Prospectus Supplement 52006 4/99
dated April 12, 1999 to:
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PUTNAM VARIABLE TRUST
Prospectuses dated April 30, 1998 and April 30, 1998, as revised
July 2, 1998
The Trustees of the Trust at the April 9, 1999 meeting voted to
rename the Putnam VT U.S. Government and High Quality Bond Fund
as the Putnam VT Income Fund. The Trustees also changed certain
of the investment strategies and polices of the fund. As a
result, the section entitled Putnam VT U.S. Government and High
Quality Bond Fund in the section entitled "Investment Objective
and Policies of the funds" is hereby deleted and the following
section is added to the prospectus under the section "Investment
Objectives and Policies of the funds."
PUTNAM VT INCOME FUND
OBJECTIVE
Putnam VT Income Fund seeks high current income consistent with
what Putnam Management believes to be prudent risk. The fund may
invest in debt securities, including both government and
corporate obligations, preferred stocks and dividend-paying
common stocks. The fund may also hold a portion of its assets in
cash or money market instruments.
The fund's portfolio currently emphasizes fixed-income
securities. Putnam Management presently expects that it will
continue to do so. Declines in the prices of equity securities
coupled with rising dividend payouts, however, could result in an
increase in the fund's equity positions.
The fund may invest in both higher-rated and lower-rated fixed-
income securities. The values of lower-rated securities
generally fluctuate more than those of higher-rated securities.
In addition, the lower rating reflects a greater possibility that
the financial condition of the issuer, or adverse changes in
economic conditions, or both, may impair the ability of the
issuer to make payments of income and principal. The fund may
also invest in premium securities, engage in foreign currency
transactions, enter into repurchase agreements, loan its
portfolio securities and purchase securities for future delivery.
See "Common investment policies and techniques" below for a
discussion of these securities and types of transactions and the
risks associated with them.
The fund will not invest in securities rated lower than B by a
nationally recognized securities rating agency, such as Standard
& Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's"),
or in unrated securities determined by Putnam Management to be of
comparable quality. Securities rated B are predominantly
speculative and have large uncertainties or major exposures to
adverse conditions. Securities rated below BBB or Baa are
commonly known as "junk bonds." For a discussion of the risks
associated with investments in fixed-income securities, including
lower-rated fixed-income securities, see "Common investment
policies and techniques - Lower-rated and other fixed-income
securities." The foregoing investment limitations 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.
The fund may invest a substantial portion of its assets in
mortgage-backed securities, including collateralized mortgage
obligations ("CMOs") and certain stripped mortgage-backed
securities. For a discussion of the risks associated with
mortgage-backed securities, see "Common investment policies and
techniques - Mortgage-backed and asset-backed securities."
The fund may engage in a variety of transactions involving the
use of options and futures contracts. The fund may purchase and
sell futures contracts in order to hedge against changes in the
values of securities the fund owns or expects to purchase or to
hedge against interest rate changes. The fund may also seek to
increase its current return by writing covered call and put
options on securities it owns or in which it may invest.
The fund may invest in the securities of foreign issuers. It may
invest without limit in the securities of foreign issuers that
are traded in U.S. public markets. The fund expects that its
investments in securities of foreign issuers that are not
actively traded in U.S. public markets generally will not exceed
20% of its total assets, although the fund's investments in such
foreign securities may exceed this amount from time to time. See
"Common investment policies and techniques - Foreign
investments."
At times Putnam Management may judge that conditions in the
securities markets make pursuing the fund's basic investment
strategy inconsistent with the best interests of its
shareholders. At such times, Putnam Management may temporarily
use alternative strategies that are primarily designed to reduce
fluctuations in the value of fund assets. In implementing these
defensive strategies, the fund may invest without limit in money
market instruments and in U.S. government or agency obligations,
or in any other securities Putnam Management considers consistent
with such defensive strategies.
2. IN THE SECTION ENTITLED "HOW THE TRUST IS MANAGED," THE CHART
INDICATING THE OFFICERS OF PUTNAM MANAGEMENT THAT HAVE PRIMARY
RESPONSIBILITY FOR THE DAY-TO-DAY MANAGEMENT OF EACH FUND'S
PORTFOLIO IS REVISED WITH RESPECT TO PUTNAM VT INCOME FUND AS
FOLLOWS:
PUTNAM VT INCOME FUND
Kevin M. Cronin 1999 Employed by Putnam Management since 1997.
Managing Director Prior to February 1997, Mr. Cronin was
employed at MFS Investment Management.
Krishna K. Memani 1999 Employed by Putnam Management since 1998.
Managing Director Prior to September 1998, Mr. Memani was
employed at Morgan Stanley & Co.
