issued
by state and local governments and public authorities
as interim financing in anticipation of tax
collections, revenue receipts, or bond sales to
finance such public purposes.

In addition, certain types of "private activity" bonds
may be issued by public authorities to finance
projects such as privately operated housing
facilities; certain local facilities for supplying
water, gas or electricity; sewage or solid waste
disposal facilities; student loans; or public or
private institutions for the construction of
educational, hospital, housing and other facilities.
Such obligations are included within the term Tax-
exempt securities if the interest paid thereon is, in
the opinion of bond counsel, exempt from federal
income tax and state personal income tax (such
interest may, however, be subject to federal
alternative minimum tax). Other types of private
activity bonds, the proceeds of which are used for the
construction, repair or improvement of, or to obtain
equipment for, privately operated industrial or
commercial facilities, may also constitute Tax-exempt
securities, although the current federal tax laws
place substantial limitations on the size of such
issues.

PARTICIPATION INTERESTS (MONEY MARKET FUNDS ONLY).
The Money Market Fund may invest in Tax-exempt
securities either by purchasing them directly or by
purchasing certificates of accrual or similar
instruments evidencing direct ownership of interest
payments or principal payments, or both, on Tax-exempt
securities, provided that, in the opinion of counsel
to the initial seller of each such certificate or
instrument, any discount accruing on a certificate or
instrument that is purchased at a yield not greater
than the coupon rate of interest on the related Tax-
exempt securities will be exempt from federal
income tax to the same extent as interest on the Tax-
exempt securities. The Money Market Fund may also
invest in Tax-exempt securities by purchasing from
banks participation interests in all or part of
specific holdings of Tax-exempt securities. These
participations may be backed in whole or in part by an
irrevocable letter of credit or guarantee of the
selling bank. The selling bank may receive a fee from
the Money Market Fund in connection with the
arrangement. The Money Market Fund will not purchase
such participation interests unless it receives an
opinion of counsel or a ruling of the Internal Revenue
Service that interest earned by it on Tax-exempt
securities in which it holds such participation
interests is exempt from federal income tax. The
Money Market Fund does not expect to invest more than
5% of its assets in participation interests.

STAND-BY COMMITMENTS. When the fund purchases Tax-
exempt securities, it has the authority to acquire
stand-by commitments from banks and broker-dealers
with respect to those Tax-exempt securities. A stand-
by commitment may be considered a security independent
of the Tax-exempt security to which it relates. The
amount payable by a bank or dealer during the time a
stand-by commitment is exercisable, absent unusual
circumstances, would be substantially the same as the
market value of the underlying Taxexempt security to a
third party at any time. The fund expects that stand-
by commitments generally will be available without the
payment of direct or indirect consideration. The fund
does not expect to assign any value to stand-by
commitments.

YIELDS. The yields on Tax-exempt securities depend on
a variety of factors, including general money market
conditions, effective marginal tax rates, the
financial condition of the issuer, general conditions
of the Tax-exempt security market, the size of a
particular offering, the maturity of the obligation
and the rating of the issue. The ratings of
nationally recognized securities rating agencies
represent their opinions as to the credit quality of
the Tax-exempt securities which they undertake to
rate. It should be emphasized, however, that ratings
are general and are not absolute standards of quality.
Consequently, Tax-exempt securities with the same
maturity and interest rate but with different ratings
may have the same yield. Yield disparities may occur
for reasons not directly related to the investment
quality of particular issues or the general movement
of interest rates and may be due to such factors as
changes in the overall demand or supply of various
types of Tax-exempt securities or changes in the
investment objectives of investors. Subsequent to
purchase by the fund, an issue of Tax-exempt
securities or other investments may cease to be rated,
or its rating may be reduced below the minimum rating
required for purchase by the fund. Neither event will
require the elimination of an investment from the
fund's portfolio, but Putnam Management will consider
such an event in its determination of whether the fund
should continue to hold an investment in its
portfolio.

"MORAL OBLIGATION" BONDS. The fund does not
currently intend to invest in so-called "moral
obligation" bonds, where repayment is backed by a
moral commitment of an entity other than the issuer,
unless the credit of the issuer itself, without regard
to the "moral obligation," meets the investment
criteria established for investments by the fund.

MUNICIPAL LEASES. The fund may acquire participations
in lease obligations or installment purchase contract
obligations (collectively, "lease obligations") of
municipal authorities or entities. Lease obligations
do not constitute general obligations of the
municipality for which the municipality's taxing power
is pledged. Certain of these lease obligations contain
"non-
appropriation" clauses, which provide that the
municipality has no obligation to make lease or
installment purchase payments in future years unless
money is appropriated for such purpose on a yearly
basis. In addition to the "non-appropriation" risk,
these securities represent a relatively new type of
financing that has not yet developed the depth of
marketability associated with more conventional bonds.
In the case of a "non-appropriation" lease,
the fund's ability to recover under the lease in the
event of nonappropriation or default will be limited
solely to the repossession of the leased property, and
in any event,
foreclosure of that property might prove difficult.

ADDITIONAL RISKS. Securities in which the fund may
invest, including Tax-exempt securities, are subject
to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors,
such as the federal Bankruptcy Code (including special
provisions related to municipalities and other public
entities), and laws, if any, that may be enacted by
Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing
other constraints upon enforcement of such
obligations. There is also the possibility that, as a
result of litigation or other conditions, the power,
ability or willingness of issuers to meet their
obligations for the payment of interest and principal
on their Tax-exempt securities may be materially
affected.

From time to time, proposals have been introduced
before Congress for the purpose of restricting or
eliminating the federal income tax exemption for
interest on debt obligations issued by states and
their political subdivisions. Federal tax laws limit
the types and amounts of tax-exempt bonds issuable for
certain purposes, especially industrial development
bonds and private activity bonds. Such limits may
affect the future supply and yields of these types of
Tax-exempt securities. Further proposals limiting the
issuance of tax-exempt bonds may well be introduced in
the future. If it appeared that the availability of
Tax-exempt securities for investment by the fund and
the value of the fund's portfolio could be materially
affected by such changes in law, the Trustees of the
fund would reevaluate its investment objective and
policies and consider changes in the structure of the
fund or its dissolution.

CONVERTIBLE SECURITIES

Convertible securities include bonds, debentures,
notes, preferred stocks and other securities that may
be converted into or exchanged for, at a specific
price or formula within a particular period of time, a
prescribed amount of common stock or other equity
securities of the same or a different issuer.
Convertible securities entitle the holder to receive
interest paid or accrued on debt or dividends paid or
accrued on preferred stock until the security matures
or is redeemed, converted or exchanged.

The market value of a convertible security is a
function of its "investment value" and its "conversion
value." A security's "investment value" represents
the value of the security without its conversion
feature (i.e., a nonconvertible fixed income
security). The investment value may be determined by
reference to its credit quality and the current value
of its yield to maturity or probable call date. At
any given time, investment value is dependent upon
such factors as the general level of interest rates,
the yield of similar nonconvertible securities, the
financial strength of the issuer and the seniority of
the security in the issuer's capital structure. A
security's "conversion value" is determined by
multiplying the number of
shares the holder is entitled to receive upon
conversion or exchange by the current price of the
underlying security.

If the conversion value of a convertible security is
significantly below its investment value, the
convertible security will trade like nonconvertible
debt or preferred stock and its market value will not
be influenced greatly by fluctuations in the market
price of the underlying security. Conversely, if the
conversion value of a convertible security is near or
above its investment value, the market value of the
convertible security will be more heavily influenced
by fluctuations in the market price of the underlying
security.

The fund's investments in convertible securities may
at times include securities that have a mandatory
conversion feature, pursuant to which the securities
convert automatically into common stock or other
equity securities at a specified date and a specified
conversion ratio, or that are convertible at the
option of the issuer. Because conversion of the
security is not at the option of the holder, the fund
may be required to convert the security into the
underlying common stock even at times when the value
of the underlying common stock or other equity
security has declined substantially.

The fund's investments in convertible securities,
particularly securities that are convertible into
securities of an issuer other than the issuer of the
convertible security, may be illiquid. The fund may
not be able to dispose of such securities in a timely
fashion or for a fair price, which could result in
losses to the fund.

PRIVATE PLACEMENTS

The fund may invest in securities that are purchased
in private placements and, accordingly, are subject to
restrictions on resale as a matter of contract or
under federal securities laws. Because there may be
relatively few potential purchasers for such
investments, especially under adverse market or
economic conditions or in the event of adverse changes
in the financial condition of the issuer, the fund
could find it more difficult to sell such securities
when Putnam Management believes it advisable to do so
or may be able to sell such securities only at prices
lower than if such securities were more widely held.
At times, it may also be more difficult to determine
the fair value of such securities for purposes of
computing the fund's net asset value.

While such private placements may often offer
attractive opportunities for investment not otherwise
available on the open market, the securities so
purchased are often "restricted securities," i.e.,
securities which cannot be sold to the public without
registration under the Securities Act of 1933 or the
availability of an exemption from registration (such
as Rules 144 or 144A), or which are "not readily
marketable" because they are subject to other legal or
contractual delays in or restrictions on resale.

The absence of a trading market can make it difficult
to ascertain a market value for illiquid investments.
Disposing of illiquid investments may involve time-
consuming negotiation and legal expenses, and it may
be difficult or impossible for the fund to sell them
promptly at an acceptable price. The fund may have to
bear the extra expense of registering such securities
for resale and the risk of substantial delay in
effecting such registration. Also market quotations
are less readily available. The judgment of Putnam
Management may at times play a greater role in valuing
these securities than in the case of unrestricted
securities.

Generally speaking, restricted securities may be sold
only to qualified institutional buyers, or in a
privately negotiated transaction to a limited number
of purchasers, or in limited quantities after they
have been held for a specified period of time and
other conditions are met pursuant to an exemption from
registration, or in a public offering for which a
registration statement is in effect under the
Securities Act of 1933. The funds may be deemed to be
an "underwriter" for purposes of the Securities Act of
1933 when selling restricted securities to the public,
and in such event the fund may be liable to purchasers
of such securities if the registration statement
prepared by the issuer, or the prospectus forming a
part of it, is materially inaccurate or misleading.

FUTURES CONTRACTS AND RELATED OPTIONS

Subject to applicable law the fund may invest without
limit in futures contracts and related options for
hedging and non-hedging purposes, such as to manage
the effective duration of the fund's portfolio or as a
substitute for direct investment. A financial futures
contract sale creates an obligation by the seller to
deliver the type of financial instrument called for in
the contract in a specified delivery month for a
stated price. A financial futures contract purchase
creates an obligation by the purchaser to take
delivery of the type of financial instrument called
for in the contract in a specified delivery month at a
stated price. The specific instruments delivered or
taken, respectively, at settlement date are not
determined until on or near that date. The
determination is made in accordance with the rules of
the exchange on which the futures contract sale or
purchase was made. Futures contracts are traded in
the United States only on commodity exchanges or
boards of trade -- known as "contract markets" --
approved for such trading by the Commodity Futures
Trading Commission (the "CFTC"), and must be executed
through a futures commission merchant or brokerage
firm which is a member of the relevant contract
market.

Although futures contracts (other than index futures)
by their terms call for actual delivery or acceptance
of commodities or securities, in most cases the
contracts are closed out before the settlement date
without the making or taking of delivery.
Closing out a futures contract sale is effected by
purchasing a futures contract for the same aggregate
amount of the specific type of financial instrument or
commodity with the same delivery date. If the price
of the initial sale of the futures contract exceeds
the price of the offsetting purchase, the seller is
paid the difference and realizes a gain. Conversely,
if the price of the offsetting purchase exceeds the
price of the initial sale, the seller realizes a loss.
If the fund is unable to enter into a closing
transaction, the amount of the fund's potential loss
is unlimited. The closing out of a futures contract
purchase is effected by the purchaser's entering into
a futures contract sale. If the offsetting sale price
exceeds the purchase price, the purchaser realizes a
gain, and if the purchase price exceeds the offsetting
sale price, he realizes a loss. In general, 40% of
the gain or loss arising from the closing out of a
futures contract traded on an exchange approved by the
CFTC is treated as short-term gain or loss, and 60% is
treated as long-term gain or loss.

Unlike when the fund purchases or sells a security, no
price is paid or received by the fund upon the
purchase or sale of a futures contract. Upon entering
into a contract, the fund is
required to deposit with its custodian in a segregated
account in the name of the futures broker an amount of
liquid assets. This amount is known as "initial
margin." The nature of initial margin in futures
transactions is different from that of margin in
security transactions in that futures contract margin
does not involve the borrowing of funds to finance the
transactions. Rather, initial margin is similar to a
performance bond or good faith deposit which is
returned to the fund upon termination of the futures
contract, assuming all contractual obligations have
been satisfied. Futures contracts also involve
brokerage costs.

Subsequent payments, called "variation margin" or
"maintenance margin," to and from the broker (or the
custodian) are made on a daily basis as the price of
the underlying security or commodity fluctuates,
making the long and short positions in the futures
contract more or less valuable, a process known as
"marking to the market." For example, when the fund
has purchased a futures contract on a security and the
price of the underlying security has risen, that
position will have increased in value and the fund
will receive from the broker a variation margin
payment based on that increase in value. Conversely,
when the fund has purchased a security futures
contract and the price of the underlying security has
declined, the position would be less valuable and the
fund would be required to make a variation margin
payment to the broker.

The fund may elect to close some or all of its futures
positions at any time prior to their expiration in
order to reduce or eliminate a hedge position then
currently held by the fund. The fund may close its
positions by taking opposite positions which will
operate to terminate the fund's position in the
futures contracts. Final determinations of variation
margin are then made, additional cash is required to
be paid by or released to the fund, and the fund
realizes a loss or a gain. Such closing transactions
involve additional commission costs.

The fund does not intend to purchase or sell futures
or related options for other than hedging purposes,
if, as a result, the sum of the initial margin
deposits on the fund's existing futures and related
options positions and premiums paid for outstanding
options on futures contracts would exceed 5% of the
fund's net assets.

OPTIONS ON FUTURES CONTRACTS. The fund may purchase
and write call and put options on futures contracts it
may buy or sell and enter into closing transactions
with respect to such options to terminate existing
positions. In return for the premium paid, options on
futures contracts give the purchaser the right to
assume a position in a futures contract at the
specified option exercise price at any time during the
period of the option. The fund may use options on
futures contracts in lieu of writing or buying options
directly on the underlying securities or purchasing
and selling the underlying futures contracts. For
example, to hedge against a possible decrease in the
value of its portfolio securities, the fund may
purchase put options or write call options on futures
contracts rather than selling futures contracts.
Similarly, the fund may purchase call options or write
put options on futures contracts as a substitute for
the purchase of futures contracts to hedge against a
possible increase in the price of securities which the
fund expects to purchase. Such options generally
operate in the same manner as options purchased or
written directly on the underlying investments.

As with options on securities, the holder or writer of
an option may terminate his position by selling or
purchasing an offsetting
option. There is no guarantee that such closing
transactions can be effected.

The fund will be required to deposit initial margin
and maintenance margin with respect to put and call
options on futures contracts written by it pursuant to
brokers' requirements similar to those described above
in connection with the discussion of futures
contracts.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED
OPTIONS. Successful use of futures contracts by the
fund is subject to Putnam Management's ability to
predict movements in various factors affecting
securities markets, including interest rates. Compared
to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts
involves less potential risk to the fund because the
maximum amount at risk is the premium paid for the
options (plus transaction costs). However, there may
be circumstances when the purchase of a call or put
option on a futures contract would result in a loss to
the fund when the purchase or sale of a futures
contract would not, such as when there is no movement
in the prices of the hedged investments. The writing
of an option on a futures contract involves risks
similar to those risks relating to the sale of futures
contracts.

The use of options and futures strategies also
involves the risk of imperfect correlation among
movements in the prices of the securities underlying
the futures and options purchased and sold by the
fund, of the options and futures contracts themselves,
and, in the case of hedging transactions, of the
securities which are the subject of a hedge. The
successful use of these strategies further depends on
the ability of Putnam Management to forecast interest
rates and market movements correctly.

There is no assurance that higher than anticipated
trading activity or other unforeseen events might not,
at times, render certain market clearing facilities
inadequate, and thereby result in the institution by
exchanges of special procedures which may interfere
with the timely execution of customer orders.

To reduce or eliminate a position held by the fund,
the fund may seek to close out such position. The
ability to establish and close out positions will be
subject to the development and maintenance of a liquid
secondary market. It is not certain that this market
will develop or continue to exist for a particular
futures contract or option. Reasons for the absence
of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading
interest in certain contracts or options; (ii)
restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or
series of contracts or options, or underlying
securities; (iv) unusual or unforeseen circumstances
may interrupt normal operations on an exchange; (v)
the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges
could, for economic or other reasons, decide or be
compelled at some future date to discontinue the
trading of contracts or options (or a particular class
or series of contracts or options), in which event the
secondary market on that exchange for such contracts
or options (or in the class or series of contracts or
options) would cease to exist, although outstanding
contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades
on that exchange would continue to be exercisable in
accordance with their terms.

U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS.
U.S. Treasury security futures contracts require the
seller to deliver, or the purchaser to take delivery
of, the type of U.S. Treasury security called for in
the contract at a specified date and price. Options
on U.S. Treasury security futures contracts give the
purchaser the right in return for the premium paid to
assume a position in a U.S. Treasury security futures
contract at the specified option exercise price at any
time during the period of the option.

Successful use of U.S. Treasury security futures
contracts by the fund is subject to Putnam
Management's ability to predict movements in the
direction of interest rates and other factors
affecting markets for debt securities. For example,
if the fund has sold U.S. Treasury security futures
contracts in order to hedge against the possibility of
an increase in interest rates which would adversely
affect securities held in its portfolio, and the
prices of the fund's securities increase instead as a
result of a decline in interest rates, the fund will
lose part or all of the benefit of the increased value
of its securities which it has hedged because it will
have offsetting losses in its futures positions. In
addition, in such situations, if the fund has
insufficient cash, it may have to sell securities to
meet daily maintenance margin requirements at a time
when it may be disadvantageous to do so.

There is also a risk that price movements in U.S.
Treasury security futures contracts and related
options will not correlate closely with price
movements in markets for particular securities. For
example, if the fund has hedged against a decline in
the values of tax-exempt securities held by it by
selling Treasury security futures and the values of
Treasury securities subsequently increase while the
values of its taxexempt securities decrease, the fund
would incur losses on both
the Treasury security futures contracts written by it
and the taxexempt securities held in its portfolio.

INDEX FUTURES CONTRACTS. An index futures contract is
a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the
contract is made. Entering into a contract to buy
units of an index is commonly referred to as buying or
purchasing a contract or holding a long position in
the index. Entering into a contract to sell units of
an index is commonly referred to as selling a contract
or holding a short position. A unit is the current
value of the index. The fund
may enter into stock index futures contracts, debt
index futures contracts, or other index futures
contracts appropriate to its objective(s). The fund
may also purchase and sell options on index futures
contracts.

For example, the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500") is composed of 500 selected
common stocks, most of which are listed on the New
York Stock Exchange. The S&P 500 assigns relative
weightings to the common stocks included in the Index,
and the value fluctuates with changes in the market
values of those common stocks. In the case of the S&P
500, contracts are to buy or sell 500 units. Thus, if
the value of the S&P 500 were $150, one contract would
be worth $75,000 (500 units x $150). The stock index
futures contract specifies that no delivery of the
actual stocks making up the index will take place.
Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being
the difference between the contract price and the
actual level of the stock index at the expiration of
the contract. For example, if the fund enters into a
futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price
of $150 and the S&P 500 is at $154 on that future
date, the fund will gain $2,000 (500 units x gain of
$4). If the fund enters into a futures contract to
sell 500 units of the stock index at a specified
future date at a contract price of $150 and the S&P
500 is at $152 on that future date, the fund will lose
$1,000 (500 units x loss of $2).

There are several risks in connection with the use by
the fund of index futures. One risk arises because of
the imperfect correlation between movements in the
prices of the index futures and movements in the
prices of securities which are the subject of the
hedge. Putnam Management will, however, attempt to
reduce this risk by buying or selling, to the extent
possible, futures on indices the movements of which
will, in its judgment, have a significant correlation
with movements in the prices of the securities sought
to be hedged.

Successful use of index futures by the fund is also
subject to Putnam Management's ability to predict
movements in the direction of the market. For
example, it is possible that, where the fund has sold
futures to hedge its portfolio against a decline in
the market, the index on which the futures are written
may advance and the value of securities held in the
fund's portfolio may decline. If this occurred, the
fund would lose money on the futures and also
experience a decline in value in its portfolio
securities. It is also possible that, if the fund has
hedged against the possibility of a decline in the
market adversely affecting securities held in its
portfolio and securities prices increase instead, the
fund will lose part or all of the benefit of the
increased value of those securities it has hedged
because it will have offsetting losses in its futures
positions. In addition, in such situations, if the
fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements
at a time when it is disadvantageous to do so.

In addition to the possibility that there may be an
imperfect correlation, or no correlation at all,
between movements in the index futures and the portion
of the portfolio being hedged, the prices of index
futures may not correlate perfectly with movements in
the underlying index due to certain market
distortions. First, all participants in the futures
market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin
deposit requirements, investors may close futures
contracts through offsetting transactions which could
distort the normal relationship between the index and
futures markets. Second, margin requirements in the
futures market are less onerous than margin
requirements in the securities market, and as a result
the futures market may attract more speculators than
the securities market does. Increased participation
by speculators in the futures market may also cause
temporary price distortions. Due to the possibility
of price distortions in the futures market and also
because of the imperfect correlation between movements
in the index and movements in the prices of index
futures, even a correct forecast of general market
trends by Putnam Management may still not result in a
profitable position over a short time period.

OPTIONS ON STOCK INDEX FUTURES. Options on index
futures are similar to options on securities except
that options on index futures give the purchaser the
right, in return for the premium paid, to assume a
position in an index futures contract (a long position
if the option is a call and a short position if the
option is a put) at a specified exercise price at any
time during the period of the option. Upon exercise
of the option, the delivery of the futures position by
the writer of the option to
the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's
futures margin account which represents the amount by
which the market price of the index futures contract,
at exercise, exceeds (in the case of a call) or is
less than (in the case of a put) the exercise price of
the option on the index future. If an option is
exercised on the last trading day prior to its
expiration date, the settlement will be made entirely
in cash equal to the difference between the exercise
price of the option and the closing level of the index
on which the future is based on the expiration date.
Purchasers of options who fail to exercise their
options prior to the exercise date suffer a loss of
the premium paid.

OPTIONS ON INDICES

As an alternative to purchasing call and put options
on index futures, the fund may purchase and sell call
and put options on the underlying indices themselves.
Such options would be used in a manner identical to
the use of options on index futures.

INDEX WARRANTS

The fund may purchase put warrants and call warrants
whose values vary depending on the change in the value
of one or more specified securities indices ("index
warrants"). Index warrants are generally issued by
banks or other financial institutions and give the
holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a
cash payment from the issuer based on the value of the
underlying index at the time of exercise. In general,
if the value of the underlying index rises above the
exercise price of the index warrant, the holder of a
call warrant will be entitled to receive a cash
payment from the issuer upon exercise based on the
difference between the value of the index and the
exercise price of the warrant; if the value of the
underlying index falls, the holder of a put warrant
will be entitled to receive a cash payment from the
issuer upon exercise based on the difference between
the exercise price of the warrant and the value of the
index. The holder of a warrant would not be entitled
to any payments from the issuer at any time when, in
the case of a call warrant, the exercise price is
greater than the value of the underlying index, or, in
the case of a put warrant, the exercise price is less
than the value of the underlying index. If the fund
were not to exercise an index warrant prior to its
expiration, then the fund would lose the amount of the
purchase price paid by it for the warrant.

The fund will normally use index warrants in a manner
similar to its use of options on securities indices.
The risks of the fund's use of index warrants are
generally similar to those relating to its use of
index options. Unlike most index options, however,
index warrants are issued in limited amounts and are
not obligations of a regulated clearing agency, but
are backed only by the credit of the bank or other
institution which issues the warrant. Also, index
warrants generally have longer terms than index
options. Although the fund will normally invest only
in exchange-listed warrants, index warrants are not
likely to be as liquid as certain index options backed
by a recognized clearing agency. In addition, the
terms of index warrants may limit the fund's ability
to exercise the warrants at such time, or in such
quantities, as the fund would otherwise wish to do.

SHORT-TERM TRADING

In seeking the fund's objective(s), Putnam Management
will buy or sell portfolio securities whenever Putnam
Management believes it
appropriate to do so. In deciding whether to sell a
portfolio security, Putnam Management does not
consider how long the fund has owned the security.
From time to time the fund will buy securities
intending to seek short-term trading profits. A
change in the securities held by the fund is known as
"portfolio turnover" and generally involves some
expense to the fund. This expense may include
brokerage commissions or dealer markups and other
transaction costs on both the sale of securities and
the reinvestment of the proceeds in other securities.
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 (except for Putnam Money Market Fund) may
enter into repurchase agreements, amounting to not
more than 25% of its total assets. A repurchase
agreement is a contract under which the fund acquires
a security for a relatively short period (usually not
more than one week) subject to the obligation of the
seller to repurchase and the fund to resell such
security at a fixed time and price (representing the
fund's cost plus interest). It is the fund's present
intention to enter into repurchase agreements only
with commercial banks and registered broker-dealers
and only with respect to obligations of the U.S.
government or its agencies or instrumentalities.
Repurchase agreements may also be viewed as loans made
by the fund which are collateralized by the securities
subject to repurchase. Putnam Management will monitor
such transactions to ensure that the value of the
underlying securities will be at least equal at all
times to the total amount of the repurchase
obligation, including the interest factor. If the
seller defaults, the fund could realize a loss on the
sale of the underlying security to the
extent that the proceeds of the sale including accrued
interest are less than the resale price provided in
the agreement including interest. In addition, if the
seller should be involved in bankruptcy or insolvency
proceedings, the fund may incur delay and costs in
selling the underlying security or may suffer a loss
of principal and interest if the fund is treated as an
unsecured creditor and required to return the
underlying collateral to the seller's estate.

Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may
transfer uninvested cash balances into a joint
account, along with cash of other Putnam funds and
certain other accounts. These balances may be
invested in one or more repurchase agreements and/or
short-term money market instruments.

RESTRICTED SECURITIES

The SEC Staff currently takes the view that any
delegation by the Trustees of the authority to
determine that a restricted security is readily
marketable (as described in the investment
restrictions of the funds) must be pursuant to written
procedures established by the Trustees. It is the
present intention of the funds' Trustees that, if the
Trustees decide to delegate such determinations to
Putnam Management or another person, they would do so
pursuant to written procedures, consistent with the
Staff's position. Should the Staff modify its
position in the future, the Trustees would consider
what action would be appropriate in light of the
Staff's position at that time.

FORWARD COMMITMENTS

The fund may enter into contracts to purchase
securities for a fixed price at a future date beyond
customary settlement time ("forward commitments") if
the fund sets aside, on the books and records of its
custodian, liquid assets in an amount sufficient to
meet the purchase price, or if the fund enters into
offsetting contracts for the forward sale of other
securities it owns. In the case of to-be-announced
("TBA") purchase commitments, the unit price and the
estimated principal amount are established when the
fund enters into a contract, with the actual principal
amount being within a specified range of the estimate.
Forward commitments may be considered securities in
themselves, and involve a risk of loss if the value of
the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk
of decline in the value of the fund's other assets.
Where such purchases are made through dealers, the
fund relies on the dealer to consummate the sale. The
dealer's failure to do so may result in the loss to
the fund of an advantageous yield or price. Although
the fund will generally enter into forward commitments
with the intention of acquiring securities for its
portfolio or for delivery pursuant to options
contracts it has entered into, the fund may dispose of
a commitment prior to settlement if Putnam Management
deems it appropriate to do so. The fund may realize
short-term profits or losses upon the sale of forward
commitments.

The fund may enter into TBA sale commitments to hedge
its portfolio positions or to sell securities it owns
under delayed delivery arrangements. Proceeds of TBA
sale commitments are not received until the
contractual settlement date. During the time a TBA
sale commitment is outstanding, equivalent deliverable
securities, or an offsetting TBA purchase commitment
deliverable on or before the sale commitment date, are
held as "cover" for the transaction. Unsettled TBA
sale commitments are valued at current market value of
the underlying securities. If the TBA
sale commitment is closed through the acquisition of
an offsetting purchase commitment, the fund realizes a
gain or loss on the commitment without regard to any
unrealized gain or loss on the underlying security.
If the fund delivers securities under the commitment,
the fund realizes a gain or loss from the sale of the
securities based upon the unit price established at
the date the commitment was entered into.

SWAP AGREEMENTS

The fund may enter into swap agreements and other
types of overthe-counter transactions with broker-
dealers or other financial institutions, in which its
investment return will depend on the change in value
of a specified security or index. The fund would
typically receive from the counterparty the amount of
any increase, and pay to the counterparty the amount
of any decrease, in the value of the underlying
security or index. The contracts would thus, absent
the failure of the counterparty to complete its
obligations, provide to the fund approximately the
same return as it would have realized if it had owned
the security or index directly.

The fund's ability to realize a profit from such
transactions will depend on the ability of the
financial institutions with which it enters into the
transactions to meet their obligations to the fund.
Under certain circumstances, suitable transactions may
not be available to the fund, or the fund may be
unable to close out its position under such
transactions at the same time, or at the same price,
as if it had purchased comparable publicly traded
securities.

DERIVATIVES

Certain of the instruments in which the fund may
invest, such as futures contracts, options and forward
contracts, are considered to be "derivatives."
Derivatives are financial instruments whose value
depends upon, or is derived from, the value of an
underlying asset, such as a security or an index.
Further information about these instruments and the
risks involved in their use is included elsewhere in
the prospectus or in this SAI. The fund's use of
derivatives may cause the fund to recognize higher
amounts of short-term capital gains, generally taxed
to shareholders at ordinary income tax rates.

YEAR 2000

Like other financial and business organizations, the
funds depend on the proper function of their service
providers' computer systems. To the extent that the
systems used by the funds or their service providers
cannot distinguish between the year 1900 and the year
2000 or have other operating difficulties as a result
of the year 2000, the operations of and services
provided to the funds and their shareholders could be
adversely impacted. Putnam Management and its
affiliates have reported that each expects to modify
its systems, as necessary, to address this socalled
"year 2000 problem," and will, on behalf of the funds,
inquire as to the year 2000 compliance of the funds'
other major service providers. However, there can be
no assurance that the operations of and services
provided to the funds and their shareholders will not
be adversely affected. Similarly, companies in which
the funds invest may also experience "year 2000
problems," which could ultimately result in losses to
a fund to the extent that the securities of any such
company decline in value as a result of a "year 2000
problem."

EURO CONVERSION

Eleven member countries of the European Economic and
Monetary Union (the "EMU") have qualified for
conversion of their national currencies to the euro on
January 1, 1999. The euro is a common currency that
is expected to eventually be used as the sole currency
for these countries and other EMU members that wish to
convert to the euro. National currencies will remain
for the converting countries through at least July of
2002 while the full transition to the euro in the
countries involved in the conversion occurs. Possible
consequences to funds that invest in securities
denominated in any of the national currencies affected
include the risks that: (i) the unification of
economic and monetary policies underpinning the
currency unification may increase the potential for
similarities in the movements of markets in the
European countries converting to the euro, (ii)
contracts (including contracts regarding currency
transactions) denominated in (or tied to) those
currencies may become more difficult to enforce, and
that (iii) companies in which the funds invest may be
adversely affected by their failure (or the failure of
other companies with which they do business) to
adequately address the operational aspects of the
conversion.

Like other financial and business organizations, the
funds depend on the proper function of their service
providers' computer and other systems. The funds
could be adversely affected if the computer or other
systems used by Putnam Management and the funds' other
service providers cannot appropriately account for the
conversion to the euro. Putnam Management and its
affiliates expect that their systems will be able to
address this issue without any material interruption
of service. However, there can be no assurance that
the operations of and services provided to the funds
and their shareholders will not be adversely affected.
Similarly, companies in which the funds invest may
also experience similar problems in dealing with the
conversion to the euro, which could result in losses
to the funds.

TAXES

TAXATION OF THE FUND. The fund intends to qualify
each year as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for the
special tax treatment accorded regulated investment
companies and their shareholders, the fund must, among
other things:

(a) Derive at least 90% of its gross income from
dividends, interest, payments with respect to certain
securities loans, and gains from the sale of stock,
securities and foreign currencies, or other income
(including but not limited to gains from options,
futures, or forward contracts) derived with respect to
its business of investing in such stock, securities,
or currencies;

(b) distribute with respect to each taxable year at
least 90% of the sum of its taxable net investment
income, its net tax-exempt income, and the excess, if
any, of net short-term capital gains over net long-
term capital losses for such year; and

(c) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value
of the fund's assets is represented by cash and cash
items, U.S. government securities, securities of other
regulated investment companies, and other securities
limited in respect of any one issuer to a value not
greater than 5% of the value of the fund's total
assets and to not more than 10% of the outstanding
voting securities of
such issuer, and (ii) not more than 25% of the value
of its assets is invested in the securities (other
than those of the U.S. Government or other regulated
investment companies) of any one issuer or of two or
more issuers which the fund controls and which are
engaged in the same, similar, or related trades or
businesses.

If the fund qualifies as a regulated investment
company that is accorded special tax treatment, the
fund will not be subject to federal income tax on
income paid to its shareholders in the form of
dividends (including capital gain dividends).

If the fund failed to qualify as a regulated
investment company accorded special tax treatment in
any taxable year, the fund would be subject to tax on
its taxable income at corporate rates, and all
distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-
term capital gains, would be taxable to shareholders
as ordinary income. In addition, the fund could be
required to recognize unrealized gains, pay
substantial taxes and interest and make substantial
distributions before requalifying as a regulated
investment company that is accorded special tax
treatment.

If the fund fails to distribute in a calendar year
substantially all of its ordinary income for such year
and substantially all of its capital gain net income
for the one-year period ending October 31 (or later if
the fund is permitted so to elect and so elects), plus
any retained amount from the prior year, the fund will
be subject to a 4% excise tax on the undistributed
amounts. A dividend paid to shareholders by the fund
in January of a year generally is deemed to have been
paid by the fund on December 31 of the preceding year,
if the dividend was declared and payable to
shareholders of record on a date in October, November
or December of that preceding year. The fund intends
generally to make distributions sufficient to avoid
imposition of the 4% excise tax.

FUND DISTRIBUTIONS. Distributions from the fund
(other than exempt-interest dividends, as discussed
below) will be taxable to shareholders as ordinary
income to the extent derived from the fund's
investment income and net short-term gains.
Distributions of net capital gains (that is, the
excess of net gains from capital assets held more than
one year over net losses from capital assets held for
not more than one year) will be taxable to
shareholders as such, regardless of how long a
shareholder has held the shares in the fund.

EXEMPT-INTEREST DIVIDENDS. The fund will be qualified
to pay exempt-interest dividends to its shareholders
only if, at the close of each quarter of the fund's
taxable year, at least 50% of the total value of the
fund's assets consists of obligations the interest on
which is exempt from federal income tax. Distributions
that the fund properly designates as exemptinterest
dividends are treated as interest excludable from
shareholders' gross income for federal income tax
purposes but may be taxable for federal alternative
minimum tax purposes and for state and local purposes.
If the fund intends to be qualified to pay exempt-
interest dividends, the fund may be limited in its
ability to enter into taxable transactions involving
forward commitments, repurchase agreements, financial
futures and options contracts on financial futures,
tax-exempt bond indices and other assets.

Part or all of the interest on indebtedness, if any,
incurred or continued by a shareholder to purchase or
carry shares of a fund paying exempt-interest
dividends is not deductible. The portion
of interest that is not deductible is equal to the
total interest paid or accrued on the indebtedness,
multiplied by the percentage of the fund's total
distributions (not including distributions from net
long-term capital gains) paid to the shareholder that
are exempt-interest dividends. Under rules used by
the Internal Revenue Service for determining when
borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase
of shares may be considered to have been made with
borrowed funds even though such funds are not directly
traceable to the purchase of shares.

In general, exempt-interest dividends, if any,
attributable to interest received on certain private
activity obligations and certain industrial
development bonds will not be tax-exempt to any
shareholders who are "substantial users" of the
facilities financed by such obligations or bonds or
who are "related persons" of such substantial users.

A fund which is qualified to pay exempt-interest
dividends will inform investors within 60 days of the
fund's fiscal year-end of the percentage of its income
distributions designated as taxexempt. The percentage
is applied uniformly to all distributions
made during the year. The percentage of income
designated as taxexempt for any particular
distribution may be substantially different from the
percentage of the fund's income that was taxexempt
during the period covered by the distribution.

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 shortterm capital gains
or convert short-term capital losses into longterm
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 currencydenominated 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 a 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.

SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. The
fund's investment in securities issued at a discount
and certain other obligations will (and investments
in securities purchased at a discount may) require
the fund to accrue and distribute income not yet
received. In order to generate sufficient cash to
make the requisite distributions, the fund may be
required to sell securities in its portfolio that it
otherwise would have continued to hold.

CAPITAL LOSS CARRYOVER. Distributions from capital
gains are generally made after applying any available
capital loss
carryovers. The amounts and expiration dates of any
capital loss carryovers available to the fund are
shown in Note 1 (Federal income taxes) to the
financial statements included in Part I of this SAI
or incorporated by reference into this SAI.

FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED
HEDGING TRANSACTIONS. The fund's transactions in
foreign currencies, foreign currency-denominated debt
securities and certain foreign currency options,
futures contracts and forward contracts (and similar
instruments) may give rise to ordinary income or loss
to the extent such income or loss results from
fluctuations in the value of the foreign currency
concerned.

If more than 50% of the fund's assets at year end
consists of the securities of foreign corporations,
the fund may elect to permit shareholders to claim a
credit or deduction on their income tax returns for
their pro rata portion of qualified taxes paid by the
fund to foreign countries in respect of foreign
securities the fund has held for at least the minimum
period specified in the Code. In such a case,
shareholders will include in gross income from
foreign sources their pro rata shares of such taxes.
A shareholder's ability to claim a foreign tax credit
or deduction in respect of foreign taxes paid by the
fund may be subject to certain limitations imposed by
the Code, as a result of which a shareholder may not
get a full credit or deduction for the amount of such
taxes. In particular, shareholders must hold their
fund shares (without protection from risk of loss) on
the ex-dividend date and for at least 15 additional
days during the 30-day period surrounding the ex-
dividend date to be eligible to claim a foreign tax
credit with respect to a given dividend.
Shareholders who do not itemize on their federal
income tax returns may claim a credit (but no
deduction) for such foreign taxes.

Investment by the fund in "passive foreign
investment companies" could subject the fund to a
U.S. federal income tax or other charge on the
proceeds from the sale of its investment in such a
company; however, this tax can be avoided by making
an election to mark such investments to market
annually or to treat the passive foreign investment
company as a "qualified electing fund."

A "passive foreign investment company" is any
foreign corporation: (i) 75 percent or more of the
income of which for the taxable year is passive
income, or (ii) the average
percentage of the assets of which (generally by value,
but by adjusted tax basis in certain cases) that
produce or are held for the production of passive
income is at least 50 percent. Generally, passive
income for this purpose means dividends, interest
(including income equivalent to interest), royalties,
rents, annuities, the excess of gains over losses from
certain property transactions and commodities
transactions, and foreign currency gains. Passive
income for this purpose does not include rents and
royalties received by the foreign corporation from
active business and certain income received from
related persons.

SALE OR REDEMPTION OF SHARES. The sale, exchange or
redemption of fund shares may give rise to a gain or
loss. In general, any gain or loss realized upon a
taxable disposition of shares will be treated as long-
term capital gain or loss if the shares have been held
for more than 12 months. Otherwise the gain or loss
on the sale, exchange or redemption of fund shares
will be treated as short-term capital gain or loss.
However, if a shareholder sells shares at a loss
within six months of purchase, any loss will be
disallowed for Federal income tax purposes to the
extent of any exempt-interest dividends received on
such shares. In addition, any loss (not already
disallowed as provided in the preceding sentence)
realized upon a taxable disposition of shares held for
six months or less will be treated as long-term,
rather than short-term, to the extent of any long-term
capital gain distributions received by the shareholder
with respect to the shares. All or a portion of any
loss realized upon a taxable disposition of fund
shares will be disallowed if other shares of the same
fund are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly
purchased shares will be adjusted to reflect the
disallowed loss.

SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS. Special
tax rules apply to investments though defined
contribution plans and other tax-qualified plans.
Shareholders should consult their tax adviser to
determine the suitability of shares of a fund as an
investment through such plans and the precise effect
of an investment on their particular tax situation.

BACKUP WITHHOLDING. The fund generally is required to
withhold and remit to the U.S. Treasury 31% 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 Internal Revenue Service recently revised its
regulations affecting the application to foreign
investors of the back-up withholding and withholding
tax rules described above. The new regulations will
generally be effective for payments made after
December 31, 1999 (although transition rules will
apply). In some circumstances, the new rules will
increase the certification and filing requirements
imposed on foreign investors in order to qualify for
exemption from the 31% back-up withholding tax rates
under income tax treaties. Foreign investors in a
fund should consult their tax advisors with respect to
the potential application of these new regulations.

MANAGEMENT

TRUSTEES NAME (AGE)

*+GEORGE PUTNAM (72), Chairman and President.
Chairman and Director of Putnam Management and Putnam
Mutual Funds. Director, Freeport Copper and Gold,
Inc. (a mining and natural resource
company), Houghton Mifflin Company (a major publishing
company) and Marsh & McLennan Companies, Inc.

JOHN A. HILL (57), Vice Chairman. Chairman and
Managing Director, First Reserve Corporation (a
registered investment adviser investing in companies
in the world-wide energy industry on behalf of
institutional investors). Director of Snyder Oil
Corporation, TransMontaigne Oil Company and various
private companies owned by First Reserve Corporation,
such as James River Coal and Anker Coal Corporation.

+WILLIAM F. POUNDS (70), Vice Chairman. Professor
Emeritus of Management, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology.
Director of IDEXX Laboratories, Inc. (a provider of
diagnostic products and services for the animal health
and food and environmental industries), Management
Sciences for Health, Inc. (a non-profit organization),
and Sun Company, Inc. (a petroleum refining and
marketing company).

JAMESON A. BAXTER (55), Trustee. President, Baxter
Associates, Inc. (a management consulting and private
investments firm). Director of MB Financial, Inc.,
ASHTA Chemicals, Inc., Banta Corporation (printing and
digital imaging), and Ryerson Tull, Inc. (America's
largest steel service corporation). Chairman Emeritus
of the Board of Trustees, Mount Holyoke College.

+HANS H. ESTIN (70), Trustee. Chartered Financial
Analyst and Vice Chairman, North American Management
Corp. (a registered investment adviser).

RONALD J. JACKSON (55), Trustee. Former Chairman,
President and Chief Executive Officer of Fisher-Price,
Inc. (a major toy manufacturer).

*PAUL L. JOSKOW (51), Trustee. Professor Emeritus of
Economics and Management and Director of the Center
for Energy and Environmental Policy Research,
Massachusetts Institute of Technology. Director, New
England Electric System (a public utility holding
company), State Farm Indemnity Company (an automobile
insurance company) and the Whitehead Institute for
Biomedical Research (a non-profit research
institution).

ELIZABETH T. KENNAN (61), Trustee. President Emeritus
and Professor, Mount Holyoke College. Director, Bell
Atlantic (a telecommunications company), the Kentucky
Home Life Insurance Companies, Bell Atlantic,
Northeast Utilities and Talbots (a distributor of
women's apparel).

*LAWRENCE J. LASSER (56), Trustee and Vice President.
President, Chief Executive Officer and Director of
Putnam Investments, Inc. and Putnam Investment
Management, Inc. Director of Marsh & McLennan
Companies, Inc. and the United Way of Massachusetts
Bay.

JOHN H. MULLIN, III (57), Trustee. Chairman and CEO
of Ridgeway Farm, Director of ACX Technologies, Inc.
(a company engaged in the manufacture of industrial
ceramics and packaging products), Alex. Brown Realty,
Inc. and The Liberty Corporation (a company engaged in
the life insurance and broadcasting industries).

+ROBERT E. PATTERSON (53), Trustee. President and
Trustee of Cabot Industrial Trust (a publicly traded
real estate investment trust). Director of Brandywine
Trust Company.

*GEORGE PUTNAM III (47), Trustee. President, New
Generation Research, Inc. (a publisher of financial
advisory and other research services relating to
bankrupt and distressed companies)
and New Generation Advisers, Inc. (a registered
investment adviser). Director, Massachusetts Audubon
Society and The Boston Family Office, L.L.C. (a
registered investment advisor).

*A.J.C. SMITH (64), Trustee. Chairman and Chief
Executive Officer, Marsh & McLennan Companies, Inc.
Director, Trident Partnership (a $667 million 10-year
limited partnership with over 30 institutional
investors).

W. THOMAS STEPHENS (56), Trustee. President and Chief
Executive Officer of MacMillan Bloedel Ltd. (a major
forest products company). Director, Qwest
Communications (a fiber optics manufacturer) and New
Century Energies (a public utility company).

W. NICHOLAS THORNDIKE (65), Trustee. Director of
various corporations and charitable organizations,
including Courier Corporation (a book manufacturer),
Data General Corporation (a provider of customized
computer solutions), Bradley Real Estate, Inc., and
Providence Journal Co.

OFFICERS NAME (AGE)

CHARLES E. PORTER (60), Executive Vice President.
Managing Director of Putnam Investments, Inc. and
Putnam Management.

PATRICIA C. FLAHERTY (52), Vice President. Senior
Vice President of Putnam Investments, Inc. and Putnam
Management.

GORDON H. SILVER (51), Vice President. Director and
Senior Managing Director of Putnam Investments, Inc.
and Putnam Management.

BRETT C. BROWCHUK (36), Vice President. Managing
Director of Putnam Management.

IAN C. FERGUSON (41), Vice President. Senior Managing
Director of Putnam Investments, Inc. and Putnam
Management.

RICHARD A. MONAGHAN (44), Vice President. Managing
Director of Putnam Investments, Inc., Putnam
Management and Putnam Mutual Funds.

JOHN R. VERANI (59), Vice President. Senior Vice
President of Putnam Investments, Inc. and Putnam
Management.

JOHN D. HUGHES (64), Senior Vice President and
Treasurer.

*Trustees who are or may be deemed to be "interested
persons" (as defined in the Investment Company Act of
1940) of the fund, Putnam Management or Putnam Mutual
Funds.

Messrs. Putnam, Lasser and Smith are deemed
"interested persons" by virtue of their positions as
officers or shareholders of the fund, or directors of
Putnam Management, Putnam Mutual Funds, or Marsh &
McLennan Companies, Inc., the parent company of Putnam
Management and Putnam Mutual Funds.

Mr. George Putnam, III, Mr. Putnam's son, is also an
"interested person" of the fund, Putnam Management,
and Putnam Mutual Funds. Mr. Joskow is not currently
an "interested person" of the fund but could be deemed
by the Securities and Exchange Commission to be an
"interested person" on account of his prior consulting
relationship with National Economic Research
Associates, Inc., a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc., which was terminated as of
August 31, 1998. The balance of the
Trustees are not "interested persons."
+Members of the Executive Committee of the Trustees.
The Executive Committee meets between regular meetings
of the Trustees as may be required to review
investment matters and other affairs of the fund and
may exercise all of the powers of the Trustees.
-----------------
Certain other officers of Putnam Management are
officers of the fund. SEE "ADDITIONAL OFFICERS" IN
PART I OF THIS SAI. The mailing address of each of
the officers and Trustees is One Post Office Square,
Boston, Massachusetts 02109.
Except as stated below, the principal occupations of
the officers and Trustees for the last five years have
been with the employers as shown above, although in
some cases they have held different positions with
such employers. Prior to July, 1998, Mr. Joskow was
Chairman of the Department of Economics, Massachusetts
Institute of Technology, and, prior to September,
1998, he was a consultant to National Economic
Research Associates. Prior to June, 1995, Dr. Kennan
was President of Mount Holyoke College. Prior to 1996,
Mr. Stephens was Chairman of the Board of Directors,
President and Chief Executive Officer of Johns
Manville Corporation. Prior to April, 1996, Mr.
Ferguson was CEO at Hong Kong Shanghai Banking
Corporation. Prior to February, 1998, Mr. Patterson
was Executive Vice President and Director of
Acquisitions of Cabot Partners Limited Partnership.
Prior to November, 1998, Mr. Monaghan was Managing
Director at Merrill Lynch.
Each Trustee of the fund receives an annual fee and an
additional fee for each Trustees' meeting attended.
Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees
receive additional fees for attendance at certain
committee meetings and for special services rendered
in that connection. All of the Trustees are Trustees
of all the Putnam funds and each receives fees for his
or her services. FOR DETAILS OF TRUSTEES' FEES PAID
BY THE FUND AND INFORMATION CONCERNING RETIREMENT
GUIDELINES FOR THE TRUSTEES, SEE "CHARGES AND
EXPENSES" IN PART I OF THIS SAI.
The Agreement and Declaration of Trust of the fund
provides that the fund will indemnify its Trustees and
officers against liabilities and expenses incurred in
connection with litigation in which they may be
involved because of their offices with the fund,
except if it is determined in the manner specified in
the Agreement and Declaration of Trust that they have
not acted in good faith in the reasonable belief that
their actions were in the best interests of the fund
or that such indemnification would relieve any officer
or Trustee of any liability to the fund or its
shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of his
or her duties. The fund, at its expense, provides
liability insurance for the benefit of its Trustees
and officers.
PUTNAM MANAGEMENT AND ITS AFFILIATES
Putnam Management is one of America's oldest and
largest money management firms. Putnam Management's
staff of experienced portfolio managers and research
analysts selects securities and constantly supervises
the fund's portfolio. By pooling an investor's money
with that of other investors, a greater variety of
securities can be purchased than would be the case
individually; the resulting diversification helps
reduce
investment risk. Putnam Management has been managing
mutual funds since 1937. Today, the firm serves as
the investment manager for the funds in the Putnam
Family, with nearly $222 billion in assets in nearly
11 million shareholder accounts at December 31, 1998.
An affiliate, The Putnam Advisory Company, Inc.,
manages domestic and foreign institutional accounts
and mutual funds, including the accounts of many
Fortune 500 companies. Another affiliate, Putnam
Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary
powers. At December 31, 1998, Putnam Management and
its affiliates managed over $294 billion in assets,
including over $20 billion in tax-exempt securities
and over $71 billion in retirement plan assets.

Putnam Management, Putnam Mutual Funds and Putnam
Fiduciary Trust Company are subsidiaries of Putnam
Investments, Inc., a holding company which in turn is,
except for a minority stake owned by employees, owned
by Marsh & McLennan Companies, Inc., a publiclyowned
holding company whose principal businesses are
international insurance and reinsurance brokerage,
employee benefit consulting and investment management.

Trustees and officers of the fund who are also
officers of Putnam Management or its affiliates or who
are stockholders of Marsh & McLennan Companies, Inc.
will benefit from the advisory fees, sales
commissions, distribution fees, custodian fees and
transfer agency fees paid or allowed by the fund.

THE MANAGEMENT CONTRACT

Under a Management Contract between the fund and
Putnam Management, subject to such policies as the
Trustees may determine, Putnam Management, at its
expense, furnishes continuously an investment program
for the fund and makes investment decisions on behalf
of the fund. Subject to the control of the Trustees,
Putnam Management also manages, supervises and
conducts the other affairs and business of the fund,
furnishes office space and equipment, provides
bookkeeping and clerical services (including
determination of the fund's net asset value, but
excluding shareholder accounting services) and places
all orders for the purchase and sale of the fund's
portfolio securities. Putnam Management may place
fund portfolio transactions with broker-dealers which
furnish Putnam Management, without cost to it, certain
research, statistical and quotation services of value
to Putnam Management and its affiliates in advising
the fund and other clients. In so doing, Putnam
Management may cause the fund to pay greater brokerage
commissions than it might otherwise pay.

FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER
THE MANAGEMENT CONTRACT, SEE "CHARGES AND EXPENSES" IN
PART I OF THIS SAI. Putnam Management's compensation
under the Management Contract may be reduced in any
year if the fund's expenses exceed the limits on
investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which
shares of the fund are qualified for offer or sale.
The term "expenses" is defined in the statutes or
regulations of such jurisdictions, and generally
excludes brokerage commissions, taxes, interest,
extraordinary expenses and, if the fund has a
distribution plan, payments made under such plan.

Under the Management Contract, Putnam Management may
reduce its compensation to the extent that the fund's
expenses exceed such lower expense limitation as
Putnam Management may, by notice to the fund, declare
to be effective. The expenses subject to this
limitation are exclusive of brokerage commissions,
interest,
taxes, deferred organizational and extraordinary
expenses and, if the fund has a distribution plan,
payments required under such plan. For the purpose of
determining any such limitation on Putnam Management's
compensation, expenses of the fund shall not reflect
the application of commissions or cash management
credits that may reduce designated fund expenses. THE
TERMS OF ANY EXPENSE LIMITATION FROM TIME TO TIME IN
EFFECT ARE DESCRIBED IN THE PROSPECTUS AND/OR PART I
OF THIS SAI.

In addition to the fee paid to Putnam Management, the
fund reimburses Putnam Management for the compensation
and related expenses of certain officers of the fund
and their assistants who provide certain
administrative services for the fund and the other
Putnam funds, each of which bears an allocated share
of the foregoing costs. The aggregate amount of all
such payments and reimbursements is determined
annually by the Trustees.

THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S MOST
RECENT FISCAL YEAR IS INCLUDED IN "CHARGES AND
EXPENSES" IN PART I OF THIS SAI. Putnam Management
pays all other salaries of officers of the fund. The
fund pays all expenses not assumed by Putnam
Management including, without limitation, auditing,
legal, custodial, investor servicing and shareholder
reporting expenses. The fund pays the cost of
typesetting for its prospectuses and the cost of
printing and mailing any prospectuses sent to its
shareholders. Putnam Mutual Funds pays the cost of
printing and distributing all other prospectuses.

The Management Contract provides that Putnam
Management shall not be subject to any liability to
the fund or to any shareholder of the fund for any act
or omission in the course of or connected with
rendering services to the fund in the absence of
willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties on the part of Putnam
Management.

The Management Contract may be terminated without
penalty by vote of the Trustees or the shareholders of
the fund, or by Putnam Management, on 30 days' written
notice. It may be amended only by a vote of the
shareholders of the fund. The Management Contract
also terminates without payment of any penalty in the
event of its assignment. The Management Contract
provides that it will continue in effect only so long
as such continuance is approved at least annually by
vote of either the Trustees or the shareholders, and,
in either case, by a majority of the Trustees who are
not "interested persons" of Putnam Management or the
fund. In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of
the outstanding voting securities" as defined in the
Investment Company Act of 1940.

PERSONAL INVESTMENTS BY EMPLOYEES OF PUTNAM MANAGEMENT

Employees of Putnam Management are permitted to engage
in personal securities transactions, subject to
requirements and restrictions set forth in Putnam
Management's Code of Ethics.
The Code of Ethics contains provisions and
requirements designed to identify and address certain
conflicts of interest between personal investment
activities and the interests of investment advisory
clients such as the funds. Among other things, the
Code of Ethics, consistent with standards recommended
by the Investment Company Institute's Advisory Group
on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time
periods during which personal transactions may not be
made in certain securities, and requires the
submission of duplicate broker confirmations and
quarterly reporting of securities transactions.
Additional restrictions
apply to portfolio managers, traders, research
analysts and others involved in the investment
advisory process. Exceptions to these and other
provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate
personnel.

PORTFOLIO TRANSACTIONS

INVESTMENT DECISIONS. Investment decisions for the
fund and for the other investment advisory clients of
Putnam Management and its affiliates are made with a
view to achieving their respective investment
objectives. Investment decisions are the product of
many factors in addition to basic suitability for the
particular client involved. Thus, a particular
security may be bought or sold for certain clients
even though it could have been bought or sold for
other clients at the same time. Likewise, a
particular security may be bought for one or more
clients when one or more other clients are selling the
security. In some instances, one client may sell a
particular security to another client. It also
sometimes happens that two or more clients
simultaneously purchase or sell the same security, in
which event each day's transactions in such security
are, insofar as possible, averaged as to price and
allocated between such clients in a manner which in
Putnam Management's opinion is equitable to each and
in accordance with the amount being purchased or sold
by each.
There may be circumstances when purchases or sales of
portfolio securities for one or more clients will have
an adverse effect on other clients.

BROKERAGE AND RESEARCH SERVICES. Transactions on U.S.
stock exchanges, commodities markets and futures
markets and other agency transactions involve the
payment by the fund of negotiated brokerage
commissions. Such commissions vary among different
brokers. A particular broker may charge different
commissions according to such factors as the
difficulty and size of the transaction. Transactions
in foreign investments often involve the payment of
fixed brokerage commissions, which may be higher than
those in the United States. There is generally no
stated commission in the case of securities traded in
the over-thecounter markets, but the price paid by the
fund usually includes an undisclosed dealer commission
or mark-up. In underwritten offerings, the price paid
by the fund includes a disclosed, fixed commission or
discount retained by the underwriter or dealer. It is
anticipated that most purchases and sales of
securities by funds investing primarily in tax-exempt
securities and certain other fixed-income securities
will be with the issuer or with underwriters of or
dealers in those securities, acting as principal.
Accordingly, those funds would not ordinarily pay
significant brokerage commissions with respect to
securities transactions. SEE "CHARGES AND EXPENSES"
IN PART I OF THIS SAI FOR INFORMATION CONCERNING
COMMISSIONS PAID BY THE FUND.

It has for many years been a common practice in the
investment advisory business for advisers of
investment companies and other institutional investors
to receive brokerage and research services (as defined
in the Securities Exchange Act of 1934, as amended
(the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such
advisers and from third parties with which such broker-
dealers have arrangements. Consistent with this
practice, Putnam Management receives brokerage and
research services and other similar services from many
broker-dealers with which Putnam Management places the
fund's portfolio transactions and from third parties
with which these broker-dealers have arrangements.
These services include such matters as general
economic and market reviews, industry and company
reviews, evaluations of investments, recommendations
as
to the purchase and sale of investments, newspapers,
magazines, pricing services, quotation services, news
services and personal computers utilized by Putnam
Management's managers and analysts. Where the services
referred to above are not used exclusively by Putnam
Management for research purposes, Putnam Management,
based upon its own allocations of expected use, bears
that portion of the cost of these services which
directly relates to their nonresearch 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 brokerdealer in other transactions.

As permitted by Section 28(e) of the 1934 Act, and by
the Management Contract, Putnam Management may cause
the fund to pay
a broker-dealer which provides "brokerage and
research services" (as defined in the 1934 Act) to
Putnam Management an amount of disclosed commission
for effecting securities transactions on stock
exchanges and other transactions for the fund on an
agency basis in excess of the commission which
another broker-dealer would have charged for
effecting that transaction. Putnam Management's
authority to cause the fund to pay any such greater
commissions is also subject to such policies as the
Trustees may adopt from time to time. Putnam
Management does not currently intend to cause the
fund to make such payments. It is the position of
the staff of the Securities and Exchange Commission
that Section 28(e) does not apply to the payment of
such greater commissions in "principal" transactions.
Accordingly Putnam Management will use its best
effort to obtain the most favorable price and
execution available with respect to such
transactions, as described above.

The Management Contract provides that commissions,
fees, brokerage or similar payments received by
Putnam Management or an affiliate in connection with
the purchase and sale of portfolio investments of the
fund, less any direct expenses approved by the
Trustees, shall be recaptured by the fund through a
reduction of the fee payable by the fund under the
Management Contract.
Putnam Management seeks to recapture for the fund
soliciting dealer fees on the tender of the fund's
portfolio securities in tender or exchange offers.
Any such fees which may be recaptured are likely to
be minor in amount.

Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc. and subject
to seeking the most favorable price and execution
available and such other policies
as the Trustees may determine, Putnam Management may
consider sales of shares of the fund (and, if
permitted by law, of the other Putnam funds) as a
factor in the selection of brokerdealers to execute
portfolio transactions for the fund.

PRINCIPAL UNDERWRITER

Putnam Mutual Funds is the principal underwriter of
shares of the fund and the other continuously offered
Putnam funds. Putnam Mutual Funds is not obligated
to sell any specific amount of shares of the fund and
will purchase shares for resale only against orders
for shares. SEE "CHARGES AND EXPENSES" IN PART I OF
THIS SAI FOR INFORMATION ON SALES CHARGES AND OTHER
PAYMENTS RECEIVED BY PUTNAM MUTUAL FUNDS.

INVESTOR SERVICING AGENT AND CUSTODIAN

Putnam Investor Services, a division of Putnam
Fiduciary Trust Company ("PFTC"), is the fund's
investor servicing agent (transfer, plan and dividend
disbursing agent), for which it receives fees which
are paid monthly by the fund as an expense of all its
shareholders. The fee paid to Putnam Investor
Services is determined on the basis of the number of
shareholder accounts, the number of transactions and
the assets of the fund. Putnam Investor Services has
won the DALBAR Service Award eight times in the past
nine years. In 1997 and 1998, Putnam was the only
company to win all three DALBAR Awards: for service
to investors, to financial advisors, and to variable
annuity contract holders. DALBAR, Inc. an independent
research firm, presents the awards to financial
services firms that provide consistently excellent
service.

PFTC is the custodian of the fund's assets. In
carrying out its duties under its custodian contract,
PFTC may employ one or more subcustodians whose
responsibilities include safeguarding and controlling
the fund's cash and securities, handling the receipt
and delivery of securities and collecting interest
and dividends on the fund's investments. PFTC and
any subcustodians employed by it have a lien on the
securities of the fund (to the extent permitted by
the fund's investment restrictions) to secure charges
and any advances made by such subcustodians at the
end of any day for the purpose of paying for
securities purchased by the fund. The fund expects
that such advances will exist only in unusual
circumstances. Neither PFTC nor any subcustodian
determines the investment policies of the fund or
decides which securities the fund will buy or sell.
PFTC pays the fees and other charges of any
subcustodians employed by it. The fund may from time
to time pay custodial expenses in full or in part
through the placement by Putnam Management of the
fund's portfolio transactions with the subcustodians
or with a thirdparty broker having an agreement with
the subcustodians. The fund pays PFTC an annual fee
based on the fund's assets, securities transactions
and securities holdings and reimburses PFTC for
certain out-of-pocket expenses incurred by it or any
subcustodian employed by it in performing custodial
services.

SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI FOR
INFORMATION ON FEES AND REIMBURSEMENTS FOR INVESTOR
SERVICING AND CUSTODY RECEIVED BY PFTC. THE FEES MAY
BE REDUCED BY CREDITS ALLOWED BY PFTC.

DETERMINATION OF NET ASSET VALUE

The fund determines the net asset value per share of
each class of shares once each day the New York Stock
Exchange (the "Exchange") is open. Currently, the
Exchange is closed
Saturdays, Sundays and the following holidays: New
Year's Day, Rev. Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, the
Fourth of July, Labor Day, Thanksgiving and
Christmas. The fund determines net asset value as of
the close of regular trading on the Exchange,
currently 4:00 p.m. However, equity options held by
the fund are priced as of the close of trading at
4:10 p.m., and futures contracts on U.S. government
and other fixed-income securities and index options
held by the fund are priced as of their close of
trading at 4:15 p.m.

Securities for which market quotations are readily
available are valued at prices which, in the opinion
of Putnam Management, most nearly represent the
market values of such securities.
Currently, such prices are determined using the last
reported sale price or, if no sales are reported (as
in the case of some securities traded over-the-
counter), the last reported bid price, except that
certain securities are valued at the mean between the
last reported bid and asked prices. Short-term
investments having remaining maturities of 60 days or
less are valued at amortized cost, which approximates
market value. All other securities and assets are
valued at their fair value following procedures
approved by the Trustees. Liabilities are deducted
from the total, and the resulting amount is divided
by the number of shares of the class outstanding.

If any securities held by the fund are restricted as
to resale, Putnam Management determines their fair
value following procedures approved by the Trustees.
The fair value of such securities is generally
determined as the amount which the fund could
reasonably expect to realize from an orderly
disposition of such securities over a reasonable
period of time. The valuation procedures applied in
any specific instance are likely to vary from case to
case. However, consideration is generally given to
the financial position of the issuer and other
fundamental analytical data relating to the
investment and to the nature of the restrictions on
disposition of the securities (including any
registration expenses that might be borne by the fund
in connection with such disposition). In addition,
specific factors are also generally considered, such
as the cost of the investment, the market value of
any unrestricted securities of the same class, the
size of the holding, the prices of any recent
transactions or offers with respect to such
securities and any available analysts' reports
regarding the issuer.

Generally, trading in certain securities (such as
foreign securities) is substantially completed each
day at various times prior to the close of the
Exchange. The values of these securities used in
determining the net asset value of the fund's shares
are computed as of such times. Also, because of the
amount of time required to collect and process
trading information as to large numbers of securities
issues, the values of certain securities (such as
convertible bonds, U.S. government securities, and
tax-exempt securities) are determined based on market
quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such
securities may occur between such times and the close
of the Exchange which will not be reflected in the
computation of the fund's net asset value. If events
materially affecting the value of such securities
occur during such period, then these securities will
be valued at their fair value following procedures
approved by the Trustees. In addition, securities
held by some of the funds may be traded in foreign
markets that are open for business on days that a
fund is not, and the trading of such securities on
those days may have an impact on the value of a
shareholder's investment at a time when the
shareholder cannot buy and sell shares of the fund.

Money market funds generally value their portfolio
securities at amortized cost according to Rule 2a-7
under the Investment Company Act of 1940.

HOW TO BUY SHARES

GENERAL

The prospectus contains a general description of how
investors may buy shares of the fund and states
whether the fund offers more than one class of
shares. This SAI contains additional information
which may be of interest to investors.

Class A shares and class M shares are generally sold
with a sales charge payable at the time of purchase
(except for class A shares and class M shares of
money market funds). As used in this SAI and unless
the context requires otherwise, the term "class A
shares" includes shares of funds that offer only one
class of shares. The prospectus contains a table of
applicable sales charges. For information about how
to purchase class A or class M shares of a Putnam
fund at net asset value through an employersponsored
retirement plan, please consult your employer.
Certain purchases of class A shares and class M
shares may be exempt from a sales charge or, in the
case of class A shares, may be subject to a
contingent deferred sales charge ("CDSC"). See
"General-Sales without sales charges or contingent
deferred sales charges," "Additional Information
About Class A and Class M shares," and "Contingent
Deferred Sales Charges--Class A shares."

Class B shares and class C shares are sold subject to
a CDSC payable upon redemption within a specified
period after purchase. The prospectus contains a
table of applicable CDSCs.

Class B shares will automatically convert into class
A shares no later than the end of the month eight
years after the purchase date, and may, in the
discretion of the Trustees, convert to class A shares
earlier. Class B shares acquired by exchanging class
B shares of another Putnam fund will convert into
class A shares based on the time of the initial
purchase. Class B shares acquired through
reinvestment of distributions will convert into Class
A shares based on the date of the initial purchase to
which such shares relate. For this purpose, class B
shares acquired through reinvestment of distributions
will be attributed to particular purchases of class B
shares in accordance with such procedures as the
Trustees may determine from time to time. The
conversion of class B shares to class A shares is
subject to the condition that such conversions will
not constitute taxable events for Federal tax
purposes.

Class Y shares, which are not subject to sales
charges or a CDSC, are available only to certain
defined contribution plans. See the prospectus that
offers class Y shares for more information.
Certain purchase programs described below are not
available to defined contribution plans. Consult
your employer for information on how to purchase
shares through your plan.

The fund is currently making a continuous offering of
its shares. The fund receives the entire net asset
value of shares sold. The fund will accept
unconditional orders for shares to be executed at the
public offering price based on the net asset value
per share next determined after the order is placed.
In the case of class A shares and class M shares, the
public offering price is the net asset value plus the
applicable sales charge, if any. No sales charge is
included in the public offering price of other
classes of shares. In the case of orders for
purchase of shares placed through dealers, the public
offering price will be based on the net asset value
determined on the day the order is placed, but only
if the dealer receives the order before the close of
regular trading on the Exchange. If the dealer
receives the order after the close of the Exchange,
the price will be based on the net asset value next
determined. If funds for the purchase of shares are
sent directly to Putnam Investor Services, they will
be invested at the public offering price based on the
net asset value next determined after receipt.
Payment for shares of the fund must be in U.S.
dollars; if made by check, the check must be drawn on
a U.S. bank.

Initial and subsequent purchases must satisfy the
minimums stated in the prospectus, except that (i)
individual investments under certain employee benefit
plans or Tax Qualified Retirement Plans may be lower,
(ii) persons who are already shareholders may make
additional purchases of $50 or more by sending funds
directly to Putnam Investor Services (see "Your
investing account" below), and (iii) for investors
participating in systematic investment plans and
military allotment plans, the initial and subsequent
purchases must be $25 or more. Information about
these plans is available from investment dealers or
from Putnam Mutual Funds.

As a convenience to investors, shares may be
purchased through a systematic investment plan. Pre-
authorized monthly bank drafts for a fixed amount (at
least $25) are used to purchase fund shares at the
applicable public offering price next determined
after Putnam Mutual Funds receives the proceeds from
the draft.
A shareholder may choose any day of the month and, if
a given month (for example, February) does not
contain that particular date, or if the date falls on
a weekend or holiday, the draft will be processed on
the next business day. Further information and
application forms are available from investment
dealers or from Putnam Mutual Funds.

Except for funds that declare a distribution daily,
distributions to be reinvested are reinvested without
a sales charge in shares of the same class as of the
ex-dividend date using the net asset value determined
on that date, and are credited to a shareholder's
account on the payment date. Dividends for Putnam
money market funds are credited to a shareholder's
account on the payment date. Distributions for all
other funds that declare a distribution daily are
reinvested without a sales charge as of the last day
of the period for which distributions are paid using
the net asset value determined on that date, and are
credited to a shareholder's account on the payment
date.

PAYMENT IN SECURITIES. In addition to cash, the fund
may accept securities as payment for fund shares at
the applicable net asset value. Generally, the fund
will only consider accepting securities to increase
its holdings in a portfolio security, or if Putnam
Management determines that the offered securities are
a suitable investment for the fund and in a
sufficient amount for
efficient management.
While no minimum has been established, it is expected
that the fund would not accept securities with a
value of less than $100,000 per issue as payment for
shares. The fund may reject in whole or in part any
or all offers to pay for purchases of fund shares
with securities, may require partial payment in cash
for such purchases to provide funds for applicable
sales charges, and may discontinue accepting
securities as payment for fund shares at any time
without notice. The fund will value accepted
securities in the manner described in the section
"Determination of Net Asset Value" for valuing shares
of the fund. The fund will only accept securities
which are delivered in proper form. The fund will not
accept options or restricted securities as payment
for shares. The acceptance of securities by certain
funds in exchange for fund shares is subject to
additional requirements. For federal income tax
purposes, a purchase of fund shares with securities
will be treated as a sale or exchange of such
securities on which the investor will generally
realize a taxable gain or loss. The processing of a
purchase of fund shares with securities involves
certain delays while the fund considers the
suitability of such securities and while other
requirements are satisfied. For information
regarding procedures for payment in securities,
contact Putnam Mutual Funds.
Investors should not send securities to the fund
except when authorized to do so and in accordance
with specific instructions received from Putnam
Mutual Funds.

SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED
SALES CHARGES. The fund may sell shares without a
sales charge or CDSC to:

(i) current and retired Trustees of the fund;
officers of the
fund; directors and current and retired U.S. full-
time employees of Putnam Management, Putnam Mutual
Funds, their parent corporations and certain
corporate affiliates; family members of and
employee benefit plans for the foregoing; and
partnerships, trusts or other entities in which
any of the foregoing has a substantial interest;

(ii) employer-sponsored retirement plans, for the
repurchase of shares in connection with repayment
of plan loans made to plan participants (if the
sum loaned was obtained by
redeeming shares of a Putnam fund sold with a sales
charge)
(not offered by tax-exempt funds);
(iii) clients of administrators of tax-qualified
employersponsored retirement plans which have
entered into agreements with Putnam Mutual Funds
(not offered by tax-exempt funds);
(iv) registered representatives and other
employees of brokerdealers having sales agreements
with Putnam Mutual Funds; employees of financial
institutions having sales agreements with Putnam
Mutual Funds or otherwise having an arrangement
with any such broker-dealer or financial
institution with respect to sales of fund shares;
and their spouses and children under age 21
(Putnam Mutual Funds is regarded as
the dealer of record for all such accounts);

(v) investors meeting certain requirements who
sold shares of certain Putnam closed-end funds
pursuant to a tender offer by such closed-end
fund;

(vi) a trust department of any financial
institution purchasing shares of the fund in its
capacity as trustee of any trust (other than a
tax-qualified retirement plan trust), through an
arrangement approved by Putnam Mutual Funds, if
the value of the shares of the fund and other
Putnam funds purchased or held by all such
trusts exceeds $1 million in the aggregate; and

(vii) "wrap accounts" maintained for clients of
brokerdealers, financial institutions or
financial intermediaries who have entered into
agreements with Putnam Mutual Funds with respect
to such accounts, which in all cases shall be
subject to a wrap fee economically comparable to
a sales charge. Fund shares offered pursuant to
this waiver may not be advertised as "no load,"
or otherwise offered for sale at NAV without a
wrap fee.

In addition, each of the Putnam funds may issue its
shares at net asset value without an initial sales
charge or a CDSC in connection with the acquisition
of substantially all of the securities owned by other
investment companies or personal holding companies,
and the CDSC will be waived on redemptions of shares
arising out of death or post-purchase disability of a
shareholder or settlor of a living trust account and
on redemptions in connection with certain withdrawals
from IRA or other retirement plans and on redemptions
to pay premiums for insurance under Putnam's insured
investor program. Up to 12% of the value of shares
subject to a systematic withdrawal plan may also be
redeemed each year without a CDSC. The fund may sell
class A or class M shares at net asset value to
members of qualified groups. See "Group purchases of
class A and class M shares" below. Class A and class
M shares are available without an initial sales
charge to "class A qualified benefit plans" and
"class M qualified benefit plans," respectively, as
described below. See "Qualified benefit plans;
Individual account plans" below.

PAYMENTS TO DEALERS. Putnam Mutual Funds may, at its
expense, pay concessions in addition to the payments
disclosed in the prospectus to dealers which satisfy
certain criteria established from time to time by
Putnam Mutual Funds relating to increasing net sales
of shares of the Putnam funds over prior periods, and
certain other factors.

ADDITIONAL INFORMATION ABOUT CLASS A AND CLASS M SHARES

The underwriter's commission is the sales charge
shown in the prospectus less any applicable dealer
discount. Putnam Mutual Funds will give dealers ten
days' notice of any changes in the dealer discount.
Putnam Mutual Funds retains the entire sales charge
on any retail sales made by it.

Putnam Mutual Funds offers several plans by which an
investor may obtain reduced sales charges on
purchases of class A shares and class M shares. The
variations in sales charges reflect the varying
efforts required to sell shares to separate
categories of purchasers. These plans may be altered
or discontinued at any time.

The public offering price of class A and class M
shares is the net asset value plus a sales charge
that varies depending on the size of your purchase.
The fund receives the net asset value. The sales
charge is allocated between your investment dealer
and Putnam Mutual Funds as shown in the following
table, except when Putnam Mutual Funds, in its
discretion, allocates the entire amount to your
investment dealer.

For Growth Funds, Growth and Income Funds and Asset
Allocation Funds only:

CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE
AS A REALLOWED TO AS A REALLOWED TO
PERCENTAGE DEALERS AS A PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE OFFERING PRICE
- -------------------------------------------------------------------------------
Under 50,000 5.75% 5.00% 3.50% 3.00%
50,000 but under 100,000 4.50 3.75 2.50 2.00
100,000 but under 250,000 3.50 2.75 1.50 1.00
250,000 but under 500,000 2.50 2.00 1.00 1.00
500,000 but under 1,000,000 2.00 1.75 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- -------------------------------------------------------------------------------

For Income Funds only (except for Putnam Intermediate
U.S. Government Income Fund and Putnam Preferred
Income Fund):

CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE
AS A REALLOWED TO AS A REALLOWED TO
PERCENTAGE DEALERS AS A PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE OFFERING PRICE
- --------------------------------------------------------------------------
Under 50,000 4.75% 4.25% 3.25% 3.00%
50,000 but under 100,000 4.50 4.00 2.25 2.00
100,000 but under 250,000 3.50 3.00 1.50 1.25
250,000 but under 500,000 2.50 2.25 1.00 1.00
500,000 but under 1,000,000 2.00 1.75 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- -----------------------------------------------------------------------------

For Putnam Intermediate U.S. Government Income Fund
and Putnam Preferred Income Fund only:

CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE
AS A REALLOWED TO AS A REALLOWED TO
PERCENTAGE DEALERS AS A PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE OFFERING PRICE
- --------------------------------------------------------------------------
Under 100,000 3.25% 3.00% 2.00% 1.80%
100,000 but under 250,000 2.50 2.25 1.50 1.30
250,000 but under 500,000 2.00 1.75 1.00 1.00
500,000 but under 1,000,000 1.50 1.25 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- ----------------------------------------------------------------------------

For Tax Free Funds only:

CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE
AS A REALLOWED TO AS A REALLOWED TO
PERCENTAGE DEALERS AS A PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE OFFERING PRICE
- --------------------------------------------------------------------------
Under 25,000 4.75% 4.50% 3.25% 3.00%
25,000 but under 50,000 4.50 4.25 3.25 3.00
50,000 but under 100,000 4.50 4.25 2.25 2.00
100,000 but under 250,000 3.75 3.50 1.50 1.25
250,000 but under 500,000 3.00 2.75 1.00 1.00
500,000 but under 1,000,000 2.00 1.85 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- ------------------------------------------------------------------------

COMBINED PURCHASE PRIVILEGE. The following persons
may qualify for the sales charge reductions or
eliminations shown in the prospectus by combining
into a single transaction the purchase of class A
shares or class M shares with other purchases of any
class of shares:

(i) an individual, or a "company" as defined in
Section 2(a)(8) of the Investment Company Act
of 1940 (which includes corporations which are
corporate affiliates of each other);

(ii) an individual, his or her spouse and their
children under twenty-one, purchasing for his,
her or their own account;

(iii) a trustee or other fiduciary purchasing
for a single trust estate or single fiduciary
account (including a pension, profit-sharing,
or other employee benefit trust created
pursuant to a plan qualified under Section 401
of the Internal Revenue Code of 1986, as
amended (the "Code"));

(iv) tax-exempt organizations qualifying under
Section 501(c)(3) of the Internal Revenue Code
(not including taxexempt organizations
qualifying under Section 403(b)(7) (a "403(b)
plan") of the Code; and

(v) employee benefit plans of a single employer or of
affiliated employers, other than 403(b) plans.
A combined purchase currently may also include shares
of any class of other continuously offered Putnam
funds (other than money market funds) purchased at
the same time through a single investment dealer, if
the dealer places the order for such shares directly
with Putnam Mutual Funds.

CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION).
A purchaser of class A shares or class M shares may
qualify for a cumulative quantity discount by
combining a current purchase (or combined purchases
as described above) with certain other shares of any
class of Putnam funds already owned. The applicable
sales charge is based on the total of:

(i) the investor's current purchase; and

(ii) the maximum public offering price (at the close
of
business on the previous day) of:

(a) all shares held by the investor in
all of the Putnam funds (except money
market funds); and

(b) any shares of money market funds
acquired by exchange from other Putnam
funds; and

(iii) the maximum public offering price of all
shares described in paragraph (ii) owned by
another shareholder eligible to participate
with the investor in a "combined purchase" (see
above).

To qualify for the combined purchase privilege or to
obtain the cumulative quantity discount on a purchase
through an investment dealer, when each purchase is
made the investor or dealer must provide Putnam
Mutual Funds with sufficient information to verify
that the purchase qualifies for the privilege or
discount. The shareholder must furnish this
information to Putnam Investor Services when making
direct cash investments.

STATEMENT OF INTENTION. Investors may also obtain
the reduced sales charges for class A shares or class
M shares shown in the prospectus for investments of a
particular amount by means of a written Statement of
Intention, which expresses the investor's intention
to invest that amount (including certain "credits,"
as described below) within a period of 13 months in
shares of any class of the fund or any other
continuously offered Putnam fund (excluding money
market funds). Each purchase of class A shares or
class M shares under a Statement of Intention will be
made at the public offering price applicable at the
time of such purchase to a single transaction of the
total dollar amount indicated in the Statement of
Intention. A Statement of Intention may include
purchases of shares made not more than 90 days prior
to the date that an investor signs a Statement;
however, the 13-month period during which the
Statement of Intention is in effect will begin on the
date of the earliest purchase to be included.

An investor may receive a credit toward the amount
indicated in the Statement of Intention equal to the
maximum public offering
price as of the close of business on the previous day
of all shares he or she owns on the date of the
Statement of Intention which are eligible for
purchase under a Statement of Intention (plus any
shares of money market funds acquired by exchange of
such eligible shares). Investors do not receive
credit for shares purchased by the reinvestment of
distributions. Investors qualifying for the
"combined purchase privilege" (see above) may
purchase shares under a single Statement of
Intention.

The Statement of Intention is not a binding
obligation upon the investor to purchase the full
amount indicated. The minimum initial investment
under a Statement of Intention is 5% of such amount,
and must be invested immediately. Class A shares or
class M shares purchased with the first 5% of such
amount will be held in escrow to secure payment of
the higher sales charge applicable to the shares
actually purchased if the full amount indicated is
not purchased. When the full amount indicated has
been purchased, the escrow will be released. If an
investor desires to redeem escrowed shares before the
full amount has been purchased, the shares will be
released from escrow only if the investor pays the
sales charge that, without regard to the Statement of
Intention, would apply to the total investment made
to date.

To the extent that an investor purchases more than
the dollar amount indicated on the Statement of
Intention and qualifies for a further reduced sales
charge, the sales charge will be adjusted for the
entire amount purchased at the end of the 13-month
period, upon recovery from the investor's dealer of
its portion of the sales charge adjustment. Once
received from the dealer, which may take a period of
time or may never occur, the sales charge adjustment
will be used to purchase additional shares at the
then current offering price applicable to the actual
amount of the aggregate purchases. These additional
shares will not be considered as part of the total
investment for the purpose of determining the
applicable sales charge pursuant to the Statement of
Intention. No sales charge adjustment will be made
unless and until the investor's dealer returns any
excess commissions previously received.

To the extent that an investor purchases less than
the dollar amount indicated on the Statement of
Intention within the 13month period, the sales charge
will be adjusted upward for the entire amount
purchased at the end of the 13-month period. This
adjustment will be made by redeeming shares from the
account to cover the additional sales charge, the
proceeds of which will be paid to the investor's
dealer and Putnam Mutual Funds in accordance with the
prospectus. If the account exceeds an amount that
would otherwise qualify for a reduced sales charge,
that reduced sales charge will be applied.

Statements of Intention are not available for certain
employee benefit plans.

Statement of Intention forms may be obtained from
Putnam Mutual Funds or from investment dealers.
Interested investors should read the Statement of
Intention carefully.

GROUP PURCHASES OF CLASS A AND CLASS M SHARES.
Members of qualified groups may purchase class A
shares of the fund at a group sales charge rate of
4.50% of the public offering price (4.71% of the net
amount invested). The dealer discount on such sales
is 3.75% of the offering price. Members of qualified
groups may also purchase class M shares at net asset
value.

To receive the class A or class M group rate, group
members must
purchase shares through a single investment dealer
designated by the group. The designated dealer must
transmit each member's initial purchase to Putnam
Mutual Funds, together with payment and completed
application forms. After the initial purchase, a
member may send funds for the purchase of shares
directly to Putnam Investor Services. Purchases of
shares are made at the public offering price based on
the net asset value next determined after Putnam
Mutual Funds or Putnam Investor Services receives
payment for the shares. The minimum investment
requirements described above apply to purchases by
any group member. Only shares purchased under the
class A group discount are included in calculating
the purchased amount for the purposes of these
requirements.

Qualified groups include the employees of a
corporation or a sole proprietorship, members and
employees of a partnership or association, or other
organized groups of persons (the members of which may
include other qualified groups) provided that: (i)
the group has at least 25 members of which, with
respect to the class A discount only, at least 10
members participate in the initial purchase; (ii) the
group has been in existence for at least six months;
(iii) the group has some purpose in addition to the
purchase of investment company shares at a reduced
sales charge; (iv) the group's sole organizational
nexus or connection is not that the members are
credit card holders of a company, policy holders of
an insurance company, customers of a bank or broker
dealer, clients of an investment adviser or security
holders of a company; (v) with respect to the class A
discount only, the group agrees to provide its
designated investment dealer access to the group's
membership by means of written communication or
direct presentation to the membership at a meeting on
not less frequently than an annual basis; (vi) the
group or its investment dealer will provide annual
certification in form satisfactory to Putnam Investor
Services that the group then has at least 25 members
and, with respect to the class A discount only, that
at least ten members participated in group purchases
during the immediately preceding 12 calendar months;
and (vii) the group or its investment dealer will
provide periodic certification in form satisfactory
to Putnam Investor Services as to the eligibility of
the purchasing members of the group.

Members of a qualified group include: (i) any group
which meets the requirements stated above and which
is a constituent member of a qualified group; (ii)
any individual purchasing for his or her own account
who is carried on the records of the group or on the
records of any constituent member of the group as
being a good standing employee, partner, member or
person of like status of the group or constituent
member; or (iii) any fiduciary purchasing shares for
the account of a member of a qualified group or a
member's beneficiary. For example, a qualified group
could consist of a trade association which would have
as its members individuals, sole proprietors,
partnerships and corporations. The members of the
group would then consist of the individuals, the sole
proprietors and their employees, the members of the
partnerships and their employees, and the
corporations and their employees, as well as the
trustees of employee benefit trusts acquiring class A
shares for the benefit of any of the foregoing.

A member of a qualified group may, depending upon the
value of class A shares of the fund owned or proposed
to be purchased by the member, be entitled to
purchase class A shares of the fund at non-group
sales charge rates shown in the prospectus which may
be lower than the group sales charge rate, if the
member qualifies as a person entitled to reduced non-
group sales charges. Such a group member will be
entitled to purchase at the lower rate if,
at the time of purchase, the member or his or her
investment dealer furnishes sufficient information
for Putnam Mutual Funds or Putnam Investor Services
to verify that the purchase qualifies for the lower
rate.

Interested groups should contact their investment
dealer or Putnam Mutual Funds. The fund reserves the
right to revise the terms of or to suspend or
discontinue group sales at any time.

QUALIFIED BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS.
The terms "class A qualified benefit plan" and "class
M qualified benefit plan" mean any employer-sponsored
plan or arrangement, whether or not tax-
qualified and whether or not Putnam Fiduciary
Trust Company or its affiliates provide recordkeeping
or other services , that initially invest at least
$1 million or $500,000, respectively, in class A
shares or class M shares of the fund and other
Putnam funds.

The fund may sell class A shares at net asset value
to class A qualified benefit plans and may sell class
M shares at net asset value to class M qualified
benefit plans .

The table of sales charges in the prospectus applies
to sales to employer-sponsored retirement plans that
choose not to be treated as class A
qualified benefit plans, except that the fund may
sell class A shares at net asset value to employee
benefit plans, including plans with respect to
which separate accounts are maintained for each
participant , of employers or of affiliated (as
defined in Section 2(a)(3)(C) of the Investment
Company Act of 1940) employers which have at
least $1 million in assets to whom such plan
is made available, in connection with a payroll
deduction system of plan funding (or other system
acceptable to Putnam Investor Services) by which
contributions or account information for plan
participation are transmitted to Putnam Investor
Services by methods acceptable to Putnam Investor
Services.

Additional information about qualified benefit
plans is available from investment dealers or
from Putnam Mutual Funds.

CONTINGENT DEFERRED SALES CHARGES; COMMISSIONS

CLASS A SHARES. Except as described below, a CDSC of
0.50% (0.75% in the case of plans with less
than $5 million in Putnam funds and other
investmentsmanaged by Putnam Management or its
affiliates) of the total amount redeemed is
imposed on redemptions of shares purchased by class A
qualified benefit plans if, within two years of a
plan's initial purchase of class A shares, it redeems
90% or more of its cumulative purchases. Thereafter,
such plan is no longer liable for any CDSC.
Class A qualified benefit plans whose dealer
of record has, with Putnam Mutual Funds' approval,
waived its commission or agreed to refund its
commission to Putnam Mutual Funds in the event a CDSC
would otherwise be applicable, are not subject to any
CDSC.

Similarly, class A shares purchased at net asset
value by any investor other than a class A qualified
benefit plan, including purchases pursuant to any
Combined Purchase Privilege, Right of Accumulation or
Statement of Intention, are subject to a CDSC of
1.00% or 0.50%, respectively, if redeemed within the
first or second year after purchase, unless the
dealer of record waived its commission with Putnam
Mutual Funds' approval. The class A CDSC is imposed
on the lower of the cost and the current net asset
value of the shares redeemed.

Except as described below for sales to class A
qualified benefit plans, Putnam Mutual Funds pays
investment dealers of record commissions on sales of
class A shares of $1 million or more ,
including purchases pursuant to any Combined Purchase
Privilege, Right of Accumulation or Statement of
Intention, during the one-year period beginning with
the date of the initial purchase at net asset value.
Each subsequent one-year measuring period for these
purposes will begin with the first net asset value
purchase following the end of the prior period. Such
commissions are paid at the rate of 1.00% of the
amount under $3 million, 0.50% of the next $47
million and 0.25% thereafter.

On sales at net asset value to a class A qualified
benefit plan, Putnam Mutual Funds pays commissions to
the dealer of record at the time of the sale on net
monthly purchases up to the following rates:
1.00% of the first $1 million, 0.75% of the next $1
million and 0.50% thereafter.

Different CDSC and commission rates may apply to
shares purchased prior to April 15, 1997 and to
shares purchased by investmentonly plans prior to
August 1, 1999 .

ALL SHARES. Investors who set up an Automatic Cash
Withdrawal Plan ("ACWP") for a share account (see
"Plans available to shareholders -- Automatic Cash
Withdrawal Plan") may withdraw through the ACWP up to
12% of the net asset value of the account (calculated
as set forth below) each year without incurring any
CDSC. Shares not subject to a CDSC (such as shares
representing reinvestment of distributions) will be
redeemed first and will count toward the 12%
limitation. If there are insufficient shares not
subject to a CDSC, shares subject to the lowest CDSC
liability will be redeemed next until the 12% limit
is reached. The 12% figure is calculated on a pro
rata basis at the time of the first payment made
pursuant to an ACWP and recalculated thereafter on a
pro rata basis at the time of each ACWP payment.
Therefore, shareholders who have chosen an ACWP based
on a percentage of the net asset value of their
account of up to 12% will be able to receive ACWP
payments without incurring a CDSC. However,
shareholders who have chosen a specific dollar amount
(for example, $100 per month from a fund that pays
income distributions monthly) for their periodic ACWP
payment should be aware that the amount of that
payment not subject to a CDSC may vary over time
depending on the net asset value of their account.
For example, if the net asset value of the account is
$10,000 at the time of payment, the shareholder will
receive $100 free of the CDSC (12% of $10,000 divided
by 12 monthly payments). However, if at the time of
the next payment the net asset value of the account
has fallen to $9,400, the shareholder will receive
$94 free of any CDSC (12% of $9,400 divided by 12
monthly payments) and $6 subject to the lowest
applicable CDSC. This ACWP privilege may be revised
or terminated at any time.

No CDSC is imposed on the redemption of shares
of any class subject to a CDSC to the extent
that the shares redeemed (i) are no longer
subject to the holding period therefor, (ii) resulted
from reinvestment of distributions , or (iii)
were exchanged for shares of another Putnam fund,
provided that the shares acquired in such exchange or
subsequent exchanges (including shares of a Putnam
money market fund) will continue to remain subject to
the CDSC, if applicable, until the applicable holding
period expires. In determining whether the CDSC
applies to each redemption , shares not
subject to a CDSC are redeemed first.

The fund will waive any CDSC on redemptions, in the
case of individual, joint or Uniform Transfers to Minors Act
accounts, in the event of death or post-purchase
disability of a shareholder, for the purpose of
paying benefits pursuant to tax-qualified retirement
plans ("Benefit Payments"), or, in the case of living
trust accounts, in the event of the death or post-
purchase disability of the settlor of the
trust . Benefit Payments currently
include, without limitation, (1) distributions from
an IRA due to death or disability, (2) a return of
excess contributions to an IRA or 401(k) plan, and
(3) distributions from retirement plans qualified
under Section 401(a) of the Code or from a 403(b)
plan due to death, disability, retirement or
separation from service. These waivers may be changed
at any time. Additional waivers may apply to IRA
accounts opened prior to February 1, 1994.

ADDITIONAL INFORMATION ABOUT CLASS B SHARES

Except as noted below, Putnam Mutual Funds will pay a
4% commission on sales of class B shares of a fund
only to those financial intermediaries who have
entered into service agreements with Putnam Mutual
Funds. For tax-exempt funds, this commission
includes a 0.20% pre-paid service fee (except for
Putnam Municipal Income Fund, which has a 0.25% pre-
paid service fee). For Putnam Intermediate U.S.
Government Income Fund, Putnam Mutual Funds will pay
a 2.75% commission to financial intermediaries
selling class B shares of the fund. For money market
funds, class B shares may only be purchased as part
of an exchange to class B shares of another Putnam
fund or from class B shares of another Putnam fund.
Class B share purchases for money market funds are
not subject to a separate CDSC, but a if a
shareholder exchanges class B shares from a non-money
market fund to a money market fund and then redeems
the class B shares of the money market fund, that
redemption will be subject to the CDSC applicable to
the class B shares of the non-money market fund.
Therefore no up-front commission is paid on sales of
class B shares for money market funds. Putnam Mutual
Funds will retain any contingent deferred sales
charges imposed on redemptions of class B shares to
compensate it for the cost of paying the upfront
commissions paid to financial intermediaries for
class B share sales.

DISTRIBUTION PLANS

If the fund or a class of shares of the fund has
adopted a distribution plan, the prospectus describes
the principal features of the plan. This SAI
contains additional information which may be of
interest to investors.

Continuance of a plan is subject to annual approval
by a vote of the Trustees, including a majority of
the Trustees who are not interested persons of the
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 a plan must
be likewise approved by the Trustees and the
Qualified Trustees. No plan may be amended in order
to increase materially the costs which the fund may
bear for distribution pursuant to such plan without
also being approved by a majority of the outstanding
voting securities of the fund or the relevant class
of the fund, as the case may be.
A plan terminates automatically in the event of its
assignment and may be terminated without penalty, at
any time, by a vote of a majority of the Qualified
Trustees or by a vote of a majority of the
outstanding voting securities of the fund or the
relevant class of the fund, as the case may be.

Putnam Mutual Funds compensates qualifying dealers
(including, for this purpose, certain financial institutions) for
sales of shares and the maintenance of shareholder
accounts.
Putnam Mutual Funds may suspend or modify its
payments to dealers. The payments are also subject
to the continuation of the relevant distribution
plan, the terms of the service agreements between the
dealers and Putnam Mutual Funds and any applicable
limits imposed by the National Association of
Securities Dealers, Inc.
Financial institutions receiving payments from Putnam
Mutual Funds as described above may be required to
comply with various state and federal regulatory
requirements, including among others those regulating
the activities of securities brokers or dealers.
Except as otherwise agreed between Putnam Mutual
Funds and a dealer, for purposes of determining the
amounts payable to dealers for shareholder accounts
for which such dealers are designated as the dealer
of record, "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.
CLASS A SHARES:
Putnam Mutual Funds makes quarterly payments to
dealers at the annual rates set forth below (as a
percentage of the average net asset value of class A
shares for which such dealers are designated the
dealer of record) except that payments to dealers for
shares held by class A qualified benefit plans may
be made at other rates, as described below. No
payments are made during the first year after
purchase on shares purchased at net asset value by
shareholders that invest at least $1 million
or that are class A qualified benefit plans,
unless the shareholder has made arrangements with
Putnam Mutual Funds and the dealer of record has
waived the sales commission.
Rate Fund
0.25% All funds currently making
payments under a class A
distribution plan, except for those listed
below

0.50% for shares purchased on Putnam Diversified Equity Trust
or before 7/1/95; 0.25% for
shares purchased after 7/1/95

0.20% Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund

0.20% for shares purchased on Putnam Balanced Retirement Fund
or before 12/31/89; 0.25% for Putnam Convertible IncomeGrowth Trust
shares purchased after 12/31/89 The George Putnam Fund of Boston
Putnam Global Growth Fund
Putnam Global Natural Resources Fund
Putnam Health Sciences Trust The
Putnam Fund for Growth and Income
Putnam Investors Fund
Putnam Vista Fund
Putnam Voyager Fund
0.20% for shares purchased on Putnam High Yield Trust
or before 3/31/90; 0.25% for Putnam U.S. Government Income Trust
shares purchased after 3/31/90

0.20% for shares purchased on Putnam Income Fund
or before 3/31/91; 0.25% for
shares purchased after 3/31/91

0.20% for shares purchased on Putnam Municipal Income Fund
or before 5/7/92; 0.25% for
shares purchased after 5/7/92

0.15% for shares purchased on Putnam Michigan Tax Exempt Income Fund
or before 3/9/92; 0.20% for Putnam Minnesota Tax Exempt Income Fund
shares purchased after 3/9/92 Putnam Ohio Tax Exempt Income Fund

0.15% for shares purchased on Putnam Massachusetts Tax Exempt Income Fund
or before 5/11/92; 0.20% for
shares purchased after 5/11/92

0.15% for shares purchased on Putnam New York Tax Exempt Opportunities Fund
or before 7/13/92; 0.20% for
shares purchased after 7/13/92

0.15% for shares purchased on Putnam California Tax Exempt Income Fund
or before 12/31/92; 0.20% for Putnam New Jersey Tax Exempt Income Fund
shares purchased after 12/31/92 Putnam New York Tax Exempt Income Fund
Putnam Tax Exempt Income Fund
0.15% for res purchased on Putnam Arizona Tax Exempt Income Fund
or before 3/5/93; 0.20% for
shares purchased after 3/5/93

0.15% for shares purchased on Putnam Florida Tax Exempt Income Fund
or before 7/8/93; 0.20% for Putnam Pennsylvania Tax Exempt Income Fund
shares purchased after 7/8/93

0.00% Putnam California Money Market Fund
Putnam Money Market Fund
Putnam New York Money
Market Fund Putnam
Preferred Income Fund
Putnam Tax Exempt Money Market Fund

Putnam Mutual Funds pays service fees to the dealer
of record for plans at the rate of up to 0.25%
of average net assets, depending on the level of
service provided by Putnam Fiduciary Trust Company or
its affiliates, by the dealer of record, and by third
parties. Service fees are paid quarterly to the
dealer of record for that quarter.

CLASS B SHARES:
Putnam Mutual Funds makes quarterly payments to
dealers at the annual rates set forth below (as a
percentage of the average net asset value of class B
shares for which such dealers are designated the
dealer of record).
Rate Fund
0.25% All funds currently making
payments under a class B
distribution plan, except for those listed below

0.25%, except that the first Putnam Municipal Income Fund
year's service fees of 0.25%
are prepaid at time of sale

0.25%, except that the first Putnam Arizona Tax Exempt Income Fund
year's service fees of 0.20% Putnam California Tax Exempt Income Fund
are prepaid at time of sale Putnam Florida Tax Exempt Income Fund
Putnam Massachusetts Tax Exempt Income Fund
Putnam Michigan Tax Exempt Income Fund
Putnam Minnesota Tax Exempt Income Fund
Putnam New Jersey Tax Exempt Income Fund
Putnam New York Tax Exempt Income Fund
Putnam New York Tax Exempt Opportunities Fund
Putnam Ohio Tax Exempt Income Fund Putnam
Pennsylvania Tax Exempt Income Fund
Putnam Tax Exempt Income Fund

0.20% for shares purchased on Putnam Tax-Free Insured Fund
or before 3/31/90; 0.25% for Putnam Tax-Free High Yield
shares purchased after 3/31/90;
first year's service fees are prepaid
at time of sale

0.00% Putnam Money Market Fund

CLASS C SHARES:

Putnam Mutual Funds makes quarterly payments to
dealers at the annual rates set forth below (as a
percentage of the average net asset value of class C
shares for which such dealers are designated the
dealer of record).

Rate Fund

1.00% All funds currently making payments
under a class C distribution plan,
except the fund listed below
0.50% Putnam Money Market Fund

CLASS M SHARES:
Putnam Mutual Funds makes quarterly payments to
dealers at the annual rates set forth below (as a
percentage of the average net asset value of class M
shares for which such dealers are designated the
dealer of record).
Rate Fund
0.65% All growth and growth and
income funds currently making
payments under
a class M distribution plan

0.45% Putnam Diversified Income Trust

0.40% All income and money market
funds currently making
payments under a class
M distribution plan (except
for Putnam Diversified
Income Trust, Putnam
Preferred Income Fund and Putnam Money
Market Fund)

0.25% Putnam Preferred Income Fund

0.15% Putnam Money Market Fund

INVESTOR SERVICES

SHAREHOLDER INFORMATION

Each time shareholders buy or sell shares, they will
receive a statement confirming the transaction and
listing their current share balance. (Under certain
investment plans, a statement may only be sent
quarterly.) Shareholders will receive a statement
confirming reinvestment of distributions in
additional fund shares (or in shares of other Putnam
funds for Dividends Plus accounts) promptly following
the quarter in which the reinvestment occurs. To
help shareholders take full advantage of their Putnam
investment, they will receive a Welcome Kit and a
periodic publication covering many topics of interest
to investors. The fund also sends annual and
semiannual reports that keep shareholders informed
about its portfolio and performance, and year-end tax
information to simplify their recordkeeping. Easy-to-
read, free booklets on special subjects such as the
Exchange Privilege and IRAs are available from Putnam
Investor Services. Shareholders may call Putnam
Investor Services toll-free weekdays at 1-800-225-
1581 between 8:30 a.m. and 7:00 p.m. Boston time for
more information, including account balances.

YOUR INVESTING ACCOUNT

The following information provides more detail
concerning the operation of a Putnam Investing
Account. For further information or assistance,
investors should consult Putnam Investor Services.
Shareholders who purchase shares through a defined
contribution plan should note that not all of the
services or features
described below may be available to them, and they
should contact their employer for details.

A shareholder may reinvest a cash distribution
without a frontend sales charge or without the
reinvested shares being subject to a CDSC, as the
case may be, by delivering to Putnam Investor
Services the uncashed distribution check, endorsed to
the order of the fund. Putnam Investor Services must
receive the properly endorsed check within 1 year
after the date of the check.

The Investing Account also provides a way to
accumulate shares of the fund. In most cases, after
an initial investment of $500, a shareholder may send
checks to Putnam Investor Services for $50 or more,
made payable to the fund, to purchase additional
shares at the applicable public offering price next
determined after Putnam Investor Services receives
the check. Checks must be drawn on a U.S. bank and
must be payable in U.S. dollars.

Putnam Investor Services acts as the shareholder's
agent whenever it receives instructions to carry out
a transaction on the shareholder's account. Upon
receipt of instructions that shares are to be
purchased for a shareholder's account, shares will be
purchased through the investment dealer designated by
the shareholder. Shareholders may change investment
dealers at any time by written notice to Putnam
Investor Services, provided the new dealer has a
sales agreement with Putnam Mutual Funds.

Shares credited to an account are transferable upon
written instructions in good order to Putnam Investor
Services and may be sold to the fund as described
under "How do I sell fund shares?" in the prospectus.
Money market funds and certain other funds will not
issue share certificates. A shareholder may send to
Putnam Investor Services any certificates which have
been previously issued for safekeeping at no charge
to the shareholder.

Putnam Mutual Funds, at its expense, may provide
certain additional reports and administrative
material to qualifying institutional investors with
fiduciary responsibilities to assist these investors
in discharging their responsibilities. Institutions
seeking further information about this service should
contact Putnam Mutual Funds, which may modify or
terminate this service at any time.

Putnam Investor Services may make special services
available to shareholders with investments exceeding
$1,000,000. Contact Putnam Investor Services for
details.

The fund pays Putnam Investor Services' fees for
maintaining Investing Accounts.

REINSTATEMENT PRIVILEGE

An investor who has redeemed shares of the fund may
reinvest (within 1 year) the proceeds of such sale in
shares of the same class of the fund, or may be able
to reinvest (within 1 year) the proceeds in shares of
the same class of one of the other continuously
offered Putnam funds (through the exchange privilege
described in the prospectus), including, in the case
of shares subject to a CDSC, the amount of CDSC
charged on the redemption. Any such reinvestment
would be at the net asset value of the shares of the
fund(s) the investor selects, next determined after
Putnam Mutual Funds receives a Reinstatement
Authorization. The time that the previous investment
was held will be included in determining any
applicable CDSC due upon redemptions and, in the case
of class B shares, the eight-year period for
conversion to
class A shares. Shareholders will receive from
Putnam Mutual Funds the amount of any CDSC paid at
the time of redemption as part of the reinstated
investment, which may be treated as capital gains to
the shareholder for tax purposes. Exercise of the
Reinstatement Privilege does not alter the federal
income tax treatment of any capital gains realized on
a sale of fund shares, but to the extent that any
shares are sold at a loss and the proceeds are
reinvested in shares of the fund, some or all of the
loss may be disallowed as a deduction. Consult your
tax adviser. Investors who desire to exercise the
Reinstatement Privilege should contact their
investment dealer or Putnam Investor Services.

EXCHANGE PRIVILEGE

Except as otherwise set forth in this section, by
calling Putnam Investor Services, investors may
exchange shares valued up to $500,000 between
accounts with identical registrations, provided that
no certificates are outstanding for such shares and
no address change has been made within the preceding
15 days.
During periods of unusual market changes and
shareholder activity, shareholders may experience
delays in contacting Putnam Investor Services by
telephone to exercise the Telephone Exchange
Privilege.

Putnam Investor Services also makes exchanges
promptly after receiving a properly completed
Exchange Authorization Form and, if issued, share
certificates. If the shareholder is a corporation,
partnership, agent, or surviving joint owner, Putnam
Investor Services will require additional
documentation of a customary nature. Because an
exchange of shares involves the redemption of fund
shares and reinvestment of the proceeds in shares of
another Putnam fund, completion of an exchange may be
delayed under unusual circumstances if the fund were
to suspend redemptions or postpone payment for the
fund shares being exchanged, in accordance with
federal securities laws. Exchange Authorization
Forms and prospectuses of the other Putnam funds are
available from Putnam Mutual Funds or investment
dealers having sales contracts with Putnam Mutual
Funds. The prospectus of each fund describes its
investment objective(s) and policies, and
shareholders should obtain a prospectus and consider
these objectives and policies carefully before
requesting an exchange. Shares of certain Putnam
funds are not available to residents of all states.
The fund reserves the right to change or suspend the
Exchange Privilege at any time. Shareholders would
be notified of any change or suspension. Additional
information is available from Putnam Investor
Services.

Shareholders of other Putnam funds may also exchange
their shares at net asset value for shares of the
fund, as set forth in the current prospectus of each fund.

For federal income tax purposes, an exchange is a
sale on which the investor generally will realize a
capital gain or loss depending on whether the net
asset value at the time of the exchange is more or
less than the investor's basis. The Exchange
Privilege may be revised or terminated at any time.
Shareholders would be notified of any such change or
suspension.

DIVIDENDS PLUS

Shareholders may invest the fund's distributions of
net investment income or distributions combining net
investment income and short-term capital gains in
shares of the same class of another continuously
offered Putnam fund (the "receiving fund") using the
net asset value per share of the receiving fund
determined on the date the fund's distribution is
payable. No sales charge or CDSC will apply to the
purchased shares unless the fund paying the
distribution is a money market fund. The prospectus
of each fund describes its investment objective(s)
and policies, and shareholders should obtain a
prospectus and consider these objective(s) and
policies carefully before investing their
distributions in the receiving fund. Shares of
certain Putnam funds are not available to residents
of all states.

The minimum account size requirement for the
receiving fund will not apply if the current value of
your account in the fund paying the distribution is
more than $5,000.

Shareholders of other Putnam funds (except for money
market funds, whose shareholders must pay a sales
charge or become subject to a CDSC) may also use
their distributions to purchase shares of the fund at
net asset value.

For federal tax purposes, distributions from the fund
which are reinvested in another fund are treated as
paid by the fund to the shareholder and invested by
the shareholder in the receiving fund and thus, to
the extent comprised of taxable income and deemed
paid to a taxable shareholder, are taxable.

The Dividends PLUS program may be revised or
terminated at any time.

PLANS AVAILABLE TO SHAREHOLDERS

The plans described below are fully voluntary and may
be terminated at any time without the imposition by
the fund or Putnam Investor Services of any penalty.
All plans provide for automatic reinvestment of all
distributions in additional shares of the fund at net
asset value. The fund, Putnam Mutual Funds or Putnam
Investor Services may modify or cease offering these
plans at any time.

AUTOMATIC CASH WITHDRAWAL PLAN ("ACWP"). An investor
who owns or buys shares of the fund valued at $10,000
or more at the current public offering price may open
an ACWP plan and have a designated sum of money ($50
or more) paid monthly, quarterly, semi-annually or
annually to the investor or another person.
(Payments from the fund can be combined with payments
from other Putnam funds into a single check through a
designated payment plan.) Shares are deposited in a
plan account, and all distributions are reinvested in
additional shares of the fund at net asset value
(except where the plan is utilized in connection with
a charitable remainder trust). Shares in a plan
account are then redeemed at net asset value to make
each withdrawal payment. Payment will be made to any
person the investor designates; however, if shares
are registered in the name of a trustee or other
fiduciary, payment will be made only to the
fiduciary, except in the case of a profit-sharing or
pension plan where payment will be made to a
designee. As withdrawal payments may include a
return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the
investor.
The redemption of shares in connection with a plan
generally will result in a gain or loss for tax
purposes. Some or all of the losses realized upon
redemption may be disallowed pursuant to the so-
called wash sale rules if shares of the same fund
from which shares were redeemed are purchased
(including through the reinvestment of fund
distributions) within a period beginning 30 days
before, and ending 30 days after, such redemption.
In such a case, the basis of the replacement shares
will be increased to reflect the disallowed loss.
Continued withdrawals in excess of
income will reduce and possibly exhaust invested
principal, especially in the event of a market
decline. The maintenance of a plan concurrently with
purchases of additional shares of the fund would be
disadvantageous to the investor because of the sales
charge payable on such purchases. For this reason,
the minimum investment accepted while a plan is in
effect is $1,000, and an investor may not maintain a
plan for the accumulation of shares of the fund
(other than through reinvestment of distributions)
and a plan at the same time. The cost of
administering these plans for the benefit of those
shareholders participating in them is borne by the
fund as an expense of all shareholders. The fund,
Putnam Mutual Funds or Putnam Investor Services may
terminate or change the terms of the plan at any
time. A plan will be terminated if communications
mailed to the shareholder are returned as
undeliverable.
Investors should consider carefully with their own
financial advisers whether the plan and the specified
amounts to be withdrawn are appropriate in their
circumstances. The fund and Putnam Investor Services
make no recommendations or representations in this
regard.
TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS.
(NOT OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-
EXEMPT SECURITIES.) Investors may purchase shares of
the fund through the following Tax Qualified
Retirement Plans, available to qualified individuals
or organizations:
Standard and variable profit-sharing (including 401(k))
and money purchase pension plans; and
Individual Retirement Account Plans (IRAs).
Each of these Plans has been qualified as a prototype
plan by the Internal Revenue Service. Putnam
Investor Services will furnish services under each
plan at a specified annual cost. Putnam Fiduciary
Trust Company serves as trustee under each of these
Plans.
Forms and further information on these Plans are
available from investment dealers or from Putnam
Mutual Funds. In addition, specialized professional
plan administration services are available on an
optional basis; contact Putnam Defined Contribution
Plan Services at 1-800-225-2465, extension 8600.
A 403(b) Retirement Plan is available for employees
of public school systems and organizations which meet
the requirements of Section 501(c)(3) of the Internal
Revenue Code. Forms and further information on the
403(b) Plan are also available from investment
dealers or from Putnam Mutual Funds. Shares of the
fund may also be used in simplified employee pension
(SEP) plans. For further information on the Putnam
prototype SEP plan, contact an investment dealer or
Putnam Mutual Funds.
Consultation with a competent financial and tax
adviser regarding these Plans and consideration of
the suitability of fund shares as an investment under
the Employee Retirement Income Security Act of 1974,
or otherwise, is recommended.
SIGNATURE GUARANTEES
Redemption requests for shares having a net asset
value of $100,000 or more must be signed by the
registered owners or their legal representatives and
must be guaranteed by a bank, broker/dealer,
municipal securities dealer or broker, government
securities dealer or broker, credit union, national
securities
exchange, registered securities association, clearing
agency, savings association or trust company,
provided such institution is acceptable under and
conforms with Putnam Fiduciary Trust Company's
signature guarantee procedures. A copy of such
procedures is available upon request. If you want
your redemption proceeds sent to an address other
than your address as it appears on Putnam's records,
you must provide a signature guarantee. Putnam
Investor Services usually requires additional
documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a
surviving joint owner. Contact Putnam Investor
Services for details.

SUSPENSION OF REDEMPTIONS

The fund may not suspend shareholders' right of
redemption, or postpone payment for more than seven
days, unless the Exchange is closed for other than
customary weekends or holidays, or if permitted by
the rules of the Securities and Exchange Commission
during periods when trading on the Exchange is
restricted or during any emergency which makes it
impracticable for the fund to dispose of its
securities or to determine fairly the value of its
net assets, or during any other period permitted by
order of the Commission for protection of investors.

SHAREHOLDER LIABILITY

Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for
the obligations of the fund. However, the Agreement
and Declaration of Trust disclaims shareholder
liability for acts or obligations of the fund and
requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered
into or executed by the fund or the Trustees. The
Agreement and Declaration of Trust provides for
indemnification out of fund property for all loss and
expense of any shareholder held personally liable for
the obligations of the fund. Thus, the risk of a
shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in
which the fund would be unable to meet its
obligations. The likelihood of such circumstances is
remote.

STANDARD PERFORMANCE MEASURES

Yield and total return data for the fund may from
time to time be presented in Part I of this SAI and
in advertisements. In the case of funds with more
than one class of shares, all performance information
is calculated separately for each class. The data is
calculated as follows.

Total return for one-, five- and ten-year periods (or
for such shorter periods as the fund has been in
operation or shares of the relevant class have been
outstanding) is determined by calculating the actual
dollar amount of investment return on a $1,000
investment in the fund made at the beginning of the
period, at the maximum public offering price for
class A shares and class M shares and net asset value
for other classes of shares, and then calculating the
annual compounded rate of return which would produce
that amount. Total return for a period of one year
is equal to the actual return of the fund during that
period. Total return calculations assume deduction
of the fund's maximum sales charge or CDSC, if
applicable, and reinvestment of all fund
distributions at net asset value on their respective
reinvestment dates.

The fund's yield is presented for a specified thirty-
day period (the "base period"). Yield is based on the amount
determined by (i) calculating the aggregate amount of
dividends and interest earned by the fund during the
base period less expenses for that period, and (ii)
dividing that amount by the product of (A) the
average daily number of shares of the fund
outstanding during the base period and entitled to
receive dividends and (B) the per share maximum
public offering price for class A shares or class M
shares, as appropriate, and net asset value for other
classes of shares on the last day of the base period.
The result is annualized on a compounding basis to
determine the yield. For this calculation, interest
earned on debt obligations held by the fund is
generally calculated using the yield to maturity (or
first expected call date) of such obligations based
on their market values (or, in the case of
receivables-backed securities such as the Government
National Mortgage Association ("GNMAs"), based on
cost). Dividends on equity securities are accrued
daily at their stated dividend rates. The amount of
expenses used in determining the fund's yield
includes, in addition to expenses actually accrued by
the fund, an estimate of the amount of expenses that
the fund would have incurred if brokerage commissions
had not been used to reduce such expenses.

If the fund is a money market fund, yield is computed
by determining the percentage net change, excluding
capital changes, in the value of an investment in one
share over the seven-day period for which yield is
presented (the "base period"), and multiplying the
net change by 365/7 (or approximately 52 weeks).
Effective yield represents a compounding of the yield
by adding 1 to the number representing the percentage
change in value of the investment during the base
period, raising that sum to a power equal to 365/7,
and subtracting 1 from the result.

If the fund is a tax-exempt fund, the tax-equivalent
yield during the base period may be presented for
shareholders in one or more stated tax brackets. Tax-
equivalent yield is calculated by adjusting the tax-
exempt yield by a factor designed to show the
approximate yield that a taxable investment would
have to earn to produce an after-tax yield equal, for
that shareholder, to the tax-exempt yield. The tax-
equivalent yield will differ for shareholders in
other tax brackets.

At times, Putnam Management may reduce its
compensation or assume expenses of the fund in order
to reduce the fund's expenses. The per share amount
of any such fee reduction or assumption of expenses
during the fund's past five fiscal years (or for the
life of the fund, if shorter) is set forth in the
footnotes to the table in the section entitled
"Financial highlights" in the prospectus. Any such
fee reduction or assumption of expenses would
increase the fund's yield and total return for
periods including the period of the fee reduction or
assumption of expenses.

All data are based on past performance and do not
predict future results.

COMPARISON OF PORTFOLIO PERFORMANCE

Independent statistical agencies measure the fund's
investment performance and publish comparative
information showing how the fund, and other
investment companies, performed in specified time
periods. Three agencies whose reports are commonly
used for such comparisons are set forth below. From
time to time, the fund may distribute these
comparisons to its shareholders or to potential
investors. THE AGENCIES LISTED BELOW MEASURE
PERFORMANCE BASED ON THEIR OWN CRITERIA RATHER THAN
ON THE STANDARDIZED PERFORMANCE MEASURES DESCRIBED IN
THE PRECEDING SECTION.

LIPPER ANALYTICAL SERVICES, INC. distributes
mutual fund rankings monthly. The rankings
are based on total return performance
calculated by Lipper, generally reflecting
changes in net asset value adjusted for
reinvestment of capital gains and income
dividends. They do not reflect deduction of
any sales charges. Lipper rankings cover a
variety of performance periods, including year-
to-date, 1year, 5-year, and 10-year
performance. Lipper classifies mutual funds
by investment objective and asset category.

MORNINGSTAR, INC. distributes mutual fund
ratings twice a month. The ratings are
divided into five groups:
highest, above average, neutral, below average
and lowest. They represent a fund's historical
risk/reward ratio relative to other funds in
its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a
variety of performance periods, including 1-
year, 3year, 5-year, 10-year and overall
performance. The performance factor for the
overall rating is a weightedaverage assessment
of the fund's 1-year, 3-year, 5-year, and 10-
year total return performance (if available)
reflecting deduction of expenses and sales
charges. Performance is adjusted using
quantitative techniques to reflect the risk
profile of the fund. The ratings are derived
from a purely quantitative system that does
not utilize the subjective criteria
customarily employed by rating agencies such
as Standard & Poor's and Moody's Investor
Service, Inc.

CDA/WIESENBERGER'S MANAGEMENT RESULTS
publishes mutual fund rankings and is
distributed monthly. The rankings are based
entirely on total return calculated by
Weisenberger for periods such as year-to-date,
1-year, 3year, 5-year and 10-year. Mutual
funds are ranked in general categories (e.g.,
international bond, international equity,
municipal bond, and maximum capital gain).
Weisenberger rankings do not reflect deduction
of sales charges or fees.

Independent publications may also evaluate the
fund's performance. The fund may from time to time
refer to results published in various periodicals,
including Barrons, Financial World, Forbes, Fortune,
Investor's Business Daily, Kiplinger's Personal
Finance Magazine, Money, U.S. News and World Report
and The Wall Street Journal.

Independent, unmanaged indexes, such as those listed
below, may be used to present a comparative
benchmark of fund performance. The performance
figures of an index reflect changes in market
prices, reinvestment of all dividend and interest
payments and, where applicable, deduction of foreign
withholding taxes, and do not take into account
brokerage commissions or other costs. Because the
fund is a managed portfolio, the securities it owns
will not match those in an index. Securities in an
index may change from time to time.

THE CONSUMER PRICE INDEX, prepared by the U.S.
Bureau of Labor Statistics, is a commonly used
measure of the rate of inflation. The index
shows the average change in the cost of
selected consumer goods and services and does
not represent a return on an investment
vehicle.

THE DOW JONES INDUSTRIAL AVERAGE is an index
of 30 common stocks frequently used as a
general measure of stock market performance.

THE DOW JONES UTILITIES AVERAGE is an index of 15 utility
stocks frequently used as a general measure of stock market
performance.

CS FIRST BOSTON HIGH YIELD INDEX is a market-weighted index
including publicly traded bonds having a rating below BBB by
Standard & Poor's and Baa by Moody's.

THE LEHMAN BROTHERS AGGREGATE BOND INDEX is an index
composed of securities from The Lehman Brothers
Government/Corporate Bond Index, The Lehman Brothers
Mortgage-Backed Securities Index and The Lehman Brothers
Asset-Backed Securities Index and is frequently used as a
broad market measure for fixed-income securities.

THE LEHMAN BROTHERS ASSET-BACKED SECURITIES INDEX is an
index composed of credit card, auto, and home equity loans.
Included in the index are pass-through, bullet
(noncallable), and controlled amortization structured debt
securities; no subordinated debt is included. All
securities have an average life of at least one year.

THE LEHMAN BROTHERS CORPORATE BOND INDEX is an index of
publicly issued, fixed-rate, non-convertible investmentgrade
domestic corporate debt securities frequently used as a
general measure of the performance of fixed-income
securities.

THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is an
index of publicly issued U.S. Treasury obligations, debt
obligations of U.S. government agencies (excluding mortgage-
backed securities), fixed-rate, non-convertible,
investment-grade corporate debt securities and U.S. dollar
denominated, SEC-registered non-convertible debt issued by
foreign governmental entities or international agencies used
as a general measure of the performance of fixedincome
securities.

THE LEHMAN BROTHERS INTERMEDIATE TREASURY BOND INDEX is an
index of publicly issued U.S. Treasury obligations with
maturities of up to ten years and is used as a general gauge
of the market for intermediate-term fixed-income securities.

THE LEHMAN BROTHERS LONG-TERM TREASURY BOND INDEX is an
index of publicly issued U.S. Treasury obligations
(excluding flower bonds and foreign-targeted issues) that
are U.S. dollar-denominated and have maturities of 10
years or greater.

THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX
includes 15- and 30-year fixed rate securities backed by
mortgage pools of the Government National Mortgage
Association, Federal Home Loan Mortgage Corporation, and
Federal National Mortgage Association.

THE LEHMAN BROTHERS MUNICIPAL BOND INDEX is an index of
approximately 20,000 investment-grade, fixed-rate tax
exempt bonds.

THE LEHMAN BROTHERS TREASURY BOND INDEX is an index of
publicly issued U.S. Treasury obligations (excluding
flower bonds and foreign-targeted issues) that are U.S.
dollar denominated, have a minimum of one year to
maturity, and are issued in amounts over $100 million.

THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX is an
index of approximately 1,482 equity securities listed on the
stock exchanges of the United States, Europe, Canada,
Australia, New Zealand and the Far East, with all values
expressed in U.S. dollars.

THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS
INDEX is an index of approximately 1,100 securities
representing 20 emerging markets, with all values expressed
in U.S. dollars.

THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS
FREE INDEX is an index of approximately 1,003 securities
available to non-domestic investors representing 26 emerging
markets, with all values expressed in U.S. dollars.

THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX is an
index of approximately 1,045 equity securities issued by
companies located in 18 countries and listed on the stock
exchanges of Europe, Australia, and the Far East. All
values are expressed in U.S. dollars.

THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX is an
index of approximately 627 equity securities issued by
companies located in one of 13 European countries, with all
values expressed in U.S. dollars.

THE MORGAN STANLEY CAPITAL INTERNATIONAL PACIFIC INDEX is an
index of approximately 418 equity securities issued by
companies located in 5 countries and listed on the exchanges
of Australia, New Zealand, Japan, Hong Kong,
Singapore/Malaysia. All values are expressed in U.S.
dollars.

THE NASDAQ INDUSTRIAL AVERAGE is an index of stocks traded
in The Nasdaq Stock Market, Inc. National Market System.

THE RUSSELL 1000 INDEX is composed of the 1,000 largest
companies in the Russell 3000 Index, representing
approximately 89% of the Russell 3000 total market
capitalization. The Russell 3000 Index is composed of the
3,000 largest U.S. companies ranked by total market
capitalization, representing approximately 98% of the U.S.
investable equity market.

THE RUSSELL 2000 INDEX is composed of the 2,000 smallest
companies in the Russell 3000 Index, representing
approximately 11% of the Russell 3000 total market
capitalization.

THE RUSSELL 2000 GROWTH INDEX is composed of securities with
greater-than-average growth orientation within the Russell
2000 Index. Each security's growth orientation is
determined by a composite score of the security's price-to
book ratio and forecasted growth rate. Growth stocks tend to
have higher price-to-book ratios and forecasted growth rates
than value stocks. This index is composed of approximately
1,310 companies from the Russell 2000 Index, representing
approximately 50% of the total market capitalization of the
Russell 2000 Index.

THE RUSSELL MIDCAP INDEX is composed of the 800 smallest
companies in the Russell 1000 Index, representing
approximately 35% of the Russell 1000 total market
capitalization.
THE RUSSELL MIDCAP GROWTH INDEX is composed of securities
with greater-than-average growth orientation within the
Russell Midcap Index. Each security's growth orientation is
determined by a composite score of the security's priceto-
book ratio and forecasted growth rate. Growth stocks tend
to have higher price-to-book ratios and forecasted growth
rates than value stocks. This index is composed of
approximately 450 companies from the Russell 1000 Growth
Index, representing 20% of the total market capitalization
of the Russell 1000 Growth Index.
THE SALOMON BROTHERS LONG-TERM HIGH-GRADE CORPORATE BOND
INDEX is an index of publicly traded corporate bonds
having a rating of at least AA by Standard & Poor's or Aa by
Moody's and is frequently used as a general measure of the
performance of fixed-income securities.

THE SALOMON BROTHERS LONG-TERM TREASURY INDEX is an index of
U.S. government securities with maturities greater than 10
years.

THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX is an index
that tracks the performance of the 14 government bond
markets of Australia, Austria, Belgium Canada, Denmark,
France, Germany, Italy, Japan, Netherlands, Spain, Sweden,
United Kingdom and the United States. Country eligibility is
determined by market capitalization and investability
criteria.

THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX (non $U.S.)
is an index of foreign government bonds calculated to
provide a measure of performance in the government bond
markets outside of the United States.

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX is an
index of common stocks frequently used as a general measure
of stock market performance.

STANDARD & POOR'S 40 UTILITIES INDEX is an index of 40
utility stocks.

STANDARD & POOR'S/BARRA VALUE INDEX is an index constructed
by ranking the securities in the Standard & Poor's 500
Composite Stock Price Index by price-to-book ratio and
including the securities with the lowest priceto-book ratios
that represent approximately half of the market
capitalization of the Standard & Poor's 500 Composite Stock
Price Index.

In addition, Putnam Mutual Funds may distribute to shareholders or
prospective investors illustrations of the benefits of reinvesting
tax-exempt or tax-deferred distributions over specified time
periods, which may include comparisons to fully taxable
distributions. These illustrations use hypothetical rates of tax-
advantaged and taxable returns and are not intended to indicate
the past or future performance of any fund.

SECURITIES RATINGS

The ratings of securities in which the fund may invest will be
measured at the time of purchase and, to the extent a security is
assigned a different rating by one or more of the various rating
agencies, Putnam Management will use the highest rating assigned
by any agency. Putnam Management will not necessarily sell an
investment if its rating is reduced. The following rating
services describe rated securities as follows:

MOODY'S INVESTORS SERVICE, INC.

BONDS

AAA -- Bonds which are rated AAA are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.

AA -- Bonds which are rated AA are judged to be of high quality by
all standards. Together with the AAA group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in AAA securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long-term risk appear somewhat larger than the AAA
securities.

A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment sometime in the future.

BAA -- Bonds which are rated BAA are considered as medium grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.

BA -- Bonds which are rated BA are judged to have speculative
elements; their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.

B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.

CAA -- Bonds which are rated CAA are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.

CA -- Bonds which are rated CA represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

NOTES (FOR MONEY MARKET FUNDS ONLY)

MIG 1/VMIG 1 -- This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market
for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
COMMERCIAL PAPER (FOR MONEY MARKET FUNDS ONLY)
Issuers rated PRIME-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by the following
characteristics:
- -- Leading market positions in well established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- -- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- -- Well established access to a range of financial markets
and assured sources of alternate liquidity.

Issuers rated PRIME-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above to a lesser degree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

STANDARD & POOR'S

BONDS

AAA -- An obligation rated AAA has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.

AA -- An obligation rated AA differs from the highest-rated
obligations only in small degree. The obligor's capacity to meet
its financial commitment on the obligation is very strong.

A -- An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher-rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.

BBB -- An obligation rated BBB exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.

Obligations rated BB, B, CCC, CC and C are regarded as having
significant speculative characteristics. BB indicates the lowest
degree of speculation and C the highest. While such obligations
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to
adverse conditions.

BB -- An obligation rated BB is less vulnerable to nonpayment
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.

B -- An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity
to meet its financial commitment on the obligations. Adverse
business, financial, or economic conditions will likely impair
the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC -- An obligation rated CCC is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the
obligation.

CC -- An obligation rated CC is currently highly vulnerable to
nonpayment.

C -- The C rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has been
taken, but payments on this obligation are being continued.

D -- An obligation rated D is in payment default. The D rating
category is used when interest payments or principal payments are
not made on the date due even if the applicable grace period has
not expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition, or the taking of a
similar action if payments on an obligation are jeopardized.

NOTES (FOR MONEY MARKET FUNDS ONLY)

SP-1 -- Strong capacity to pay principal and interest. Those

issues determined to possess overwhelming safety characteristics

are given a plus (+) designation.

SP-2 -- Satisfactory capacity to pay principal and interest.

SP-3 -- Speculative capacity to pay principal and interest.

COMMERCIAL PAPER (FOR MONEY MARKET FUNDS ONLY)

A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.

A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated `A-1'.

A-3 -- Issues carrying this designation have adequate capacity
for timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.

DUFF & PHELPS CORPORATION

LONG-TERM DEBT

AAA -- Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.

AA+, AA, AA- -- High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time
because of economic conditions.

A+, A, A- -- Protection factors are average but adequate. However,
risk factors are more variable and greater in periods of economic
stress.

BBB+, BBB, BBB- -- Below-average protection factors but still
considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.

BB+, BB, BB- -- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within
this category.

B+, B, B- -- Below investment grade and possessing risk that
obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists for
frequent changes in the rating within this category or into a
higher or lower rating grade.

CCC -- Well below investment-grade securities. Considerable
uncertainty exists as to timely payment of principal, interest or
preferred dividends. Protection factors are narrow and risk can
be substantial with unfavorable economic/industry conditions,
and/or with unfavorable company developments.

DD -- Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

FITCH INVESTORS SERVICE, INC.

AAA -- Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.

AA -- Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated AAA.

A -- Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.

BBB -- Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings.

BB -- Bonds considered to be speculative. The obligor's ability
to pay interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in
satisfying its debt service requirements.
B -- Bonds are considered highly speculative. Bonds in this class
are lightly protected as to the obligor's ability to pay interest
over the life of the issue and repay principal when due.

CCC -- Bonds have certain characteristics which, with passing of
time, could lead to the possibility of default on either principal
or interest payments.

CC -- Bonds are minimally protected. Default in payment of
interest and/or principal seems probable.

C -- Bonds are in actual or imminent default in payment of
interest or principal.

DDD -- Bonds are in default and in arrears in interest and/or
principal payments. Such bonds are extremely speculative and
should be valued only on the basis of their value in liquidation
or reorganization of the obligor.

DEFINITIONS

"Putnam Management" -- Putnam Investment
Management, Inc., the fund's
investment manager.

"Putnam Mutual Funds" -- Putnam Mutual Funds Corp.,
the fund's principal
underwriter.

"Putnam Fiduciary Trust -- Putnam Fiduciary Trust
Company,
Company" the fund's custodian.

"Putnam Investor Services" -- Putnam Investor Services, a
division of Putnam Fiduciary Trust
Company, the fund's investor
servicing agent.

PUTNAM VARIABLE TRUST

FORM N-1A
PART C

OTHER INFORMATION

ITEM 23. EXHIBITS

1. Agreement and Declaration of Trust dated September 24, 1987,
as revised January 1, 1997 -- Incorporated by reference to Post-
Effective Amendment No. 14 to the Registrant's Registration
Statement.
2. By-Laws, as amended through January 30, 1997 -- Incorporated
by reference to Post-Effective Amendment No. 14 to the
Registrant's Registration Statement.
3a. Portions of Agreement and Declaration of Trust Relating to
Shareholders' Rights -- Incorporated by reference to Post-
Effective Amendment No. 14 to the Registrant's Registration
Statement.
3b. Portions of By-Laws Relating to Shareholders' Rights --
Incorporated by reference to Post-Effective Amendment No. 14 to
the Registrant's Registration Statement.
4. Management Contract dated October 2, 1987, as supplemented
March 2, 1990, as further supplemented February 27, 1992, July 9,
1993, April 5, 1994, June 2, 1994, April 7, 1995, July 13, 1995,
July 11, 1996, December 20, 1996, February 6, 1998, July 10, 1998,
March 4, 1999, July 1, 1999 and November 8, 1999 -- Exhibit 1.
5a. Distributor's Contract dated May 6, 1994 -- Incorporated by
reference to Post-Effective Amendment No. 10 to the Registrant's
Registration Statement.
5b. Form of Specimen Dealer Sales Contract -- Incorporated by
reference to Post-Effective Amendment No. 11 to the Registrant's
Registration Statement.
5c. Form of Specimen Financial Institution Sales Contract --
Incorporated by reference to Post-Effective Amendment No. 11 to
the Registrant's Registration Statement.
6. Not applicable.
7. Custodian Agreement with Putnam Fiduciary Trust Company dated
May 3, 1991, as amended July 13, 1992 -- Incorporated by reference
to Post-Effective Amendment No. 10 to the Registrant's
Registration Statement.
8. Investor Servicing Agreement dated June 3, 1991 with Putnam
Fiduciary Trust Company -- Incorporated by reference to Post-
Effective Amendment No. 10 to the Registrant's Registration
Statement.
9. Opinion of Ropes & Gray, including consent -- Exhibit 2.
10. Not applicable.
11. Not applicable.
12. Investment Letters from Putnam Investment Management, Inc. to
the Registrant -- Incorporated by reference to Post-Effective
Amendment No. 10 to the Registrant's Registration Statement.
13a. Class IB Distribution Plan and Agreement -- Incorporated by
reference to Post-Effective Amendment No. 15 to the Registrant's
Registration Statement.
13b. Form of Specimen Dealer Service Agreement -- Incorporated by
reference to Post-Effective Amendment No. 15 to the Registrant's
Registration Statement.
13c. Form of Specimen Financial Institution Service Agreement --
Incorporated by reference to Post-Effective Amendment No. 15 to
the Registrant's Registration Statement.
14a. Not applicable.
15. Rule 18f-3(d) Plan -- Incorporated by reference to Post-
Effective Amendment No. 15 to the Registrant's Registration
Statement.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND

Immediately following the effectiveness of this post-
effective amendment, Putnam Investments, Inc. expects to own 100%
of the outstanding shares of the funds. Also, as of October 31,
1999, Putnam Investments, Inc. owned 100% of the outstanding
shares of Putnam Mid-Cap Value Fund, 98.30% of the outstanding
shares of Putnam Growth Fund, 95.30% of the outstanding shares of
Putnam Value Fund, 94.30% of the outstanding shares of Putnam
International Fund, 91.70% of the outstanding shares of Putnam
Balanced Fund, 90.50% of the outstanding shares of Putnam Asia
Pacific Fund II, 89.70% of the outstanding shares of Putnam Latin
America Fund, 83.00% of the outstanding shares of Putnam U.S. Core
Fund, 73.50% of the outstanding shares of Putnam Worldwide Equity
Fund, 68.50% of the outstanding shares of Putnam Investment Fund
98, 58.30% of the outstanding shares of Putnam Equity Fund 98, and
29.60% of the outstanding shares of Putnam Asset Allocation:
Conservative Portfolio and may be deemed to control such funds.

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).

<PAGE>

C-3
10/28/99

Item 26. Business and Other Connections of Investment Adviser

Except as set forth below, the directors and officers of the
Registrant's investment adviser have been engaged during the past
two fiscal years in no business, vocation or employment of a
substantial nature other than as directors or officers of the
investment adviser or certain of its corporate affiliates.
Certain officers of the investment adviser serve as officers of
some or all of the Putnam funds. The address of the investment
adviser, its corporate affiliates and the Putnam Funds is one
Post Office Square, Boston, Massachusetts 02109.

Name Non-Putnam business and other
connections
Pankaj Aggrawal Prior to April 1998,
Vice President Quantitative Analyst, Vestek
Systems, 388 Market St., Suite
700, San Francisco, CA 94111

Michael R. Alexander Prior to February, 1998,
Vice President Director - Business Operations,
Comcast Communications, 8031
Corporate Drive, Baltimore, MD
21236

Blake Anderson Trustee, Salem Female Charitable
Managing Director Society, Salem MA 01970

Barry R. Allen Prior to December 1997,
Vice Present Analyst/Director of Research,
Harbor Capital Management, 125
High St., Boston, MA 02110

Paul A. Astbury-Aston Prior to June, 1999, Senior
Vice President Quantitative Strategist,
Santander Global Advisors, 28
State Street, Boston, MA 02109

Jeffrey B. Augustine Prior to January 1998, Vice
Senior Vice President President, Investment
Consulting, Investor Tools,
Inc., 100 Bridge St. Plaza,
Yorkville, IL 60560

Robert R. Beck Director, Charles Bridge
Senior Vice President Publishing, 85 Main St.,
Watertown, MA 02172; Board of
Overseers, Beth Israel Deaconess
Medical Center, 330 Brookline
Ave., Boston, MA 02215

Kirsten A. Bjerklie Prior to June 1998, Assistant
Assistant Vice President Vice President, Scudder, Stevens
& Clark, Two International
Place, Boston, MA 02110

Carl D. Bell Prior to January 1998,
Vice President Principal, Smith Breedon
Association, 100 Europa Drive,
Suite 200, Chapel Hill, NC
27514

Richard L. Block Prior to June 1998, Principal,
Senior Vice President Head International Equity
Trader, Morgan Stanley Asset
Management, 1221 Avenue of the
Americas, New York, NY 10036

Rob A. Bloemker Prior to September 1999,
Senior Vice President Managing Director, Lehman
Brothers, 555 California St.,
30th floor, San Francisco, CA
94104

Claudio Brocado Prior to August 1999,
Vice President independent consultant by
Stires, O'Donnell & Co. 12 East
44th St., New York, NY 10017;
Prior to January 1999,
independent consultant by Coast
Partners, 601 California St.,
San Francisco, CA 94108; Prior
to November 1997, Head of Latin
America Business Development,
Dresdner RCM Global Investors,
Four Embarcadero Center, San
Francisco, CA 94111

Anna Bulkovshteyn Prior to July 1999, Quantitative
Assistant Vice President Analyst, Sun Life Investment
Management, 200 King Street
West, Toronto, Ontario M5H 3T4
Canada

Robert W. Burke Member-Executive Committee, The
Senior Managing Director Ridge Club, Country Club Road,
Sandwich, MA 02563; Member-
Advisory Board, Cathedral High
School, 74 Union Park St., So.
Boston, MA 02118

David N. Burnham Prior to July 1998, Director -
Vice President Finance, Fidelity Investments,
82 Devonshire Street, Boston, MA
02109

Richard P. Cervone Prior to August 1998, Equity
Vice President Analyst, Loomis, Sayles & Co.,
One Financial Center, Boston,
MA, 02216.

Christopher Ceruolo Prior to July 1998, Associate,
Assistant Vice President Ropes & Gray, One International
Place, Boston, MA 02110

Mark Chameih Prior to May 1999, Vice
Vice President President, Chase Manhattan, 125
London Wall, London, UK

Bihua Chen Prior to July 1998, Research
Assistant Vice President Associate, ProNeuron, Inc., 1531
E. Jefferson St., Rockville, MD
20847

C. Beth Cotner Director, The Lyric Stage
Senior Vice President Theater, 140 Clarendon St.,
Boston, MA 02116

Stephen P. Cotto Prior to March 1998, Facilities
Assistant Vice President Supervisor, Unicco Service Co.,
4 Copley Place, Boston, MA 02116

Lindsey L. Curley Prior to June 1999, Portfolio
Assistant Vice President Analyst, Standish, Ayer & Wood,
Inc., One Financial Center,
Boston, MA 02110. Prior to
March, 1998,. Fixed-Income
Research Assistant, Invesco
Management & Research, Inc., 101
Federal St., Boston, MA 02110

Joseph F. Cushing Prior to June 1998, Investment
Assistant Vice President Analyst - Fixed Income,
Metropolitan Life Insurance
Company, 334 Madison Avenue,
Convent Station, NJ 07961

John R.S. Cutler Member, Burst Media, L.L.C., 10
Vice President New England Executive Park,
Burlington, MA 01803

Kenneth Daly President, Andover River Rd.
Managing Director TMA, River Road Transportation
Management Association, 7
Shattuck Rd., Andover, MA 01810

Donna M. Daylor Prior to April 1998, Director of
Vice President Training, UniCare Life & Health
Ins. Co., 1350 Main St.,
Springfield, MA

John C. Delano Prior to July 1998, Senior
Assistant Vice President Foreign Exchange Trader,
Nationsbank, 233 So. Wacker
Drive, Chicago, IL 60606

Edwin M. Denson Prior to November 1997, Vice
Vice President President and Senior Economist
Primark Decision Economics, 260
Franklin St., Boston, MA 02110

Ralph C. Derbyshire Prior to November 1997, Partner,
Senior Vice President Palmer & Dodge, One Beacon
Street, Boston, MA 02108; Board
Member, MSPCC, 399 Boylston St.,
Boston, MA; Board Member,
Winchester After School Program,
Skillings Rd., Winchester, MA

Stephen P. Dexter Prior to June 1999, Senior Vice
Senior Vice President President and Senior Portfolio
Manger, Scudder Kemper, Inc. One
International Place, Boston, MA

Michael G. Dolan Chairman-Finance Council, St.
Assistant Vice President Mary's Parish, 44 Myrtle St.,
Melrose, MA 02176; Member,
School Advisory Board, St.
Mary's School, 44 Myrtle St.,
Melrose, MA 02176

Edward Driscoll Prior to September 1999, Equity
Vice President Trader, Fidelity Research and
Management, 82 Devonshire St.,
Boston, MA 02109

Emily Durbin Board of Directors, Family
Vice President Service, Inc., Lawrence, MA
01840

Karnig H. Durgarian Board Member, EBRI, Suite 600,
Managing Director 2121 K St., N.W., Washington, DC
20037-1896. Trustee, American
Assembly, 122 C. St., N.W.,
Suite 350, Washington, DC 20001

Christine Durkee Prior to June 1998, Project
Assistant Vice President Manager, Foundation
Technologies, Inc., 78 4th Ave.,
Waltham, MA 02451
Nathan Eigerman Trustee, Flower Hill Trust, 298
Senior Vice President Marlborough St., #4, Boston, MA
02116

Tony H. Elavia Prior to September 1999,
Senior Vice President Executive Vice President,
Voyageur Asset Management, 90 S.
7th Street, Minneapolis, MN
55402

Lisa V. Emerick Prior to September 1998, Asian
Vice President Sales Trader, BWZ Securities
Asia, Inc., Citibank Tower, 3
Garden Road, Hong Kong

Irene M. Esteves Board of Director Member,
Managing Director American Management Association
Finance council, 1601 Broadway,
New York, NY; Board of Director
Member, First Night Boston, 20
Park Plaza, Suite 927, Boston,
MA; Board of Director Member, SC
Johnson Commercialmarkets, 8310
16th St., Stutevant, WI 53177;
Board of Director Member,
Massachusetts Taxpayers
Foundation, 24 Province St.,
Boston, MA; Board of Director
Member, Mrs. Bairds Bakeries,
515 Jones St., Suite 200, Fort
Worth, Texas 76102

Ian Ferguson Trustee, Park School, 171
Senior Managing Director Goddard Avenue, Brookline, MA
02146

John Ferry Prior to September 1998, Vice
Vice President President, Scudder Kemper
Investments, 101 California St.,
San Francisco, CA 94111.

Edward R. Finch Prior to December 1997, Managing
Senior Vice President Director, M.A. Weatherbie & Co.,
265 Franklin St., Boston, MA
02110

Kate Fleisher Prior to January 1998, Director
Vice President of Human Resources, Laura
Ashley, 6 St., James Ave. Suite
410, Boston, MA 02116

Peter M. Fleisher Prior to July 1999, Senior Vice
Senior Vice President President, Fleet National Bank,
75 State Street, Boston, MA
02109

Henrietta Fraser Prior to October, 1998, Manager,
Vice President Fleming Investment Management,
25 Copthall Ave., London EC2R
7DR

Karen T. Frost Prior to February 1998, Vice
Senior Vice President President, Morgan Stanley
Organization, 25 Cabot Square,
London, England E14 4QA

Stephen C. Gibbs Prior to June 1998, Senior
Vice President Financial Analyst, Fidelity
Investments, 82 Devonshire St.,
Boston, MA 02109

Ken S. Gordon Prior to July, 1998, Vice
Vice President President, Union Bank of
Switzerland, 2-2-2 Otemachi,
Chiyoda-Ku, Tokyo, Japan

J. Peter Grant Trustee, The Dover Church,
Senior Vice President Dover, MA 02030

Patrice Graviere Prior to March 1998, Regional
Senior Vice President Director for Latin America, MFS
International, LTD, Buenos
Aires, Brazil

Paul E. Haagensen Director, Haagensen Research
Senior Vice President Foundation, 630 West 168th St.,
New York, NY 10032

Andrew J. Hachey Prior to July 1998. Associate,
Assistant Vice President Skadden, Arps, Slate, Meagher &
Flom, LLP, One Beacon Street,
Boston, MA 02108

David E. Hamlin Prior to August 1998, Principal,
Senior Vice President The Vanguard Group, 100 Vanguard
Blvd., Valley Forge, PA 19355

Linda Harring Prior to December 1997, Senior
Senior Vice President Vice President, Oppenheimer and
Company, Inc., CIBC Oppenheimer
Tower, World Financial Center,
New York, NY 10281

Deborah R. Healey Corporator, New England Baptist
Senior Vice President Hospital, 125 Parker Hill Ave.,
Boston, MA 02120; Director, NEB
Enterprises, 125 Parket Hill
Ave., Boston, MA 02120

Jonathan S. Horwitz Prior to August 1998, Vice
Senior Vice President President - Corporate Planning,
Keystone Group, 200 Berkely St.,
Boston, MA 02116

Yoshiro Iino Prior to November 1997, Deputy
Vice President Managing Director, Nomura
International PLC, 1 St.
Martin's-le-Grand, London.

Jeffrey Kaufman Prior to July 1998, Vice
Senior Vice President President and Portfolio Manager,
MFS Investment Management, 500
Boylston St., Boston, MA 02116

Ira C. Kalus-Bystricky Prior to March 1998, Consultant,
Vice President Arthur D. Little, 25 Acorn Park,
Cambridge, MA 02114

Hiroshi Kato Prior to August 1998, Manager,
Vice President Senior Analyst, Daiwa Institute
of Research, 15-6 Fuyuki, Koutou-
ku, Tokyo, 135-8460

Kevin J. Keleher Prior to August 1998, Support
Assistant Vice President Manager, Digital Equipment Co.,
111 Powder Mill Rd., Maynard, MA
01754

William P. King Prior to November 1997,
Vice President Portfolio Manager, TSA Global
Asset Management, 700 South
Flower St., Los Angeles, CA
90017

Deborah F. Kuenstner Director, Board of Pensions,
Managing Director Presbyterian Church, 1001 Market
St., Philadelphia, PA

Leonard LaPorta, Jr. Prior to March 1998, Assistant
Vice President Vice President, State Street
Global Advisors, Two
International Place, Boston, MA
02110; Board of Overseers', USS
Constitution Museum, Charleston,
MA

Lawrence J. Lasser Director, Marsh & McLennan
President, Director and Chief Companies, Inc., 1221 Avenue of
Executive the Americas, New York, NY
10020; Board of Governors and
Executive Committee, Investment
Company Institute, 1401 H. St.,
N.W. Suite 1200, Washington, DC
20005; Board of Overseers,
Museum of Fine Arts, 465
Huntington, Ave., Boston, MA
02115; Trustee, Beth Israel
Deaconess Medical Center, 330
Brookline Ave., Boston, MA;
Member of the Council on Foreign
Relations, 58 East 68th St., New
York, NY 10021; Member of the
Board of Directors of the United
Way of Massachusetts Bay, 245
Summer St., Suite 1401, Boston,
MA 02110; Trustee of the
Vineyard Open Land Foundation,
RFD Box 319X, Vineyard Haven, MA
02568

Gordon R. Lawrence Prior to July 1999, summer
Assistant Vice President associate, J.P. Morgan
Investment Management, 522 Fifth
Ave., New York, NY 10009, Prior
to July, 1997, Associate Lehman
Brothers, 3 World Financial
Center, New York, NY 10285

Maura W. Leddy Prior to October 1998,
Vice President Bookkeeper, Davol/Taunton
Printing, 330 Winthrop Street
Taunton, MA 02780.

Richard Leibovitch Prior to February 1999, Managing
Managing Director Director, J.P. Morgan, 60 Wall
St., New York, NY 10260

Craig S. Lewis Prior to January 1998, Analyst,
Vice President Keystone Investments, 200
Berkeley Street, Boston, MA
02101

Mark G. Lohr Prior to March 1998, Senior Vice
Managing Director President, Fidelity Investmetns,
82 Devonshire St., Boston, MA
02109

Elizabeth M. MacElwee Jones Prior to January 1998,
Senior Vice President Principal, Morgan Stanley, 1155
Broadway, New York, NY 10036

Noboru Machida Prior to October 1998, Senior
Vice President Analyst, The Nikko Research
Center Ltd., Nihonbashi
Kayabacho, Chuou-ku Tokyo, Japan
103

Kevin Maloney Institutional Director,
Managing Director Financial Management
Association, University of South
Florida, College of Business
Administration, Suite 3331,
Tampa, FL 33620

Jabaz Mathai Prior to December 1997,
Assistant Vice President Associate, Deutsche Morgan
Grenfell, 31 West 52nd St., New
York, NY 10019

Sarah Marshall Prior to August 1999, Associate,
Vice President McKinsey & Company, Inc., 55 E.
52nd St., New York, NY 10010

Paul McHugh Prior to June, 1998, Principal,
Vice President Robertson Stephens & Company,
One International Place, Boston,
MA 02110

Nicholas Melhuish Prior to August 1999, Assistant
Vice President Director of Schroder Investment
Management, 31 Gresham St.,
London, England ECZV8AQ

Krishna Memani Prior to September 1998,
Managing Director Principal, Morgan Stanley & Co.,
1585 Broadway, New York, NY
10039

Peter V. Meyer Prior to July 1999, Conseco
Vice President Capital Management, 11825 N.
Pennsylvania Ave., Carmel, IN
46032

Paul K. Michaud Prior to December 1997,
Vice President Assistant Vice President, Union
Bank of Switzerland,
Bahnhofstrasse 45, 8021 Zurich,
Switzerland

Christopher G. Miller Prior to January 1998, Portfolio
Vice President Manager, Analytic TSA Global
Asset Management, 700 So. Flower
St., Los Angeles, CA 90017

Jeanne L. Mockard Trustee, The Bryn Mawr School,
Senior Vice President 109, W. Melrose Avenue,
Baltimore, MA 21210

Donald E. Mullin Corporate Representative and
Senior Vice President Board Member, Delta Dental Plan
of Massachusetts, 10 Presidents
Landing, P.O. Box 94104,
Medford, MA 02155

Jennifer P. Murphy Prior to September 1999,
Managing Director Managing Director, Morgan
Stanley, 1585 Broadway, New
York, NY 10036

Kenneth W. Murphy, Jr. Prior to May 1998, Senior
Assistant Vice President Financial Analyst, Merck & Co.,
Inc., One Merck Drive,
Whitehouse Station, NJ 08889

Philip M. Murphy Prior to June 1999, Marketing
Assistant Vice President and Client Relations
Association, GE Investments,
3003 Summer Street, Stamford, CT
06904. Prior to March 1998,
Analyst, McLagan Partners, Inc.,
Four Stamford Plaza, Suite 400,
107 Elm Street, Stamford, CT
06902

Toshio Nagashima Prior to July 1999, General
Managing Director Manager, Product Dept.,
Investment Trust Preparation,
Sumitomo Bank, 1-3-2-
Marunouchi, Chiyoda-ku, Tokyo
100-0005 Japan

Kimberly A.M. Page Nauen Prior to February 1998, Senior
Vice President Consultant, Andersen Consulting,
100 Williams St., Wellesley, MA
02181

Maria Julia Nisbet Prior to May 1999, Project
Assistant Vice President Manager, Cisalpina Gestioni, Via
Boito, 10, Milan, Italy 20121

Stephen M. Oristaglio Prior to July 1998, Managing
Senior Managing Director Director Global Head of Fixed
Income, Swiss Bank Corp/UBS
Organization, 222 Broadway, New
York, NY 10022

Margery C. Parker Prior to December 1997, Vice
Senior Vice President President and Portfolio Manager,
Keystone Investments 200
Berkeley Street, Boston, MA
02101

Carlos Pampliega Prior to March 1998, Regional
Vice President Manager, Massachusetts Financial
Services, 500 Boylston St.,
Boston, MA 02116

Jeffrey F. Peters Prior to June 1999, Principal,
Managing Director McKinsey & Company, 75 Park
Plaza, Boston, MA 02116

Joseph P. Petitti Prior to May 1998, Senior
Vice President Treasury Analyst, Liberty Mutual
Insurance Co., 175 Berkely St.,
Boston, MA 02122

Randolph Petralia Prior to May 1998, First Vice
Senior Vice President President, Lehman Brothers, 3
World Financial Center, New
York, NY 10285

Robert A. Piepenburg Prior to December 1997,
Vice President Assistant Vice President,
BankBoston Corp./Boston
Security, 100 Federal St.,
Boston, MA 02106

Keith Plapinger Chairman and Trustee, Advent
Vice President School, 17 Brimmer St., Boston,
MA 02108

James A. Polk Prior to June 1998, Investment
Vice President Officer, Massachusetts Financial
Services, 500 Boylston St.,
Boston, MA 02116

Charles E. Porter Trustee, Anatolia College, 130
Executive Vice President Bowdoin St., Suite 1201, Boston,
MA 02108; Governor, Handel &
Hayden Society, Horticulture
Hall, 300 Massachusetts Ave.,
Boston, MA 02115

Elizabeth Price Prior to January 1998,
Assistant Vice President Investment Analyst, Schroder
Investment Management Limited,
33 Gutter Lane, London, EC2V
8AS, England

Quintin R.S. Price Prior to December 1998,
Managing Director Corporate Development Director,
The Boots Company PLC, Group
Headquarters, Nottingham NG2 3AA
England; Prior to June 1998,
Managing Director of Pan
European Equities and Global
Head of Research, HSBC
Investment Bank PLC, Thames
Exchange, 10 Queen St Place,
London, EC4R 1BL

George Putnam Chairman and Director, Putnam
Chairman and Director Mutual Funds Corp.; Director,
The Boston Company, Inc., One
Boston Place, Boston, MA 02108;
Director, Boston Safe Deposit
and Trust Company, One Boston
Place, Boston, MA 02108;
Director, Freeport-McMoRan,
Inc., 200 Park Avenue, New York,
NY 10166; Director, General
Mills, Inc., 9200 Wayzata
Boulevard, Minneapolis, MN
55440; Director, Houghton
Mifflin Company, One Beacon
Street, Boston, MA 02108;
Director, Marsh & McLennan
Companies, Inc., 1221 Avenue of
the Americas, New York, NY
10020; Director, Rockefeller
Group, Inc., 1230 Avenue of the
Americas, New York, NY 10020;
Trustee, Massachusetts General
Hospital, Fruit Street, Boston,
Ma 02114; McLean Hospital 115
Mill St., Belmont, MA 02178; The
Colonial Williamsburg
Foundation, Post Office Box
1776, Williamsburg, VA 23187;
The Museum of Fine Arts, 465
Huntington Avenue, Boston, MA
02115; WGBH Foundation, 125
Western Avenue, Boston, MA
02134; The Nature Conservancy,
Post Office Square Building, 79
Milk St., Suite 300, Boston, MA
02109; Trustee, The Jackson
Laboratory, 600 Main St., Bar
Harbor, ME

Edward Qian Prior to February 1998, Back Bay
Vice President Advisors, 399 Boylston St.,
Boston, MA 02116

Keith Quinton Director, Eleazar, Inc., West
Senior Vice President Wheelock St., Hanover, NH 03755

Nadine McQueen-Reed Prior to March, 1999, Key
Assistant Vice President Account Executive, Fidelity
Investments, 130 Tonbridge Road,
Hildenborough, Kent, England,
TN11 9DZ

Thomas V. Reilly Trustee, Knox College, 2 East
Managing Director South St., Galesburg, IL 61401

Kevin J. Rogers Prior to September 1998,
Senior Vice President Managing Director- Portfolio
Manager, Invesco, NY
Organization, 1066 Avenue of the
Americas, New York, NY 10036

Michael V. Salm Prior to November 1997, Mortgage
Vice President Analyst, Blackrock Financial 345
Park Ave., New York, NY 10010

Preeti Sayana Prior to January 1998, Director,
Assistant Vice President Fidelity Investments, 82
Devonshire St., Boston, MA 02109

Saied Simozar Prior to March 1998, Manager,
Senior Vice President Portfolio Analytics, DuPont
Pension fund Investment, One
Righter Parkway, Suite 3200,
Wilmington, DE 198903

Justin M. Scott Director, DSI Proprieties (Neja)
Managing Director Ltd., Epping Rd., Reydon, Essex
CM19 5RD

Denise D. Selden Prior to June 1998, Managing
Senior Vice President Director, Lehman Brothers, 260
Franklin St., Boston, MA 02110

Raj Ken Sharma Prior to January 1998, Vice
Vice President President and Portfolio Manager,
Fleet Financial, 75 State
Street, Boston, MA 02106

Jean I. Sievert Prior to October 1998, Vice
Senior Vice President President, Salomon Smith Barney,
Seven World Trade Center, New
York, NY 10048

Gordon H. Silver Trustee, Wang Center for the
Managing Director Performing Arts, 270 Tremont
St., Boston, MA 02116

David M. Silk Member of Board of Directors,
Senior Vice President Jobs for Bay State Graduates,
451 Andover St., Suite 305,
North Andover, MA 01845

Steven Spiegel Director, Ultra Diamond and Gold
Senior Managing Director Outlet, 29 East Madison St.,
Suite 1800, Chicago, IL 60602;
Director, FACES New York
University Medical Center, 550
First Avenue, New York, NY
10016; Trustee, Babson College,
One College Drive, Wellesley, MA
02157

John Graham Spiers Prior to January 1998, Managing
Senior Vice President Director, Quantitative Financial
Strategies, Inc., 100 Fourfalls
Corporate Drive, Suite 314,
Conshohocken, PA 19428
Raman Srivastava Prior to July 1999, Market Risk
Assistant Vice President Analyst, Bank of Nova Scotia, 20
King St., W., Toronto, ON

James St. John Prior to July 1998, Investment
Assistant Vice President Analyst, University of
Rochester, Rochester, NY 14627

Loren Michael Starr Prior to February 1998, Senior
Managing Director Vice President, Lehman Brothers,
3 World Financial Center, New
York, NY 10285.

Michael P. Stack Prior to November 1997, Senior
Senior Vice President Vice President and Portfolio
Manager, Independence Investment
Associates, 53 State St.,
Boston, MA 02109

Toshifumi Sugimoto Prior to October 1998, Portfolio
Senior Vice President Manager, Deputy General Manager,
Nikko Securities Investment
Trust & Management, Fixed Income
Department, 4-3 Nihonbashi,
Hakozakicho, Chuou-ku, Tokyo,
Japan, 103-0015

William J. Sullivan Prior to June 1999, Executive
Senior Vice President Director, SBC Warburg Dillion
Read, 677 Washington Blvd,
Stamford, CT, 06901

Robert E. Sweeney Prior to February 1998, Vice
Vice President President, Corporate Research
Smith Barney, One New York
Plaza, New York, NY 10004

Judith H. Swirbalus Prior to January 1998, Alex,
Vice President Brown & Sons, One South St.,
Baltimore, MD 21202

John C. Talanian Member of Board of Directors,
Managing Director the Japan Society of Boston, One
Milk Street, Boston, MA 02109

Nicole J. Thorpe Prior to February 1999,
Assistant Vice President President/Owner, Thorpe
Resources, P.O. Box 1895,
Brockton, MA 02301

John R. Tonkin Prior to January 1998, Analyst,
Assistant Vice President Credit Suisse First Boston
Celtic Towers, The Terrace
Wellington, New Zealand

Robert J. Ullman Prior to September, 1998,
Assistant Vice President Assistant Vice President, State
Street Bank, Two International
Place, Boston, MA 02109

Vincent Vliebergh Prior to May 1998, Senior
Vice President Consultant, Garnett Consulting,
30 Monument Square, Concord, MA
01742

Christopher C. Watt Prior to July 1999, Finance
Vice President Manager, Procter & Gamble, 1
Procter & Gamble Plaza,
Cincinnati, OH 45202

Eric Wetlaufer President and Member of Board of
Managing Director Directors, The Boston Security
Analysts Society, Inc., 100
Boylston St., Suite 1050,
Boston, MA 02110

Edward F. Whalen Member of the Board of
Senior Vice President Directors, Hockomock Area YMCA,
300 Elmwood St., North
Attleboro, MA 02760

Edmund F. Wright Jr. Prior to July 1998, Controller,
Assistant Vice President CBE Technologies, Inc., 50
Redfield St., Boston, MA 02122

Richard P. Wyke Director, Salem YMCA, One Sewall
Senior Vice President St., Salem, MA 01970

Item 27. Principal Underwriter

(a) Putnam Mutual Funds Corp. is the principal underwriter for
each of the following investment companies, including the
Registrant:

Putnam American Government Income Fund, Putnam Arizona Tax Exempt
Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset
Allocation Funds, Putnam Balanced Retirement Fund, Putnam
California Tax Exempt Income Fund, Putnam California Tax Exempt
Money Market Fund, Putnam Capital Appreciation Fund, Putnam
Convertible Income-Growth Trust, Putnam Diversified Income Trust,
Putnam Equity Income Fund, Putnam Europe Growth Fund, Putnam
Florida Tax Exempt Income Fund, Putnam Funds Trust, The George
Putnam Fund of Boston, Putnam Global Equity Fund, Putnam Global
Governmental Income Trust, Putnam Global Growth Fund, Putnam
Global Natural Resources Fund, The Putnam Fund for Growth and
Income, Putnam Growth and Income Fund II, Putnam Health Sciences
Trust, Putnam High Yield Trust, Putnam High Yield Advantage Fund,
Putnam Income Fund, Putnam Intermediate U.S. Government Income
Fund, Putnam International Growth Fund, Putnam Investment Funds,
Putnam Investors Fund, Putnam Massachusetts Tax Exempt Income
Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota
Tax Exempt Income Fund, Putnam Money Market Fund, Putnam
Municipal Income Fund, Putnam New Jersey Tax Exempt Income Fund,
Putnam New Opportunities Fund, Putnam New York Tax Exempt Income
Fund, Putnam New York Tax Exempt Money Market Fund, Putnam New
York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income
Fund, Putnam OTC & Emerging Growth Fund, Putnam Pennsylvania Tax
Exempt Income Fund, Putnam Preferred Income Fund, Putnam
Strategic Income Fund, Putnam Tax Exempt Income Fund, Putnam Tax
Exempt Money Market Fund, Putnam Tax-Free Income Trust, Putnam
Tax Smart Funds Trust, Putnam U.S. Government Income Trust,
Putnam Utilities Growth and Income Fund, Putnam Variable Trust,
Putnam Vista Fund, Putnam Voyager Fund, Putnam Voyager Fund II.

(b) The directors and officers of the Registrant's principal
underwriter are listed below. None of the officers are officers
of the Registrant except:

Name Position and Offices with Registrant

Richard Monaghan Vice President
George Putnam Chairman and President
Gordon Silver Vice President

The principal business address of each person is One Post Office
Square, Boston, MA 02109:

Name Position and
Offices with Underwriter
Adduci,John V. Vice President
Alberts,Richard W. Asst. Vice President
Alden,Donald F. Vice President
Alexander,Michael R. Vice President
Alpaugh,Christopher S. Vice President
Amisano,Paulette C. Vice President
Arends,Michael K. Senior Vice President
Asher,Steven E. Senior Vice President
Avery,Scott A. Senior Vice President
Aymond,Christian E. Senior Vice President
Aymond,Colin C. Vice President
Barnett,William E. Asst. Vice President
Barrett,Thomas Vice President
Battit,Suzanne J Vice President
Beatty,Steven M. Senior Vice President
Bent,John J. Vice President
Beringer,Thomas C. Vice President
Berka,Sharon A. Senior Vice President
Boneparth,John F. Managing Director
Bonfilio Jr.,Peter J. Asst. Vice President
Bouchard,Keith R. Senior Vice President
Bradford Jr.,Linwood Senior Vice President
E.
Bresnahan,Leslee R. Managing Director
Brockelman,James D. Senior Vice President
Brookman,Joel S. Vice President
Brown,Timothy K. Senior Vice President
Buckner,Gail D. Senior Vice President
Burke,Robert W. Sr Managing Director
Burnham,David N. Vice President
Burrill,Gregory J. Vice President
Buzzell,Paul F. Asst. Vice President
Cabana,Susan D. Vice President
Cartwright,Patricia A. Asst. Vice President
Casey,David M. Vice President
Castle Jr.,James R. Vice President
Chamieh,Mark Vice President
Chapman,Frederick Vice President
Chapman,Thomas E. Vice President
Chase,Mary Claire Vice President
Chrostowski,Louis F. Senior Vice President
Church,Daniel J. Vice President
Clark,Richard B. Senior Vice President
Clermont,Mary Asst. Vice President
Clinton,John C. Asst. Vice President
Cohen,Jeff M. Asst. Vice President
Collman,Kathleen M. Sr Managing Director
Commane,Karen L. Asst. Vice President
Coneeny,Mark L. Senior Vice President
Connelly,Donald A. Senior Vice President
Connolly,William T. Managing Director
Cooper,John S. Vice President
Corbett,Dennis Vice President
Corvinus,F. Nicholas Senior Vice President
Cotto,Stephen P Asst. Vice President
Crane III,George H. Senior Vice President
Cristo,Chad H. Vice President
Curran,Peter J. Senior Vice President
Dahill,Jessica E. Vice President
Daly,Kenneth L. Managing Director
Daylor,Donna M. Vice President
Days,Nancy M. Asst. Vice President
Deluse,Laura R. Asst. Vice President
deMont,Lisa M. Vice President
Diaz,Roger Vice President
Dirstine,Michael T. Asst. Vice President
DiStasio,Karen E. Vice President
Divney,Kevin M. Vice President
Dolan,Michael G. Vice President
Donaldson,Scott M. Vice President
Dougherty,Thomas Vice President
Durbin,Emily J. Vice President
Durkee,Christine Asst. Vice President
Edlin,David B. Managing Director
Elder,Michael D. Vice President
Emhof,Joseph R. Vice President
English,James M. Senior Vice President
Esposito,Vincent Managing Director
Favaloro,Beth A. Vice President
Feldman,Susan H. Senior Vice President
Fisher,C. Nancy Managing Director
Fishman,Mitchell B. Senior Vice President
Fiumara,Joseph C. Vice President
Flaherty,Patricia C. Senior Vice President
Fleisher,Kate Vice President
Fleming,Ellen E. Asst. Vice President
Foley,Timothy P. Vice President
Frost,Karen T. Senior Vice President
Gaudette,Marjorie B. Vice President
Gibbs,Stephen C. Vice President
Gindel,Caroline E. Asst. Vice President
Goodfellow,Mark D. Vice President
Goodman,Robert Managing Director
Gould,Carol J. Asst. Vice President
Grace,Anthony J. Asst. Vice President
Grace,Linda K. Vice President
Graviere,Patrice Senior Vice President
Grey,Eric M. Vice President
Grossberg,Jill Asst. Vice President
Grove,Denise Vice President
Gubala,Jeffrey P. Vice President
Guerin,Donnalee Asst. Vice President
Hachey,Andrew J Asst. Vice President
Hall,Debra L. Vice President
Halloran,James E. Vice President
Halloran,Thomas W. Senior Vice President
Hansen,Christine M. Asst. Vice President
Harring,Linda Senior Vice President
Harrington,Shannon W. Vice President
Hartig,Robert Vice President
Hartigan,Craig W. Vice President
Hartley,Deborah M. Asst. Vice President
Hayes-Castro,Deanna R. Vice President
Hedstrom,Gayle A. Asst. Vice President
Heimanson,Susan M. Senior Vice President
Holmes,Maureen A. Asst. Vice President
Hooley,Daniel F Jr. Asst. Vice President
Horwitz,Jonathan S. Senior Vice President
Hotchkiss,Michael F. Senior Vice President
Hoyt,Paula J. Asst. Vice President
Hurley,William J. Managing Director & CFO
Hutchins,Robert B. Vice President
Iino,Yoshiro Vice President
Jacobsen,Dwight D. Managing Director
Kaminsky,Gregory C. Vice President
Kapinos,Peter J. Vice President
Keleher,Kevin J. Asst. Vice President
Kelley,Brian J. Vice President
Kelly,David Vice President
Kelly,Robin F. Asst. Vice President
Kennedy,Alicia C. Asst. Vice President
Kinsman,Anne Senior Vice President
Kirk,Deborah H. Senior Vice President
Koontz,Jill A. Senior Vice President
Kringdon,Joseph D. Senior Vice President
Landers,Bruce M. Vice President
Lane,Linda L. Asst. Vice President
LaPierre,Christopher W Asst. Vice President
Lathrop,James D. Senior Vice President
Lawlor,Stephanie T. Asst. Vice President
Leary,Joan M. Vice President
Ledbetter,Charles C. Vice President
Leddy,Maura W. Vice President
Leipsitz,Margaret Asst. Vice President
Lemire,Kevin Vice President
Levy,Eric S. Senior Vice President
Levy,Norman S. Vice President
Lewandowski Jr.,Edward Vice President
V.
Lewandowski,Edward V. Senior Vice President
Li,Mei Asst. Vice President
Lieberman,Samuel L. Vice President
Lifsitz,David M. Vice President
Lilien,David R. Vice President
Link,Christopher H. Asst. Vice President
Linquata,Louis K. Asst. Vice President
Litant,Lisa M. Asst. Vice President
Lockwood,Maura A. Senior Vice President
Loew,Christopher R. Asst. Vice President
Lohr,Mark G. Managing Director
Lomba,Rufino R. Senior Vice President
Lucey,Robert F. Director
Lucey,Thomas J. Director
Lyons,Robert F. Asst. Vice President
Macdonald,Richard A. Senior Vice President
Maloof,Renee L. Asst. Vice President
Mancini,Dana Asst. Vice President
Mancini,Jane M. Managing Director
Manning,George J. Vice President
Manthorne,Heather M. Asst. Vice President
Maravel,Alexi A. Asst. Vice President
Maxwell,Scott M. Managing Director
McAvoy,Bridget Asst. Vice President
McCafferty,Karen A. Vice President
McCarthy,Anne B. Asst. Vice President
McConville,Paul D. Senior Vice President
McCracken,Brian Asst. Vice President
McCutcheon,Bruce A Senior Vice President
McDermott,Robert J. Vice President
McKenna,Mark J. Senior Vice President
McNamara,Laura Vice President
McNamee,Mary G. Asst. Vice President
Meagher,Dorothy B. Asst. Vice President
Mehta,Ashok Vice President
Metelmann,Claye A. Vice President
Michejda,Marek A. Vice President
Miller,Bart D. Senior Vice President
Miller,Gregory T. Vice President
Miller,Jeffrey M. Managing Director
Mills,Ronald K. Vice President
Minsk,Judith Asst. Vice President
Monaghan,Richard A. Director
Monahan,Kimberly A. Vice President
Moody,Paul R. Vice President
Moret,Mitchell L. Senior Vice President
Morey,John P. Senior Vice President
Mosher,Barry L. Asst. Vice President
Mullen,Donald E. Senior Vice President
Munson,Brian D. Vice President
Murphy Jr.,Kenneth W. Asst. Vice President
Murphy,Paul G. Vice President
Murray,Brendan R. Vice President
Nadherny,Robert Senior Vice President
Nagashima,Toshio Managing Director
Nauen,Kimberly Page Asst. Vice President
Neary,Ellen R. Vice President
Nelson,Andrew E. Vice President
Neutra,Colleen J. Asst. Vice President
Newell,Amy Jane Vice President
Nickodemus,John P. Senior Vice President
Nickse,Gail A. Asst. Vice President
Nicolazzo,Jon C. Vice President
Nisbet,M. Julia Asst. Vice President
O'Brien,Lois C. Vice President
O'Connell,Gayle M. Asst. Vice President
O'Connor,Brian P. Vice President
Onofrio,Ellen Asst. Vice President
Orr,Kevin Vice President
Palmer,Patrick J. Vice President
Pampliega,Carlos Vice President
Panessa,Brian Vice President
Papes,Scott A. Vice President
Parker,Michael T. Asst. Vice President
Patton,Robert J. Vice President
Peters,Jeffrey F. Managing Director
Petitti,Joseph P. Vice President
Petralia,Randolph S. Senior Vice President
Phoenix,John G. Senior Vice President
Phoenix,Joseph Senior Vice President
Pilibosian,George J. Vice President
Plapinger,Keith Senior Vice President
Powers,Brian S. Asst. Vice President
Present,Howard B. Senior Vice President
Puddle,David G. Senior Vice President
Pulkrabek,Scott M. Vice President
Putnam,George Director
Reed,Nadine McQueen Asst. Vice President
Riley,Megan G. Asst. Vice President
Rodammer,Kris Vice President
Rogers,Deborah A. Vice President
Rowe,Robert B. Vice President
Ryan,Carolyn M. Asst. Vice President
Ryan,Deborah A. Vice President
Ryan,William M. Vice President
Saunders,Catherine A. Senior Vice President
Saur,Karl W. Vice President
Scanlon,Michael M. Vice President
Schlosberg,Alan R. Asst. Vice President
Schofield,Shannon D. Vice President
Schultz,Mitchell D. Managing Director
Scordato,Christine A. Senior Vice President
Segers,Elizabeth R. Senior Vice President
Selden,Denise D. Senior Vice President
Shamburg,John B. Vice President
Shanahan,Christopher Vice President
W.
Sharpless,Kathy G. Managing Director
Shelby,Robert Vice President
Short,Jonathan D. Senior Vice President
Siebold,Mark J. Asst. Vice President
Siemon Jr.,Frank E. Asst. Vice President
Silva,J. Paul Vice President
Silver,Gordon H. Sr Managing Director
Skistimas Jr,John J. Vice President
Solan,Meenakshi Asst. Vice President
Soule,Scott W. Asst. Vice President
Spiegel,Steven Sr Managing Director
Sprague,David L. Vice President
Starishevsky,Daniel Vice President
Starr,Loren M. Managing Director
Statuta,Jason M. Vice President
Steinberg,Lauren B. Asst. Vice President
Stern,Derek A. Asst. Vice President
Stickney,Paul R. Senior Vice President
Strumpf,Casey Senior Vice President
Sugimoto,Toshifumi Senior Vice President
Sullivan,Brian L. Senior Vice President
Sullivan,Donna G Vice President
Sullivan,Elaine M. Senior Vice President
Sullivan,Maryann Asst. Vice President
Suzuki,Toshimi Senior Vice President
Sweeney,Janet C. Senior Vice President
Talanian,John C. Managing Director
Tanner,B Iris Vice President
Tavares,April M. Asst. Vice President
Telling,John R. Senior Vice President
Thorpe,Nicole J. Asst. Vice President
Tibbetts,Richard B. Managing Director
Tirado,Patrice M. Vice President
Toner,Robert J. Asst. Vice President
Troped Blacker,Bonnie Senior Vice President
Trowbridge,Wendy S. Asst. Vice President
Upham,Scott E. Vice President
Walsh,Stephen R. Vice President
Washburn,Andrew O. Vice President
Waters,Mitchell J. Vice President
Watt,Christopher C. Vice President
Whalen,Brian Vice President
Whalen,Edward F. Senior Vice President
Whitaker,J. Greg Vice President
White,J. Bennett Vice President
Wolfson,Jane Senior Vice President
Woodlock,Ronald J. Asst. Vice President
Woolverton,William H. Managing Director
Wright Jr.,Edmund F. Asst. Vice President
Yan,Yanfang Asst. Vice President
Young,Jason P. Vice President
Zografos,Laura J. Vice President
Zukowski,Virginia A. Senior Vice President

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

Persons maintaining physical possession of accounts, books
and other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated
thereunder are Registrant's Associate Clerk, Judith Cohen;
Registrant's investment adviser, Putnam Investment Management,
Inc.; Registrant's principal underwriter, Putnam Mutual Funds
Corp.; Registrant's custodian, Putnam Fiduciary Trust Company
("PFTC"); and Registrant's transfer and dividend disbursing agent,
Putnam Investor Services, a division of PFTC. The address of the
Associate Clerk, investment adviser, principal underwriter,
custodian and transfer and dividend disbursing agent is One Post
Office Square, Boston, Massachusetts 02109.

ITEM 29. MANAGEMENT SERVICES

None.

ITEM 30. UNDERTAKINGS

None.

NOTICE

A copy of the Agreement and Declaration of Trust of Putnam
Variable Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts and notice is hereby given that this
instrument is executed on behalf of the Registrant by an officer
of the Registrant as an officer and not individually and the
obligations of or arising out of this instrument are not binding
upon any of the Trustees, officers or shareholders individually
but are binding only upon the assets and property of the
Registrant.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the fund 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 16th day of
November, 1999.

PUTNAM VARIABLE TRUST

By: Gordon H. Silver, Vice President

Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement of Putnam Variable
Trust has been signed below by the following persons in the
capacities and on the dates indicated:

SIGNATURE TITLE

George Putnam President and Chairman of the Board; Principal
Executive Officer; Trustee

John D. Hughes Senior Vice President; Treasurer and Principal
Financial Officer

Paul G. Bucuvalas Assistant Treasurer and Principal Accounting Officer

Jameson A. Baxter Trustee

Hans H. Estin Trustee

John A. Hill Trustee

Ronald J. Jackson Trustee

Paul L. Joskow Trustee

Elizabeth T. Kennan Trustee

Lawrence J. Lasser Trustee

John H. Mullin, III Trustee

Robert E. Patterson Trustee

William F. Pounds Trustee

George Putnam, III Trustee

A.J.C. Smith Trustee

W. Thomas Stephens Trustee

W. Nicholas Thorndike Trustee

By: Gordon H. Silver,
as Attorney-in-Fact
November 16, 1999

EXHIBIT INDEX

4. Management Contract dated October 2, 1987, as supplemented
March 2, 1990, as further supplemented February 27, 1992, July 9,
1993, April 5, 1994, June 2, 1994, April 7, 1995, July 13, 1995,
July 11, 1996, December 20, 1996, February 6, 1998, July 10, 1998,
March 4, 1999, July 1, 1999 and November 8, 1999 -- Exhibit 1.

9. Opinion of Ropes & Gray, including consent -- Exhibit 2.

PUTNAM VARIABLE TRUST
(FORMERLY PUTNAM CAPITAL MANAGER TRUST)
MANAGEMENT CONTRACT

Management Contract dated as of October 2, 1987, as supplemented
March 2, 1990, as further supplemented February 27, 1992, as
further supplemented July 9, 1993, as further supplemented April
5, 1994, as further supplemented June 2, 1994, as further
supplemented April 7, 1995, as further supplemented July 13,
1995, as further supplemented July 11, 1996, as further
supplemented December 20, 1996 as further supplemented February
6, 1998, as further supplemented July 10, 1998, as further
supplemented March 4, 1999, as further supplemented July 1, 1999
and as further supplemented November 8, 1999 between Putnam
Variable Trust (formerly Putnam Capital Manager Trust), a
Massachusetts business trust (the "Fund"), and PUTNAM INVESTMENT
MANAGEMENT, INC., a Massachusetts corporation (the "Manager").

WITNESSETH:

That in consideration of the mutual covenants herein contained,
it is agreed as follows:

1. SERVICES TO BE RENDERED BY MANAGER TO FUND.

(a) The Manager, at its expense, will furnish continuously an
investment program for the Fund, will determine what investments
shall be purchased, held, sold or exchanged by the Fund and what
portion, if any, of the assets of the Fund shall be held
uninvested and shall, on behalf of the Fund, make changes in the
Fund's investments. Subject always to the control of the
Trustees of the Fund and except for the functions carried out by
the officers and personnel referred to in Section 1(d), the
Manager will also manage, supervise and conduct the other affairs
and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the
provisions of the Agreement and Declaration of Trust and By-Laws
of the Fund and its stated investment objectives, policies and
restrictions, and will use its best efforts to safeguard and
promote the welfare of the Fund and to comply with other policies
which the Trustees may from time to time determine and shall
exercise the same care and diligence expected of the Trustees.

(b) The Manager, at its expense, except as such expense is paid
by the Fund as provided in Section 1(d), will furnish (1) all
necessary investment and management facilities, including
salaries of personnel, required for it to execute its duties
faithfully; (2) suitable office space for the Fund; and (3)
administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of
the affairs of the Fund, including determination of the Fund's
net asset value, but excluding shareholder accounting services.
Except as otherwise provided in Section 1(d), the Manager will
pay the compensation, if any, of the officers of the Fund.

(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Fund's account
with brokers or dealers selected by the Manager. In the
selection of such brokers or dealers and the placing of such
orders, the Manager shall use 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 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 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 Fund may determine, the 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 the Fund to pay a broker or dealer that provides
brokerage and research services to the 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 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 the Manager's overall
responsibilities with respect to the Fund and to other clients of
the Manager as to which the Manager exercises investment
discretion. The Manager agrees that in connection with purchases
or sales of portfolio investments for the Fund's account, neither
the Manager nor any officer, director, employee or agent of the
Manager shall act as a principal or receive any commission other
than as provided in Section 3.

(d) The Fund will pay or reimburse the Manager for (i) the
compensation of the Vice Chairman of the Fund and of persons
assisting him in these offices, as determined from time to time
by the Trustees of the Fund, (ii) the compensation in whole or in
part of such other officers of the Fund and persons assisting
them as may be determined from time to time by the Trustees of
the Fund, and (iii) the cost of suitable office space, utilities,
support services and equipment of the Vice Chairman and persons
assisting him and, as determined from time to time by the
Trustees of the Fund, all or a part of such cost attributable to
the other officers and persons assisting them whose compensation
is paid in whole or in part by the Fund. The Fund will pay the
fees, if any, of the Trustees of the Fund.

(e) The Manager shall pay all expenses incurred in connection
with the organization of the Fund and the initial public offering
and sale of its shares of beneficial interest, provided that upon
the issuance and sale of such shares to the public pursuant to
the offering, and only in such event, the Fund shall become
liable for, and to the extent requested reimburse the Manager
for, registration fees payable to the Securities and Exchange
Commission and for an additional amount not exceeding $125,000 as
its agreed share of such expenses.

(f) The Manager shall not be obligated to pay any expenses of or
for the Fund not expressly assumed by the Manager pursuant to
this Section 1 other than as provided in Section 3.

2. OTHER AGREEMENTS, ETC.

It is understood that any of the shareholders, Trustees, officers
and employees of the Fund may be a shareholder, director, officer
or employee of, or be otherwise interested in, the Manager, and
in any person controlled by or under common control with the
Manager, and that the Manager and any person controlled by or
under common control with the Manager may have an interest in the
Fund. It is also understood that the Manager and any person
controlled by or under common control with the 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 TO BE PAID BY THE FUND TO THE MANAGER.

The Fund will pay to the Manager as compensation for the
Manager's services rendered, for the facilities furnished and for
the expenses borne by the Manager pursuant to paragraphs (a),
(b), (c) and (e) of Section 1, a fee, computed and paid quarterly
at the following annual rates applicable to the average net asset
value of each Series of the Fund (a "Series") 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 Asia Pacific Growth Fund, Putnam VT Global Growth Fund,
Putnam VT International Growth Fund, Putnam VT International
Growth and Income Fund, and Putnam VT Small Cap Value Fund:

(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 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 New Opportunities Fund, Putnam VT New Value
Fund, Putnam VT Utilities Growth and Income Fund, Putnam VT
Voyager Fund and Putnam VT OTC Emerging Growth Fund:

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 Growth and Income Fund, Putnam VT Income Fund, Putnam
VT Vista Fund, Putnam VT Investors Fund, Putnam VT The George
Putnam Fund of Boston and Putnam VT Research Fund:

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.

Such fees computed with respect to the net asset value of each
Series shall be paid from the assets of such Series. Such
average net asset value of each Series of the Fund shall be
determined by taking an average of all of the determinations of
such net asset value during such 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 month within 30
days after the end of such quarter.

The fees payable by the Fund to the Manager pursuant to this
Section 3 with respect to any Series of the Fund shall be reduced
by any commissions, fees, brokerage or similar payments received
by the Manager or any affiliated person of the Manager in
connection with the purchase and sale of portfolio investments of
such Series, less any direct expenses approved by the Trustees
incurred by the Manager or any affiliated person of the Manager
in connection with obtaining such payments.

In the event that expenses of any Series of the Fund for any
fiscal year should exceed the expense limitation on investment
company expenses imposed by any statute or regulatory authority
of any jurisdiction in which shares of that Series are qualified
for offer or sale, the compensation due the Manager for such
fiscal year shall be reduced by the amount of such excess by a
reduction or refund thereof. In the event that the expenses of
any Series of the Fund exceed any expense limitation which the
Manager may, by written notice to the Fund, voluntarily declare
to be effective subject to such terms and conditions as the
Manager may prescribe in such notice, the compensation due the
Manager shall be reduced, and, if necessary, the Manager shall
assume expenses of the Series to the extent required by the terms
and conditions of such expense limitation.

If the Manager shall serve for less than the whole of a month,
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 as to any Series of the Fund unless such
amendment be approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Series, and 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
Fund who are not interested persons of the 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 as to each Series
continuously thereafter (unless terminated automatically as set
forth in Section 4) until terminated as follows:

(a) Either party hereto may at any time terminate this Contract
as to any Series or as to the Fund 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) If (i) the Trustees of the Fund or the shareholders by the
affirmative vote of a majority of the outstanding shares of the
Series, and (ii) a majority of the Trustees of the Fund who are
not interested persons of the 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 as to such Series at the close of
business on the second anniversary of its execution with respect
to any Series, or the expiration of one year from the effective
date of the last such continuance, whichever is later; provided,
however, that if the continuance of this Contract is submitted to
the shareholders of a Series for their approval and such
shareholders fail to approve such continuance of this Contract as
provided herein, the Manager may continue to serve hereunder in a
manner consistent with the Investment Company Act of 1940 and the
Rules and Regulations thereunder.

Action by the 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 one or more
Series affected.

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" means the affirmative vote,
at a duly called and held meeting of shareholders, (a) of the
holders of 67% or more of the shares of the Fund or the Series,
as the case may be, 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 the Fund or the Series, as the case may be,
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 the Fund, or the Series, as the case may be, 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 Investment Company Act of 1940
and the Rules and Regulations thereunder, 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 Investment Company Act of 1940 and the Rules and Regulations
thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and
the Rules and Regulations thereunder.

7. NON-LIABILITY OF MANAGER.

In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager 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 hereunder.

8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.

A copy of the Agreement and Declaration of Trust of the Fund is
on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Fund as Trustees and
not individually and that the obligations of or arising out of
this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets
and property of the Fund.

IN WITNESS WHEREOF, PUTNAM VARIABLE TRUST and PUTNAM INVESTMENT
MANAGEMENT, INC. have each caused this instrument to be signed in
duplicate in its behalf by its President or a Vice President
thereunto duly authorized, all as of the day and year first above
written.

PUTNAM VARIABLE TRUST

By:/s/ Charles E. Porter
Charles E. Porter
Executive Vice President

PUTNAM INVESTMENT MANAGEMENT, INC.

By:/s/ Gordon H. Silver
Gordon H. Silver
Senior Managing Director

[Ropes & Gray Letterhead]

November 15, 1999

Putnam Variable Trust
One Post Office Square
Boston, MA 02109

Gentlemen:

We are furnishing this opinion in connection with the Registration
Statement on Form N-1A (the "Registration Statement") filed under the
Securities Act of 1933, as amended, by Putnam Variable Trust (f/k/a Putnam
Capital Manager Trust) (the "Trust") for the registration of an
indefinite number of its shares of beneficial interest (the
"Shares"). The Shares are proposed to be sold pursuant to a
Distributor's Contract dated May 6, 1994 (the "Distributor's
Contract") between the Trust and Putnam Mutual Funds Corp.

We have acted as counsel for the Trust since its
organization. We are familiar with the action taken by its
Trustees to authorize this issuance of the Shares. We have
examined its records of Trustee and shareholder action, its
Bylaws, and its Agreement and Declaration of Trust on file at the
office of the Secretary of State of The Commonwealth of
Massachusetts. We have examined copies of such Registration
Statement, in the form filed with the Securities and Exchange
Commission, and such other documents as we deem necessary for the
purpose of this opinion.

We assume that upon sale of the Shares the Trust will
receive the net asset value thereof.

We are of the opinion that the Shares are currently divided
into 24 separate portfolio series; that the Trust is authorized
to issue an unlimited number of Shares of each of the following
series: Putnam VT Voyager Fund, Putnam VT Growth and Income
Fund, Putnam VT Money Market Fund, Putnam VT High Yield Fund,
Putnam VT Income Fund, Putnam VT Global Asset Allocation Fund,
Putnam VT Global Growth Fund, Putnam VT Utilities Growth and
Income Fund, Putnam VT Diversified Income Fund, Putnam VT New
Opportunities Fund, Putnam VT Asia Pacific Growth Fund, Putnam VT
International Growth Fund, Putnam VT International Growth and
Income Fund, Putnam VT International New Opportunities Fund,
Putnam VT New Value Fund, Putnam VT Vista Fund, Putnam VT The
George Putnam Fund of Boston, Putnam VT Health Sciences Fund,
Putnam VT Investors Fund, Putnam VT OTC & Emerging Growth Fund,
Putnam VT Research Fund, Putnam VT Small Cap Value Fund, Putnam
VT Growth Opportunities Fund and Putnam VT American Government
Income Fund; and that when the Shares are issued and sold
pursuant to the Distributor's Contract, they will be validly
issued, fully paid and nonassessable by the Trust.

The Trust is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Trust. However, the
Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that
notice of such disclaimer by given in each agreement, obligation,
or instrument entered into or executed by the Trust or the
Trustees. The Agreement and Declaration of Trust provides for
allocation of the assets and liabilities of the Trust among its
portfolio series, and further provides for indemnification out of
the property of a portfolio series for all loss and expense of
any shareholder of the portfolio series held personally liable
solely by reason of his being or having been a shareholder.
Thus, the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances in
which the portfolio series itself would be unable to meet its
obligations.

We consent to the filing of this opinion as an exhibit to
such Registration Statement.

Very truly yours,

/s/ Ropes & Gray

Ropes & Gray